Ethyl 10Q 2003 Q3 Quarterly report

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 September 30, 2003

¨	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 1-5112

ETHYL CORPORATION

(Exact name of registrant as specified in its charter)

VIRGINIA

54-0118820

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

330 SOUTH FOURTH STREET

RICHMOND, VIRGINIA

23218-2189

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code - (804) 788-5000

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 shares of common stock, $1 par value, outstanding as of October 31, 2003: 16,762,009.

ETHYL CORPORATION

I N D E X

		Page Number
PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 2003 and 2002	3

	Consolidated Balance Sheets – September 30, 2003 and December 31, 2002	4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2003 and 2002	5

	Notes to Financial Statements	6-22

ITEM 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	23-36

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	37

ITEM 4.	Controls and Procedures	37-38

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	39

ITEM 2.	Changes in Securities and Use of Proceeds	39

ITEM 6.	Exhibits and Reports on Form 8-K	39-40

SIGNATURES		41

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ETHYL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share amounts)

(unaudited)

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003			2002
Net sales	$	197,095	$	172,750	$	551,135		$	489,869
Cost of goods sold		151,839		130,792		425,821			382,575

Gross profit		45,256		41,958		125,314			107,294

TEL marketing agreements services		9,712		8,325		20,644			18,487

Selling, general, and administrative expenses		20,864		18,199		63,356			53,307
Research, development, and testing expenses		13,801		11,978		42,504			37,144

Operating profit		20,303		20,106		40,098			35,330
Interest and financing expenses		5,205		6,352		16,409			19,952
Other income (expense), net		37		1,390		(105	)		(3,030	)

Income from continuing operations before income taxes		15,135		15,144		23,584			12,348
Income tax expense		4,838		4,999		7,679			5,277

Income from continuing operations		10,297		10,145		15,905			7,071
Discontinued operations
Gain on disposal of business (net of tax of $8,391)		—		—		14,805			—
Income from operations of discontinued business (net of tax of $424 for third quarter and $1,301 for nine months)		—		722		—			2,217

Income before cumulative effect of accounting changes		10,297		10,867		30,710			9,288
Cumulative effect of accounting changes (net of tax of $925 in 2003 and ($615) in 2002)		—		—		1,624			(2,505	)

Net income	$	10,297	$	10,867	$	32,334		$	6,783

Basic earnings per share:
Earnings from continuing operations	$	0.61	$	0.61	$	0.95		$	0.43
Discontinued operations (net of tax)		—		0.04		0.88			0.13
Cumulative effect of accounting changes (net of tax)		—		—		0.10			(0.15	)

Basic earnings per share	$	0.61	$	0.65	$	1.93		$	0.41

Diluted earnings per share:
Earnings from continuing operations	$	0.61	$	0.61	$	0.94		$	0.43
Discontinued operations (net of tax)		—		0.04		0.88			0.13
Cumulative effect of accounting changes (net of tax)		—		—		0.09			(0.15	)

Diluted earnings per share	$	0.61	$	0.65	$	1.91		$	0.41

Shares used to compute basic earnings per share		16,753		16,689		16,722			16,689

Shares used to compute diluted earnings per share		17,020		16,689		16,893			16,728

See accompanying notes to financial statements.

ETHYL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30 2003			December 31 2002
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	22,061		$	15,478
Restricted cash		880			683
Trade and other accounts receivable, less allowance for doubtful accounts ($2,060 - 2003; $911 - 2002)		121,770			124,430
Receivable - TEL marketing agreements services		10,819			7,418
Inventories:
Finished goods and work-in-process		104,167			87,542
Raw materials		12,709			8,604
Stores, supplies and other		8,350			7,900

		125,226			104,046

Prepaid expenses		5,842			2,232

Deferred income taxes		11,960			14,339
Assets of discontinued operations		—			4,323

Total current assets		298,558			272,949

Property, plant and equipment, at cost		741,869			746,237
Less accumulated depreciation and amortization		566,187			547,518

Net property, plant and equipment		175,682			198,719

Prepaid pension cost		26,636			24,995
Deferred income taxes		9,441			9,494
Other assets and deferred charges		78,982			80,756
Intangibles, net of amortization		65,155			69,338

Total assets	$	654,454		$	656,251

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	51,763		$	44,130
Accrued expenses		49,264			38,778
Long-term debt, current portion		7,503			40,537
Income taxes payable		15,958			6,288

Total current liabilities		124,488			129,733

Long-term debt		214,520			249,530
Other noncurrent liabilities		124,248			123,910

Commitments and contingencies (Note 4)

Shareholders’ equity:
Common stock ($1 par value) Issued - 16,761,009 in 2003 and 16,689,009 in 2002		16,761			16,689
Additional paid-in capital		67,007			66,766
Accumulated other comprehensive loss		(23,821	)		(29,294	)
Retained earnings		131,251			98,917

		191,198			153,078

Total liabilities and shareholders’ equity	$	654,454		$	656,251

See accompanying notes to financial statements.

ETHYL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30
	2003			2002
Cash and cash equivalents at beginning of year	$	15,478		$	12,382

Cash flows from operating activities:
Net income		32,334			6,783
Adjustments to reconcile net income to cash flows from operating activities:
Amortization of deferrred financing costs		3,685			4,148
Depreciation and other amortization		34,714			35,615
Gain on sale of phenolic antioxidant business		(23,196	)		—
Cumulative effect of accounting changes		(2,549	)		3,120
Noncash pension expense		6,673			4,888
TEL working capital advance		1,270			772
Deferred income tax expense (benefit)		18			(7,710	)
Net loss on impairments		—			4,033
Working capital changes		5,200			(950	)
Proceeds from legal settlement		4,825			—
Cash pension contributions		(7,802	)		(2,431	)
Proceeds from contract settlement		—			2,700
Other, net		2,357			4,373

Cash provided from operating activities		57,529			55,341

Cash flows from investing activities:
Capital expenditures		(7,236	)		(10,290	)
Proceeds from sale of phenolic antioxidant business		27,770			—
Proceeds from sale of certain assets		12,576			—
Prepayment for TEL marketing agreements services		(3,200	)		(12,800	)
Other, net		174			25

Cash provided from (used in) investing activities		30,084			(23,065	)

Cash flows from financing activities:
Repayment of debt - old agreements		(284,519	)		(58,640	)
Net borrowings - old agreements		—			31,840
Issuance of senior notes and term loan		265,000			—
Repayments on term loan		(48,124	)		—
Debt issuance costs		(13,299	)		(1,982	)
Other, net		(88	)		(368	)

Cash used in financing activities		(81,030	)		(29,150	)

Increase in cash and cash equivalents		6,583			3,126

Cash and cash equivalents at end of period	$	22,061		$	15,508

See accompanying notes to financial statements.

ETHYL CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(tabular amounts in thousands, except where noted, excluding share and per-share amounts)

(unaudited)

In the opinion of management, the accompanying consolidated financial statements of Ethyl Corporation and Subsidiaries contain all necessary adjustments for the fair presentation of, in all material respects, our consolidated financial position as of September 30, 2003, as well as the consolidated results of operations for the three- and nine-month periods ended September 30, 2003 and 2002, and the consolidated cash flows for the nine-months ended September 30, 2003 and 2002. The financial statements are subject to normal year-end adjustments and do not include the comprehensive footnotes. All adjustments are of a normal, recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (2002 Annual Report). The results of operations for the nine-month period ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

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

Unless the context otherwise requires, all references to “we,” “us,” “our,” the “Company,” and “Ethyl” are to Ethyl Corporation and its subsidiaries.

2.	After approval by the Board of Directors in December 2002, on January 21, 2003, we completed the sale of our phenolic antioxidant business to Albemarle Corporation. Following an extensive assessment, we concluded this business was not part of our future core business or growth goals.

As part of the transaction, we sold accounts receivable and inventory, as well as fixed assets at our Orangeburg, South Carolina facility. These accounts receivable and inventory are reported as “Assets of discontinued operations” on our December 31, 2002 Consolidated Balance Sheet. The net book value of the fixed assets was zero. The cost and accumulated depreciation of these fixed assets have been removed from the property, plant, and equipment captions on the December 31, 2002 Consolidated Balance Sheet. The net sales of the discontinued business were $4.8 million for the third quarter of 2002 and $13.8 million for the first nine months of last year.

We recognized a gain of $23.2 million ($14.8 million after tax) in first quarter 2003 related to this transaction.

The cumulative effect of accounting change in nine months 2003 reflects the gain of $2.5 million ($1.6 million after tax, or $.10 per basic share) recognized upon the January 1, 2003 adoption of Statement of Financial Accounting Standard (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” This statement addresses the obligations and asset retirement costs associated with the retirement of tangible long-lived assets. It requires that the fair value of the liability for an asset retirement obligation be recorded when incurred instead of ratably over the life of the asset. The asset retirement costs

must be capitalized as part of the carrying value of the long-lived asset. If the liability is settled for an amount other than the recorded balance, either a gain or loss will be recognized at settlement.

Our asset retirement obligations are related primarily to TEL operations. These obligations had been previously fully accrued. Upon the implementation of SFAS No. 143 on January 1, 2003, these accruals were discounted to their net present value to comply with the requirements of SFAS No. 143, which resulted in the recognition of a gain. Current accretion of the asset retirement obligations is being expensed in operations. The following table illustrates the activity associated with the adoption of SFAS No. 143.

Asset retirement obligation, December 31, 2002	$	14,828
Gain upon implementation of SFAS No. 143		(2,549	)
Accretion expense		679
Liabilities settled		(669	)
Foreign currency impact		868

Asset retirement obligation, September 30, 2003	$	13,157

Had we adopted SFAS No. 143 on January 1, 2002, accretion expense would have been approximately $200 thousand ($100 thousand after tax) for the third quarter 2002 and $600 thousand ($400 thousand after tax) for nine months 2002.

The nine months 2002 cumulative effect of accounting change reflects the impairment of goodwill of $3.1 million ($2.5 million after tax, or $.15 per share) resulting from the January 1, 2002 adoption of SFAS No. 142.

There have been no significant changes in our commitments and contingencies from those reported in our 2002 Annual Report, except for the legal proceedings described in Part II, Item 1 and the sale-leaseback transaction described in Note 12. The sale-leaseback transaction will result in increased annual rental expense of approximately $1.1 million.

Our accruals for environmental remediation were $23 million at both September 30, 2003 and December 31, 2002. We also recorded expected insurance reimbursement assets for these amounts of $4 million at both September 30, 2003 and December 31, 2002. When significant events or circumstances occur that might impair the value of this insurance receivable, we evaluate recoverability of the recorded amounts. In addition to the accruals for environmental remediation, we also have accruals for dismantling, decommissioning, and other costs of $11 million at September 30, 2003 and $13 million at December 31, 2002.

We account for the stock-based compensation plan using the intrinsic-value method. Under this method, we do not record compensation cost unless the quoted market price of the stock at grant date or other measurement date exceeds the amount the employee must pay to exercise the stock option. See Note 14 in our 2002 Annual Report for further information on our stock-based compensation plan. The following table illustrates the effect on net income and earnings per share as if we had applied the fair-value method of accounting for the stock-based compensation plan.

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
Net income, as reported	$	10,297		$	10,867		$	32,334		$	6,783
Less: Total stock-based employee compensation expense determined under the fair-value based method, net of related tax effect		(82	)		(157	)		(246	)		(470	)

Net income, pro forma	$	10,215		$	10,710		$	32,088		$	6,313

Earnings per share:
Basic, as reported	$	0.61		$	0.65		$	1.93		$	0.41

Basic, pro forma	$	0.61		$	0.64		$	1.92		$	0.38

Diluted, as reported	$	0.61		$	0.65		$	1.91		$	0.41

Diluted, pro forma	$	0.60		$	0.64		$	1.90		$	0.38

6.	The tables below show our consolidated net sales by segment, operating profit by segment, reconciliation to income from continuing operations before income taxes, and depreciation and amortization by segment.

Net Sales by Segment

(in millions)

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Petroleum additives	$	194.1	$	170.7	$	544.7	$	483.1
Tetraethyl lead		3.0		2.1		6.4		6.8

Consolidated net sales	$	197.1	$	172.8	$	551.1	$	489.9

Segment Operating Profit

(in millions)

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
Petroleum additives	$	19.2		$	23.9		$	47.7		$	44.3
Tetraethyl lead		9.4			3.1			19.6			9.3

Segment operating profit		28.6			27.0			67.3			53.6
Effect of accounting changes reflected in segment operating profit		—			—			(2.5	)		3.1
Corporate unallocated expense		(4.3	)		(3.9	)		(13.4	)		(10.2	)
Interest expense		(5.2	)		(6.4	)		(16.4	)		(20.0	)
Loss on impairments of nonoperating assets		—			—			—			(4.1	)
Pension expense		(1.6	)		(0.5	)		(4.4	)		(3.4	)
Other expense, net		(2.4	)		(1.1	)		(7.0	)		(6.7	)

Income from continuing operations before income taxes	$	15.1		$	15.1		$	23.6		$	12.3

Depreciation and Amortization

(in millions)

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Petroleum additives	$	8.4	$	8.3	$	25.6	$	26.2
Tetraethyl lead		2.7		2.8		8.0		8.3
Other long-lived assets		0.3		0.3		1.1		1.1

Total depreciation and amortization	$	11.4	$	11.4	$	34.7	$	35.6

Other income (expense), net in the Consolidated Statements of Income included expenses related to debt refinancing activities of $300 thousand for nine months 2003. Third quarter 2002 included $1.2 million interest income from a settlement with the Internal Revenue Service. In addition to the $1.2 million income, nine months 2002 also included a loss on the impairment of nonoperating assets of $4.1 million. Expenses related to debt refinancing activities for nine months 2002 amounted to $1.1 million.

Basic and diluted earnings per share are calculated as shown in the table below. Options are not included in the computation of diluted earnings per share when the option exercise price exceeds the average market price of the common share. At September 30, 2003, we had outstanding options to purchase 293,200 shares of common stock at $62.50 per share, as well as 50,000 shares of common stock at $44.375 per share. At September 30, 2002, we had outstanding options to purchase 303,200 shares of common stock at $62.50 per share; 50,000 shares of common stock at $44.375 per share; and 4,177 shares of common stock at $64.15 per share. None of these options were included in the computation of diluted earnings per share for any period.

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Basic earnings per share
Numerator:
Net income	$	10,297	$	10,867	$	32,334	$	6,783

Denominator:
Average number of shares of common stock outstanding		16,753		16,689		16,722		16,689

Basic earnings per share	$	.61	$	.65	$	1.93	$	.41

Diluted earnings per share
Numerator:
Net income	$	10,297	$	10,867	$	32,334	$	6,783

Denominator:
Average number of shares of common stock outstanding		16,753		16,689		16,722		16,689

Shares issuable upon exercise of stock options		267		—		171		39

Total shares		17,020		16,689		16,893		16,728

Diluted earnings per share	$	.61	$	.65	$	1.91	$	.41

9.	The following table provides certain information related to our intangible assets.

	Identifiable Intangibles
	September 30 2003				December 31 2002
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets
Formulas	$	85,910	$	29,727	$	85,910	$	26,333
Contracts		40,873		37,512		40,873		36,644

	$	126,783	$	67,239	$	126,783	$	62,977

Nonamortizing intangible assets
Minimum pension liabilities	$	5,611			$	5,532

Aggregate amortization expense			$	4,262			$	5,677

Estimated amortization expense for the next five years is expected to be:

• 2003	$	5,896
• 2004	$	6,540
• 2005	$	5,365
• 2006	$	4,524
• 2007	$	4,524

We amortize the cost of intangible assets by the straight-line method, over their economic lives of 5 to 20 years.

10.	Long-term debt consisted of the following:

	September 30 2003			December 31 2002
Senior notes	$	150,000		$	—
Term loan agreements		66,876			211,679
Revolving credit agreement		—			54,200
Private borrowing		—			18,640

		216,876			284,519
Obligations under capital lease		5,147			5,548

Total debt		222,023			290,067
Less current portion		(7,503	)		(40,537	)

Long-term debt	$	214,520		$	249,530

On April 30, 2003, we entered into a new long-term debt structure for Ethyl. The debt structure includes senior notes and a senior credit facility with a bank term loan and a revolving credit facility.

We sold, in a private offering, senior notes in the aggregate principal amount of $150 million that bear interest at a fixed rate of 8.875% and are due in 2010. On June 26, 2003, we commenced an exchange offer for all of the outstanding 8.875% senior notes. We offered to exchange up to $150 million aggregate principal amount of our 8.875% senior notes due in 2010 which have been registered under the Securities Act of 1933, as amended, for a like principal amount of the original unregistered senior notes. The exchange offer expired as scheduled at 5:00 p.m., New York City time, on Monday, July 28, 2003. All of the notes were tendered. The terms of the exchange securities are identical in all material respects to the terms of the original securities for which they were exchanged, except that the registration rights and the transfer restrictions, applicable to the original securities, are not applicable to the exchange securities.

The bank term loan was initially for $115 million and has a variable interest rate of LIBOR plus 450 basis points (5.62% at September 30, 2003). The term loan matures in April 2009 and has scheduled quarterly payments, which began in June 2003.

The revolver is a $50 million facility for working capital and letter of credit issuance purposes. It bears interest at LIBOR plus 375 to 400 basis points and matures in April 2008.

The senior credit facility contains covenants, representations, and events of default that management considers typical of a credit agreement of this nature.

The proceeds from the senior notes and the bank term loan were used to repay existing debt. We incurred financing costs of approximately $11.5 million in obtaining the new credit facilities, which will be amortized over periods of six to seven years.

For a more detailed description of the long-term debt structure, see Item 2, “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Cash Flows, Financial Condition and Liquidity.”

11.	The components of comprehensive income consist of the following:

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003		2002

Net income	$	10,297		$	10,867		$	32,334	$	6,783
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on marketable equity securities		79			(709	)		345		(982	)
Unrealized gain on derivative instruments		(26	)		—			—		—
Foreign currency translation adjustments		618			(927	)		5,128		3,958

Other comprehensive income (loss)		671			(1,636	)		5,473		2,976

Comprehensive income	$	10,968		$	9,231		$	37,807	$	9,759

The components of accumulated other comprehensive loss consist of the following:

	September 30 2003			December 31 2002
Unrealized (loss) on marketable equity securities	$	(275	)	$	(620	)
Minimum pension liability adjustment		(10,902	)		(10,902	)
Foreign currency translation adjustments		(12,644	)		(17,772	)

Accumulated other comprehensive loss	$	(23,821	)	$	(29,294	)

12.

In June 2003, we entered into a sale-leaseback transaction for the land, buildings, and certain equipment located at our Bracknell, England facility. We received $11.1 million for the assets, which had a net book value of $9.6 million. The resulting operating lease is for ten years with a break option after five years. The gain of $1.5 million was deferred and will be amortized over the term of the lease agreement.

13.

Both Liabilities and Equity” establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective at the beginning of the first interim period after June 15, 2003. These statements did not have a significant impact on third quarter 2003 results, nor do we expect either of the statements to have a significant impact on future results.

FASB Interpretation Number 46 (FIN 46), “Consolidation of Variable Interest Entities,” was released in January 2003. FIN 46 expands existing accounting guidance that specifies when a company should include the assets, liabilities, and activities of another entity in the company’s financial statements. Generally, the interpretation requires that a variable interest entity be consolidated if the company has the majority of either the risk of loss or benefit of returns of the variable interest entity’s activities. Originally, the requirements of this interpretation were effective for interim or annual periods beginning after June 15, 2003. The FASB has recently deferred the effective date of the interpretation until the first reporting period ending after December 15, 2003. We do not expect this interpretation to have a significant impact on Ethyl.

14.

The 8.875% senior notes due 2010 are fully and unconditionally guaranteed by certain of our subsidiaries (Guarantor Subsidiaries) on a joint and several unsecured senior basis. The Guarantor Subsidiaries include all of our existing and future wholly-owned domestic restricted subsidiaries and certain of our existing wholly-owned foreign subsidiaries. The Guarantor Subsidiaries and the Non-Guarantor subsidiaries are wholly-owned by Ethyl Corporation (the Parent Company). The Guarantor Subsidiaries consist of the following.

Domestic Subsidiaries

Ethyl Asia Pacific Company

Ethyl Export Corporation

Ethyl Interamerica Corporation

Ethyl Petroleum Additives, Inc.

Ethyl Ventures, Inc.

Interamerica Terminals Corporation

The Edwin Cooper Corporation

Ethyl Additives Corporation

Foreign Subsidiaries

Ethyl Europe SPRL

Ethyl Brasil Aditivos, LTDA

Ethyl Administration GmbH

Ethyl Services, GmbH

We conduct much of our business and derive much of our income from our subsidiaries. Therefore, our ability to make payments on the senior notes or other obligations is dependent on the earnings and the distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our domestic subsidiaries to transfer funds to the Parent Company. We are currently able to transfer funds from our foreign subsidiaries although certain conditions may arise occasionally that may restrict these transfers.

The following financial information sets forth, on a consolidating basis, the financial position as of September 30, 2003 and December 31, 2002; results of operations for the three- and nine-month periods ended September 30, 2003 and 2002; and cash flows for

the nine-month periods ended September 30, 2003 and 2002 for the Parent Company, the Guarantor Subsidiaries and Non-Guarantor Subsidiaries. The financial information is based on our understanding of the Securities and Exchange Commission’s (SEC) interpretation and application of Rule 3-10 of the SEC Regulation S-X.

The financial information may not necessarily be indicative of results of operations or financial position had the Guarantor Subsidiaries or Non-Guarantor Subsidiaries operated as independent entities.

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended September 30, 2003

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales	$	2,503		$	150,919		$	106,391		$	(62,718	)	$	197,095
Cost of goods sold		4,040			120,464			91,210			(63,875	)		151,839

Gross (loss) profit		(1,537	)		30,455			15,181			1,157			45,256
TEL marketing agreements services		(2,156	)		6,271			5,597			—			9,712
Intercompany service fee income (expense) from TEL marketing agreements		5,416			(18	)		(5,398	)		—			—
Selling, general, and administrative expenses		8,432			3,309			9,123			—			20,864
Research, development, and testing expenses		—			10,925			2,876			—			13,801

Operating (loss) profit		(6,709	)		22,474			3,381			1,157			20,303

Interest and financing expenses		3,282			1,911			12			—			5,205
Other income (expense), net		21			38			(22	)		—			37

(Loss) income from continuing operations before income taxes and equity income of subsidiaries		(9,970	)		20,601			3,347			1,157			15,135
Income tax (benefit) expense		(3,197	)		6,332			1,285			418			4,838
Equity income of subsidiaries		17,070			—			—			(17,070	)		—

Net income	$	10,297		$	14,269		$	2,062		$	(16,331	)	$	10,297

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended September 30, 2002

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales	$	1,724		$	141,256		$	97,102		$	(67,332	)	$	172,750
Cost of goods sold		7,629			100,983			86,877			(64,697	)		130,792

Gross (loss) profit		(5,905	)		40,273			10,225			(2,635	)		41,958

TEL marketing agreements services		(901	)		(1,181	)		10,407			—			8,325
Intercompany service fee income (expense) from TEL marketing agreements		10,159			(162	)		(9,997	)		—			—

Selling, general, and administrative expenses		7,421			4,052			6,726			—			18,199
Research, development, and testing expenses		—			9,574			2,404			—			11,978

Operating (loss) profit		(4,068	)		25,304			1,505			(2,635	)		20,106

Interest and financing expenses		6,165			187			—			—			6,352
Other income, net		1,344			30			16			—			1,390

(Loss) income from continuing operations before income taxes and equity income of subsidiaries		(8,889	)		25,147			1,521			(2,635	)		15,144
Income tax (benefit) expense		(2,924	)		8,259			659			(995	)		4,999
Equity income of subsidiaries		16,110			—			—			(16,110	)		—

Income from continuing operations		10,145			16,888			862			(17,750	)		10,145

Income from operations of discontinued business (net of tax)		722			437			312			(749	)		722

Net income	$	10,867		$	17,325		$	1,174		$	(18,499	)	$	10,867

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Nine Months Ended September 30, 2003

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales	$	5,511		$	422,178		$	303,823		$	(180,377	)	$	551,135
Cost of goods sold		11,627			331,289			266,064			(183,159	)		425,821

Gross (loss) profit		(6,116	)		90,889			37,759			2,782			125,314

TEL marketing agreements services		(2,129	)		10,283			12,490			—			20,644
Intercompany service fee income (expense) from TEL marketing agreements		11,837			(17	)		(11,820	)		—			—

Selling, general, and administrative expenses		24,715			14,029			24,612			—			63,356
Research, development, and testing expenses		—			33,830			8,674			—			42,504

Operating (loss) profit		(21,123	)		53,296			5,143			2,782			40,098

Interest and financing expenses		13,803			2,594			12			—			16,409
Other (expense) income, net		(72	)		152			(185	)		—			(105	)

(Loss) income from continuing operations before income taxes and equity income of subsidiaries		(34,998	)		50,854			4,946			2,782			23,584
Income tax (benefit) expense		(11,984	)		16,329			2,327			1,007			7,679
Equity income of subsidiaries		38,919			—			—			(38,919	)		—

Income from continuing operations		15,905			34,525			2,619			(37,144	)		15,905

Gain on disposal of business (net of tax)		14,805			—			—			—			14,805

Income before cumulative effect of accounting change		30,710			34,525			2,619			(37,144	)		30,710
Cumulative effect of accounting change (net of tax)		1,624			74			438			(512	)		1,624

Net income	$	32,334		$	34,599		$	3,057		$	(37,656	)	$	32,334

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Nine Months Ended September 30, 2002

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales	$	5,991		$	389,134		$	273,074		$	(178,330	)	$	489,869
Cost of goods sold		15,821			288,161			247,205			(168,612	)		382,575

Gross (loss) profit		(9,830	)		100,973			25,869			(9,718	)		107,294

TEL marketing agreements services		(1,697	)		(2,739	)		22,923			—			18,487
Intercompany service fee income (expense) from TEL marketing agreements		22,176			(137	)		(22,039	)		—			—

Selling, general, and administrative expenses		20,502			13,974			18,831			—			53,307
Research, development, and testing expenses		—			29,585			7,559			—			37,144

Operating (loss) profit		(9,853	)		54,538			363			(9,718	)		35,330

Interest and financing expenses		19,053			899			—			—			19,952
Other income (expense), net		360			(3,455	)		65			—			(3,030	)

(Loss) income from continuing operations before income taxes and equity income of subsidiaries		(28,546	)		50,184			428			(9,718	)		12,348
Income tax (benefit) expense		(11,706	)		19,742			878			(3,637	)		5,277
Equity income of subsidiaries		23,911			—			—			(23,911	)		—

Income (loss) from continuing operations		7,071			30,442			(450	)		(29,992	)		7,071

Income from operations of discontinued business (net of tax)		2,217			1,699			670			(2,369	)		2,217

Income before cumulative effect of accounting change		9,288			32,141			220			(32,361	)		9,288

Cumulative effect of accounting change (net of tax)		(2,505	)		—			(853	)		853			(2,505	)

Net income (loss)	$	6,783		$	32,141		$	(633	)	$	(31,508	)	$	6,783

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

September 30, 2003

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
ASSETS

Cash and cash equivalents	$	6,908		$	6,692		$	8,461		$	—		$	22,061
Restricted cash		408			472			—			—			880
Trade and other accounts receivable, net		4,426			56,474			60,870			—			121,770
Receivable - TEL marketing agreements services		1			7,610			3,208			—			10,819
Amounts due from affiliated companies		337,155			439,586			41,918			(818,659	)		—
Inventories		3,455			69,468			60,345			(8,042	)		125,226
Deferred income taxes		4,768			3,406			701			3,085			11,960
Prepaid expenses		3,793			595			1,454			—			5,842

Total current assets		360,914			584,303			176,957			(823,616	)		298,558

Amounts due from affiliated companies		23,084			—			—			(23,084	)		—

Property, plant and equipment, at cost		228,693			454,702			58,474			—			741,869
Less accumulated depreciation & amortization		159,450			351,465			55,272			—			566,187

Net property, plant and equipment		69,243			103,237			3,202			—			175,682

Investment in consolidated subsidiaries		433,507			—			—			(433,507	)		—
Prepaid pension cost		18,999			1,588			6,049			—			26,636
Deferred income taxes		14,908			(8,218	)		2,751			—			9,441
Other assets and deferred charges		32,868			40,002			6,112			—			78,982
Intangibles-net of amortization		1,711			61,135			2,309			—			65,155

Total assets	$	955,234		$	782,047		$	197,380		$	(1,280,207	)	$	654,454


LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable	$	1,639		$	32,108		$	18,016		$	—		$	51,763
Accrued expenses		23,574			20,233			5,457			—			49,264
Amounts due to affiliated companies		427,649			323,888			67,122			(818,659	)		—
Long-term debt, current portion		6,948			555			—			—			7,503
Income taxes payable		4,811			9,881			1,266			—			15,958

Total current liabilities		464,621			386,665			91,861			(818,659	)		124,488

Long-term debt		209,927			4,593			—			—			214,520
Amounts due to affiliated companies		—			23,084			—			(23,084	)		—
Other noncurrent liabilities		89,488			8,104			26,656			—			124,248

Total liabilities		764,036			422,446			118,517			(841,743	)		463,256

Shareholders’ equity:
Common stock		16,761			32,268			35,498			(67,766	)		16,761
Additional paid-in capital		67,007			240,320			5,793			(246,113	)		67,007
Accumulated other comprehensive loss		(23,821	)		(11,924	)		(8,270	)		20,194			(23,821	)
Retained earnings		131,251			98,937			45,842			(144,779	)		131,251

Total shareholders’ equity		191,198			359,601			78,863			(438,464	)		191,198

Total liabilities and shareholders’ equity	$	955,234		$	782,047		$	197,380		$	(1,280,207	)	$	654,454

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

December 31, 2002

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
ASSETS
Cash and cash equivalents	$	1,366		$	4,206		$	9,906		$	—		$	15,478
Restricted cash		683			—			—			—			683
Trade and other accounts receivable, net		13,306			58,825			52,299			—			124,430
Receivable - TEL marketing agreements services		—			(962	)		8,380			—			7,418
Amounts due from affiliated companies		60,696			103,369			41,543			(205,608	)		—
Inventories		2,958			61,153			50,759			(10,824	)		104,046
Deferred income taxes		4,558			5,042			647			4,092			14,339
Prepaid expenses		923			280			1,029			—			2,232
Assets of discontinued operations		—			2,722			1,601			—			4,323

Total current assets		84,490			234,635			166,164			(212,340	)		272,949

Amounts due from affiliated companies		29,694			—			2,500			(32,194	)		—

Property, plant and equipment, at cost		227,453			443,399			75,385			—			746,237
Less accumulated depreciation & amortization		154,283			330,463			62,772			—			547,518

Net property, plant and equipment		73,170			112,936			12,613			—			198,719

Investment in consolidated subsidiaries		389,444			—			—			(389,444	)		—
Prepaid pension cost		20,777			538			3,680			—			24,995
Deferred income taxes		15,364			(9,483	)		3,613			—			9,494
Other assets and deferred charges		25,625			48,473			6,658			—			80,756
Intangibles-net of amortization		1,710			65,397			2,231			—			69,338

Total assets	$	640,274		$	452,496		$	197,459		$	(633,978	)	$	656,251

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable	$	2,180		$	22,039		$	19,911		$	—		$	44,130
Accrued expenses		17,922			16,630			4,226			—			38,778
Amounts due to affiliated companies		87,965			43,871			73,772			(205,608	)		—
Long-term debt, current portion		40,000			537			—			—			40,537
Income taxes payable		2,415			1,561			2,312			—			6,288

Total current liabilities		150,482			84,638			100,221			(205,608	)		129,733

Long-term debt		244,519			5,011			—			—			249,530
Amounts due to affiliated companies		—			32,194			—			(32,194	)		—
Other noncurrent liabilities		92,195			8,032			23,683			—			123,910

Total liabilities		487,196			129,875			123,904			(237,802	)		503,173

Shareholders’ equity:
Common stock		16,689			32,268			35,498			(67,766	)		16,689
Additional paid-in capital		66,766			240,320			5,793			(246,113	)		66,766
Accumulated other comprehensive loss		(29,294	)		(14,309	)		(10,517	)		24,826			(29,294	)
Retained earnings		98,917			64,342			42,781			(107,123	)		98,917

Total shareholders’ equity		153,078			322,621			73,555			(396,176	)		153,078

Total liabilities and shareholders’ equity	$	640,274		$	452,496		$	197,459		$	(633,978	)	$	656,251

Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended September 30, 2003

(in thousands)

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash provided from (used in) operating activities	$	50,746		$	21,293		$	(14,510	)	$	—		$	57,529

Cash flows from investing activities
Capital expenditures		(1,416	)		(5,309	)		(511	)		—			(7,236	)
Proceeds from sale of phenolic antioxidant business		27,770			—			—			—			27,770
Proceeds from sale of certain assets		1,500			—			11,076			—			12,576
Prepayment for TEL marketing agreements services		—			(3,200	)		—			—			(3,200	)
Increase in intercompany loans		7,397			—			2,500			(9,897	)		—
Other, net		174			—			—			—			174

Cash provided from (used in) investing activities		35,425			(8,509	)		13,065			(9,897	)		30,084

Cash flows from financing activities
Repayments of debt		(284,519	)		—			—			—			(284,519	)
Issuance of senior notes and term loan		265,000			—			—			—			265,000
Repayments on term loan		(48,124	)		—			—			—			(48,124	)
Repayment of intercompany notes payable		—			(13,097	)		—			13,097			—
Financing from parent		—			3,200			—			(3,200	)		—
Debt issuance costs		(13,299	)		—			—			—			(13,299	)
Other, net		313			(401	)		—			—			(88	)

Cash (used in) provided from financing activities		(80,629	)		(10,298	)		—			9,897			(81,030	)

Increase (decrease) in cash and cash equivalents		5,542			2,486			(1,445	)		—			6,583
Cash and cash equivalents at beginning of year		1,366			4,206			9,906			—			15,478

Cash and cash equivalents at end of period	$	6,908		$	6,692		$	8,461		$	—		$	22,061

Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended September 30, 2002

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash provided from operating activities	$	42,031		$	11,746		$	1,564		$	—		$	55,341

Cash flows from investing activities
Capital expenditures		(4,117	)		(5,763	)		(410	)		—			(10,290	)
Prepayment for TEL marketing agreements services		—			(12,800	)		—			—			(12,800	)
Increase in intercompany loans		(7,223	)		—			—			7,223			—
Cash dividends from subsidiaries		4,405			—			—			(4,405	)		—
Other, net		25			—			—			—			25

Cash used in investing activities		(6,910	)		(18,563	)		(410	)		2,818			(23,065	)

Cash flows from financing activities
Repayments of debt		(58,640	)		—			—			—			(58,640	)
Net borrowings		31,840			—			—			—			31,840
Repayment of intercompany notes payable		—			(5,577	)		—			5,577			—
Financing from parent		—			12,800			—			(12,800	)		—
Debt issuance costs		(1,982	)		—			—			—			(1,982	)
Cash dividends paid		—			—			(4,405	)		4,405			—
Other, net		—			(368	)		—			—			(368	)

Cash (used in) provided from financing activities		(28,782	)		6,855			(4,405	)		(2,818	)		(29,150	)

Increase (decrease) in cash and cash equivalents		6,339			38			(3,251	)		—			3,126
Cash and cash equivalents at beginning of year		(4,476	)		5,759			11,099			—			12,382

Cash and cash equivalents at end of period	$	1,863		$	5,797		$	7,848		$	—		$	15,508

ITEM 2.

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Forward-Looking Statements

The following discussion contains statements about future events and expectations, or forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future results. When we use words in this document, such as “anticipates,” “intends,” “plans,” “believes,” “estimates,” “expects,” and similar expressions, we do so to identify forward-looking statements. Examples of forward-looking statements include statements we make regarding future prospects of growth in the petroleum additives market, the level of future declines in the market for tetraethyl lead and other trends in the petroleum additives market, our ability to maintain or increase our market share and our future capital expenditure levels.

We believe our forward-looking statements are based on reasonable expectations and assumptions, within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control.

These factors include, but are not limited to, timing of sales orders, gain or loss of significant customers, competition from other manufacturers, a significant rise in interest rates, resolution of environmental liabilities, or changes in the demand for our products. Other factors include significant changes in new product introduction, increases in product cost, the impact of fluctuations in foreign exchange rates on reported results of operations, changes in various markets, geopolitical risks in certain of the countries in which we conduct business, and the impact of consolidation of the petroleum additives industry. In addition, we also discuss certain risk factors in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2002 Annual Report and incorporate the same herein by reference.

You should keep in mind that any forward-looking statement made by us in this discussion or elsewhere speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this discussion, or elsewhere, might not occur.

Results of Operations

The 2002 results of operations exclude the operations of our phenolic antioxidant business, which we sold on January 21, 2003 to Albemarle Corporation. The results of this business have been removed from net sales and operating profit for all 2002 periods covered in this review. These results are included in our Consolidated Statements of Income under “Income from operations of discontinued business.” There was no effect on net income as a result of these reclassifications.

Net Sales

Our consolidated net sales for the third quarter 2003 amounted to $197.1 million, representing an increase of 14% from the 2002 level of $172.8 million. The nine months 2003 consolidated net sales of $551.1 million were 12% higher than the nine months 2002 amount of $489.9 million. The table below shows our consolidated net sales by segment.

Net Sales by Segment

(in millions)

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Petroleum additives	$	194.1	$	170.7	$	544.7	$	483.1
Tetraethyl lead		3.0		2.1		6.4		6.8

Consolidated net sales	$	197.1	$	172.8	$	551.1	$	489.9

Petroleum Additives Segment

Petroleum additives net sales in the third quarter 2003 of $194.1 million were up $23.4 million (14%) from $170.7 million in the third quarter 2002. Total volumes shipped were 15% higher for the third quarter 2003 as compared to the same period in 2002 reflecting increased shipments across all major product lines. The higher shipments, along with product mix, resulted in essentially the entire increase in sales. While the foreign exchange impact on net sales was favorable, the combined effect on net sales of prices and foreign exchange was flat.

The nine months 2003 net sales were $61.6 million (13%) higher than the nine months 2002. Similarly to third quarter 2003, shipments were higher across all product lines. The overall increase of 8% in volumes shipped, combined with product mix resulted in higher sales of $52.2 million as compared to nine months 2002. Favorable foreign currency caused the remaining increase in net sales.

Tetraethyl Lead Segment

Most of the tetraethyl lead (TEL) marketing activity is through marketing agreements with The Associated Octel Company Limited and its affiliates (Octel), under which we do not record the sales transactions. Therefore, the TEL net sales shown in the table above are those made by Ethyl in areas not covered by the marketing agreements, as well as sales made to Octel under the terms of the agreements. The sales made in areas not covered by the Octel marketing agreements are very minor compared to the TEL sales made through the marketing agreements with Octel.

Total TEL sales in the third quarter 2003 were slightly higher than third quarter 2002, while nine months 2003 were slightly lower when compared to the same period in 2002. There were no sales to Octel for either of the nine months ended September 30, 2003 or September 30, 2002.

Segment Operating Profit

Ethyl evaluates the performance of petroleum additives and TEL based on segment operating profit. Corporate departments and other expenses outside the control of the segment manager are not allocated to segment operating profit. Depreciation on segment property, plant, and equipment and amortization of segment intangible assets and the prepayment for services are included in the operating profit of each segment.

The table below reports operating profit by segment.

Segment Operating Profit

(in millions)

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Petroleum additives before nonrecurring items	$	19.2	$	23.9	$	47.6	$	45.5
Nonrecurring items		—		—		0.1		(1.2	)

Total petroleum additives		19.2		23.9		47.7		44.3
Tetraethyl lead before nonrecurring items		9.4		3.1		17.2		10.9
Nonrecurring items		—		—		2.4		(1.6	)

Total tetraethyl lead		9.4		3.1		19.6		9.3

Segment operating profit	$	28.6	$	27.0	$	67.3	$	53.6

Third quarter 2003 operating profit of $28.6 million was $1.6 million (6%) higher than third quarter 2002. The $6.3 million increase in operating profit of the TEL segment was substantially offset by a reduction of $4.7 million in the petroleum additives segment.

Nine months 2003 segment operating profit was $67.3 million and included nonrecurring income of $2.5 million related to the implementation of Statement of Financial Accounting Standards (SFAS) No. 143 – “Accounting for Asset Retirement Obligations.” Nine months 2002 segment operating profit was $53.6 million and included a nonrecurring charge of $3.1 million for the impairment of goodwill upon the adoption of SFAS 142 – “Goodwill and Other Intangible Assets.” In addition, nine months 2002 included a nonrecurring income item of $255 thousand for a change in the estimate of the restructuring accrual for the engine oil additive rationalization. Excluding these nonrecurring items, combined segment operating profit was $8.4 million (15%) higher than 2002 levels, reflecting an increase in both petroleum additives and TEL operating profit.

Petroleum Additives Segment

We have been notified by DSM Copolymer, Inc., our supplier of olefin copolymer viscosity index improvers, of their intent to terminate a contract in mid-2005. The contract was initially scheduled to terminate in 2012. We have adjusted the amortization of this intangible to coincide with the 2005 termination date. We are pursuing other supply alternatives, which may not be as favorable as our current terms. In the event we cannot achieve the same or similar terms, our cost will increase.

Third Quarter 2003 vs. Third Quarter 2002 - Petroleum additives third quarter 2003 operating profit was $19.2 million or $4.7 million lower than third quarter 2002 operating profit of $23.9 million, a decrease of 19%.

Volumes shipped were higher across all major product lines, but the increase in raw material costs partially offset the impact of the increased shipments. A positive foreign exchange impact partially offset the unfavorable effect of raw material costs. Compared to third quarter 2002, these factors combined to result in slight improvements in operating profit of all of the major product lines, except for engine oil additives. A reduction in operating results of engine oil products more than offset the improvements in the other areas of petroleum additives.

Research, development, and testing expenses (R&D) in the petroleum additives segment were $1.8 million higher when comparing third quarter 2003 to the same period in 2002. In addition to a slightly unfavorable foreign currency effect, increases in personnel, as well as outside testing, generated most of the increase as we continue to support growth and customer requirements.

Selling, general, and administrative expenses (SG&A) increased $1.6 million or 13% from third quarter 2002 levels. As a percentage of net sales, SG&A expenses combined with R&D expenses, was even when comparing third quarter 2003 to the same period in 2002, at 14.2%. This reflects similar increases in both SG&A and net sales from third quarter 2002.

Nine Months 2003 vs. Nine Months 2002 – Petroleum additives nine months 2003 operating profit was $47.7 million as compared to $44.3 million for nine months 2002, an increase of 8%. Excluding nonrecurring items, petroleum additives operating profit for the nine months 2003 of $47.6 million increased 4% from nine months 2002 operating profit of $45.5 million on the same basis.

The improved nine months profits this year are across all major product lines, except for engine oil additives, and reflect an increase of 8% in shipments. The most significant improvement is in the fuels product line. The improved profit also reflects improved production costs, including a build-up of inventory levels. Operating profit also improved due to favorable foreign currency impact, primarily from the Euro. Raw material costs were up between the two nine-month periods resulting from the higher shipments and an increase in raw material prices. Energy costs continue to be higher than last year.

The nonrecurring income of $100 thousand for the nine months 2003 was the gain recognized upon the implementation of SFAS No. 143. The nonrecurring item for the nine months 2002 was for a $1.5 million impairment of goodwill, which was partially offset by the $255 thousand benefit related to a change in estimate of the restructuring accrual for the engine oil additive rationalization. The goodwill impairment was done in response to the implementation provisions of SFAS No. 142.

Research, development, and testing expenses (R&D) in the petroleum additives segment were $5.6 million higher when comparing nine months 2003 to the same period in 2002. In addition to an unfavorable foreign currency impact, the higher expenses primarily resulted from increases in outside testing and personnel support, as well as fleet tests and health tests in the methylcyclopentadienyl manganese tricarbonyl (MMT) product line.

Selling, general, and administrative expenses (SG&A) increased $6.6 million or 18% from nine months 2002 levels. SG&A expenses included an increase in our allowance for doubtful accounts. As a percentage of net sales, SG&A expenses combined with R&D expenses, increased from 15.1% for the nine months 2002 to 15.7% for nine months this year. This increase reflects the 18% increase in SG&A expenses from nine months 2002, as compared to a 13% increase in net sales.

TEL Segment

Results of our TEL segment include the operating profit contribution from our marketing agreements with Octel, as well as certain TEL operations not included in the marketing agreements.

The operating profit from our marketing agreements for the third quarter 2003 was $9.7 million, which was $1.4 million higher than the third quarter last year, an increase of 17%. The marketing agreement operating profit was $20.6 million for nine months 2003 and $18.5 million for nine months 2002. The improved earnings in both of the current year periods reflect higher selling prices. This was partially offset by lower volumes shipped for the nine months 2003 period. This segment is characterized by large swings in quarterly profitability, and these results reflect the timing of shipments.

Other TEL operations not included in the marketing agreements improved $4.9 million as compared to the third quarter last year and $4.1 million compared to the nine months 2002. The improvements in 2003 periods reflect the absence in the current year of 2002 charges related to environmental and premises asbestos liabilities.

Also included in TEL for the nine months 2003 is nonrecurring income of $2.4 million from the implementation of SFAS No. 143. Nine months 2002 included a nonrecurring charge of $1.6 million required by the adoption of SFAS No. 142, reflecting an impairment of goodwill.

While the market for this product is declining, the TEL business continues to supply Ethyl with strong cash flows.

The following discussion references the Consolidated Financial Statements beginning on page 3 of this Form 10-Q.

Interest and Financing Expenses

Third quarter 2003 interest and financing expenses were $5.2 million as compared to $6.4 million in third quarter 2002. Lower average debt resulted in a decrease in interest and financing expenses of $1.2 million. Higher average interest rates resulted in an increase in interest expenses of $800 thousand. Fees and amortization of financing costs were $800 thousand lower.

Interest and financing expenses of $16.4 million for nine months 2003 were $3.5 million lower than the same 2002 period. Similarly to the third quarter 2003, lower average debt caused a reduction of $3.4 million and higher interest rates negatively impacted interest and financing expenses $1.2 million. Fees and amortization were $1.3 million favorable when comparing nine months 2003 to 2002.

On April 30, 2003, we entered into a new long-term debt structure. Interest costs under the new long-term debt structure will vary from our former credit facility. The interest on the seven year $150 million senior notes is at a fixed rate of 8.875%. The interest rates on the remaining debt are at variable rates of LIBOR plus a premium of 375 to 450 basis points.

Other Income (Expense), Net

Other income (expense), net was $37 thousand income for third quarter 2003 and $105 thousand expense for nine months 2003. Both periods were comprised of a number of small items, including $300 thousand for expenses related to debt refinancing activities for the nine months.

Other income (expense), net for the third quarter 2002 amounted to $1.4 million income and included $1.2 million of interest income from a settlement with the Internal Revenue Service. Nine months 2002 was $3.0 million expense, primarily including the $1.2 million of interest income which was offset by expenses of $4.1 million for impairment of nonoperating assets and $1.1 million for debt refinancing activities.

Income Taxes

Income taxes for third quarter 2003 were $4.8 million with an effective income tax rate 32.0%. Income tax expense on continuing operations for third quarter 2002 was $5.0 million with an effective tax rate of 33.0%. The small change in income taxes was substantially the result of the slightly lower effective tax rate in 2003.

Income taxes on continuing operations for nine months 2003 were $7.7 million with an effective income tax rate of 32.6%. Total income taxes on the same basis for nine months 2002 were $5.3 million resulting in an effective income tax rate of 42.7%. The change in income before income taxes caused $4.8 million of the increase in income taxes. The change in the effective tax rate resulted in a decrease in taxes of $2.4 million.

The higher tax rate in 2002 primarily reflects the effect of a valuation allowance, which increased tax expense approximately $1.4 million and was recorded at September 30, 2002. This valuation allowance, which was released in December 2002, was primarily due to the uncertainty of whether the capital loss carryforward related to the impairments of certain nonoperating assets would ultimately be realized.

Our deferred taxes are in a net asset position and we believe that we will recover the full benefit of these deferred tax assets.

Discontinued Operations

After approval by the Board of Directors in December 2002, on January 21, 2003, we completed the sale of our phenolic antioxidant business to Albemarle Corporation.

Following an extensive assessment, we concluded this business was not part of our future core business or growth goals.

As part of the transaction, we sold accounts receivable and inventory, as well as fixed assets at our Orangeburg, South Carolina facility. These accounts receivable and inventory are reported as “Assets of discontinued operations” on our Consolidated Balance Sheets. The net book value of the fixed assets was zero. The cost and accumulated depreciation of these fixed assets have been removed from the property, plant, and equipment captions on our Consolidated Balance Sheets.

The income from operations of discontinued business reflected in our Consolidated Statements of Income is on an after-tax basis. The net sales of the discontinued business were $4.8 million for the third quarter 2002 and $13.8 million for nine months 2002. We recognized a gain of $23.2 million ($14.8 million after tax) in first quarter 2003 related to this transaction.

Cumulative Effect of Accounting Changes

As discussed above in the “Segment Operating Profit” section, during first quarter 2003, we recognized a gain of $2.5 million ($1.6 million after tax) on the implementation of SFAS No. 143 – “Accounting for Asset Retirement Obligations.”

We wrote-off goodwill of $3.1 million in first quarter 2002 in accordance with SFAS No. 142 – “Goodwill and Other Intangible Assets.” On an after-tax basis, this amounted to $2.5 million.

Both of these items are reported as cumulative effect of accounting changes on an after-tax basis.

Net Income

Net income for the third quarter 2003 was $10.3 million ($.61 per share), compared to net income for third quarter 2002 of $10.9 million ($.65 per share). The third quarter 2002 included $722 thousand of income from discontinued operations.

For the nine months of this year, net income was $32.3 million ($1.93 per share) compared to net income of $6.8 million ($.41 per share) for the same period of 2002. Nonrecurring items and discontinued operations totaled income of $16.4 million for nine months 2003 and expense of $4.2 million for the same 2002 period.

Nine months 2003 results include an increase of $3.2 million in corporate unallocated general and administrative expenses from nine months 2002, primarily reflecting increased insurance, legal, and personnel expenses.

A summary of earnings and earnings per share, in millions except for per share amounts, is shown below. Certain information presented in the table below are non-GAAP financial measures. We have included this information in order to provide transparency to investors and to enhance period-to-period comparability of performance. We believe that these non-GAAP financial measures are more reflective of our continuing operations.

	Three Months Ended September 30				Nine Months Ended September 30
	2003		2002		2003		2002
Net income:
Earnings excluding discontinued operations and nonrecurring items	$	10.3	$	10.2	$	15.9	$	11.0
Discontinued operations		—		0.7		14.8		2.2
Nonrecurring items (a)		—		—		1.6		(6.4	)

Net income	$	10.3	$	10.9	$	32.3	$	6.8

Basic earnings per share (b):
Earnings excluding discontinued operations and nonrecurring items	$	0.61	$	0.61	$	0.95	$	0.66
Discontinued operations		—		0.04		0.88		0.13
Nonrecurring items (a)		—		—		0.10		(0.38	)

Net income	$	0.61	$	0.65	$	1.93	$	0.41

(a) Nonrecurring items after income taxes:
SFAS No. 143 - gain on implementation	$	—	$	—	$	1.6	$	—
SFAS No. 142 - impairment of goodwill		—		—		—		(2.5	)
Loss on impairments of nonoperating assets		—		—		—		(4.1	)
Engine oil additives rationalization		—		—		—		0.2

	$	—	$	—	$	1.6	$	(6.4	)

(b) Information on diluted earnings per share is provided on the Consolidated Statements of Income.

Cash Flows, Financial Condition, and Liquidity

Cash and cash equivalents at September 30, 2003 were $22.1 million, which was an increase of $6.6 million since December 31, 2002. Our cash flows were more than sufficient to cover operating activities during nine months 2003. Cash flows from operating activities for the nine months 2003 were $57.5 million, while the proceeds from the sale of the phenolic antioxidant business were $27.8 million and the proceeds from the sale of certain other assets were $12.6 million. We used these cash flows to pay $13.3 million in debt issuance costs, fund capital expenditures of $7.2 million, and make the final payment of $3.2 million to Octel for TEL marketing agreements services. In addition, we made a net repayment on debt of $67.6 million and increased our cash and cash equivalents $6.6 million. Our cash from operations included $4.8 million received from a lawsuit settlement. This settlement was related to the recovery of operating costs of $2.4 million, as well as interest income on the settlement of $2.4 million. In addition, cash flows from operations reflected $7.8 million of pension plan contributions. Ethyl expects that cash from operations will continue to be sufficient to cover our operating expenses.

We had restricted cash of $900 thousand at September 30, 2003 and $700 thousand at December 31, 2002. Of these funds, $400 thousand represent a portion of the funds we received from the demutualization of MetLife, Inc. in 2000. We are using this cash to reduce the employee portion of retiree health benefit costs. The remaining $500 thousand represent funds related to the issuance of a European bank guarantee.

During the first quarter of 2003, we worked on an initiative to provide a long-term debt structure for Ethyl. That structure was put in place on April 30, 2003 and includes senior notes and a senior credit facility with a bank term loan and a revolving credit facility.

Senior Notes

On April 30, 2003, we sold, in a private offering, senior notes in the aggregate principal amount of $150 million that bear interest at a fixed rate of 8.875% and are due in 2010. On June 26, 2003, we commenced an exchange offer for all of the outstanding 8.875% senior notes. We offered to exchange up to $150 million aggregate principal amount of our 8.875% senior notes due in 2010 which are registered under the Securities Act of 1933, as amended, for a like principal amount of the original unregistered senior notes. The exchange offer expired as scheduled at 5:00 p.m., New York City time, on Monday, July 28, 2003. All of the notes were tendered. The terms of the exchange securities are identical in all material respects to the terms of the original securities for which they were exchanged, except that the registration rights and the transfer restrictions, applicable to the original securities, are not applicable to the exchange securities.

The senior notes are our senior unsecured obligations and are jointly and severally guaranteed on an unsecured basis by all of our existing and future wholly owned domestic restricted subsidiaries and certain of our existing wholly owned foreign subsidiaries.

The senior notes and the subsidiary guarantees rank:

•

effectively junior to all of our and the guarantors’ existing and future secured indebtedness, including any borrowings under the senior credit facility described below;

•

equal in right of payment with any of our and the guarantors’ existing and future unsecured senior indebtedness; and

•

senior in right of payment to any of our and the guarantors’ existing and future subordinated indebtedness.

The indenture governing the senior notes contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

•

incur additional indebtedness;

•

create liens;

•

pay dividends or repurchase capital stock;

•

make certain investments;

•

sell assets or consolidate or merge with or into other companies; and

•

engage in transactions with affiliates.

Senior Credit Facility

The senior credit facility is secured by first priority perfected liens on substantially all of the existing and future acquired U.S. assets of Ethyl and our domestic subsidiaries and certain foreign assets. In addition, the senior credit facility is guaranteed by certain foreign subsidiaries and all our existing, and substantially all of our future, U.S. subsidiaries to the extent that it would not result in material increased tax liabilities.

The senior credit facility requires mandatory prepayments of:

•

100% of the net proceeds from all material dispositions or issuances of new debt or equity; and

•

75% of excess cash flow, as defined, subject to a step down upon meeting certain financial conditions.

The senior credit facility contains covenants, representations, and events of default that management considers typical of a credit agreement of this nature. The financial covenants include:

•

a minimum net worth;

•

a maximum debt to earnings before interest, taxes, depreciation and amortization (EBITDA);

•

a maximum senior debt to EBITDA;

•

limitations on capital expenditures;

•

an interest coverage ratio; and

•

restrictions on the payment of dividends or repurchases of capital stock.

The bank term loan had an original principal amount of $115 million and has a variable interest rate of LIBOR plus 450 basis points. The term loan matures in April 2009 and has scheduled quarterly payments, which began in June 2003.

The revolver is a $50 million facility for working capital and letter of credit issuance purposes. It bears interest at LIBOR plus 375 to 400 basis points.

* * *

The new debt structure will cause Ethyl to incur higher cash interest cost than the previous facility, but provides the long-term capital structure we need to manage our business. The proceeds from the senior notes and the bank term loan were used to repay our former credit facility, which on April 30, 2003 included a term loan of $178.3 million

and a revolving line of credit of $55.3 million, as well as a loan in the amount of $18.6 million borrowed from Bruce C. Gottwald, Chairman of the Board of Directors.

We had combined current and noncurrent long-term debt of $222.0 million at September 30, 2003, representing a net reduction of $68.0 million in our total debt since December 31, 2002. The net reduction in debt includes the full payment of the debt under our previous agreement of $265.9 million and full payment of our private borrowing of $18.6 million. These payments were offset by new borrowing amounting to $150 million on the 8.875% senior notes and $115 million on the term loan. Subsequent to the refinancing of our debt, we have made payments of $48.1 million on the term loan. Capital lease obligations also decreased $400 thousand. We expect to make further reductions in debt during the year.

As a percentage of total capitalization, our total debt decreased from 65.5% at the end of 2002 to 53.7% at September 30, 2003. Normally, we repay debt with cash from operations, as well as with proceeds from occasional sales of business units, plant sites, or other assets.

We completed the funding requirement of $3.2 million associated with the amendment of our Alcor marketing alliance during the second quarter 2003.

We estimate our capital spending during 2003 will be in the range of $10 million to $15 million. We will continue to finance capital spending through cash provided from operations.

We had working capital at September 30, 2003 of $174.1 million resulting in a current ratio of 2.40 to 1. At December 31, 2002, the working capital was $143.2 million and the current ratio was 2.10 to 1. The increase in working capital and the current ratio primarily reflect a decrease in the current portion of long-term debt, as well as increases in cash and cash equivalents, inventories, and prepaid expenses. Offsetting these were smaller increases in accounts payable, accrued expenses, and income taxes payable, as well as a decrease in assets of discontinued operations. The change in inventory is in support of increased business activity.

Reverse Stock Split

On March 26, 2002, the Board of Directors recommended an amendment to our Restated Articles of Incorporation effecting a 1-for-5 reverse stock split of the Ethyl common stock and reducing the number of authorized shares of common stock from 400 million to 80 million. Ethyl shareholders approved this recommendation at the June 4, 2002 annual meeting of shareholders.

On the effective date of July 1, 2002, each holder of record was deemed to hold one share of common stock for every five shares held immediately prior to the effective date. We made cash payments for fractional shares to holders who had a number of shares not divisible by five. The cash payment was based on the average of the closing price for the common stock on each of the five trading days prior to the effective date and amounted to $4.25 per share.

Following the effective date of the reverse stock split, the par value of the common stock remained at $1 per share. As a result, we reduced the common stock in our Consolidated

Balance Sheet as of the effective date by approximately $66.8 million, with a corresponding increase in the additional paid-in capital. All previously reported per-share amounts have been retroactively adjusted to reflect the 1-for-5 reverse stock split.

Critical Accounting Policies

It is our goal to clearly present our financial information in a manner that enhances the understanding of our sources of earnings and our financial condition. We do this by including the information required by the Securities and Exchange Commission, as well as additional information that gives further insight into our financial operations.

This report, as well as our 2002 Annual Report, includes a discussion of our accounting principles, as well as methods and estimates used in the preparation of our financial statements. We believe these discussions and statements fairly represent the financial position and operating results of our company. The purpose of this portion of our discussion is to further emphasize some of the more critical areas where a significant change in facts and circumstances in our operating and financial environment might cause a change in reported financial results.

As discussed in our 2002 Annual Report, we have made certain payments related to our TEL marketing agreements and have made the final payment of $3.2 million in May 2003. The unamortized total at September 30, 2003 is $31.7 million. We are amortizing these costs on an accelerated method using a declining balance method over the life of the contracts. We feel this is the appropriate methodology and time period for this amortization based on the facts and circumstances of our TEL operations and the estimated product life of TEL. The customer base of TEL is significantly concentrated in a few countries and if conditions change that cause a shorter product life or other restrictions outside of our control, the amortization period would have to be adjusted accordingly. Any adjustment to the amortization period would impact earnings, but would have no effect on cash flows. While we feel the basis being used is appropriate, we continue to keep our accounting for this issue current with the business conditions.

We also have certain identifiable intangibles amounting to $59.5 million at September 30, 2003. These intangibles relate to our petroleum additives business and are being amortized over periods with up to thirteen years of remaining life. We continue to assess the market related to these intangibles, as well as their specific values, and conclude the amortization periods and values are appropriate. During the second quarter 2003, due to a change in a contract, we modified the amortization period of one of the identifiable intangibles from nine remaining years to two remaining years. This change results in additional monthly amortization expense of $129 thousand over the next 20 months. We also evaluate these intangibles for any potential impairment. These evaluations continue to support the value at which these identifiable intangibles are carried on our financial statements. However, if conditions were to substantially deteriorate in this market, it could possibly cause a reduction in the periods of this amortization charge or could possibly result in a noncash write-off of a portion of the intangibles’ carrying value. A reduction in the amortization period would have no cash effect. While we do not anticipate such a change in the market conditions, this disclosure is provided to enhance the understanding of the factors involved.

We have made disclosure of our environmental issues in Part I, Item I of our 2002 Annual Report, as well as in the Notes to Consolidated Financial Statements of our 2002

Annual Report. We feel our environmental accruals are appropriate for the exposures and regulatory guidelines under which we currently operate. While we currently do not anticipate significant changes to the many factors that could impact our environmental requirements, we continue to keep our accruals consistent with these requirements as they change.

Also, as noted in the discussion of Legal Proceedings in Item 3 of our 2002 Annual Report, while it is not possible to predict or determine the outcome of any legal proceeding, it is our opinion that we will not experience materially adverse effects on our results of operations or financial condition as a result of any pending or threatened proceeding.

We use significant assumptions to record the impact of the pension and post-retirement plans in the financial statements. These assumptions include the discount rate, expected long-term rate of return, rate of compensation increase, and health care cost trend rate. A change in any one of these assumptions could result in significantly different results for the plans. We develop these assumptions after considering advice from a major global actuarial consulting firm. Information is provided on the pension and post-retirement plans in Note 17 of our 2002 Annual Report. In addition, further disclosure on the effect of changes in these assumptions is provided in the “Financial Position and Liquidity” section of Item 7 of our 2002 Annual Report.

We believe the preceding discussion of some of the more critical accounting policies and assumptions will enhance the understanding of certain issues related to our efforts to provide an informative financial report.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) issued two new accounting standards during 2003. Statement of Financial Accounting Standard Number 149 (SFAS 149), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” clarifies accounting and reporting requirements for derivative instruments and hedging activities. The statement is generally effective for derivative and hedging activities entered into after June 30, 2003. Statement of Financial Accounting Standards Number 150 (SFAS 150), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective at the beginning of the first interim period after June 15, 2003. These statements did not have a significant impact on third quarter 2003 results, nor do we expect either of the statements to have a significant impact on future results.

Other Matters

Ethyl is considering the formation of a holding company and an internal restructuring in which its various businesses would be organized into separate business units. On August 8, 2003, Ethyl filed a request with the Internal Revenue Service seeking rulings as to certain federal income tax consequences of such a holding company transaction and internal restructuring. The formation of a holding company would be subject to approval by our Board of Directors and Ethyl shareholders.

In July 2003, Ethyl completed its critical review of the MMT fleet study report released by the Alliance of Automobile Manufacturers (“AAM”) in July 2002. With the assistance of ENVIRON International Corporation, Ethyl has concluded that the AAM study reaffirms that MMT^{^®} is an acceptable fuel constituent that does not harm vehicle emission control systems. The automotive industry continues to persist in demanding that oil companies discontinue the use of MMT^{^®} and that governments disallow the use of the product. The automotive industry alleges that MMT^{^®} may cause catalyst plugging in advanced emission control vehicles. However, no credible evidence to support such allegation has been provided to Ethyl. The EPA and the Canadian government have extensively studied the product and have determined that MMT^{^®} does not harm vehicle emission control systems. We believe that the additive is an environmentally beneficial product that has proven its effectiveness in real-world use.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our market risk from the information provided in our 2002 Annual Report, except for interest rate risk, which is discussed below.

In April 2003, we entered into a new long-term debt structure. As part of that structure, $150 million of our long-term debt is at a fixed rate of 8.875%. The remaining debt is at a variable rate of LIBOR plus 450 basis points. Under our previous facility, most of our borrowings had interest rates of LIBOR plus 375 basis points. This new facility will cause our cash interest cost to be higher than the previous facility.

Based on $67 million of debt at variable rates under the new debt structure and holding all other variables constant, if LIBOR rates increased a hypothetical 10% (currently approximately 11 basis points), the annual effect on our earnings and cash flows would be higher interest expense of approximately $75 thousand.

ITEM 4.

Controls and Procedures

We maintain a system of internal control over financial reporting to provide reasonable, but not absolute, assurance of the reliability of the financial records and the protection of assets. Our controls and procedures include written policies and procedures, careful selection and training of qualified personnel, and an internal audit program. We use a third-party firm, separate from the independent accountants, to perform internal audit services.

We work closely with the business group, operations personnel, and information technology to ensure transactions are recorded properly. Environmental and legal staff are consulted to determine the appropriateness of our environmental and legal liabilities for each reporting period. We regularly review the regulations and rule changes that affect our financial disclosures.

Our disclosure controls and procedures include signed representation letters from our regional officers, as well as senior management.

We have formed a Financial Disclosure Committee, which is made up of our three senior vice presidents, general counsel and controller. The committee, as well as regional management, make representations with regard to the financial statements that, to the best of their knowledge, the report does not contain any misstatement of a material fact or omit a material fact that is necessary to make the statements not misleading with respect to the periods covered by the report.

The committee and the regional management also represent, to the best of their knowledge, that the financial statements and other financial information included in the report fairly present, in all material respects, the financial condition, results of operations and cash flows of the company as of and for the periods presented in the report.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, we carried out an evaluation, with the participation of our management, including our chief executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of

1934) as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and our principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Ethyl, including our consolidated subsidiaries, required to be included in Ethyl’s periodic SEC filings. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – Other Information

ITEM

1.Legal Proceedings

Ethyl was served as a defendant in two cases filed in the Circuit Court for Baltimore City, Maryland, in September 1999. Both cases claimed damages attributable to lead. One case was dismissed in its entirety, the plaintiffs did not appeal, and the case has ended. The other,Smith et al. v. Lead Industries Association, Inc., et al., alleged personal injuries for seven children from lead exposure due to lead paint and dust from tailpipe emissions due to leaded gasoline. The Court dismissed Ethyl and some other defendants from theSmith case in February 2002 and granted summary judgment to other defendants in November 2002. The plaintiffs appealed both decisions in theSmith case and the appeal has not been decided. Ethyl was served as a defendant in another case filed in the Circuit Court for Baltimore City, Maryland, on November 3, 2003,David Johnson et al. v. Clinton et al. The case claims damages attributable to lead similar to theSmith case, for alleged personal injuries for two plaintiffs. Ethyl has strong defenses and will vigorously defend the cases.

ITEM 2.

Changes in Securities and Use of Proceeds

The indenture governing our senior notes and the credit agreement governing our senior credit facility contain restrictions on our ability to pay dividends and repurchase shares of our common stock. See Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cash Flows, Financial Condition, and Liquidity.”

ITEM 6.

Exhibits and Reports on Form 8-K


(a)	Exhibit 31(a)	Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald

	Exhibit 31(b)	Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza

	Exhibit 32(a)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald.

	Exhibit 32(b)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza.

(b)

Current Reports on Form 8-K

(i)

Dated August 5, 2003, reporting under Item 12, “Results of Operations and Financial Condition”, a press release announcing the Company’s earnings for the second quarter ended June 30, 2003.

(In accordance with General Instruction B.6 of Form 8-K, the information in this Current Report on Form 8-K shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in this filing.)

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.

		ETHYL CORPORATION
		(Registrant)

Date: November 5, 2003		By: /s/ D. A. Fiorenza
		David A. Fiorenza
		Vice President and
		Treasurer
		(Principal Financial Officer)

Date: November 5, 2003		By: /s/ Wayne C. Drinkwater
		Wayne C. Drinkwater
		Controller
		(Principal Accounting Officer)

EXHIBIT INDEX

Exhibit 31(a)		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald.

Exhibit 31(b)		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza.

Exhibit 32(a)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald.

Exhibit 32(b)		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza.

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	8th grade Good

Ethyl (EY) Inactive 10-Q2003 Q3 Quarterly report

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