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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

THE LUBRIZOL CORPORATION

(Exact name of registrant as specified in its charter)

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

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

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

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

Yes þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of the registrant’s common shares, without par value, outstanding as of April 30, 2007: 69,193,107.

 

 

EXPLANATORY NOTE

On October 22, 2007, we concluded to restate our previously issued financial statements because of reporting errors relating to five postemployment employee benefit plans in three foreign countries. Accordingly, we restated our previously issued financial statements included in our most recently filed annual report on Form 10-K/A for the year ended December 31, 2006. We are filing this quarterly report on Form 10-Q/A for the quarterly period ended March 31, 2007 to restate the interim financial statements for the periods ended March 31, 2007 and 2006. The following items have been amended as a result of this restatement:

	•		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

The impact of the restatement decreased both income from continuing operations and net income for the three months ended March 31, 2007 by $0.3 million or less than one-half percent from amounts previously reported. The impact of the restatement decreased income from continuing operations and net income for the three months ended March 31, 2006 by $0.6 million or 1.3% and 4.1%, respectively, from amounts previously reported. The restatement had no effect on our previously reported revenues or net cash flows. The cumulative effect of the errors decreased shareholders’ equity as of March 31, 2007 by $24.9 million or 0.6% of total liabilities and shareholders’ equity and by 1.4% of total shareholders’ equity. The cumulative effect of the errors decreased shareholders’ equity as of December 31, 2006 by $24.3 million or 0.6% of total liabilities and shareholders’ equity and 1.4% of total shareholders’ equity.

The errors primarily arose in three different postemployment employee benefit plans at a wholly owned subsidiary and in postemployment employee benefit plans at two of our consolidated joint ventures. Four of these postemployment employee benefit plans had been accounted for inappropriately on a cash basis rather than an accrual basis as required by U.S. generally accepted accounting principles (U.S. GAAP), while the accrual recorded in the financial statements for the fifth plan was not calculated in accordance with U.S. GAAP. The cumulative effect of the errors resulted in an understatement of postemployment employee benefit plan liabilities of $39.7 million and $38.9 million at March 31, 2007 and December 31, 2006, respectively.

See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 16 - Restatement of Consolidated Financial Statements” contained in the Notes to Financial Statements for more information regarding the restatement and changes to previously issued financial statements.

We also concluded that a material weakness in internal control over financial reporting existed for deficiencies at some international locations due to insufficient requisite technical knowledge of accounting for postemployment employee benefit plans in accordance with U.S. GAAP for the 2004 through 2006 fiscal years and through June 30, 2007, and that our disclosure controls were not effective solely because of this material weakness. As such, we have modified our discussion of disclosure controls and procedures included in “Item 4 - Controls and Procedures.”

Except as noted above, we have not updated or modified disclosures presented in the original quarterly report on Form 10-Q for the quarterly period ended March 31, 2007 except as required to reflect the effects of the restatement on this quarterly report on Form 10-Q/A. Accordingly, this quarterly report on Form 10-Q/A does not reflect events occurring after the filing of our original quarterly report on Form 10-Q on May 4, 2007.

THE LUBRIZOL CORPORATION
Quarterly Report on Form 10-Q/A
Quarter Ended March 31, 2007

Table of Contents

				Page Number
PART I. FINANCIAL INFORMATION
Item 1		Financial Statements (unaudited)			4
		Consolidated Statements of Income (as restated)			4
		Consolidated Balance Sheets (as restated)			5
		Consolidated Statements of Cash Flows (as restated)			6
		Notes to Consolidated Financial Statements (as restated)			7
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3		Quantitative and Qualitative Disclosures about Market Risk			40
Item 4		Controls and Procedures			41
PART II. OTHER INFORMATION
Item 1		Legal Proceedings			42
Item 1A		Risk Factors			42
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds			42
Item 6		Exhibits			43
		Signatures			44
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

THE LUBRIZOL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended
		March 31,
(In Millions of Dollars Except Per Share Data)		2007					2006
		(as restated, see					(as restated, see
		Note 16)					Note 16)
Net sales			$	1,075.8				$	983.5
Royalties and other revenues				0.9					0.6
Total revenues				1,076.7					984.1
Cost of sales				798.3					739.3
Selling and administrative expenses				102.3					93.3
Research, testing and development expenses				51.7					49.6
Amortization of intangible assets				6.0					5.8
Restructuring and impairment (credits) charges				(2.4	)				1.8
Total costs and expenses				955.9					889.8
Other income (expense) – net				5.7					(1.5	)
Interest income				7.1					2.2
Interest expense				(24.2	)				(25.3	)
Income from continuing operations before income taxes				109.4					69.7
Provision for income taxes				38.1					24.4
Income from continuing operations				71.3					45.3
Discontinued operations – net of tax				–					(60.7	)
Net income (loss)			$	71.3				$	(15.4	)
Basic earnings (loss) per share:
Continuing operations			$	1.03				$	0.66
Discontinued operations				–					(0.89	)
Net income (loss) per share, basic			$	1.03				$	(0.23	)
Diluted earnings (loss) per share:
Continuing operations			$	1.02				$	0.65
Discontinued 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.

THE LUBRIZOL CORPORATION

CONSOLIDATED BALANCE SHEETS

		March 31,					December 31,
(In Millions of Dollars Except Share Data)		2007					2006
		(as restated, see
		Note 16)
ASSETS
Cash and short-term investments			$	582.8				$	575.7
Receivables				625.5					573.6
Inventories				573.0					589.0
Other current assets				86.7					98.0
Total current assets				1,868.0					1,836.3
Property and equipment – at cost				2,580.3					2,546.0
Less accumulated depreciation				1,496.5					1,464.7
Property and equipment – net				1,083.8					1,081.3
Goodwill				1,092.9					1,076.1
Intangible assets – net				325.4					322.8
Investments in non-consolidated companies				7.2					7.7
Other assets				71.7					66.7
TOTAL			$	4,449.0				$	4,390.9
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt and current portion of long-term debt			$	6.1				$	3.7
Accounts payable				360.2					340.5
Accrued expenses and other current liabilities				229.7					290.2
Total current liabilities				596.0					634.4
Long-term debt				1,507.1					1,538.0
Pension obligations				226.7					237.9
Other postretirement benefit obligations				93.0					93.5
Noncurrent liabilities				141.0					72.3
Deferred income taxes				76.1					80.4
Total liabilities				2,639.9					2,656.5
Minority interest in consolidated companies				51.7					51.3
Contingencies and commitments
Shareholders’ equity:
Preferred stock without par value – authorized and unissued:
Serial preferred stock – 2,000,000 shares				–					–
Serial preference shares – 25,000,000 shares				–					–
Common shares without par value:
Authorized – 120,000,000 shares
Outstanding – 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					710.1
Retained earnings				1,077.5					1,033.8
Accumulated other comprehensive loss				(48.6	)				(60.8	)
Total shareholders’ equity				1,757.4					1,683.1
TOTAL			$	4,449.0				$	4,390.9

Amounts shown are unaudited.

See accompanying notes to the financial statements.

THE LUBRIZOL CORORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended
		March 31,
(In Millions of Dollars)		2007					2006
		(as restated, see					(as restated, see
		Note 16)					Note 16)
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (loss)			$	71.3				$	(15.4	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization				39.2					42.9
Deferred income taxes				10.7					7.9
Deferred compensation				8.0					3.8
Restructuring and impairment charges				–					61.0
(Gain) loss from divestitures and sales of property and equipment				(7.9	)				0.9
Change 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	)				4.1
Other items – net				(2.7	)				2.1
Total operating activities				98.0					25.7
INVESTING ACTIVITIES
Capital expenditures				(31.9	)				(30.3	)
Acquisitions				(15.7	)				–
Net proceeds from divestitures and sales of property and equipment				11.4					8.5
Other items – net				(0.1	)				–
Total investing activities				(36.3	)				(21.8	)
FINANCING ACTIVITIES
Changes in short-term debt – net				2.4					0.3
Repayments 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					7.3
Total financing activities				(55.7	)				(33.8	)
Effect of exchange rate changes on cash				1.1					0.8
Net increase (decrease) in cash and short-term investments				7.1					(29.1	)
Cash and short-term investments at the beginning of period				575.7					262.4
Cash and short-term investments at the end of period			$	582.8				$	233.3

Amounts shown are unaudited.

See accompanying notes to the financial statements.

March 31, 2007
(Unaudited)

(In Millions of Dollars except Share and Per Share Data)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals unless otherwise noted) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

2. Significant Accounting Policies

Net Income Per Share

Net income per share is computed by dividing net income by the weighted-average common shares outstanding during the period, including contingently issuable shares. Net income per diluted share includes the dilutive effect resulting from outstanding stock options and awards. Per share amounts from continuing operations are computed as follows:

		Three Months Ended
		March 31,
		2007					2006
Numerator:
Income from continuing operations			$	71.3				$	45.3
Denominator:
Weighted-average common shares outstanding				69.3					68.4
Dilutive effect of stock options and awards				0.8					0.7
Denominator for income from continuing operations per share, diluted				70.1					69.1
Income from continuing operations per share, basic			$	1.03				$	0.66
Income from continuing operations per share, diluted			$	1.02				$	0.65

Weighted-average shares issuable upon the exercise of stock options that were excluded from the diluted earnings per share calculations because they were antidilutive for the three months ended March 31, 2007 and 2006 were 0.7 million and 0.1 million, respectively.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

New Accounting Standards

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This statement permits entities to make an irrevocable election to measure many financial instruments and certain other items at fair value at specified election dates. The fair value option may be applied instrument by instrument and must be applied to entire instruments. Unrealized gains and losses on items for which the entity elects the fair value option are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of the fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Measurements.” Entities are not permitted to apply this statement retrospectively to the fiscal years preceding the effective date unless the entity chooses early adoption. The company currently is evaluating the impact of this recently issued standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosure about fair value measurements. SFAS No. 157 does not expand the use of fair value measures in financial statements, but simplifies and codifies related guidance within U.S. GAAP. SFAS No. 157 establishes a fair value hierarchy from observable market data as the highest level to fair value based on an entity’s own fair value assumptions as the lowest level. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those years. SFAS No. 157 requires adoption prospectively as of the beginning of the fiscal year in which this statement is initially applied, with the exception of certain financial instruments, in which adoption is applied retrospectively as of the beginning of the fiscal year in which this statement is initially applied. The company currently is evaluating the impact of this recently issued standard on its consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Stock-Based Compensation

The company utilizes the 2005 Stock Incentive Plan (2005 Plan) and other deferred compensation plans to provide equity awards to its key employees. The 2005 Plan, approved by the company’s shareholders on April 25, 2005, provides for the granting of stock appreciation rights, restricted and unrestricted shares and options to buy common shares up to an amount equal to 4,000,000 common shares, of which no more than 2,000,000 can be settled as full-value awards. After the 2,000,000 limit has been reached, full-value awards are counted in a 3-to-1 ratio against the 4,000,000 limit. Options become exercisable 50% one year after date of grant, 75% after two years, 100% after three years and expire up to 10 years after grant. In addition, the 2005 Plan provides each nonemployee director of the company an automatic annual grant of restricted stock units worth approximately $0.1 million based on the fair market value of the company’s common shares on the date of each Annual Meeting of Shareholders. These restricted stock units vest one year after the grant date.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

The fair value of share-based payment awards are estimated using the Black-Scholes option pricing model. There were 213,200 stock options granted during the three months ended March 31, 2007. There were no stock options granted during the three months ended March 31, 2006. The weighted-average assumptions used to value the options granted during the first quarter of 2007 were as follows:

Risk-free interest rate			4.8	%
Dividend yield			2.0	%
Volatility			17.8	%
Expected life (years)			10.0
Weighted-average fair value of options granted during the period		$	14.68

Cash received from option exercises and purchases during the three months ended March 31, 2007 was $9.4 million. The company realized a reduction in its income tax payable of $2.3 million for the three months ended March 31, 2007 relating to the exercise of nonqualified stock options. For accounting purposes, these tax benefits were realized as increases in paid-in capital included in the common shares caption in shareholders’ equity (see Note 14).

As of March 31, 2007, there was $23.4 million of total before-tax unrecognized compensation cost related to nonvested stock-based awards. That cost is expected to be recognized over a weighted-average period of 2.1 years. The company is using previously purchased treasury shares for all net shares issued for option exercises, long-term incentive plans and restricted stock awards.

Under the company’s long-term incentive program, dollar-based target awards are determined by the organization and compensation committee of the board of directors for three-year performance periods. During the three months ended March 31, 2007, the award for the 2004-2006 performance period was paid resulting in the issuance of 178,541 shares in lieu of a cash distribution. In addition, during the three months ended March 31, 2006, the award for the 2003-2005 performance period was paid in cash.

The following table identifies the number of shares expected to be issued based on current performance measures and the stock price on the date of grant for the performance shares granted:

		Expected				Average
		Number of Units				Stock Price on
Award		to be Issued				Date of Grant
2005-2007			268,881			$	39.44
2006-2008			298,034			$	43.07
2007-2009			162,414			$	53.07

Performance-based stock awards as of March 31, 2007 and changes during the three months ended March 31, 2007 were as follows:

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

								Weighted-
								Average
		Share						Grant Date
		Units						Fair Value
Nonvested at January 1, 2007				370,448				$	40.95
Granted				129,930				$	53.07
Performance increase				228,981				$	43.66
Vested				–					–
Forfeited				–					–
Nonvested at March 31, 2007				729,359				$	43.96

The following table reflects the total stock-based compensation expense and the related tax benefit recognized in the consolidated statements of income.

		Three Months Ended
		March 31,
			2007					2006
Restricted share units:
Long-term incentive program				$   6.6					$  1.7
Other plans				2.9					1.7
Stock options				0.7					0.8
Total				$ 10.2					$  4.2
Tax benefit				$  3.6					$  1.5

4. Acquisitions

On February 7, 2007, the company completed the acquisition of the entire metalworking additives product line of Lockhart Chemical Company (Lockhart), a private company with headquarters in Gibsonia, Pennsylvania, for approximately $15.7 million. Annualized revenues of these products are approximately $20.0 million. The company began including the results of the acquired products in the Lubrizol Additives segment in February 2007. The purchase price for this acquisition included goodwill of $8.1 million.

5. Divestitures

In May 2006, the company sold the food ingredients and industrial specialties business (FIIS) and the active pharmaceutical ingredients and intermediate compounds business (A&I), both of which were included in the Lubrizol Advanced Materials segment. At March 31, 2006, these businesses were classified as held-for-sale pursuant to the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” as definitive sales agreements were signed during March 2006. The held-for-sale classification triggered an impairment test, which resulted in an impairment charge of $60.6 million recorded in the first quarter of 2006 to reflect the FIIS business at its fair value. The results of these divested businesses have been reflected in the discontinued operations - net of tax line item in the company’s consolidated statement of income for the three months ended March 31, 2006.

In February 2006, the company sold certain assets and liabilities of its Telene^® resins business (Telene), which was included in the Lubrizol Advanced Materials segment. The results of Telene have been reflected in the

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

discontinued operations - net of tax line item in the company’s consolidated statement of income for the three months ended March 31, 2006.

Total revenues from discontinued operations for the three months ended March 31, 2006 were $107.1 million. Net loss from discontinued operations was $60.7 million or $0.88 per diluted share.

6.    Inventories

The company’s inventories were comprised of the following:

						March 31,				December 31,
						2007				2006
Finished products							$ 310.7				$ 315.0
Products in process							87.7				108.2
Raw materials							146.3				138.2
Supplies and engine test parts							28.3				27.6
Total inventory							$ 573.0				$ 589.0

7.    Goodwill and Intangible Assets

Goodwill is tested for impairment at the reporting unit level as of October 1 each year or if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The carrying amount of goodwill by reporting segment as of March 31, 2007 follows:

		Lubrizol
		Advanced				Lubrizol
		Materials				Additives				Total
Balance, January 1, 2007			$ 978.3				$   97.8				$ 1,076.1
Additions			–				8.1				8.1
Translation & other adjustments			8.6				0.1				8.7
Balance, March 31, 2007			$ 986.9				$ 106.0				$ 1,092.9

The major components of the company’s identifiable intangible assets are customer lists, technology, trademarks, patents, land-use rights and non-compete agreements. Definite-lived intangible assets are amortized over their useful lives, which range between 3 and 40 years. The company’s indefinite-lived intangible assets consist of certain trademarks that are tested for impairment each year as of October 1 or more frequently if impairment indicators arise. Indefinite-lived trademarks are assessed for impairment separately from goodwill.

The following table shows the components of identifiable intangible assets.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

		March 31, 2007								December 31, 2006
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Amortized intangible assets:
Customer lists			$ 150.1				$ 26.3				$ 145.0				$ 24.0
Technology			141.5				47.4				139.8				44.9
Trademarks			21.9				5.8				20.7				5.5
Patents			14.1				4.5				14.0				4.2
Land-use rights			7.5				1.2				7.5				1.2
Non-compete agreements			8.4				7.8				8.2				7.2
Other			0.9				0.9				0.9				0.7
Total amortized intangible assets			344.4				93.9				336.1				87.7
Non-amortized trademarks			74.9				–				74.4				–
Total			$ 419.3				$ 93.9				$ 410.5				$ 87.7

Annual intangible amortization expense for the next five years will approximate $23.5 million in 2007, $22.0 million in 2008 and $20.3 million in 2009, 2010 and 2011, respectively.

8.    Income Taxes

Effective January 1, 2007, the company adopted the provisions of FASB Interpretation (FIN) No. 48 “Accounting for Uncertainty in Income Taxes.” FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in tax returns. Under FIN No. 48, the economic benefit associated with a tax position only will be recognized if it is more likely than not that a tax position ultimately will be sustained. After this threshold is met, a tax position is reported at the largest amount of benefit that is more likely than not to be ultimately sustained. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. Prior to January 1, 2007, the company regularly assessed positions with regard to tax exposures and recorded liabilities for uncertain income tax positions in accordance with SFAS No. 5, “Accounting for Contingencies.”

As a result of adopting FIN No. 48 on January 1, 2007, the company recognized an $8.9 million reduction to retained earnings and a $5.4 million increase to goodwill for pre-acquisition income tax liabilities of Noveon International, Inc. (Noveon International). As of January 1, 2007, after recording this FIN No. 48 adoption impact, the company had gross unrecognized tax benefits of $57.8 million, of which $38.8 million, if recognized, would affect the effective tax rate.

The company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the income tax provision. As of January 1, 2007, the date of adoption, the company had accrued interest of $7.1 million. Penalties were immaterial to the company’s consolidated financial statements.

The company operates in numerous taxing jurisdictions and is subject to regular examinations by various U.S. federal, state and foreign jurisdictions. The company’s income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which the company does business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions and difficulty in estimating the final resolution of complex tax audit matters, the company’s estimates of income tax liabilities may differ from actual payments or assessments.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

It is reasonably possible that unrecognized tax benefits may decrease by up to $8.0 million within 12 months of the January 1, 2007 adoption date primarily as a result of the settlement of foreign audits and the closure of foreign statutes of limitations.

With few exceptions, the company is no longer subject to U.S. federal, state and local tax examinations for years before 2001 and foreign jurisdiction examinations for years before 2000.

Effective with the adoption of FIN No. 48, the majority of the company’s unrecognized tax benefits are classified as noncurrent liabilities because payment of cash is not expected within one year. Prior to the adoption of FIN No. 48, the company classified unrecognized tax benefits in accrued expenses and other current liabilities.

9.    Comprehensive Income (Loss)

Total comprehensive income (loss) was comprised of the following:

		Three Months Ended
		March 31,
		2007				2006
Net income (loss)			$ 71.3				$ (15.4	)
Foreign currency translation adjustment			10.0				6.7
Pension and other postretirement benefit plans			–				(0.8	)
Unrealized gain (loss) - natural gas hedges			1.5				(0.8	)
Amortization of treasury rate locks			0.7				0.7
Total comprehensive income (loss)			$ 83.5				$ (9.6	)

10.    Segment Reporting

The company is organized into two operating and reporting segments. The company changed the names of its two reporting segments in 2007. The new segment names are Lubrizol Additives, previously known as Lubricant Additives, and Lubrizol Advanced Materials, previously known as Specialty Chemicals. The change was in name only as the management structure of the segments and product lines included in each segment remained unchanged. The Lubrizol Additives segment represented 65% of the company’s consolidated revenues for the three months ended March 31, 2007 and is comprised of the company’s businesses in engine additives and driveline and industrial oil additives. The Lubrizol Advanced Materials segment represented 35% of the company’s consolidated revenues for three months ended March 31, 2007 and is comprised of the businesses in engineered polymers, performance coatings and Noveon consumer specialties.

Lubrizol Additives consists of two product lines: engine additives and driveline and industrial oil additives. Engine additives is comprised of additives for lubricating engine oils, such as for gasoline, diesel, marine and stationary gas engines and additive components, additives for fuel products and refinery and oil field chemicals, as well as outsourcing strategies for supply chain and knowledge center management. In addition, this product line sells additive components and viscosity improvers within its lubricant and fuel additives product areas. Driveline and industrial oil additives is comprised of additives for driveline oils, such as automatic transmission fluids, gear oils and tractor lubricants and industrial oil additives, such as additives for hydraulic, grease and metalworking fluids, as well as compressor lubricants. Lubrizol Additives product lines generally are produced in company-owned shared manufacturing facilities and largely sold to a common customer base.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

The Lubrizol Advanced Materials segment consists of engineered polymers, performance coatings and Noveon consumer specialties product lines. The engineered polymers product line is characterized by products such as TempRite^® engineered polymers and Estane^® engineered polymers. Engineered polymers products are sold to a diverse customer base comprised of major manufacturers in the construction, automotive, telecommunications, electronics and recreation industries. The performance coatings product line includes high-performance polymers and additives for specialty paper, graphic arts, paint and textile coatings applications. The Noveon consumer specialties product line is characterized by global production of acrylic thickeners, specialty monomers, film formers, fixatives, emollients, silicones, surfactants, botanicals and process chemicals. The company markets products in the Noveon consumer specialties product line to the personal care and pharmaceutical primary end-use industries. The Noveon consumer specialties products are sold to customers worldwide and these customers include major manufacturers of cosmetics, personal care products, water soluble polymers and household products. During the first quarter of 2006, the company completed the sale of the Telene business and entered into sales agreements to divest the FIIS and A&I businesses, which were subsequently sold during the second quarter of 2006. The company recorded the results of operations of these businesses either divested or classified as held-for-sale in the discontinued operations - net of tax line item in the consolidated statements of income for 2006.

The company primarily evaluates performance and allocates resources based on segment operating income, defined as revenues less expenses identifiable to the product lines included within each segment, as well as projected future returns. Segment operating income reconciles to consolidated income from continuing operations before income taxes by deducting corporate expenses and income that are not attributed to the operating segments, restructuring and impairment (credits) charges and net interest expense.

The following table presents a summary of the results of the company’s reportable segments:

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

		Three Months Ended
		March 31,
		2007				2006
Revenues from external customers:
Lubrizol Additives		$	696.0			$	627.5
Lubrizol Advanced Materials			380.7				356.6
Total revenues		$	1,076.7			$	984.1
Segment operating income:
Lubrizol Additives		$	100.9			$	73.5
Lubrizol Advanced Materials			45.4				44.6
Segment operating income			146.3				118.1
Corporate 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			$	69.7
The company’s total assets by segment were as follows:
		March 31,			December 31,
		2007				2006
Segment total assets:
Lubrizol Additives		$	1,451.9			$	1,397.6
Lubrizol Advanced Materials			2,209.8				2,193.7
Total segment assets			3,661.7				3,591.3
Corporate assets			787.3				799.6
Total consolidated assets		$	4,449.0			$	4,390.9

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

11.    Pension and Postretirement Benefits

The components of net periodic pension cost and net periodic non-pension postretirement benefit cost consisted of the following:

		Three Months Ended
		March 31,
		2007				2006
Pension benefits:
Service cost - benefits earned during period			$   7.5				$   8.3
Interest cost on projected benefit obligation			9.8				8.5
Expected return on plan assets			(8.6	)			(7.1	)
Amortization of prior service costs			0.7				0.5
Amortization of initial net obligation			–				0.1
Settlement / curtailment loss			–				3.3
Recognized net actuarial loss			1.2				2.1
Net periodic pension cost			$ 10.6				$ 15.7
Other postretirement benefits:
Service cost - benefits earned during period			$   0.4				$   0.5
Interest cost on projected benefit obligation			1.4				1.4
Amortization of prior service costs			(1.6	)			(2.1	)
Amortization of initial net obligation			0.1				0.1
Recognized net actuarial loss			0.3				0.4
Net periodic non-pension postretirement benefit cost			$   0.6				$   0.3

Expected employer contributions worldwide for pension benefits in 2007 approximate $59.5 million for the qualified plans, of which $22.4 million was contributed during the three months ended March 31, 2007. The portion of the 2007 total expected contributions attributable to the U.S. qualified pension plans is $34.5 million, of which $19.1 million was contributed during the three months ended March 31, 2007. The non-qualified pension plans and other postretirement benefit plans are unfunded. As a result, the 2007 expected contributions to these plans of $1.8 million and $4.8 million, respectively, represent actuarial estimates of future assumed payments based on historic retirement and payment patterns as well as medical trend rates and historical claim information, as appropriate. The settlement loss in 2006 resulted from a distribution from a non-qualified pension plan.

12.    Restructuring and Impairment (Credits) Charges

During the three months ended March 31, 2007 and 2006, the company recorded aggregate restructuring and impairment (credits) charges of ($2.4) million and $1.8 million, respectively. The net restructuring and impairment credit during the first quarter of 2007 primarily related to a pretax gain and restructuring credit of $2.8 million recorded on the sale of the manufacturing facility located in Bromborough, U.K. in January 2007 for net cash proceeds of $5.9 million.

The following table shows the reconciliation of the restructuring liability since January 1, 2007 by major restructuring activity:

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

		Liability				Restructuring								Liability
		January 1,				and Impairment								March 31,
		2007				(Credits) Charges				Cash Paid				2007
Bromborough, U.K. plant closure and sale			$ 1.0				$ (0.8	)			$     –				$ 0.2
Lubrizol Advanced Materials plant closures and workforce reductions			0.7				0.3				(0.4	)			0.6
Corporate / 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

Included in restructuring and impairment (credits) charges for the three months ended March 31, 2007 was a $2.0 million gain on the sale of the U.K. plant.

13.    Debt

During the three months ended March 31, 2007, the company repaid €25.0 million against its €250.0 million revolving credit agreement. The remaining balance outstanding as of March 31, 2007 under this arrangement was €60.0 million, or $80.1 million.

14.    Shareholders’ Equity

The following table summarizes the changes in shareholders’ equity since December 31, 2006:

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

						Shareholders’ Equity
														Accumulated
		Number of												Other
		Shares				Common				Retained				Comprehensive
		Outstanding				Shares				Earnings				(Loss) Income				Total
Balance, December 31, 2006			69.0				$ 710.1				$ 1,033.8				$ (60.8	)			$ 1,683.1
Cumulative 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	)			1,674.2
Comprehensive income:
Net income							–				71.3				–				71.3
Other comprehensive income							–				–				12.2				12.2
Total comprehensive income																			83.5
Deferred stock compensation							7.3				–				–				7.3
Common 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				–				–				11.7
Balance, March 31, 2007			69.0				$ 728.5				$ 1,077.5				$ (48.6	)			$ 1,757.4

15.    Contingencies

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

General

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

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

Environmental

The company’s environmental engineers and consultants review and monitor environmental issues at operating facilities and, where appropriate, the company initiates corrective and/or preventive environmental projects to ensure environmental compliance and safe and lawful activities at its current operations. The company also conducts compliance and management systems audits.

The company and its subsidiaries are generators of both hazardous and non-hazardous wastes, the treatment, storage, transportation and disposal of which are regulated by various laws and governmental regulations. These laws and regulations generally impose liability for costs to investigate and remediate contamination without regard to fault and, under certain circumstances, liability may be joint and several resulting in one party being held responsible for the entire obligation. Liability also may include damages to natural resources. Although the company believes past operations were in substantial compliance with the then-applicable regulations, either the company or the predecessor of Noveon International, the Performance Materials Segment of Goodrich Corporation (Goodrich), has been designated under a country’s laws and/or regulations as a potentially responsible party (PRP) in connection with several sites including both third party sites and/or current operating facilities.

The company participates in the remediation process for onsite and third party waste management sites at which the company has been identified as a PRP. This process includes investigation, remedial action selection and implementation, as well as discussions and negotiations with other parties, which primarily include PRPs, past owners and operators and governmental agencies. The estimates of environmental liabilities are based on the results of this process. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, remediation standards and evolving technologies for managing investigations and remediation. The company revises its estimates accordingly as events in this process occur and additional information is obtained.

The company’s environmental reserves, measured on an undiscounted basis, totaled $13.4 million at March 31, 2007 and $14.2 million at December 31, 2006. Of these amounts, $4.0 million and $4.5 million were included in accrued expenses and other current liabilities at March 31, 2007 and December 31, 2006, respectively. Goodrich provided Noveon International with an indemnity for various environmental liabilities. The company estimates Goodrich’s share of such currently identified liabilities under the indemnity, which extends through February 2011, to be approximately $3.6 million of which $0.6 million of the recovery is included in receivables and $3.0 million is included in other assets. There are specific environmental contingencies for company-owned sites for which third parties such as past owners and/or operators are the named PRPs and also for which the company is indemnified by Goodrich. Goodrich currently is indemnifying Noveon International for several environmental remediation projects. Goodrich’s share of all of these liabilities may increase to the extent such third parties fail to honor their obligations through February 2011.

The company believes that its environmental accruals are adequate based on currently available information. The company believes that it is reasonably possible that $20.5 million in additional costs may be incurred at certain locations beyond the amounts accrued as a result of new information, newly discovered conditions, changes in remediation standards or technologies or a change in the law. Additionally, as the indemnification from Goodrich extends through February 2011, changes in assumptions regarding when costs will be incurred may result in additional expenses to the company. Additional costs in excess of $20.5 million cannot currently be estimated.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

GUARANTEES

On May 1, 2006, the company sold the FIIS business to SPM Group Holdings, LLC, now known as Emerald Performance Materials, LLC (Emerald). As a result of the sale, Emerald became responsible for contracts relating to FIIS, including a Toluene Sale and Purchase Agreement between SK Corporation (SK) and the company dated December 6, 2005 (the Toluene Agreement). Although Emerald has assumed the obligations under the Toluene Agreement, the company has guaranteed to SK the timely performance of Emerald’s payment obligations under the Toluene Agreement for purchases thereunder. The term of the Toluene Agreement extends to January 31, 2008.

If Emerald does not satisfy its obligations under the Toluene Agreement, SK shall notify the company and use commercially reasonable efforts to collect what is due from Emerald. If SK is unable to collect from Emerald, then SK may make a demand on the company for payment of the outstanding obligations. The guarantee is revocable by the company upon 60 days’ prior written notice.

Because of the guarantee’s existing revocation clause, the company estimates that the maximum liability under the guarantee would be approximately $15.2 million, representing the estimated liability for two shipments to Emerald. However, the company believes that it is highly unlikely that an event would occur requiring the company to pay any monies pursuant to the guarantee. Accordingly, no liability has been reflected in the accompanying consolidated balance sheet at March 31, 2007.

INDEMNIFICATIONS

In connection with the sale of the FIIS business, the company has provided indemnifications to Emerald with respect to the business sold. These indemnifications have been associated with the price and quantity of raw material purchases, permit costs, costs incurred due to the inability to obtain permits and environmental matters. In each of these circumstances, payment by the company is dependent on Emerald filing a claim. In addition, the company’s obligations under these agreements may be limited in terms of time and/or amount. It is not possible to predict the maximum potential amount of future payments under certain of these agreements due to the conditional nature of the company’s obligations and the unique facts and circumstances involved in each particular agreement. The company believes that if it were to incur a loss in any of these matters, such loss would not have a material effect on the company’s business, financial condition or results of operations. For those indemnification agreements where a payment by the company is probable and estimable, a liability has been recorded as of March 31, 2007.

16.    Restatement of Consolidated Financial Statements

On October 22, 2007, the company concluded to restate its previously issued financial statements because of reporting errors relating to five postemployment employee benefit plans in three foreign countries. Accordingly, the company has restated its previously issued financial statements included in its most recently filed annual report on Form 10-K/A for the year ended December 31, 2006. As a result, the company also has restated the accompanying interim financial statements for the periods ended March 31, 2007 and 2006.

The impact of the restatement decreased both income from continuing operations and net income for the three months ended March 31, 2007 by $0.3 million or less than one-half percent from amounts previously reported. The impact of the restatement decreased income from continuing operations and net income for the three months ended March 31, 2006 by $0.6 million or 1.3% and 4.1%, respectively, from amounts previously reported. The restatement had no effect on the company’s previously reported revenues or net cash flows. The cumulative effect of the errors decreased shareholders’ equity as of March 31, 2007 by $24.9 million or 0.6% of total liabilities and shareholders’ equity and 1.4% of total shareholders’ equity. The cumulative effect of the errors decreased shareholders’ equity as of December 31, 2006 by $24.3 million or 0.6% of total liabilities and shareholders’ equity and 1.4% of total shareholders’ equity.

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

The errors primarily arose in three different postemployment employee benefit plans at a wholly owned subsidiary and in postemployment employee benefit plans at two of the company’s consolidated joint ventures. Four of these postemployment employee benefit plans had been accounted for inappropriately on a cash basis rather than an accrual basis as required by U.S. GAAP, while the accrual recorded in the financial statements for the fifth plan was not calculated in accordance with U.S. GAAP. The cumulative effect of the errors resulted in an understatement of postemployment employee benefit plan liabilities of $39.7 million and $38.9 million at March 31, 2007 and December 31, 2006, respectively.

The following tables show the impact of the restatement:

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

Consolidated Statement of Income

		Three Months Ended
(In Millions of Dollars Except Per Share Data)		March 31, 2007
		(as previously
		reported)					(adjustments)					(as restated)
Net sales			$	1,075.8				$	–				$	1,075.8
Royalties and other revenues				0.9					–					0.9
Total revenues				1,076.7					–					1,076.7
Cost of sales				797.7					0.6					798.3
Selling and administrative expenses				102.3					–					102.3
Research, testing and development expenses				51.7					–					51.7
Amortization of intangible assets				6.0					–					6.0
Restructuring and impairment credits				(2.4	)				–					(2.4	)
Total costs and expenses				955.3					0.6					955.9
Other income (expense) – net				5.6					0.1					5.7
Interest income				7.1					–					7.1
Interest expense				(24.2	)				–					(24.2	)
Income from continuing operations before income taxes				109.9					(0.5	)				109.4
Provision for income taxes				38.3					(0.2	)				38.1
Income from continuing operations				71.6					(0.3	)				71.3
Discontinued operations – net of tax				–					–					–
Net income			$	71.6				$	(0.3	)			$	71.3
Basic earnings per share:
Continuing operations			$	1.03				$	–				$	1.03
Discontinued operations				–					–					–
Net income per share, basic			$	1.03				$	–				$	1.03
Diluted earnings per share:
Continuing operations			$	1.02				$	–				$	1.02
Discontinued operations				–					–					–
Net income per share, diluted			$	1.02				$	–				$	1.02

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

Consolidated Statement of Income

		Three Months Ended
(In Millions of Dollars Except Per Share Data)		March 31, 2006
		(as previously
		reported)					(adjustments)					(as restated)
Net sales			$	983.5				$	–				$	983.5
Royalties and other revenues				0.6					–					0.6
Total revenues				984.1					–					984.1
Cost of sales				738.4					0.9					739.3
Selling and administrative expenses				93.3					–					93.3
Research, testing and development expenses				49.6					–					49.6
Amortization of intangible assets				5.8					–					5.8
Restructuring and impairment charges				1.8					–					1.8
Total costs and expenses				888.9					0.9					889.8
Other expense – net				(1.5	)				–					(1.5	)
Interest income				2.2					–					2.2
Interest expense				(25.3	)				–					(25.3	)
Income from continuing operations before income taxes				70.6					(0.9	)				69.7
Provision for income taxes				24.7					(0.3	)				24.4
Income from continuing operations				45.9					(0.6	)				45.3
Discontinued 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	)			$	0.66
Discontinued 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	)			$	0.65
Discontinued operations				(0.88	)				–					(0.88	)
Net loss per share, diluted			$	(0.22	)			$	(0.01	)			$	(0.23	)

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

Consolidated Balance Sheet

		March 31, 2007
		(as previously
(In Millions of Dollars)		reported)					(adjustments)					(as restated)
ASSETS
Cash and short-term investments			$	582.8				$	–				$	582.8
Receivables				625.5					–					625.5
Inventories				573.0					–					573.0
Other current assets				86.7					–					86.7
Total current assets				1,868.0					–					1,868.0
Property and equipment – at cost				2,580.3					–					2,580.3
Less accumulated depreciation				1,496.5					–					1,496.5
Property and equipment – net				1,083.8					–					1,083.8
Goodwill				1,092.9					–					1,092.9
Intangible assets – net				325.4					–					325.4
Investments in non-consolidated companies				7.2					–					7.2
Other assets				67.0					4.7					71.7
TOTAL			$	4,444.3				$	4.7				$	4,449.0
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt and current portion of long-term debt			$	6.1				$	–				$	6.1
Accounts payable				360.2					–					360.2
Accrued expenses and other current liabilities				227.5					2.2					229.7
Total current liabilities				593.8					2.2					596.0
Long-term debt				1,507.1					–					1,507.1
Pension obligations				206.7					20.0					226.7
Other postretirement benefit obligations				81.1					11.9					93.0
Noncurrent liabilities				135.4					5.6					141.0
Deferred income taxes				84.7					(8.6	)				76.1
Total liabilities				2,608.8					31.1					2,639.9
Minority interest in consolidated companies				53.2					(1.5	)				51.7
Contingencies and commitments
Preferred stock without par value – unissued				–					–					–
Common shares without par value				728.5					–					728.5
Retained earnings				1,094.2					(16.7	)				1,077.5
Accumulated other comprehensive loss				(40.4	)				(8.2	)				(48.6	)
Total shareholders’ equity				1,782.3					(24.9	)				1,757.4
TOTAL			$	4,444.3				$	4.7				$	4,449.0

THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
March 31, 2007
(Unaudited)

Consolidated Statement of Cash Flows

		Three Months Ended
		March 31, 2007
		(as previously
(In Millions of Dollars)		reported)					(adjustments)					(as restated)
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income			$	71.6				$	(0.3	)			$	71.3
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization				39.2					–					39.2
Deferred income taxes				10.7					–					10.7
Deferred compensation				8.0					–					8.0
Gain 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					–					18.8
Accounts payable, accrued expenses and other current liabilities				16.7					(0.2	)				16.5
Other 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					–					98.0
INVESTING ACTIVITIES
Capital expenditures				(31.9	)				–					(31.9	)
Acquisitions				(15.7	)				–					(15.7	)
Net proceeds from divestitures and sales of property and equipment				11.4					–					11.4
Other items – net				(0.1	)				–					(0.1	)
Total investing activities				(36.3	)				–					(36.3	)
FINANCING ACTIVITIES
Changes in short-term debt – net				2.4					–					2.4
Repayments 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					–					11.7
Total financing activities				(55.7	)				–					(55.7	)
Effect of exchange rate changes on cash				1.1					–					1.1
Net increase in cash and short-term investments				7.1					–					7.1
Cash and short-term investments at the beginning of period				575.7					–					575.7
Cash and short-term investments at the end of period			$	582.8				$	–				$	582.8