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Exhibit 99.2
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.
1
THE LUBRIZOL CORPORATION
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------
March 31 December 31
(In Thousands of Dollars) 2004 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.
2
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 21,310 (13,558)
current liabilities
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.
3
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
========= ========
4. Total comprehensive income for the three-month periods ended March 31, 2004
and 2003 is comprised as follows:
4
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
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.
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.
5
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
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.
6
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
As of March 31, 2004 As of December 31, 2003
------------------------- --------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount 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
========
7
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
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
======== ========= ========
7. The components of net periodic pension cost and post-employment benefits
costs consisted of the following:
Three Month Period Three Month Period
Ended March 31 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 (gain) loss - 69 - -
Recognized net actuarial
(gain) 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
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
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(TM),
Solplus(TM) and Solthix(TM). 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.
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.
9
THE LUBRIZOL CORPORATION
Notes to Consolidated Financial Statements
Amounts in thousands (except per share data)
10. On June 3, 2004, the company consummated its acquisition of Noveon
International, Inc. ("Noveon") for cash of $0.9 billion and the assumption
of approximately $1.1 billion of long-term indebtedness. Similar to
Lubrizol, Noveon is a global producer and marketer of high-performance,
specialty chemicals. The acquisition and related costs were financed with
the proceeds of a $2.45 billion 364 day temporary bridge loan which bears
interest at LIBOR plus 1.25%. Shortly after the acquisition, the company
repaid substantially all of Noveon's long-term indebtedness with
proceeds of the temporary bridge loan, which is expected to be replaced
with the proceeds of permanent financing to be obtained in the future in
the form of a term loan, debt securities and an equity issuance.
The repayment of the debt securities is expected to be fully and
unconditionally guaranteed on a joint and several basis by all direct and
indirect, 100 percent owned, domestic subsidiaries of Noveon and the
company. The following supplemental condensed consolidating financial
information presents the balance sheets of the company as of March 31, 2004
and December 31, 2003 and its statements of income and cash flows for the
three month periods ended March 31, 2004 and 2003 and provides information
regarding The Lubrizol Corporation (the "Parent Company" and anticipated
issuer of the debt securities) and its guarantor and non-guarantor
("Other") subsidiaries.
10
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTH PERIOD ENDED MARCH 31, 2004
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
Net sales $296,769 $62,675 $313,334 $(94,858) $577,920
Royalties and other revenues 674 85 25 784
-------- ------- -------- -------- --------
TOTAL REVENUES 297,443 62,760 313,359 (94,858) 578,704
-------- ------- -------- -------- --------
Cost of sales 215,937 47,794 257,459 (94,874) 426,316
Selling and administrative expenses 32,636 5,836 13,408 51,880
Research, testing and development expenses 27,392 1,561 11,771 40,724
-------- ------- -------- -------- --------
TOTAL COST AND EXPENSES 275,965 55,191 282,638 (94,874) 518,920
Other income (expense) - net 11,890 2,553 (11,582) (462) 2,399
Interest income (expense) - net (5,671) 344 (5,327)
Equity in income of subsidiaries 18,307 1,561 (19,868)
-------- ------- -------- -------- --------
Income before income taxes 46,004 11,683 19,483 (20,314) 56,856
Provision for income taxes 8,496 3,612 7,224 (1) 19,331
-------- ------- -------- -------- --------
NET INCOME $ 37,508 $ 8,071 $ 12,259 $(20,313) $ 37,525
======== ======= ======== ======== ========
11
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTH PERIOD ENDED MARCH 31, 2003
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ---------- ------------ ------------ ------------
Net sales $257,235 $47,307 $278,274 $(75,816) $507,000
Royalties and other revenues 777 77 359 1,213
-------- ------- -------- -------- --------
TOTAL REVENUES 258,012 47,384 278,633 (75,816) 508,213
Cost of sales 190,485 36,083 220,367 (78,672) 368,263
Selling and administrative expenses 34,310 5,597 10,908 50,815
Research, testing and development expenses 28,887 1,424 11,322 41,633
Restructuring charge 3,506 3,506
-------- ------- -------- -------- --------
TOTAL COST AND EXPENSES 253,682 43,104 246,103 (78,672) 464,217
Other income (expense) - net 4,101 3,126 (6,888) (648) (309)
Interest income (expense) - net (5,290) (12) 455 (4,847)
Equity in income of subsidiaries 21,516 1,853 (23,369)
-------- ------- -------- -------- --------
Income before income taxes 24,657 9,247 26,097 (21,161) 38,840
Provision for income taxes 461 2,396 8,931 1,029 12,817
-------- ------- -------- -------- --------
NET INCOME $ 24,196 $ 6,851 $ 17,166 $(22,190) $ 26,023
======== ======= ======== ======== ========
12
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2004
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ---------- ------------ ------------ ------------
ASSETS
Cash and short-term investments $1,314 $(1,111) $177,812 $178,015
Receivables 129,305 39,435 217,299 386,039
Inventories 92,317 42,062 218,079 $(28,098) 324,360
Other current assets 26,890 777 7,644 9,032 44,343
---------- ---------- -------- ----------- ----------
TOTAL CURRENT ASSETS 249,826 81,163 620,834 (19,066) 932,757
---------- ---------- -------- ----------- ----------
Property and equipment - at cost 1,175,312 64,268 735,298 1,974,878
Less accumulated depreciation 769,834 14,421 501,291 1,285,546
---------- ---------- -------- ----------- ----------
PROPERTY AND EQUIPMENT - NET 405,478 49,847 234,007 689,332
---------- ---------- -------- ----------- ----------
Goodwill 26,638 122,245 132,171 281,054
Intangible assets - net 31,116 31,379 40,453 102,948
Investments in subsidiaries and intercompany balances 954,180 814,056 (129,712) (1,638,524)
Investments in non-consolidated companies 5,379 688 6,067
Other assets 16,616 2,976 13,433 33,025
---------- ---------- -------- ----------- ----------
TOTAL $1,689,233 $1,102,354 $911,186 $(1,657,590) $2,045,183
========== ========== ======== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt $59,934 $59,934
Accounts payable $69,097 $ 13,784 73,159 156,040
Accrued expenses and other current liabilities 73,824 21,902 51,826 147,552
---------- ---------- -------- ----------- ----------
TOTAL CURRENT LIABILITIES 142,921 35,686 184,919 363,526
---------- ---------- -------- ----------- ----------
Long-term debt 381,122 4,983 386,105
Postretirement health care obligations 93,180 5,634 98,814
Noncurrent liabilities 40,708 42 60,945 101,695
Deferred income taxes 24,208 6,207 21,787 52,202
---------- ---------- -------- ----------- ----------
TOTAL LIABILITIES 682,139 41,935 278,268 1,002,342
---------- ---------- -------- ----------- ----------
Minority interest in consolidated companies $52,513 52,513
TOTAL SHAREHOLDERS' EQUITY 1,007,094 1,060,419 632,918 (1,710,103) 990,328
---------- ---------- -------- ----------- ----------
TOTAL $1,689,233 $1,102,354 $911,186 $(1,657,590) $2,045,183
========== ========== ======== =========== ==========
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2003
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ---------- ------------ ------------ ------------
ASSETS
Cash and short-term investments $56,254 $(1,008) $203,453 $258,699
Receivables 100,857 39,225 184,485 324,567
Inventories 76,824 44,316 216,583 $ (25,804) 311,919
Other current assets 26,357 663 6,612 9,031 42,663
---------- ---------- -------- ----------- ----------
TOTAL CURRENT ASSETS 260,292 83,196 611,133 (16,773) 937,848
---------- ---------- -------- ----------- ----------
Property and equipment - at cost 1,156,725 71,539 732,335 1,960,599
Less accumulated depreciation 757,117 14,241 499,247 1,270,605
---------- ---------- -------- ----------- ----------
PROPERTY AND EQUIPMENT - NET 399,608 57,298 233,088 689,994
---------- ---------- -------- ----------- ----------
Goodwill 24,992 124,776 58,958 208,726
Intangible assets - net 12,169 32,784 17,449 62,402
Investments in subsidiaries and intercompany balances 934,147 811,027 (96,914) (1,648,260)
Investments in non-consolidated companies 5,609 687 6,296
Other assets 20,528 3,427 13,095 37,050
---------- ---------- -------- ----------- ----------
TOTAL $1,657,345 $1,113,195 $836,809 $(1,665,033) $1,942,316
========== ========== ======== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt $ 2,899 $ 2,899
Accounts payable $ 63,967 $ 17,418 61,735 143,120
Accrued expenses and other current liabilities 79,922 20,728 52,808 153,458
---------- ---------- -------- ----------- ----------
TOTAL CURRENT LIABILITIES 143,889 38,146 117,442 299,477
---------- ---------- -------- ----------- ----------
Long-term debt 381,801 4,925 386,726
Postretirement health care obligations 92,865 5,522 98,387
Noncurrent liabilities 44,662 44 55,624 100,330
Deferred income taxes 24,050 6,894 21,866 52,810
---------- ---------- -------- ----------- ----------
TOTAL LIABILITIES 687,267 45,084 205,379 937,730
---------- ---------- -------- ----------- ----------
Minority interest in consolidated companies $ 51,281 51,281
TOTAL SHAREHOLDERS' EQUITY 970,078 1,068,111 631,430 (1,716,314) 953,305
---------- ---------- -------- ----------- ----------
TOTAL $1,657,345 $1,113,195 $836,809 $(1,665,033) $1,942,316
========== ========== ======== =========== ==========
14
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTH PERIOD ENDED MARCH 31, 2004
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ---------- ------------ ------------ ------------
CASH PROVIDED FROM (USED FOR):
OPERATING ACTIVITIES:
Net income $37,508 $8,071 $12,259 $(20,313) $37,525
Adjustments to reconcile net income to cash provided
(used) by operating activities (33,942) 61,474 (65,486) 20,313 (17,641)
------- ------ ------- -------- -------
Total operating activities 3,566 69,545 (53,227) 19,884
INVESTING ACTIVITIES:
Capital expenditures (12,278) (1,371) (6,299) (19,948)
Acquisitions (20,328) (112,713) (133,041)
Other - net 140 (141) 148 147
------- ------ ------- -------- -------
Total investing activities (32,466) (1,512) (118,864) (152,842)
FINANCING ACTIVITIES:
Short-term borrowings 58,663 58,663
Long-term repayments (21) (21)
Dividends paid (13,415) (13,415)
Changes in intercompany activities (20,450) (68,145) 88,595
Stock options exercised 1,428 1,428
------- ------ ------- -------- -------
Total financing activities (32,437) (68,145) 147,237 46,655
Effect of exchange rate changes on cash 6,397 9 (787) 5,619
------- ------ ------- -------- -------
Net decrease in cash and short-term
investments (54,940) (103) (25,641) (80,684)
Cash and short-term investments at the beginning of
period 56,254 (1,008) 203,453 258,699
------- ------ ------- -------- -------
Cash and short-term investments at the end of period $1,314 $(1,111) $177,812 $ $178,015
======= ======== ======== ======== ========
15
THE LUBRIZOL CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTH PERIOD ENDED MARCH 31, 2003
(IN THOUSANDS OF DOLLARS)
PARENT SUBSIDIARY OTHER TOTAL
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
CASH PROVIDED FROM (USED FOR):
OPERATING ACTIVITIES:
Net income $24,196 $6,851 $17,166 $(22,190) $26,023
Adjustments to reconcile net income to cash provided
(used) by operating activities (47,876) 100,220 (106,342) 22,190 (31,808)
-------- ------- --------- --------- --------
Total operating activities (23,680) 107,071 (89,176) (5,785)
INVESTING ACTIVITIES:
Capital expenditures (8,616) (1,200) (5,515) (15,331)
Other - net 110 (272) (73) (235)
-------- ------- --------- --------- --------
Total investing activities (8,506) (1,472) (5,588) (15,566)
FINANCING ACTIVITIES:
Short-term repayments (103) (4,122) (4,225)
Long-term repayments (103) (103)
Long-term borrowings 11 11
Dividends paid (13,379) (13,379)
Changes in intercompany activities (1,710) (104,310) 106,020
Stock options exercised 1,190 1,190
-------- ------- --------- --------- --------
Total financing activities (13,899) (104,413) 101,806 (16,506)
Effect of exchange rate changes on cash (1) 26 (1,450) (1,425)
-------- ------- --------- --------- --------
Net increase (decrease) in cash and short-term
investments (46,086) 1,212 5,592 (39,282)
Cash and short-term investments at the beginning of period 116,478 (1,882) 151,832 266,428
-------- ------- --------- --------- --------
Cash and short-term investments at the end of period $70,392 $(670) $157,424 $ $227,146
======== ======= ========= ========= ========
16