10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2004

OR

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

For the transition period from                      to                     

Commission File Number 1-5263

THE LUBRIZOL CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-0367600
(State or other jurisdiction of incorporation or organization)	(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 x No ¨

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

Number of the registrant’s common shares, without par value, outstanding, as of March 31, 2004: 51,618,086.

THE LUBRIZOLA CORPORATION

Quarterly Report on Form 10-Q

Quarter Ended March 31, 2004

Table of Contents

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Statements of Income	2
	Consolidated Balance Sheets	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4	Controls and Procedures	21
PART II.	OTHER INFORMATION
Item 2	Changes in Securities and Use of Proceeds	22
Item 6	Exhibits and Reports on Form 8-K	22
	Signatures	23

1

PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

THE LUBRIZOL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	Three Month Period Ended March 31
(In Thousands Except Per Share Data)	2004			2003
Net sales	$	577,920		$	507,000
Royalties and other revenues		784			1,213
Total revenues		578,704			508,213
Cost of sales		426,316			368,263
Selling and administrative expenses		51,880			50,815
Research, testing and development expenses		40,724			41,633
Restructuring charge		—			3,506
Total cost and expenses		518,920			464,217
Other income (expense) - net		2,399			(309	)
Interest income		851			1,041
Interest expense		(6,178	)		(5,888	)
Income before income taxes		56,856			38,840
Provision for income taxes		19,331			12,817
Net income	$	37,525		$	26,023
Net income per share	$	0.72		$	0.50
Net income per share, diluted	$	0.72		$	0.50
Dividends per share	$	0.26		$	0.26
Weighted average common shares outstanding		51,799			51,643

Amounts shown are unaudited.

See accompanying notes to the financial statements.

2

THE LUBRIZOL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Thousands of Dollars)	March 31 2004			December 31 2003
ASSETS
Cash and short-term investments	$	178,015		$	258,699
Receivables		386,039			324,567
Inventories:
Finished products		158,022			150,711
Products in process		71,863			62,306
Raw materials		74,039			78,856
Supplies and engine test parts		20,436			20,046
		324,360			311,919
Other current assets		44,343			42,663
Total current assets		932,757			937,848
Property and equipment - net		689,332			689,994
Goodwill		281,054			208,726
Intangible assets - net		102,948			62,402
Investments in non-consolidated companies		6,067			6,296
Other assets		33,025			37,050
TOTAL	$	2,045,183		$	1,942,316
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt and current portion of long-term debt	$	59,934		$	2,899
Accounts payable		156,040			143,120
Accrued expenses and other current liabilities		147,552			153,458
Total current liabilities		363,526			299,477
Long-term debt		386,105			386,726
Postretirement health care obligations		98,814			98,387
Noncurrent liabilities		101,695			100,330
Deferred income taxes		52,202			52,810
Total liabilities		1,002,342			937,730
Minority interest in consolidated companies		52,513			51,281
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 - 51,618,086 shares as of March 31, 2004 after deducting 34,577,808 treasury shares, 51,588,190 shares as of December 31, 2003 after deducting 34,607,704 treasury shares		125,198			123,770
Retained earnings		903,009			865,488
Accumulated other comprehensive loss		(37,879	)		(35,953	)
Total shareholders’ equity		990,328			953,305
TOTAL	$	2,045,183		$	1,942,316

Amounts shown are unaudited.

See accompanying notes to the financial statements.

3

THE LUBRIZOL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Month Period Ended March 31
(In Thousands of Dollars)	2004			2003
Cash provided from (used for):
Operating activities:
Net income	$	37,525		$	26,023
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		26,465			24,452
Deferred income taxes		(3,702	)		1,535
Restructuring charge					3,506
Change in current assets and liabilities:
Receivables		(58,231	)		(34,228	)
Inventories		(4,186	)		(10,566	)
Accounts payable, accrued expenses and other current liabilities		21,310			(13,558	)
Other current assets		178			(1,002	)
Other items - net		525			(1,947	)
Total operating activities		19,884			(5,785	)
Investing activities:
Capital expenditures		(19,948	)		(15,331	)
Acquisitions		(133,041	)
Other - net		147			(235	)
Total investing activities		(152,842	)		(15,566	)
Financing activities:
Short-term borrowings(repayments) - net		58,663			(4,225	)
Long-term repayments		(21	)		(103	)
Long-term borrowings					11
Dividends paid		(13,415	)		(13,379	)
Stock options exercised		1,428			1,190
Total financing activities		46,655			(16,506	)
Effect of exchange rate changes on cash		5,619			(1,425	)
Net decrease in cash and short-term investments		(80,684	)		(39,282	)
Cash and short-term investments at beginning of period		258,699			266,428
Cash and short-term investments at end of period	$	178,015		$	227,146

Amounts shown are unaudited.

See accompanying notes to the financial statements.

4

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

1. The accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of March 31, 2004 and December 31, 2003, and the results of operations and cash flows for the applicable periods ended March 31, 2004 and 2003.

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

Per share amounts are computed as follows:

	Three Month Period Ended March 31
	2004		2003
Numerator:
Net income	$	37,525	$	26,023
Denominator:
Weighted average common shares outstanding		51,799		51,643
Dilutive effect of stock options and awards		188		89
Denominator for net income per share, diluted		51,987		51,732
Net income per share	$	0.72	$	0.50
Net income per share, diluted	$	0.72	$	0.50

Weighted average shares issuable upon the exercise of stock options which were excluded from the diluted earnings per share calculations because they were antidilutive were 1.9 million in 2004 and 4.0 million in 2003.

3. The company has elected the intrinsic value method to account for employee stock options. The following table shows the pro forma effect on net income per share if the company had applied the fair value recognition provisions of SFAS 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

	Three Month Period Ended March 31
	2004			2003
Reported net income	$	37,525		$	26,023
Plus: Stock-based employee compensation (net of tax) included in net income		181			181
Less: Stock-based employee compensation (net of tax) using the fair value method		(943	)		(1,400	)
Pro forma net income	$	36,763		$	24,804
Reported net income per share	$	0.72		$	0.50
Pro forma net income per share	$	0.70		$	0.47
Reported net income per share, diluted	$	0.72		$	0.50
Pro forma net income per share, diluted	$	0.70		$	0.47

5

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

4. Total comprehensive income for the three-month periods ended March 31, 2004 and 2003 is comprised as follows:

	Three Month Period Ended March 31
	2004			2003
Net income	$	37,525		$	26,023
Foreign currency translation adjustment		(989	)		872
Change in pension plan minimum liability		(320	)		—
Unrealized gains (losses) - natural gas hedges		(247	)		—
Unrealized gains (losses) - interest rate swaps		(370	)		278
Total comprehensive income	$	35,599		$	27,173

5. The company aggregates its product lines into three principal operating segments: fluid technologies for transportation, fluid technologies for industry and fluid technologies for advanced systems. The fluid technologies for advanced systems segment does not constitute a reportable business segment and has been classified as the all other reporting segment. Fluid technologies for transportation (FTT) is comprised of additives for lubricating engine oils, such as for gasoline, diesel, marine and stationary gas engines and additive components; additives for driveline oils, such as automatic transmission fluids, gear oils and tractor lubricants; and additives for fuel products and refinery and oil field chemicals. In addition, this segment sells additive components and viscosity improvers within its lubricant and fuel additives product lines. The company’s fluid technologies for transportation product lines are generally produced in shared manufacturing facilities and sold largely to a common customer base. Fluid technologies for industry (FTI) includes industrial additives, such as additives for hydraulic, grease and metalworking fluids and compressor lubricants; and performance chemicals, such as additives for coatings and inks, defoamers, process chemicals and surfactants for personal care and industrial cleaners. Fluid technologies for advanced systems is comprised of fluid metering devices, particulate emission trap devices, FluiPak^TM sensor systems, and PuriNOx^TM low-emissions diesel fuel.

The company primarily evaluates performance and allocates resources based on segment contribution income, defined as revenues less expenses directly identifiable to the product lines aggregated within each segment, as well as projected future returns. Segment contribution income reflects the exclusion for internal management reporting purposes of excess production capacity from product costs. In addition, in calculating segment operating profit before tax, the company allocates corporate research, testing, selling and administrative expenses, primarily based upon revenues, and assigns excess capacity costs to the segments to which it applies.

6

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

The following table presents a summary of the company’s reportable segments for the three months ended March 31, 2004 and 2003 based on the current reporting structure. Prior–year amounts have been restated to reflect reclassifications of products between reporting segments and changes in allocation methodology of corporate expenses.

	Three Month Period Ended March 31
	2004			2003
Revenues from external customers:
Fluid technologies for transportation (FTT)	$	421,051		$	390,505
Fluid technologies for industry (FTI)		148,499			110,513
All other		9,154			7,195
Total revenues	$	578,704		$	508,213
Segment contribution income (loss):
Fluid technologies for transportation (FTT)	$	75,706		$	75,404
Fluid technologies for industry (FTI)		25,713			20,566
All other		(1,002	)		(2,064	)
Total segment contribution income		100,417			93,906
Corporate expenses		(42,036	)		(47,781	)
Corporate other income		3,802			1,068
Restructuring charges		—			(3,506	)
Interest expense – net		(5,327	)		(4,847	)
Income before income taxes	$	56,856		$	38,840
Segment operating profit (loss):
Fluid technologies for transportation (FTT)	$	44,670		$	38,464
Fluid technologies for industry (FTI)		20,046			12,087
All other		(2,533	)		(3,358	)
Total segment operating profit		62,183			47,193
Restructuring charges		—			(3,506	)
Interest expense – net		(5,327	)		(4,847	)
Income before income taxes	$	56,856		$	38,840

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

7

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

	As of March 31, 2004				As of December 31, 2003
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Technology	$	38,720	$	19,009	$	38,720	$	18,266
Land use rights		7,069		650		7,069		605
Non-compete agreements		6,892		2,332		6,892		1,989
Distributor networks		3,350		315		3,350		282
Trademarks		2,211		1,203		2,211		1,116
Customer lists		23,564		232		—		—
Patents		12,634		506		1,038		279
Other		10,742		543		10,554		427
Total amortized intangible assets		105,182		24,790		69,834		22,964
Non-amortized trademarks		22,556		—		15,532		—
Total	$	127,738	$	24,790	$	85,366	$	22,964

Amortization expense for intangible assets during the first quarter of 2004 and 2003 was $1.8 million and $1.2 million, respectively. Excluding the impact of further acquisitions, annual intangible amortization expense for the next five years will approximate $8.6 million in 2004 and 2005, $8.3 million in 2006, $7.7 million in 2007 and $6.2 million in 2008.

The fair value of intangible assets acquired at the date of acquisition in the first quarter of 2004 is shown below by major asset class. The intangible assets will be amortized over periods ranging from 4 to 15 years. The company is currently in the process of finalizing the allocation of the purchase price for the hyperdispersants business purchased from Avecia, so it is possible the amount of amortization or the purchase price allocation may change.

	Fair Value of Assets 2004
Amortized intangible assets:
Customer lists	$	23,976
Patents		11,627
Other		102
Total amortized intangible assets		35,705
Non-amortized trademarks		7,024
Total	$	42,729

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

	FTT			FTI			Total
Balance, December 31, 2002	$	44,887		$	123,465		$	168,352
Goodwill acquired					36,219			36,219
Translation & other adjustments		2,091			2,064			4,155
Balance, December 31, 2003		46,978			161,748			208,726
Goodwill acquired					74,355			74,355
Translation & other adjustments		(208	)		(1,819	)		(2,027	)
Balance, March 31, 2004	$	46,770		$	234,284		$	281,054

8

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

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

	Three Month Period Ended March 31						Three Month Period Ended March 31
	Pension Benefits						Other Benefits
	2004			2003			2004			2003
Service cost – benefits earned during period	$	3,512		$	3,615		$	661		$	507
Interest cost on projected benefit obligation		4,763			5,590			1,724			1,740
Expected return on plan assets		(5,294	)		(6,605	)		—			—
Amortization of prior service costs		440			822			(1,521	)		(1,398	)
Amortization of initial net asset obligation		(172	)		(172	)		—			—
Settlement loss		—			69			—			—
Recognized net actuarial loss		246			203			628			557
Net periodic benefit cost	$	3,495		$	3,522		$	1,492		$	1,406

Expected employer contributions for pension benefits in 2004 consist of $2.7 million to the United States plan, $2.5 million to the United States non-qualified plan and a range of $5.0 million to $6.0 million for the United Kingdom plan. The expected contribution to the non-qualified U.S. plan, which is unfunded, represents an actuarial estimate of future assumed payments based on historic retirement and payment patterns. Actual amounts paid could differ from this estimate. In the first quarter of 2004, no contributions were made to the U.S. plans and payments of $.8 million were made to the U.K. plan.

8. In January, 2004, the company completed the acquisition of the coatings hyperdispersants business of Avecia for cash totaling $133.0 million. This additives business is headquartered in Blackley, United Kingdom, and develops, manufactures and markets high-value additives that are based on polymeric dispersion technology and used in coatings and inks. These products enrich and strengthen color while reducing production costs and solvent emissions, and are marketed under the brand names Solsperse^™, Solplus^™ and Solthix^™. Historical annualized revenues of this business are approximately $50 million. The company is currently in the process of finalizing the allocation of the purchase price for the hyperdispersants business purchased from Avecia, so it is possible the amount of amortization or the purchase price allocation may change.

9

THE LUBRIZOL CORPORATION

Notes to Consolidated Financial Statements

Amounts in thousands (except per share data)

March 31, 2004

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

	Fair Value of Assets Acquired in 2004
Receivables	$	7,981
Inventories		9,864
Prepaid assets		106
Property		5,402
Goodwill		74,817
Intangibles		42,729
Total assets acquired	$	140,899
Accounts payable		2,762
Accrued expenses		107
Noncurrent liabilities		4,989
Total liabilities assumed	$	7,858
Increase in net assets from acquisitions	$	133,041

9. On April 16, 2004, the company signed a definitive agreement to purchase Noveon International, Inc. in a transaction valued at $1.84 billion. The acquisition, which has been approved by the board of directors of both companies, is subject to regulatory approval and is expected to close within three months of signing the definitive agreement. Noveon is a privately held Cleveland-based specialty chemical company with 2003 revenues of $1.1 billion. The transaction value includes a cash payment of approximately $920 million for equity and the assumption of net debt, which was approximately $920 million as of December 31, 2003.

In April 2004, the company received a commitment letter from a bank for a $2.45 billion 364-day revolving credit facility to bridge finance the pending Noveon acquisition. The company plans to implement a permanent capital structure in the near-term that will replace the bridge financing and it is expected to include approximately $400 million in new common equity, with the remainder being financed through public bonds and bank loans. The company is working to amend its existing credit facility agreements to revise the financial covenant restrictions until the permanent capital structure is in place.

After the announcement of the Noveon acquisition, the company’s long-term and commercial paper credit ratings were reduced by one rating agency and put on review by another rating agency. The credit rating change eliminated the company’s access to the commercial paper market. As a result, the company terminated its existing floating-to-fixed rate interest rate swaps with a notional value of $50 million effective April 29, 2004 and will repay its outstanding commercial paper upon maturity. The termination of the swap agreements resulted in a $3 million dollar pre-tax charge that will be recognized in the second quarter of 2004. In addition, the company decided to call the outstanding $18.4 million Marine Terminal Revenue Bonds, at par, effective June 1, 2004. To fund these actions, the company will borrow under its existing revolving credit facility.

10

THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Our revenues increased in the first quarter of 2004 as compared with the first quarter of 2003, primarily due to currency, higher ongoing shipment volume, acquisitions and favorable price and product mix. The increased revenues were partially offset by higher raw material costs and manufacturing expenses. The 2004 first quarter also included a currency forward contract gain related to an acquisition. Primarily as a result of these factors, net income increased 44% in the first quarter of 2004, compared with the same period in 2003.

We group our product lines into three reportable segments: fluid technologies for transportation, fluid technologies for industry and all other. Fluid technologies for transportation comprised approximately 73% of our consolidated revenues and 75% of our segment contribution income for the first quarter of 2004. See Note 5 to the financial statements for further financial disclosures by reporting segment.

ANALYSIS OF REVENUES

						Excluding Acquisitions
(MILLIONS OF DOLLARS)	1st Qtr 2004	1st Qtr 2003	$ Change		% Change	$ Change		% Change
Net sales	$577.9	$507.0	$70.9		14%	$52.0		10%
Royalties and other revenues	0.8	1.2	(0.4	)	(35%)	(0.4	)	(35%)
Total revenues	$578.7	$508.2	$70.5		14%	$51.6		10%

The increase in consolidated revenues, including acquisitions, resulted from 4% higher shipment volume and a 10% increase in average selling price, equally due to favorable currency and an increase in the combination of price and product mix. Acquisitions included the coatings hyperdispersants business purchased from Avecia in 2004 and the personal care specialty ingredients business from Amerchol Corporation, a subsidiary of The Dow Chemical Company, and the silicone product lines purchased from BASF in 2003. Excluding acquisitions, the increase in revenues was due to 3% higher ongoing shipment volume and 7% higher average selling price resulting from 5% favorable currency and 2% favorable prices and product mix changes. Sequentially, first quarter 2004 shipment volume was 7.5% higher and average additive selling price was 3.5% higher than the fourth quarter of 2003, primarily due to favorable currency and an increase in the combination of price and product mix.

Changes in our shipment volume vary by geographic area. The following table shows our consolidated 2004 first quarter shipment volume by geographic area as well as the corresponding changes compared with first quarter 2003:

			Excluding Acquisitions
	1st Qtr 2004 Volume	1st Qtr 2004 vs. 2003 % Change	1st Qtr 2004 vs. 2003 % Change
North America	47%	5%	4%
Europe	27%	(3%)	(3%)
Asia-Pacific/Middle East	20%	11%	10%
Latin America	6%	(2%)	(2%)
Total	100%	4%	3%

11

THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Segment shipment volume variances by geographic zone for the first quarter of 2004 compared with the same period of 2003, together with explanations for those variances, are contained under the “Segment Analysis” section below. Sequentially, consolidated volume increased 8% in the first quarter of 2004 compared with the fourth quarter of 2003.

The decrease in royalties and other revenues was due to a shift from licensing revenue with a specific customer to direct sales.

ANALYSIS OF COSTS AND EXPENSES

					Excluding Acquisitions
(MILLIONS OF DOLLARS)	1st Qtr 2004	1st Qtr 2003	$ Change	% Change	$ Change	% Change
Cost of sales	$426.3	$368.3	$58.0	16%	$45.9	12%
Selling and administrative expenses	51.9	50.8	1.1	2%	(0.4)	(1%)
Research, testing and development expenses	40.7	41.6	(0.9)	(2%)	(1.6)	(4%)
Restructuring charge	—	3.5	(3.5)	*	(3.5)	*
Total costs and expenses	$518.9	$464.2	$54.7	12%	$40.4	9%

* Calculation not meaningful

Cost of sales increased due to higher average raw material cost and higher manufacturing expenses. Average raw material cost increased 12% in the first quarter of 2004 compared with the same period in 2003, primarily due to an increase in the combination of raw material prices and higher priced product mix along with unfavorable currency effects. Excluding acquisitions, average raw material cost was 9% higher than the first quarter of 2003 and 3% higher than the fourth quarter of 2003. Material cost in the first quarter of 2004 included a purchase adjustment of $1.8 million associated with the increased valuation of inventory for the hyperdispersants acquisition earlier this year. Looking forward, we expect continued pressure on raw material prices as our material costs will reflect a 2% increase in the price of base oil that was announced in March, 2004 and another 2% increase announced in May, 2004.

Total manufacturing expenses, which are included in cost of sales, increased 15% (13% excluding acquisitions) in the first quarter of 2004 compared with the first quarter of 2003, primarily due to unfavorable currency. Manufacturing expenses in the first quarter of 2004 included an increase to labor and overhead of $2.8 million related to higher demand, which resulted in a decline in inventory. Manufacturing expenses this quarter also included $1.3 million for employee severance costs at our India joint venture and $2.0 million for an environmental accrual relating to remediation at our Texas manufacturing facility. Excluding currency, acquisitions, the labor and overhead impact, the India severance costs and the environmental accrual adjustment, manufacturing expenses for the first quarter of 2004 were flat compared with the first quarter of 2003 and down 4% from the fourth quarter of 2003.

Gross profit (net sales less cost of sales) for the first quarter of 2004 increased $12.9 million, or 9% ($6.1 million, or 4%, excluding acquisitions), compared with the first quarter of 2003. The increase primarily was due to favorable currency and the combination of favorable product mix and higher

12

THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

selling price along with higher shipment volume, partially offset by higher average raw material cost and manufacturing expenses. Our gross profit percentage (gross profit divided by net sales) decreased to 26.2% in the first quarter of 2004, compared with 27.4% in the first quarter of 2003, but increased from 24.9% in the fourth quarter of 2003. The decrease compared to the first quarter of 2003 primarily was due to higher raw material costs and manufacturing expenses.

The decrease in selling and administrative expenses, excluding acquisitions, was due to lower salary and benefit expenses, partially offset by unfavorable currency.

The decrease in research, testing and development expenses (technology expenses) primarily was due to lower testing activity at outside laboratories, partially offset by unfavorable currency.

In the first quarter of 2003, we recorded a restructuring charge of $3.5 million, or $.05 per share, for our Bromborough, England intermediate production and blending facility. The restructuring charge included $2.1 million in employee separation benefits and a $1.4 million asset impairment for production units taken out of service. As a result of the cost reduction activities in 2003, we believe there will be an incremental benefit in 2004 of approximately $15 million in addition to the $5 million already realized in 2003 from the Bromborough restructuring as well as later initiatives in India, the United States and England.

ANALYSIS OF OTHER ITEMS AND NET INCOME

						Excluding Acquisitions
(MILLIONS OF DOLLARS)	1st Qtr 2004	1st Qtr 2003	$ Change	% Change	$ Change	% Change
Other income(expense) - net	$  2.4	$ (0.3)	$  2.7	*	$  3.1	*
Interest expense-net	(5.3)	(4.8)	(0.5)	*	(0.5)	*
Income before income taxes	56.8	38.8	18.0	46%	13.9	36%
Provision for income taxes	19.3	12.8	6.5	51%	5.1	40%
Net income	$37.5	$26.0	11.5	44%	8.8	34%

* Calculation not meaningful

Other income for the quarter included a gain of $6.4 million ($.08 per share) on a currency forward contract to purchase pound sterling related to the acquisition of the hyperdispersants business. We secured the forward contract in December, 2003 and completed the acquisition at the end of January, 2004. This gain partially was offset by other currency translation losses as well as higher intangibles amortization. The amortization also related to the completed acquisition of the hyperdispersants business.

We had an effective tax rate of 34% for the first quarter of 2004, compared with 33% for the first quarter of 2003. The higher effective tax rate in 2004, which reduced first quarter earnings by $.01 per share, primarily was due to an increase in the U.S. tax cost of planned foreign dividends.

13

THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Primarily as a result of the above factors, our net income per share was $.72 for the first quarter of 2004 compared with $.50 for the first quarter of 2003. The gain on the currency forward contract increased first quarter 2004 earnings by $.08 per share and the restructuring charge in the first quarter of 2003 reduced first quarter 2003 earnings by $.05 per share.

SEGMENT ANALYSIS

A description of our operating segments along with the products, services and markets for each of these segments is included in Note 5 to the financial statements. Prior year amounts have been restated to reflect reclassifications of products among the reportable segments.

OPERATING RESULTS BY SEGMENT

										Excluding Acquisitions
(MILLIONS OF DOLLARS)	1st Qtr 2004			1st Qtr 2003			$ Change		% Change	$ Change		% Change
Revenues:
FTT	$	421.1		$	390.5		$	30.6	8%	$	30.6	8%
FTI		148.5			110.5			38.0	34%		19.1	17%
All Other		9.1			7.2			1.9	26%		1.9	26%
Total	$	578.7		$	508.2		$	70.5	14%	$	51.6	10%
Gross Profit:
FTT	$	112.7		$	112.1		$	0.6	1%	$	0.6	1%
FTI		45.7			36.1			9.6	27%		2.9	8%
All Other		2.2			1.9			0.3	16%		0.3	16%
Total	$	160.6		$	150.1		$	10.5	7%	$	3.8	3%
Segment Contribution Income:
FTT	$	75.7		$	75.4		$	0.3	0%	$	0.3	0%
FTI		25.7			20.6			5.1	25%		1.4	7%
All Other		(1.0	)		(2.1	)		1.1	52%		1.1	52%
Total	$	100.4		$	93.9		$	6.5	7%	$	2.8	3%

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THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Fluid Technologies for Transportation (FTT) Segment

Segment revenues increased in the first quarter of 2004 compared to the same period in 2003 due to 4% favorable currency, a 3% increase in the combination of price and product mix and slightly higher volume of less than 1%. The following table shows the changes in shipment volume by geographic zone in the first quarter of 2004 compared with the same period in 2003:

	1st Qtr 2004 vs. 2003 % Change
North America	1%
Europe	(6%)
Asia-Pacific / Middle East	8%
Latin America	(4%)
Total	0%

The shipment volume increase in North America was due to increases in our specialties driveline business, partially offset by some small losses in our engine oil additives business. The decrease in Europe primarily was due to some lost marine diesel business that occurred after the first quarter of 2003 that was subsequently regained late in the first quarter of 2004. The volume increase in Asia-Pacific / Middle East resulted in part from the timing of orders. The decrease in Latin America was associated with the loss of a major international customer that we previously disclosed in 2003.

The fluid technologies for transportation segment implemented a price increase effective March 1, 2004, for products sourced from North America plants. The price increase was in response to raw material cost increases and continuing high prices for natural gas used for utilities in our plants. In April, 2004, we began implementing price increases for products sourced from Asia-Pacific and Latin America.

The increase in segment gross profit in the first quarter of 2004 compared with the same period in 2003, primarily was due to higher revenues partially offset by higher average raw material cost and manufacturing expenses. Approximately one-half of the increase in manufacturing expenses was due to unfavorable currency. The remainder of the increase was due to a number of factors including increased sales demand and a change in our method of calculating excess capacity costs, which resulted in additional costs classified as FTT manufacturing expenses as compared with the prior year. In calculating gross profit at the operating segment level, we exclude our estimate of the cost of excess capacity from product costs (See Note 5 to the financial statements). The gross profit percentage for this segment was 26.8% for the first quarter of 2004 compared with 28.7% for the first quarter of 2003. The decrease primarily was due to higher average raw material cost and higher manufacturing expenses.

Direct selling, marketing and technical expenses increased $.3 million, or 1% for the first quarter of 2004 compared with the first quarter of 2003, primarily due to unfavorable currency. Segment contribution income (revenues less expenses directly identifiable to the product lines aggregated within each segment) for the first quarter of 2004 increased slightly compared with the same period in 2003 due to higher gross profit that was largely offset by higher expenses.

15

THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Fluid Technologies for Industry (FTI) Segment

The acquisition-related increase primarily was due to the 2004 acquisition of the hyperdispersants business and the 2003 acquisition of the personal care specialty ingredients business. Excluding acquisitions, segment revenues increased in the first quarter of 2004 compared with the same period in 2003 due to 11% higher shipment volumes, 4% favorable currency and 2% stronger price and product mix. The higher priced product mix primarily occurred in our synthetic refrigerant lubricants, personal care and metalworking businesses.

The following table shows the changes in shipment volume by geographic zone in the first quarter of 2004 compared with the same period in 2003:

		Excluding Acquisitions
	1st Qtr 2004 vs. 2003 % Change	1st Qtr 2004 vs. 2003 % Change
North America	12%	9%
Europe	19%	13%
Asia-Pacific / Middle East	42%	29%
Latin America	12%	8%
Total	15%	11%

Excluding acquisitions, the increases across all zones were attributable to market share gains and new business that occurred primarily in the personal care business in North America, the coatings and inks business, metalworking business and synthetic refrigerant lubricants business in Europe and the specialty monomers business in Asia-Pacific / Middle East and Latin America. In addition, the defoamers business benefited in the North America zone from the extension of the sugar beet season and growth in the fermentation industry. The increase in the Latin America zone was also due to some market rebound in the metalworking business from the prior year.

The increase in segment gross profit in the first quarter of 2004 compared with the same period in 2003, primarily was due to higher shipment volume, partially offset by higher raw material costs and manufacturing expenses. The gross profit percentage for this segment was 30.9% in the first quarter of 2004, compared with 32.7% in the same period of 2003. The decrease in the gross profit percentage partially was due to higher raw material costs and higher manufacturing expenses. Our FTI businesses began implementing price increases during the first quarter of 2004 in the range of 3% to 5% in response to rising raw material costs.

Direct selling, marketing and technical expenses increased $4.0 million, or 25% for the first quarter of 2004 compared with the first quarter of 2003, primarily due to acquisitions. Other income included an additional $.7 million of amortization expense for recent acquisitions.

Segment contribution income increased for the first quarter of 2004 compared with the same period in 2003 due to higher gross profit, partially offset by higher direct technical and selling expenses.

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THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the major components of cash flow:

SUMMARY OF CASH FLOWS

(MILLIONS OF DOLLARS)	1st Qtr 2004			1st Qtr 2003			$ Change
Cash provided from/(used for):
Operating activities	$	19.9		$	(5.8	)	$	25.7
Investing activities		(152.8	)		(15.6	)		(137.2	)
Financing activities		46.7			(16.5	)		63.2
Effect of exchange-rate changes on cash		5.6			(1.4	)		7.0
Net decrease in cash and short-term investments	$	(80.6	)	$	(39.3	)	$	(41.3	)

Operating Activities:

The increase in cash provided from operating activities in the first quarter of 2004 compared with the first quarter of the prior year primarily was due to higher earnings and a lower working capital build-up. Typically, we have a working capital build-up during the first quarter, particularly in accounts receivable, as March is usually a stronger sales month than December. Days sales in receivables averaged 54 days in the first quarter of 2004, which compares to 55 days for last year’s first quarter and our target for 2004 of 53.5 days. Days sales in inventory averaged 91 days for the first quarter of 2004 compared with 90 days for the prior year quarter and our 2004 target of 90 days.

Investing Activities:

Our capital expenditures in the first three months of 2004 were $19.9 million, as compared with $15.3 million for same period in 2003. In 2004, we estimate capital expenditures will approximate $95 million, slightly below the expected level of depreciation for the year, as compared with $88.5 million in 2003.

In January, 2004, we completed the acquisition of the coatings hyperdispersants business of Avecia for cash totaling $133.0 million. This additives business is headquartered in Blackley, United Kingdom, and develops, manufactures and markets high-value additives that are based on polymeric dispersion technology and used in coatings and inks. These products enrich and strengthen color while reducing production costs and solvent emissions, and are marketed under the brand names Solsperse^™, Solplus^™ and Solthix^™. Historical annualized revenues of this business are approximately $50 million. We funded the acquisition through Euro 43 million borrowings ($55 million equivalent) under a 364-day credit facility, $5 million in yen borrowings and the remainder in cash. At December 31, 2003, we had a foreign currency forward contract of $125 million in order to fix the U.S. dollar price for this acquisition. In the first quarter of 2004, we recorded a gain of $6.4 million ($.08 per share) upon the termination of this foreign currency forward contract.

On April 16, 2004, we signed a definitive agreement to purchase Noveon International, Inc. in a transaction valued at $1.84 billion. The acquisition, which has been approved by the board of directors of both companies, is subject to regulatory approval and is expected to close within three months of the signing of the definitive agreement. Noveon is a privately held Cleveland-based

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THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

specialty chemical company with 2003 revenues of $1.1 billion. The transaction value includes a cash payment of approximately $920 million for equity and the assumption of net debt, which was approximately $920 million as of December 31, 2003.

Financing Activities:

The increase in cash provided from financing activities of $63.2 million in 2004 almost entirely was due to a net increase in short-term borrowings relating to the hyperdispersants acquisition.

Capitalization and Credit Facilities:

Our net debt to capitalization ratio at March 31, 2004 was 23.0%. Net debt is the total of short- and long-term debt, reduced by cash and short-term investments in excess of an assumed operating cash level of $40 million and excluding unrealized gains and losses on derivative instruments designated as fair value hedges of fixed rate debt. Capitalization is shareholders’ equity plus net debt. Total debt as a percent of capitalization was 30.4% at March 31, 2004.

Our financial position remains strong with a ratio of current assets to current liabilities of 2.6 at March 31, 2004, compared with 3.1 at December 31, 2003. At March 31, 2004, we had a $350 million committed, revolving credit facility that matures in July 2006, which allows us to borrow at or below the U.S. Prime Rate. There were no borrowings under this agreement at March 31, 2004. In January 2004, we obtained a separate revolving credit facility that enabled us to borrow up to Euro 50 million for the purpose of financing European acquisitions. We borrowed Euro 43 million under this facility in January 2004. This facility expires in January 2005.

In April 2004, we received a commitment letter from a bank for a $2.45 billion 364-day revolving credit facility to bridge finance the pending Noveon acquisition. We plan to implement a permanent capital structure in the near-term that will replace the bridge financing and it is expected to include approximately $400 million in new common equity, with the remainder being financed through public bonds and bank loans. Following the implementation of this permanent capital structure, we estimate that our net debt to capitalization will be approximately 55%. Net debt in this calculation consists of total debt less combined total cash balances, without reduction for assumed operating cash levels. Our estimated total debt as a percent of capitalization will be approximately 58%. We are working to amend our existing credit facility agreements previously discussed to revise the financial covenant restrictions until our permanent capital structure is in place.

After the announcement of the Noveon acquisition, our long-term and commercial paper credit ratings were reduced by one rating agency and put on review by another rating agency. The credit rating change eliminated our access to the commercial paper market. As a result, we will repay our outstanding commercial paper upon maturity and we terminated our existing floating-to-fixed rate interest rate swaps with a notional value of $50 million effective April 29, 2004. The termination of the swaps resulted in a $3 million dollar pre-tax charge that will be recognized in the second quarter of 2004. In addition, we decided to call the outstanding $18.4 million Marine Terminal Refunding Revenue Bonds, at par, effective June 1, 2004. To fund these actions, we will borrow under our existing $350 million revolving credit facility.

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THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Contractual Cash Obligations:

Our contractual cash obligations as of December 31, 2003, are contained on page 21 of our 2003 Annual Report to our shareholders. The following items represent the significant changes that have occurred since December 31, 2003:

• We have additional annual operating lease obligations, as a result of our hyperdispersants acquisition, of approximately $6.5 million in years 2004 through 2008 and $2.4 million annually thereafter.

• We signed a definitive agreement to purchase Noveon International, Inc. in April 2004, at $1.84 billion (net of cash acquired). In April 2004, we received a commitment letter from a bank for a $2.45 billion 364-day revolving credit facility to bridge finance the pending acquisition. We plan to implement a permanent capital structure to replace the bridge financing and it is expected to include approximately $400 million in new common equity and the remainder will be financed through public bonds and bank loans.

• We have called the outstanding $18.4 million Marine Terminal Refunding Revenue Bonds, at par, effective June 1, 2004. This debt was included in our contractual obligations table as payable after five years in our 2003 Annual Report. This debt will now be paid in the second quarter of 2004.

We believe our future operating cash flows will be more than sufficient to cover debt repayments, other contractual obligations, capital expenditures and dividends. In addition, we believe our existing cash position, together with our untapped borrowing capacity, provides us with substantial additional financial resources. After completion of the pending acquisition and the assumption of additional indebtedness, we believe we will incur additional interest and commitment fees but they will not have a material impact upon our results of operations or financial condition.

CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES

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

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

• the overall demand for lubricant and fuel additives on a worldwide basis, which has a slow growth rate in mature markets such as North America and Europe;

• the effect on our business resulting from economic and political uncertainty within the Asia-Pacific, Middle East and Latin American regions;

• the lubricant additive demand in developing regions such as China and India, which geographic areas are an announced focus of our activities;

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THE LUBRIZOL CORPORATION

Item 2 - Management’s Discussion and Analysis of

Financial Condition and Results of Operations

• the potential negative impact on product pricing and volume demand from the consolidation of finished lubricant marketers;

• the degree of competition resulting from lubricant additive industry overcapacity;

• technology developments that affect longer-term trends for lubricant additives, such as improved equipment design, fuel economy, longer oil drain intervals, alternative fuel powered engines and emission system compatibility;

• the overall global economic environment, which affects the operating results of fluid technologies for industry in particular;

• the extent to which we are successful in expanding our business in new and existing fluid technology markets incorporating chemicals, systems and services for industry and transportation;

• our ability to identify, complete and integrate acquisitions for profitable growth, including our ability to complete, finance and integrate our announced acquisition of Noveon International, Inc.;

• our success at continuing to develop proprietary technology to meet or exceed new industry performance standards and individual customer and original equipment manufacturers’ expectations;

• the frequency of change in industry performance standards, which affects the level and timing of our technology costs, the product life cycles and the relative quantity of additives required for new specifications;

• our ability to continue to reduce complexities and conversion costs and modify our cost structure to maintain and enhance our competitiveness;

• our success in strengthening relationships and growing business with our largest customers, including those with affiliated lubricant additive companies, and retaining the business of our largest customers over extended time periods;

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

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

• 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 in the area of contaminant management and advanced fluid systems;

• significant changes in government regulations affecting environmental compliance;

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

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THE LUBRIZOL CORPORATION

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

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

A quantitative and qualitative discussion about our market risk is contained on page 25 of our 2003 Annual Report to our shareholders. There have been no material changes in the market risks faced by us since December 31, 2003.

Item 4. Controls and Procedures

We evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, 2004. Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2004, our disclosure controls and procedures were effective in timely alerting them to material information relating to Lubrizol and our consolidated subsidiaries required to be included in our periodic SEC filings. There were no significant changes in our internal control over financial reporting that occurred during the first quarter of 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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THE LUBRIZOL CORPORATION

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

(c) On January 30, 2004, 2,234 common shares were issued in transactions exempt from registration under the Securities Act of 1933 pursuant to Regulation S. The common shares were issued under an employee benefit plan to 21 employees of a wholly-owned Canadian subsidiary of the company.

On February 2, 2004, 259 common shares were issued in a private placement transaction exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of that Act. We issued the common shares to the surviving spouse of a former director under a deferred compensation plan for directors.

On March 5, 2004, 491 common shares were issued in transactions exempt from registration under the Securities Act of 1933 pursuant to Regulation S. The common shares were issued under an employee benefit plan to two employees of a wholly-owned UK subsidiary of the company.

On March 10, 2004, 433 common shares were issued in transactions exempt from registration under the Securities Act of 1933 pursuant to Regulation S. The common shares were issued under an employee benefit plan to three employees of a wholly-owned UK subsidiary of the company.

On March 10, 2004, 7,245 common shares were issued in private placement transactions exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of that Act. We issued the common shares to four officers under a deferred compensation plan for officers.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

(10)(h) *	The Lubrizol Corporation 1991 Stock Incentive Plan
(31.1)	Rule 13a-14(a) Certifications
(31.2)	Rule 13a-14(a) Certifications
(32)	Certification of Chief Executive Officer and Chief Financial Officer of The Lubrizol Corporation Pursuant to 18 U.S.C. Section 1350

* Indicates management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

On February 6, 2004, we furnished a Form 8-K to the Securities and Exchange Commission with respect to our news release dated February 6, 2004, announcing the results for the year ended December 31, 2003.

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THE LUBRIZOL CORPORATION

PART II. OTHER INFORMATION

Signatures

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

THE LUBRIZOL CORPORATION

/s/ John R. Ahern

John R. Ahern

Chief Accounting Officer and
Duly Authorized Signatory of
The Lubrizol Corporation

Date: May 7, 2004

23

EX-10.(H)

Exhibit (10)(h)

THE LUBRIZOL CORPORATION 1991 STOCK INCENTIVE PLAN

(As Amended March 22, 2004)

Section 1. Purpose.

The purposes of The Lubrizol Corporation 1991 Stock Incentive Plan are to encourage selected employees of The Lubrizol Corporation and its Subsidiaries and directors of the Company to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of shareholders, and to enhance the ability of the Company and its Subsidiaries to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends.

Section 2. Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

(a) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award granted pursuant to the provisions of the Plan.

(b) “Award Agreement” means a written document evidencing any Award granted hereunder, signed by the Company and delivered to the Participant or Outside Director, as the case may be.

(c) “Board” means the Board of Directors of the Company.

(d) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(e) “Committee” means a committee of not less than three (3) Outside Directors of the Board, each of whom shall be a “disinterested person” within the meaning of Rule 16b-3(d)(3) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor rule or statute.

(f) “Company” means The Lubrizol Corporation.

(g) “Employee” means any employee of the Company or of any Subsidiary.

(h) “Fair Market Value” means the average of the high and low price of a Share on the New York Stock Exchange on the Grant Date (in the case of a Grant), or any other relevant date.

(i) “Grant Date” means the date on which the Board approves the grant of an Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award, and, with respect to an Option granted to an Outside Director, the date specified pursuant to Section 10 on which such Option is granted.

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

(j) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422A of the Code or any successor provision thereto.

(k) “Non-Statutory Stock Option” means an Option that is not intended to be an Incentive Stock Option.

(l) “Option” means an option to purchase Shares granted hereunder.

(m) “Option Price” means the purchase price of each Share under an Option.

(n) “Outside Director” means a member of the Board who is not an employee of the Company or of any Subsidiary.

(o) “Participant” means an Employee who is selected by the Committee to receive an Award under the Plan.

(p) “Plan” means The Lubrizol Corporation 1991 Stock Incentive Plan.

(q) “Restricted Stock Award” means an award of restricted Shares under Section 8 hereof.

(r) “Restriction Period” means the period of time specified in an Award Agreement during which the following conditions remain in effect: (i) certain restrictions on the sale or other disposition of Shares awarded under the Plan, (ii) subject to the terms of the applicable Award Agreement, the continued employment of the Participant, and (iii) such other conditions as may be set forth in the applicable Award Agreement.

(s) “Shareholders’ Meeting” means the annual meeting of shareholders of the Company in each year.

(t) “Shares” means common shares without par value of the Company.

(u) “Stock Appreciation Right” means the right to receive a payment in cash or in Shares, or in any combination thereof, from the Company equal to the excess of the Fair Market Value of a stated number of Shares at the exercise date over a fixed price for such Shares.

(v) “Stock Award” means the grant of unrestricted Shares under the Plan.

(w) “Subsidiary” means a corporation which is at least 80% owned, directly or indirectly, by the Company.

(x) “Voting Stock” means the then-outstanding securities entitled to vote generally in the election of directors of the Company.

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Section 3. Administration.

The Plan shall be administered by the Committee. Members of the Committee shall be appointed by and serve at the pleasure of the Board, and may resign by written notice filed with the Chairman of the Board or the Secretary of the Company. A vacancy on the Committee shall be filled by the appointment of a successor member by the Board. Subject to the express provisions of this Plan, the Committee shall have conclusive authority to select Employees to be Participants for Awards and determine the type and number of Awards to be granted, to construe and interpret the Plan, any Award granted hereunder, and any Award Agreement entered into hereunder, and to establish, amend, and rescind rules and regulations for the administration of this Plan and shall have such additional authority as the Board may from time to time determine to be necessary or desirable. Notwithstanding the foregoing, the Committee shall not have discretion with respect to Options granted to Outside Directors pursuant to Section 10 such as to prevent any Award granted under this Plan from meeting the requirements for exemption from Section 16(b) of the Exchange Act, as set forth in Rule 16b-3 thereunder or any successor rule or statute.

Section 4. Shares Subject to the Plan.

(a) Subject to adjustment as provided in the Plan, the total number of Shares available under the Plan in each calendar year shall be one percent (1%) of the total outstanding Shares as of the first day of any year for which the Plan is in effect; provided that such number shall be increased in any year by the number of Shares available for grant hereunder in previous years but not covered by Awards granted hereunder in such previous years; provided further, that a total of no more than two million (2,000,000) Shares shall be available for the grant of Incentive Stock Options under the Plan; and provided further, that no more than four hundred thousand (400,000) Shares shall be available for grant to any Participant during a calendar year. Settlement of an Award, whether by the issuance of Shares or the payment of cash, shall not be deemed to be the grant of an Award hereunder. In addition, any Shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the Shares available for grants under the Plan. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury shares. If any Shares subject to any Award granted hereunder are forfeited or if such Award otherwise terminates without the issuance of such Shares or payment of other consideration in lieu of such Shares, the Shares subject to such Award, to the extent of any such forfeiture or termination, shall again be available for grant under the Plan as if such Shares had not been subject to an Award.

(b) The number of Shares which remain available for grant pursuant to this Plan, together with Shares subject to outstanding Awards, at the time of any change in the Company’s capitalization, including stock splits, stock dividends, mergers, reorganizations, consolidations, recapitalizations, or other changes in corporate structure, shall be appropriately and proportionately adjusted to reflect such change in capitalization.

Section 5. Eligibility.

Any Employee shall be eligible to be selected as a Participant.

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Section 6. Stock Options.

Non-Statutory Stock Options and Incentive Stock Options may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan. Any Option granted to a Participant under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.

(a) Option Price. The purchase price per Share under an Option shall be fixed by the Committee in its sole discretion; provided that the purchase price shall not be less than one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date of the Option. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement relating thereto.

(b) Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option shall be exercisable after the expiration of ten years from the Grant Date; and provided further, that no reload Option granted to a Participant pursuant to the terms of Section 6(e) shall be exercisable after the expiration of the term of the Option that gave rise to the grant of such reload Option.

(c) Exercise of Option. Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date, subject to any provisions respecting the exercisability of Options that may be contained in an Award Agreement; provided that a reload Option granted to a Participant pursuant to the terms of Section 6(e) shall be exercisable to the extent of one hundred percent (100%) of such Shares from the Grant Date.

(d) Incentive Stock Options. The aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options held by any Participant which are exercisable for the first time by such Participant during any calendar year under the Plan (and under any other benefit plans of the Company, of any parent corporation, or Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation in effect at the Grant Date under Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder. The terms of any Incentive Stock Option granted hereunder shall comply in all respects with the provisions of Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder.

(e) Reload. In the event that a Participant or an Outside Director exercises an Option other than a reload Option granted pursuant to this Section 6(e), and pays some or all of the Option Price with Shares, the Committee in its discretion may grant to such Participant or Outside Director a reload Option to purchase the number of Shares equal to the number of Shares used as payment of the Option Price, subject to the limitations described below. Options granted to Participants pursuant to this Section 6(e) shall have terms and conditions as described in this Section 6 and Options granted to Outside Directors pursuant to this Section 6(e) shall have terms and conditions as described in

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Section 10. Options granted pursuant to this Section 6(e) shall be of the same character (i.e., Non-Statutory Stock Options or Incentive Stock Options) as the Option that is exercised to give rise to the grant of the reload Option, provided that if an Incentive Stock Option cannot be granted under this Section 6(e) in compliance with Section 422A of the Code, then a Non-Statutory Stock Option shall be granted in lieu thereof. Options may be granted pursuant to this Section 6(e) only to the extent that the number of Shares covered by such Option grants does not, when added to the number of Shares covered by Awards previously granted during such calendar year, exceed the limitation set forth in Section 4(a).

Shares received upon the exercise of an Option granted pursuant to this Section 6(e) may not be sold or otherwise transferred (i) by a Participant until such Participant has met the Share ownership guideline for such Participant, if any, set by the Company, and then only to the extent that the Participant continues to meet such ownership guideline immediately after such sale, or (ii) by an Outside Director until such Outside Director ceases to be an Outside Director, provided, however, that a Participant or Outside Director may use such Shares as payment of the Option Price of Options granted under this Plan to the extent permitted by the applicable Award Agreement, in which case a number of the Shares (equal to the number of Shares used for such payment) purchased by the exercise of such Options also shall be subject to the same restrictions upon transferability. Certificates for such Shares with a transferability restriction shall bear a legend referencing such restriction.

Notwithstanding the foregoing, effective for grants of Options on or after November 11, 2002, this Section 6(e) is deleted.

Section 7. Stock Appreciation Rights.

Stock Appreciation Rights may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan and may, but need not, relate to a specific Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Any Stock Appreciation Right related to a Non-Statutory Stock Option may be granted at the same time such Option is granted or at any time thereafter before exercise or expiration of such Option. Any Stock Appreciation Right related to an Incentive Stock Option must be granted at the same time such Option is granted. Any Stock Appreciation Right related to an Option shall be exercisable only to the extent the related Option is exercisable. In the case of any Stock Appreciation Right related to any Option, the Stock Appreciation Right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option. Similarly, upon exercise of a Stock Appreciation Right as to some or all of the Shares covered by a related Option, the related Option shall be canceled automatically to the extent of the Stock Appreciation Rights exercised, and such Shares shall not thereafter be eligible for grant under Section 4(a). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate.

Section 8. Restricted Stock Awards.

(a) Issuance. Restricted Stock Awards may be issued hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Each Award

28

THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

under this Section 8 shall be evidenced by an Award Agreement between the Participant and the Company which shall specify the vesting schedule, any rights of acceleration and such other terms and conditions as the Board shall determine, which need not be the same with respect to each Participant.

(b) Registration. Shares issued under this Section 8 shall be evidenced by issuance of a stock certificate or certificates registered in the name of the Participant bearing the following legend and any other legend required by, or deemed appropriate under, any federal or state securities laws:

The sale or other transfer of the common shares represented by this certificate is subject to certain restrictions set forth in the Award Agreement between                      (the registered owner) and The Lubrizol Corporation dated                     , under The Lubrizol Corporation 1991 Stock Incentive Plan. A copy of the Plan and Award Agreement may be obtained from the Secretary of The Lubrizol Corporation.

Unless otherwise provided in the Award Agreement between the Participant and the Company, such certificates shall be retained by the Company until the expiration of the Restriction Period. Upon the expiration of the Restriction Period, the Company shall (i) cause the removal of the legend from the certificates for such Shares as to which a Participant is entitled in accordance with the Award Agreement between the Participant and the Company and (ii) release such Shares to the custody of the Participant.

(c) Forfeiture. Except as otherwise determined by the Committee at the Grant Date, upon termination of employment of the Participant for any reason during the Restriction Period, all Shares still subject to restriction shall be forfeited by the Participant and retained by the Company; provided that in the event of a Participant’s retirement, permanent disability, death, or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Shares. In such case, unrestricted Shares shall be issued to the Participant at such time as the Committee determines.

(d) Rights as Shareholders. At all times during the Restriction Period, Participants shall be entitled to full voting rights with respect to all Shares awarded under this Section 8 and shall be entitled to dividends with respect to such Shares.

Section 9. Stock Awards.

Awards of Shares may be granted hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine (i) the Employees to whom such Awards shall be granted, (ii) the time or times at which such Awards shall be granted, (iii) the number of Shares to be granted pursuant to such Awards, and (iv) all other conditions of the Awards. Such conditions may include issuance of Shares at the time of the Award is granted or issuance of Shares at a time or times subsequent to the time the Award is granted, which subsequent times may be specifically established by the Committee and/or may be determined by

29

THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

reference to the satisfaction of one or more performance measures specified by the Committee. The provisions of stock awards need not be the same with respect to each Participant.

Section 10. Outside Directors’ Options.

On the close of business on the date on which the Committee makes the annual grant to employees generally, each Outside Director shall automatically be granted an Option to purchase 2,500 Shares. All Options granted under this Section 10 shall be Non-Statutory Stock Options and shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as are contained in the applicable Award Agreement.

(a) Option Price. The purchase price per Share shall be one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement in effect from time to time.

(b) Option Period. The term during which Options granted under this Section 10 shall be exercisable shall be ten (10) years from the Grant Date; provided that no reload Option granted to an Outside Director pursuant to the terms of Section 6(e) shall be exercisable after the expiration of the term of the Option that gave rise to the grant of such reload Option.

(c) Exercise of Options. Subject to the provisions of this Section 10(c), Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date; provided that a reload Option granted to an Outside Director pursuant to the terms of Section 6(e) shall be exercisable to the extent of one hundred percent (100%) of such Shares from the Grant Date. Options may be exercised by an Outside Director during the period that the Outside Director remains a member of the Board and under the circumstances described below.

(i) If an Outside Director retires under a retirement plan or policy of the Company, then Options held by such Outside Director may be exercised for a period of thirty-six (36) months following retirement, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of retirement), provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b).

(ii) In the event of the death of an Outside Director while serving as a director, Options held by such Outside Director may be exercised for a period of twelve (12) months following the date of death, (A) to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise the Option at the date of death), and (B) only by the executor or administrator of the Outside Director’s estate or by the person or persons to whom the Outside Director’s rights under the

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Options shall pass by the Outside Director’s will or the laws of descent and distribution, provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b).

(iii) If an Outside Director shall cease to be a director for any reason other than retirement under a retirement plan or policy of the Company or death, Options held by such Outside Director may be exercised for a period of three (3) months following such cessation, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of such cessation), provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b).

(iv) In the event an Outside Director, after ceasing to be a director, dies during and subject to one of the periods described in Section 10(c)(i) or (iii), while possessed of unexercised Options, the executor or administrator of the Outside Director’s estate, or the person entitled by will or the applicable laws of descent and distribution, may exercise such Options held by the Outside Director at the time of the Outside Director’s death during the period that is applicable, as follows:

(A) If Section 10(c)(i) was in effect, for one year after the Outside Director’s death;

(B) If Section 10(c)(iii) was in effect, for three months after the Outside Director’s death;

provided that, in no event shall the Option be exercisable after the expiration of the Option period provided in Section 10(b).

Section 11. Change in Control.

Notwithstanding the provisions of Sections 6(c) and 10(c), Options shall become exercisable with respect to 100% of the Shares upon the occurrence of any Change in Control (as hereafter defined) of the Company; except that no Options shall be exercised prior to the end of six months from the Grant Date.

Notwithstanding the provisions of Section 8 and the applicable Award Agreement, any restricted Shares shall be 100% vested and without any restrictions upon the occurrence of any Change in Control of the Company.

For all purposes of the Plan, a “Change in Control” shall have occurred if any of the following events shall occur:

(a) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the

31

THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

aggregate by the holders of Voting Stock of the Company immediately prior to such transaction;

(b) The Company sells all or substantially all of its assets to any other corporation or other legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale;

(c) There is a report filed on Schedule 13D or Schedule 14D-l (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13(d)(3) or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the Voting Stock;

(d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or

(e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof, provided, however, that for purposes of this Section 11(e), each Director who is first elected, or first nominated for election by the Company’s stockholders, by a vote of at least two thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period.

Notwithstanding the foregoing provisions of Section 11(c) or 11(d) hereof, unless otherwise determined in a specific case by majority vote of the Board, a “Change in Control” shall not be deemed to have occurred for purposes of the Plan solely because (i) the Company, (ii) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (iii) any employee stock ownership plan or any other employee benefit plan sponsored by the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership.

Section 12. Amendments and Termination.

The Board may, at any time, amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of an Outside Director or

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THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Participant under an Award theretofore granted, without the Outside Director’s or Participant’s consent, or that without the approval of the shareholders would:

(a) except as is provided in Sections 4(b) and 13(c) of the Plan, increase the total number of Shares which may be issued under the Plan;

(b) change the class of employees eligible to participate in the Plan; or

(c) materially increase the benefits accruing to Participants under the Plan;

so long as such approval is required by law or regulation; provided that, as long as required by law or regulation, the provisions of Section 10 hereof may not be amended or altered more than once every six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder.

The Committee may amend the terms of any Award heretofore granted (except, with respect to Options granted pursuant to Section 10 hereof, only to the extent not inconsistent with Rule 16b-3 under the Exchange Act or any successor rule or statute), prospectively or retroactively, but no such amendment shall impair the rights of any Participant or Outside Director without his consent.

Section 13. General Provisions.

(a) No Option, Stock Appreciation Right, or Restricted Stock Award shall be assignable or transferable by a Participant or an Outside Director otherwise than by will or the laws of descent and distribution, and Options and Stock Appreciation Rights may be exercised during the Participant’s or Outside Director’s lifetime only by the Participant or the Outside Director or, if permissible under applicable law, by the guardian or legal representative of the Participant or Outside Director.

(b) The term of each Award shall be for such period of months or years from its Grant Date as may be determined by the Committee or as set forth in the Plan; provided that in no event shall the term of any Incentive Stock Option or any Stock Appreciation Right related to any Incentive Stock Option exceed a period of ten (10) years from the Grant Date.

(c) In the event of a merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure such that Shares are changed into or become exchangeable for a larger or smaller number of Shares, thereafter the number of Shares subject to outstanding Awards granted to Participants and to any Shares subject to Awards to be granted to Participants pursuant to this Plan shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of Shares by reason of such change in corporate structure; provided, however, that the number of Shares shall always be a whole number, and the purchase price per Share of any outstanding Options shall, in the case of an increase in the number of Shares, be proportionately reduced, and, in the case of a decrease in the number of Shares, shall be proportionately increased. The above adjustment shall also apply to any

33

THE LUBRIZOL CORPORATION

1991 STOCK INCENTIVE PLAN

Shares subject to Options granted to Outside Directors pursuant to the provisions of Section 10.

(d) No Employee shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.

(e) The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an Award Agreement, and otherwise complied with the then applicable terms and conditions.

(f) All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(g) Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, Participants shall not be required, under the Plan, to make any payment other than the rendering of services.

(h) The Company shall be authorized to withhold from any payment under the Plan, whether such payment is in Shares or cash, all withholding taxes due in respect of such payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

(i) Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

(j) Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment at any time, nor shall the Plan confer upon any Participant any right to continued employment with the Company or any Subsidiary.

Section 14. Effective Date and Term of Plan.

The Plan shall be effective as of April 22, 1991. Options may be granted after the effective date any time prior to April 22, 2006, on which date the Plan shall expire but without affecting any options then outstanding.

34

EX-31.1

Exhibit 31.1

THE LUBRIZOL CORPORATION

Rule 13a-14(a) Certification

I, James L. Hambrick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Lubrizol Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation;

c) disclosed in this report any change in registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    James L. Hambrick

James L. Hambrick

Chief Executive Officer and President

May 6, 2004

35

Exhibit 31

THE LUBRIZOL CORPORATION

Rule 13-14(a) Certification

I, Charles P. Cooley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Lubrizol Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation;

c) disclosed in this report any change in registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    Charles P. Cooley

Charles P. Cooley

Chief Financial Officer

May 6, 2004

36

EX-31.2

Exhibit 31.2

THE LUBRIZOL CORPORATION

Rule 13-14(a) Certification

I, Charles P. Cooley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Lubrizol Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation;

c) disclosed in this report any change in registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    Charles P. Cooley

Charles P. Cooley

Chief Financial Officer

May 6, 2004

36

EX-32

Exhibit 32

THE LUBRIZOL CORPORATION

Certification of Chief Executive Officer and Chief Financial Officer of

The Lubrizol Corporation Pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Quarterly Report on Form 10-Q of The Lubrizol Corporation for the period ending March 31, 2004:

(1) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Lubrizol Corporation.

/s/    James L. Hambrick

James L. Hambrick

Chief Executive Officer and President

May 6, 2004

I certify that, to the best of my knowledge and belief, the Quarterly Report on Form 10-Q of The Lubrizol Corporation for the period ending March 31, 2004:

(3) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(4) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of The Lubrizol Corporation.

/s/    Charles P. Cooley

Charles P. Cooley

Chief Financial Officer

May 6, 2004

37