Lubrizol Announces Second Quarter 2009 Earnings and Increases Full-Year Earnings...

Lubrizol Announces Second Quarter 2009 Earnings and Increases Full-Year
Earnings Guidance
- Consolidated revenues and volume declined from the prior-year period but
increased sequentially from the first quarter

CLEVELAND, July 30 /PRNewswire-FirstCall/ -- The Lubrizol Corporation (NYSE:
LZ) announced that consolidated earnings for the second quarter ended June 30,
2009 were $131.9 million, or $1.92 per diluted share, including after-tax
restructuring and impairment charges of $6.5 million, or $.10 per diluted
share. These charges primarily were related to a non-cash write off of
preliminary process engineering design work and additional expenses associated
with the cost reduction actions the company initiated in the first quarter of
2009. Comparable earnings for the second quarter of 2008 were $78.1 million,
or $1.13 per diluted share, which included after-tax restructuring and
impairment charges of $9.1 million, or $.13 per diluted share, primarily
related to the closure and realignment of North American coatings production
facilities.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080819/LUBRIZOLCORPLOGO )

Second Quarter Consolidated Results

Consolidated revenues for the second quarter decreased 18 percent to $1.11
billion compared with $1.35 billion in the second quarter of 2008. The
year-over-year decrease in revenues was attributable to lower volumes and
unfavorable currency that more than offset an improvement in the combination
of price and product mix. Included in these factors was the incremental
impact from acquisitions completed in 2008, which contributed 1 percent to
consolidated revenues in the second quarter of 2009.

Excluding the restructuring and impairment charges in both periods, adjusted
earnings were $138.4 million, or $2.02 per diluted share, for the second
quarter of 2009 compared with $87.2 million, or $1.26 per diluted share, for
the second quarter of 2008.

Adjusted earnings per share for the second quarter of 2009 increased compared
with the prior-year second quarter largely due to favorable margin management
initiatives, cost savings initiatives that reduced selling, technical,
administrative and research (STAR) expenses, lower manufacturing costs and
contributions from the 2008 acquisitions. These positive factors impacting
earnings more than offset the effect of lower volume, increased
performance-based compensation expense, higher net interest expense and an
increase in the effective tax rate.

Commenting on the results, CEO James Hambrick stated, "I am very pleased with
our second quarter results, as both operating segments benefited from ongoing
margin management initiatives. Also contributing to our success in the
quarter were the decisive cost reduction actions undertaken early in the year
in response to the global recession. But it would be misleading to attribute
our performance solely to events in the quarter. For many years we have been
working to improve the returns necessary to support the investment in our
industry. Our results highlight the cumulative impact of these efforts to
build and sustain market leadership positions while providing the innovative
technology that is valued by our customers."

Six Month Consolidated Results

For the first six months of 2009, consolidated revenues decreased 18 percent
to $2.12 billion compared with $2.58 billion for the first six months of 2008.
Consolidated earnings were $196.1 million, or $2.87 per diluted share,
including after-tax restructuring and impairment charges of $14.1 million, or
$.21 per diluted share. Earnings for the first six months of 2008 were $151.7
million, or $2.19 per diluted share, including after-tax restructuring and
impairment charges of $12.1 million, or $.17 per diluted share. Excluding the
restructuring and impairment charges from both periods, earnings of $3.08 per
diluted share in the first half of 2009 compared with $2.36 per diluted share
in the first half of 2008.

Cash flow from operations for the first six months of 2009 was $447 million,
up from $99 million in the year-earlier period. The increase in cash flow
from operations primarily was attributable to higher net income and a
significant reduction in working capital, primarily from lower inventory.
Capital expenditures in the first half of 2009 were approximately $76 million,
down from $98 million in the prior-year period as the company controlled
spending given the uncertain environment. The company's cash balance at June
30, 2009 was $861 million compared with a cash balance of $186 million at
December 31, 2008. The higher cash balance largely reflected the company's
strong operating cash flow for the first half of 2009 and the proceeds from
financing activities undertaken in the first quarter of 2009.

Earnings Outlook

The company increased its guidance for earnings that was issued on April 30.
The company's guidance for 2009 earnings is now in the range of $5.47 to $5.77
per diluted share, including restructuring and impairment charges of $.23 per
diluted share, primarily related to cost reductions announced in the first
quarter of 2009, impaired preliminary process engineering design work and the
closing of a Canadian additives blending facility. In 2008, the company
reported a loss of $0.97 per share, including restructuring and impairment
charges of $5.04 per share, largely related to goodwill impairment, and other
adjustments of $.02 per share. Excluding the special charges from both years,
the company projects 2009 adjusted earnings in the range of $5.70 to $6.00 per
diluted share, which compares with 2008 adjusted earnings of $4.09 per diluted
share.

Key updated assumptions for this revised guidance and cash flow include:

-- STAR expenses approximately 2 percent lower compared with 2008;
-- Corporate expense to average approximately $20 million per quarter for
the balance of the year;
-- Net interest expense of approximately $105 million for the year;
-- An effective tax rate of 30.7 percent for the year;
-- The euro to average $1.34 for the remainder of the year;
-- Projected pension contributions of $53 million;
-- Cash flow generated by working capital changes of approximately $200
million; and

-- Average shares outstanding of approximately 68.7 million.

Regarding the earnings outlook, Hambrick added, "The economic environment
remains challenging and the timing for significant recovery of our end markets
is uncertain. Despite this uncertainty, we have continued to perform at a high
level. With our increased guidance, we are on track to deliver a significant
increase in earnings compared with 2008. If we achieve stronger volume
recovery in the second half of this year, we may have the opportunity for
further upside in earnings. But given the volatility in business conditions
we experienced in the fourth quarter of last year, we also recognize how
quickly the drivers of our business can change. So while confident in our
success, we will continue to manage our business vigilantly."

Conference Call on the Web

An audio webcast of the second quarter earnings conference call with investors
will be available live July 30 at 11:00 a.m. Eastern time on the Investor page
of www.lubrizol.com and will be archived for 30 days. Following the call, a
transcript will be posted on the Investors page of the Web site in the
Financial Reports section.

About The Lubrizol Corporation

The Lubrizol Corporation (NYSE: LZ) is an innovative specialty chemical
company that produces and supplies technologies that improve the quality and
performance of our customers' products in the global transportation,
industrial and consumer markets. These technologies include lubricant
additives for engine oils, other transportation-related fluids and industrial
lubricants, as well as fuel additives for gasoline and diesel fuel. In
addition, Lubrizol makes ingredients and additives for personal care products
and pharmaceuticals; specialty materials, including plastics technology and
performance coatings in the form of specialty resins and additives. Lubrizol's
industry-leading technologies in additives, ingredients and compounds enhance
the quality, performance and value of customers' products, while reducing
their environmental impact.

With headquarters in Wickliffe, Ohio, The Lubrizol Corporation owns and
operates manufacturing facilities in 18 countries, as well as sales and
technical offices around the world. Founded in 1928, Lubrizol has
approximately 6,800 employees worldwide. Revenues for 2008 were $5.0 billion.
For more information, visit www.lubrizol.com.

This release contains forward-looking statements within the meaning of the
federal securities laws. As a general matter, forward-looking statements
relate to anticipated trends and expectations rather than historical matters.
Forward-looking statements are subject to uncertainties and factors relating
to the company's operations and business environment that are difficult to
predict and may be beyond the control of the company. Such uncertainties and
factors may cause actual results to differ materially from those expressed or
implied by forward-looking statements. Uncertainties and risk factors that
could affect the future performance of the company and cause results to differ
from the forward-looking statements in this release include, but are not
limited to, the company's ability to manage margins in an environment of
volatile raw material costs; conditions affecting the company's customers,
suppliers and the industries that it serves; competitors' responses to the
company's products; the impact of our current capital structure on our ability
to access the capital markets in the future; changes in accounting, tax or
regulatory practices or requirements; and other factors that are set forth in
the company's most recently filed reports with the Securities and Exchange
Commission. The forward-looking statements contained herein represent the
company's judgment as of the date of this release and it cautions readers not
to place undue reliance on such statements. The company assumes no
obligations to update the statements contained in this release.

THE LUBRIZOL CORPORATION
------------------------

CONSOLIDATED STATEMENTS OF INCOME
(In Millions Except Per Share Data)

Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----

Revenues $1,111.0 $1,350.2 $2,123.4 $2,577.5
Cost of sales 717.2 1,044.7 1,455.7 1,979.2
----- ------- ------- -------
Gross profit 393.8 305.5 667.7 598.3

Selling and
administrative
expenses 111.8 101.9 205.6 210.5
Research, testing
and development
expenses 49.2 55.7 98.2 109.8
Amortization
of intangible
assets 6.2 7.0 12.5 14.0
Restructuring
and impairment
charges 10.1 14.6 21.5 19.4
Other income -
net (5.3) (4.0) (10.5) (8.9)
Interest expense -
net 25.9 17.6 52.6 31.3
---- ---- ---- ----
Income before
income taxes 195.9 112.7 287.8 222.2
Provision for
income taxes 60.0 32.0 86.7 65.5
---- ---- ---- ----
Net income 135.9 80.7 201.1 156.7
Net income
attributable to
noncontrolling
interests 4.0 2.6 5.0 5.0
--- --- --- ---
Net income
attributable to
The Lubrizol
Corporation $131.9 $78.1 $196.1 $151.7
====== ===== ====== ======

Earnings per share
attributable to
The Lubrizol
Corporation:

Basic $1.95 $1.14 $2.90 $2.22
===== ===== ===== =====

Diluted $1.92 $1.13 $2.87 $2.19
===== ===== ===== =====

Weighted-average
common shares
outstanding:
Basic 67.8 68.3 67.7 68.4
==== ==== ==== ====

Diluted 68.6 69.1 68.3 69.2
==== ==== ==== ====

THE LUBRIZOL CORPORATION
------------------------

CONSOLIDATED BALANCE SHEETS
(In Millions of Dollars)
June 30, December 31,
2009 2008
---- ----
Assets
Cash and cash equivalents $860.8 $186.2
Receivables 654.7 608.5
Inventories 595.9 814.6
Other current assets 110.0 90.6
----- ----
Total current assets 2,221.4 1,699.9

Property and equipment - net 1,188.0 1,197.6
Goodwill and intangible assets - net 1,134.5 1,143.1
Investments and other assets 120.4 109.9
----- -----
Total $4,664.3 $4,150.5
======== ========

Liabilities and Shareholders' Equity
Short-term debt and current portion of
long-term debt $220.3 $391.2
Accounts payable 274.3 350.4
Accrued expenses and other current
liabilities 305.4 279.7
----- -----
Total current liabilities 800.0 1,021.3

Long-term debt 1,484.8 954.6
Other noncurrent liabilities 609.9 590.0
----- -----
Total liabilities 2,894.7 2,565.9
------- -------

Shareholders' equity 1,769.6 1,584.6
------- -------

Total $4,664.3 $4,150.5
======== ========

THE LUBRIZOL CORPORATION
------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions of Dollars)
Six Months
Ended
June 30,
--------
2009 2008
---- ----
Cash provided by (used for):
Operating activities:
Net income $201.1 $156.7
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 82.4 84.2
Deferred income taxes (17.4) (3.6)
Deferred compensation 9.0 5.9
Restructuring and impairment charges 6.9 14.9
Net change in working capital 156.1 (158.6)
Other items - net 8.7 (0.3)
--- ----
Total operating activities 446.8 99.2

Investing activities:
Capital expenditures (75.9) (97.6)
Other items - net 3.1 1.2
--- ---
Total investing activities (72.8) (96.4)

Financing activities:
Changes in short-term debt - net (0.7) -
Repayments of long-term debt (285.7) -
Proceeds from the issuance of long-term debt 646.3 -
Payment of Treasury rate lock upon settlement (16.7) -
Payment of debt issuance costs (4.8) -
Dividends paid (41.8) (41.6)
Dividends paid to noncontrolling interests (2.5) (3.7)
Common shares purchased - (50.1)
Proceeds from the exercise of stock options 3.3 3.0
Tax benefit from the exercise of stock options 0.7 2.0
--- ---
Total financing activities 298.1 (90.4)

Effect of exchange rate changes on cash 2.5 5.4
--- ---
Net increase (decrease) in cash and cash equivalents 674.6 (82.2)

Cash and cash equivalents at the beginning of period 186.2 502.3
----- -----

Cash and cash equivalents at the end of period $860.8 $420.1
====== ======

THE LUBRIZOL CORPORATION
------------------------

SEGMENT INFORMATION
(In Millions of Dollars)

Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Revenues from external
customers:
Lubrizol Additives $802.8 $945.6 $1,530.6 $1,790.3
Lubrizol Advanced
Materials 308.2 404.6 592.8 787.2
----- ----- ----- -----
Total revenues $1,111.0 $1,350.2 $2,123.4 $2,577.5
======== ======== ======== ========

Segment operating income:
Lubrizol Additives $221.2 $122.2 $339.9 $239.0
Lubrizol Advanced
Materials 36.6 34.7 62.1 63.9
---- ---- ---- ----
Total segment operating
income 257.8 156.9 402.0 302.9

Corporate expenses (28.8) (12.5) (44.8) (33.7)
Corporate other income - net 2.9 0.5 4.7 3.7
Restructuring and impairment
charges (10.1) (14.6) (21.5) (19.4)
Interest expense - net (25.9) (17.6) (52.6) (31.3)
----- ----- ----- -----
Income before income
taxes $195.9 $112.7 $287.8 $222.2
====== ====== ====== ======

Note: In the fourth quarter of 2008, we reorganized our reporting
structure among the Lubrizol Additives and Lubrizol Advanced Materials
operating segments related to two businesses: the AMPS(R) specialty
monomer
business and the ADEX(TM) explosives emulsifier business. We made this
change in order to better align the businesses with others of similar
asset and technology base in the Lubrizol Additives segment. In addition,
upon the adoption of SFAS 160 on January 1, 2009, we revised our
measurement of segment operating income to include income attributable to
noncontrolling interests within the Lubrizol Additives segment. The
results for 2008 have been revised to conform with the current year
presentation.

THE LUBRIZOL CORPORATION
------------------------

Supplemental Financial Information
For the Three and Six Months Ended June 30, 2009 and 2008
Reconciliation of Earnings to Earnings As Adjusted
(In Millions of Dollars, Except Per Share Data)

Earnings as adjusted (Non-GAAP) is a measure of income that differs from
earnings measured in accordance with generally accepted accounting
principles ("GAAP"). Earnings as adjusted (Non-GAAP) is net income
attributable to The Lubrizol Corporation per our consolidated results,
adjusted for exclusion of restructuring and impairment charges.
Management believes that both net income attributable to The Lubrizol
Corporation and earnings as adjusted for exclusion of these special
charges assist the investor in understanding the results of operations of
The Lubrizol Corporation. In addition, Management and the Board evaluate
results using net income attributable to The Lubrizol Corporation and
earnings as adjusted.

Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
------------- -------------
Net Income Net Income
Income Attributable Income Attributable
Before to Diluted Before to Diluted
Tax Lubrizol EPS Tax Lubrizol EPS
--- -------- --- ---- -------- ---

Earnings $195.9 $131.9 $1.92 $112.7 $78.1 $1.13

Adjustments:
Restructuring
and impairment
charges 10.1 6.5 0.10 14.6 9.1 0.13
---- --- ---- ---- --- ----

Earnings
as adjusted
(Non-GAAP) $206.0 $138.4 $2.02 $127.3 $87.2 $1.26
====== ====== ===== ====== ===== =====

Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
------------- -------------
Net Income Net Income
Income Attributable Income Attributable
Before to Diluted Before to Diluted
Tax Lubrizol EPS Tax Lubrizol EPS
--- -------- --- ---- -------- ---

Earnings $287.8 $196.1 $2.87 $222.2 $151.7 $2.19

Adjustments:
Restructuring
and impairment
charges 21.5 14.1 0.21 19.4 12.1 0.17
---- ---- ---- ---- ---- ----

Earnings
as adjusted
(Non-GAAP) $309.3 $210.2 $3.08 $241.6 $163.8 $2.36
====== ====== ===== ====== ====== =====

THE LUBRIZOL CORPORATION
------------------------

Supplemental Financial Information
For the Three and Six Months Ended June 30, 2009 and 2008

Reconciliation of Net Income Attributable to The Lubrizol Corporation
to Earnings Before Interest and Taxes (EBIT), and Before Restructuring
and Impairment Charges (Adjusted EBIT)

(in Millions of Dollars)

Earnings before interest and taxes (EBIT) (Non-GAAP) and earnings before
interest, taxes and restructuring and impairment charges (Adjusted EBIT)
(Non-GAAP) are measures of income that differ from net income attributable
to The Lubrizol Corporation measured in accordance with generally accepted
accounting principles ("GAAP"). EBIT is defined as net income
attributable to The Lubrizol Corporation per our consolidated results,
adjusted for interest expense - net and the provision for income taxes.
EBIT is further adjusted for restructuring and impairment charges to
derive Adjusted EBIT. Management believes that net income attributable to
The Lubrizol Corporation, EBIT and Adjusted EBIT assist the investor in
understanding the results of operations of The Lubrizol Corporation. In
addition, Management and the Board evaluate results using net income
attributable to The Lubrizol Corporation, EBIT and Adjusted EBIT.

Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----

Net income attributable to The Lubrizol
Corporation $131.9 $78.1 $196.1 $151.7
Add back:
Interest expense - net 25.9 17.6 52.6 31.3
Provision for income taxes 60.0 32.0 86.7 65.5
---- ---- ---- ----

Earnings before interest and taxes (EBIT) 217.8 127.7 335.4 248.5

Restructuring and impairment charges 10.1 14.6 21.5 19.4
---- ---- ---- ----

Earnings before interest, taxes,
restructuring and impairment charges
(Adjusted EBIT) $227.9 $142.3 $356.9 $267.9
====== ====== ====== ======

THE LUBRIZOL CORPORATION
------------------------

Supplemental Financial Information
For the Year Ended December 31, 2008
Reconciliation of Earnings to Earnings As Adjusted
(In Millions of Dollars, Except Per Share Data)

Earnings as adjusted (Non-GAAP) is a measure of income that differs from
earnings measured in accordance with generally accepted accounting
principles ("GAAP"). Earnings as adjusted (Non-GAAP) is net loss
attributable to The Lubrizol Corporation per our consolidated results,
adjusted for exclusion of restructuring and impairment charges and the
write-off of acquired in-process research and development. Management
believes that both net loss attributable to The Lubrizol Corporation and
earnings as adjusted for exclusion of these special charges assist the
investor in understanding the results of operations of The Lubrizol
Corporation. In addition, Management and the Board evaluate results
using net loss attributable to The Lubrizol Corporation and earnings as
adjusted.

Year Ended
December 31, 2008
-----------------
Net Loss
Income Attributable
Before to Diluted
Tax Lubrizol EPS
--- -------- ---

Earnings (loss) $17.0 $(66.1) $(0.97)

Adjustments:
Restructuring and impairment
charges 394.0 345.9 5.04
Write-off of acquired in-process
research and development 1.6 1.0 0.01
Pro forma effect of dilution on
earnings as adjusted* 0.01
----

Earnings as adjusted (Non-GAAP) $412.6 $280.8 $4.09
====== ====== =====

*Our loss per share for generally accepted accounting principles (GAAP)
does not allow for the inclusion of the dilutive effect of shares in the
denominator of our per share calculation since this effect would result
in a reduction of the loss per share. The per share impact of the
adjustments is reflected as if the dilutive shares were used in the
denominator of the earnings per share calculation of each adjustment.
The pro forma effect of dilution on earnings as adjusted is included in
the reconciliation of our Non-GAAP measure so that earnings as adjusted
reflects the impact of any applicable dilutive shares.

SOURCE The Lubrizol Corporation

Financial/Investor Contact, Mark Sutherland, +1-440-347-1206; Media Contact,
Julie Young, +1-440-347-4432