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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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FORM 10-Q



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



For the quarterly period ended March 31, 2004



OR



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



For the transition period from
 to



Commission File Number 1-5112



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ETHYL CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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



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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 April 30,
2004: 16,883,009.



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##### Table of Contents

ETHYL CORPORATION



I N D E X



|                                                                                              |  |           
|--------------------------------------------------------------------------------------------- |  | ----------
|                                                                                              |  | PageNumber
|PART I. FINANCIAL INFORMATION                                                                 |  |           
|                                                                                              | 
|ITEM 1. Financial Statements                                                                  |  |           
|                                                                                              | 
|Consolidated Statements of Income - Three Months Ended March 31, 2004 and 2003                |  | 3         
|                                                                                              | 
|Consolidated Balance Sheets  March 31, 2004 and December 31, 2003                            |  | 4         
|                                                                                              | 
|Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003  |  | 5         
|                                                                                              | 
|Notes to Financial Statements                                                                 |  | 6-21      
|                                                                                              | 
|ITEM 2. Managements Discussion and Analysis of Results of Operations and Financial Condition |  | 22-31     
|                                                                                              | 
|ITEM 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 32        
|                                                                                              | 
|ITEM 4. Controls and Procedures                                                               |  | 32        
|                                                                                              | 
|PART II. OTHER INFORMATION                                                                    |  |           
|                                                                                              | 
|ITEM 1. Legal Proceedings                                                                     |  | 33        
|                                                                                              | 
|ITEM 6. Exhibits and Reports on Form 8-K                                                      |  | 33        
|                                                                                              | 
|SIGNATURES                                                                                    |  | 34        



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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 EndedMarch 31 |        
|                                                             |  | 2004                       |         | 2003 |  
|Net sales                                                    |  | $                          | 216,770 |      | $ | 173,466 |  
|Cost of goods sold                                           |  |                            | 170,909 |      |   | 137,406 |  
|                                                             |  |                            |         |      |   |         |  
|Gross profit                                                 |  |                            | 45,861  |      |   | 36,060  |  
|TEL marketing agreements services                            |  |                            | 7,312   |      |   | 3,001   |  
|Selling, general, and administrative expenses                |  |                            | 23,518  |      |   | 20,588  |  
|Research, development, and testing expenses                  |  |                            | 15,749  |      |   | 13,682  |  
|                                                             |  |                            |         |      |   |         |  
|Operating profit                                             |  |                            | 13,906  |      |   | 4,791   |  
|Interest and financing expenses                              |  |                            | 5,156   |      |   | 4,802   |  
|                                                             |  |                           
|Other income (expense), net                                  |  |                            | 166     |      |   | (198    | )
|                                                             |  |                            |         |      |   |         |  
|Income (loss) from continuing operations before income taxes |  |                            | 8,916   |      |   | (209    | )
|Income tax expense (benefit)                                 |  |                            | 3,098   |      |   | (72     | )
|                                                             |  |                            |         |      |   |         |  
|Income (loss) from continuing operations                     |  |                            | 5,818   |      |   | (137    | )
|                                                             |  |                           
|Discontinued operations                                      |  |                            |         |      |   |         |  
|Gain on disposal of business (net of tax)                    |  |                            |        |      |   | 14,805  |  
|                                                             |  |                            |         |      |   |         |  
|Income before cumulative effect of accounting change         |  |                            | 5,818   |      |   | 14,668  |  
|                                                             |  |                           
|Cumulative effect of accounting change (net of tax)          |  |                            |        |      |   | 1,624   |  
|                                                             |  |                            |         |      |   |         |  
|Net income                                                   |  | $                          | 5,818   |      | $ | 16,292  |  
|                                                             |  |                            |         |      |   |         |  
|Basic earnings per share:                                    |  |                            |         |      |   |         |  
|Earnings (loss) from continuing operations                   |  | $                          | 0.35    |      | $ | (0.01   | )
|Discontinued operations (net of tax)                         |  |                            |        |      |   | 0.89    |  
|Cumulative effect of accounting change (net of tax)          |  |                            |        |      |   | 0.10    |  
|                                                             |  |                            |         |      |   |         |  
|Basic earnings per share                                     |  | $                          | 0.35    |      | $ | 0.98    |  
|                                                             |  |                            |         |      |   |         |  
|Diluted earnings per share:                                  |  |                            |         |      |   |         |  
|Earnings (loss) from continuing operations                   |  | $                          | 0.34    |      | $ | (0.01   | )
|Discontinued operations (net of tax)                         |  |                            |        |      |   | 0.89    |  
|Cumulative effect of accounting change (net of tax)          |  |                            |        |      |   | 0.10    |  
|                                                             |  |                            |         |      |   |         |  
|Diluted earnings per share                                   |  | $                          | 0.34    |      | $ | 0.98    |  
|                                                             |  |                            |         |      |   |         |  
|Shares used to compute basic earnings per share              |  |                            | 16,813  |      |   | 16,689  |  
|                                                             |  |                            |         |      |   |         |  
|Shares used to compute diluted earnings per share            |  |                            | 17,121  |      |   | 16,689  |  
|                                                             |  |                            |         |      |   |         |  



See accompanying notes to financial
statements.



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ETHYL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)



|                                                                                                         |  |              |         |   |                 |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | --------------- | - | ------- | -
|                                                                                                         |  | March 312004 |         |   | December 312003 |  
|ASSETS                                                                                                   |  |              |         |   |                 |   |         |  
|Current assets:                                                                                          |  |              |         |   |                 |   |         |  
|Cash and cash equivalents                                                                                |  | $            | 22,290  |   |                 | $ | 29,052  |  
|Restricted cash                                                                                          |  |              | 1,805   |   |                 |   | 1,903   |  
|Trade and other accounts receivable, less allowance for doubtful accounts ($2,691 - 2004; $2,382 - 2003) |  |              | 135,948 |   |                 |   | 132,542 |  
|Receivable - TEL marketing agreements services                                                           |  |              | 2,228   |   |                 |   | 2,456   |  
|Inventories:                                                                                             |  |              |         |   |                 |   |         |  
|Finished goods and work-in-process                                                                       |  |              | 101,207 |   |                 |   | 103,734 |  
|Raw materials                                                                                            |  |              | 12,757  |   |                 |   | 12,630  |  
|Stores, supplies and other                                                                               |  |              | 8,340   |   |                 |   | 8,064   |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|                                                                                                         |  |              | 122,304 |   |                 |   | 124,428 |  
|                                                                                                         |  |             
|Prepaid expenses                                                                                         |  |              | 9,061   |   |                 |   | 3,810   |  
|Deferred income taxes                                                                                    |  |              | 11,001  |   |                 |   | 11,296  |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Total current assets                                                                                     |  |              | 304,637 |   |                 |   | 305,487 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Property, plant and equipment, at cost                                                                   |  |              | 753,420 |   |                 |   | 751,919 |  
|Less accumulated depreciation and amortization                                                           |  |              | 583,481 |   |                 |   | 577,686 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Net property, plant and equipment                                                                        |  |              | 169,939 |   |                 |   | 174,233 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Prepaid pension cost                                                                                     |  |              | 22,754  |   |                 |   | 21,829  |  
|Deferred income taxes                                                                                    |  |              | 8,527   |   |                 |   | 5,471   |  
|Other assets and deferred charges                                                                        |  |              | 67,069  |   |                 |   | 75,564  |  
|Intangibles, net of amortization                                                                         |  |              | 61,272  |   |                 |   | 62,849  |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Total assets                                                                                             |  | $            | 634,198 |   |                 | $ | 645,433 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                     |  |              |         |   |                 |   |         |  
|Current liabilities:                                                                                     |  |              |         |   |                 |   |         |  
|Accounts payable                                                                                         |  | $            | 59,300  |   |                 | $ | 53,589  |  
|Accrued expenses                                                                                         |  |              | 42,345  |   |                 |   | 50,691  |  
|Long-term debt, current portion                                                                          |  |              | 5,871   |   |                 |   | 6,978   |  
|Income taxes payable                                                                                     |  |              | 15,657  |   |                 |   | 10,055  |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Total current liabilities                                                                                |  |              | 123,173 |   |                 |   | 121,313 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Long-term debt                                                                                           |  |              | 188,205 |   |                 |   | 201,839 |  
|Other noncurrent liabilities                                                                             |  |              | 117,607 |   |                 |   | 122,598 |  
|Commitments and contingencies (Note 10)                                                                  |  |              |         |   |                 |   |         |  
|Shareholders equity                                                                                     |  |              |         |   |                 |   |         |  
|Common stock ($1 par value) Issued - 16,831,509 in 2004 and 16,786,009 in 2003                           |  |              | 16,832  |   |                 |   | 16,786  |  
|Additional paid-in capital                                                                               |  |              | 67,242  |   |                 |   | 67,091  |  
|Accumulated other comprehensive loss                                                                     |  |              | (20,649 | ) |                 |   | (20,164 | )
|Retained earnings                                                                                        |  |              | 141,788 |   |                 |   | 135,970 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|                                                                                                         |  |              | 205,213 |   |                 |   | 199,683 |  
|                                                                                                         |  |              |         |   |                 |   |         |  
|Total liabilities and shareholders equity                                                               |  | $            | 634,198 |   |                 | $ | 645,433 |  
|                                                                                                         |  |              |         |   |                 |   |         |  



See accompanying notes to financial
statements.



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ETHYL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



|                                                                             |  |                            |         |   |      |   |         |  
|---------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                             |  | Three Months EndedMarch 31 |        
|                                                                             |  | 2004                       |         |   | 2003 |  
|Cash and cash equivalents at beginning of year                               |  | $                          | 29,052  |   |      | $ | 15,478  |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash flows from operating activities:                                        |  |                            |         |   |      |   |         |  
|Net income                                                                   |  |                            | 5,818   |   |      |   | 16,292  |  
|Adjustments to reconcile net income to cash flows from operating activities: |  |                            |         |   |      |   |         |  
|Depreciation and other amortization                                          |  |                            | 10,874  |   |      |   | 11,271  |  
|Amortization of deferred financing costs                                     |  |                            | 1,086   |   |      |   | 1,318   |  
|Noncash pension expense                                                      |  |                            | 2,583   |   |      |   | 2,316   |  
|Gain on sale of phenolic antioxidant business                                |  |                            |        |   |      |   | (23,196 | )
|Cumulative effect of accounting change                                       |  |                            |        |   |      |   | (2,549  | )
|Deferred income tax expense                                                  |  |                            | (2,356  | ) |      |   | 2,029   |  
|Working capital changes                                                      |  |                            | 2,789   |   |      |   | 3,366   |  
|TEL working capital advance                                                  |  |                            | 113     |   |      |   | 779     |  
|Cash pension contributions                                                   |  |                            | (5,940  | ) |      |   | (687    | )
|Proceeds from legal settlement                                               |  |                            |        |   |      |   | 4,825   |  
|Other, net                                                                   |  |                            | (1,860  | ) |      |   | 1,856   |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash provided from operating activities                                      |  |                            | 13,107  |   |      |   | 17,620  |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash flows from investing activities:                                        |  |                            |         |   |      |   |         |  
|Capital expenditures                                                         |  |                            | (3,295  | ) |      |   | (1,818  | )
|Proceeds from sale of phenolic antioxidant business                          |  |                            |        |   |      |   | 27,020  |  
|Other, net                                                                   |  |                            | 11      |   |      |   | 3       |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash (used in) provided from investing activities                            |  |                            | (3,284  | ) |      |   | 25,205  |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash flows from financing activities:                                        |  |                            |         |   |      |   |         |  
|Repayment of term loan                                                       |  |                            | (14,602 | ) |      |   |        |  
|Repayment of debt - previous agreements                                      |  |                            |        |   |      |   | (41,890 | )
|Debt issuance costs                                                          |  |                            |        |   |      |   | (1,756  | )
|Other, net                                                                   |  |                            | 58      |   |      |   | (131    | )
|                                                                             |  |                            |         |   |      |   |         |  
|Cash used in financing activities                                            |  |                            | (14,544 | ) |      |   | (43,777 | )
|                                                                             |  |                            |         |   |      |   |         |  
|Effect of foreign exchange on cash and cash equivalents                      |  |                            | (2,041  | ) |      |   | 1,077   |  
|                                                                             |  |                            |         |   |      |   |         |  
|Increase (decrease) in cash and cash equivalents                             |  |                            | (6,762  | ) |      |   | 125     |  
|                                                                             |  |                            |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                   |  | $                          | 22,290  |   |      | $ | 15,603  |  
|                                                                             |  |                            |         |   |      |   |         |  



See accompanying notes to financial
statements.



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ETHYL CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



|1. | 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 March 31, 2004, as well as the consolidated results of operations and the consolidated cash flows for the three-months ended March 31, 2004 and 2003. 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 and Form 10-K for the fiscal year ended December 31, 2003 (2003 Annual Report). The results of operations for the three-month period ended March 31, 2004 are not necessarily indicative of the results to be
expected for the full year.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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. The net book
value of the fixed assets was zero.



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



|3. | The cumulative effect of accounting change in the first quarter 2003 reflects the gain of $2.5 million ($1.6 million after tax or $.10 per 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 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
reserved. 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 SFAS No. 143.



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|                                                 |  |                |        |   |                 |   |        |  
|------------------------------------------------ |  | -------------- | ------ | - | --------------- | - | ------ | -
|                                                 |  | March 312004   |        |   | December 312003 |  
|                                                 |  | (in thousands) |       
|Asset retirement obligation, beginning of period |  | $              | 13,238 |   |                 | $ | 14,828 |  
|Gain upon implementation of SFAS No. 143         |  |                |       |   |                 |   | (2,549 | )
|Accretion expense                                |  |                | 239    |   |                 |   | 575    |  
|Liabilities settled                              |  |                | (178   | ) |                 |   | (884   | )
|Foreign currency impact                          |  |                |       |   |                 |   | 1,268  |  
|                                                 |  |                |        |   |                 |   |        |  
|Asset retirement obligation, end of period       |  | $              | 13,299 |   |                 | $ | 13,238 |  
|                                                 |  |                |        |   |                 |   |        |  



|4. | We account for the stock-based compensation plan using the intrinsic-value method. Under this method, we do not record compensation cost for stock options 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. Compensation cost for restricted stock grants, if issued, is recognized over the vesting period. See Note 16 in our
2003 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 EndedMarch 31               |      
|                                                                                                                             |  | 2004                                     |       |   | 2003 |  
|                                                                                                                             |  | (in thousands, except per share amounts) |      
|Net income, as reported                                                                                                      |  | $                                        | 5,818 |   |      | $ | 16,292 |  
|Less: Total stock-based employee compensation expense determined under the fair-value based method net of related tax effect |  |                                          | (31   | ) |      |   | (82    | )
|                                                                                                                             |  |                                          |       |   |      |   |        |  
|Net income, pro forma                                                                                                        |  | $                                        | 5,787 |   |      | $ | 16,210 |  
|                                                                                                                             |  |                                          |       |   |      |   |        |  
|Earnings per share:                                                                                                          |  |                                          |       |   |      |   |        |  
|Basic, as reported                                                                                                           |  | $                                        | 0.35  |   |      | $ | 0.98   |  
|                                                                                                                             |  |                                          |       |   |      |   |        |  
|Basic, pro forma                                                                                                             |  | $                                        | 0.34  |   |      | $ | 0.97   |  
|                                                                                                                             |  |                                          |       |   |      |   |        |  
|Diluted, as reported                                                                                                         |  | $                                        | 0.34  |   |      | $ | 0.98   |  
|                                                                                                                             |  |                                          |       |   |      |   |        |  
|Diluted, pro forma                                                                                                           |  | $                                        | 0.34  |   |      | $ | 0.97   |  
|                                                                                                                             |  |                                          |       |   |      |   |        |  



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|5. | The tables below show our consolidated net sales by segment, operating profit by segment, reconciliation to income (loss) from continuing operations before income taxes, and
depreciation and amortization by segment. During the first quarter 2004, we changed our methodology of allocating pension expense. Accordingly, certain prior period amounts have been reclassified to conform to the current presentation.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net Sales by Segment

(in millions)



|                       |  |                             |       |      |   |      
|---------------------- |  | --------------------------- | ----- | ---- | - | -----
|                       |  | Three Months Ended March 31
|                       |  | 2004                        |       | 2003
|Petroleum additives    |  | $                           | 214.6 |      | $ | 171.8
|Tetraethyl lead        |  |                             | 2.2   |      |   | 1.7  
|                       |  |                             |       |      |   |      
|Consolidated net sales |  | $                           | 216.8 |      | $ | 173.5
|                       |  |                             |       |      |   |      



Segment Operating
Profit

(in millions)



|                                                             |  |                            |      |   |      |   |      |  
|------------------------------------------------------------ |  | -------------------------- | ---- | - | ---- | - | ---- | -
|                                                             |  | Three Months EndedMarch 31 |     
|                                                             |  | 2004                       |      |   | 2003 |  
|Petroleum additives (a)                                      |  | $                          | 14.9 |   |      | $ | 11.3 |  
|Tetraethyl lead (a)                                          |  |                            | 7.3  |   |      |   | 3.8  |  
|                                                             |  |                            |      |   |      |   |      |  
|Segment operating profit                                     |  |                            | 22.2 |   |      |   | 15.1 |  
|Cumulative effect of accounting change (a)                   |  |                            |     |   |      |   | (2.5 | )
|Corporate, general and administrative expense                |  |                            | (5.2 | ) |      |   | (4.7 | )
|Interest expense                                             |  |                            | (5.2 | ) |      |   | (4.8 | )
|Other expense, net                                           |  |                            | (2.9 | ) |      |   | (3.3 | )
|                                                             |  |                            |      |   |      |   |      |  
|Income (loss) from continuing operations before income taxes |  | $                          | 8.9  |   |      | $ | (0.2 | )
|                                                             |  |                            |      |   |      |   |      |  

---

Prior periods have been reclassified to conform to
the current presentation.



|(a) | For purposes of segment reporting, the cumulative effect of accounting change is included in petroleum additive and tetraethyl lead segment results. In order to reconcile to
income (loss) from continuing operations before income taxes on the Consolidated Statements of Income, the before-tax cumulative effect of accounting change must be deducted in the above table.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Depreciation and Amortization

(in millions)



|                                    |  |                             |      |      |   |     
|----------------------------------- |  | --------------------------- | ---- | ---- | - | ----
|                                    |  | Three Months Ended March 31
|                                    |  | 2004                        |      | 2003
|Petroleum additives                 |  | $                           | 8.4  |      | $ | 8.2 
|Tetraethyl lead                     |  |                             | 2.1  |      |   | 2.7 
|Other long-lived assets             |  |                             | 0.4  |      |   | 0.4 
|                                    |  |                             |      |      |   |     
|Total depreciation and amortization |  | $                           | 10.9 |      | $ | 11.3
|                                    |  |                             |      |      |   |     



|6. | During the first three months of 2004, we have made contributions of $3 million for domestic pension plans and $1 million for domestic postretirement plans. We continue to expect to
make total contributions in 2004 of approximately $4 million for our U.S. pension plans and $3 million to $4 million for the U.S. postretirement plans. During 2004, we are transitioning from a self-insured post-retirement health plan for certain
retirees to a fully-insured plan. Once the transition is complete, we expect cash contributions to be similar to previous years. During the transition, we will incur higher cash costs as we must fund 2004 premium payments, as well as claims related
to the 2003 self-insured plan.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have made
contributions of $3 million for foreign pension plans during the first three months of 2004 and expect to make total contributions to foreign pension plans of $6 million during 2004.



The table below presents information on periodic benefit cost for our domestic retirement plans. The second table presents
the same information for the foreign plans.



9



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|                                   |  |                             |        |   |                          |   |        |      |  |   |       |   |  |   |       |  
|---------------------------------- |  | --------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ----- | - |  | - | ----- | -
|                                   |  | Domestic                    |       
|                                   |  | Pension Benefits            |        |   | Post-Retirement Benefits |  
|                                   |  | Three Months Ended March 31 |       
|                                   |  | 2004                        |        |   | 2003                     |   |        | 2004 |  |   | 2003  |  
|                                   |  | (in thousands)              |       
|Service cost                       |  | $                           | 1,147  |   |                          | $ | 1,023  |      |  | $ | 267   |   |  | $ | 206   |  
|Interest cost                      |  |                             | 1,353  |   |                          |   | 1,345  |      |  |   | 1,021 |   |  |   | 1,034 |  
|Expected return on plan assets     |  |                             | (1,363 | ) |                          |   | (1,298 | )    |  |   | (475  | ) |  |   | (480  | )
|Amortization of prior service cost |  |                             | 179    |   |                          |   | 180    |      |  |   | (7    | ) |  |   | (7    | )
|Amortization of net loss           |  |                             | 356    |   |                          |   | 218    |      |  |   |      |   |  |   |      |  
|                                   |  |                             |        |   |                          |   |        |      |  |   |       |   |  |   |       |  
|Net periodic domestic benefit cost |  | $                           | 1,672  |   |                          | $ | 1,468  |      |  | $ | 806   |   |  | $ | 753   |  
|                                   |  |                             |        |   |                          |   |        |      |  |   |       |   |  |   |       |  



|                                   |  |                            |      |   |      |   |      |  
|---------------------------------- |  | -------------------------- | ---- | - | ---- | - | ---- | -
|                                   |  | Foreign                    |     
|                                   |  | Pension Benefits           |     
|                                   |  | Three Months EndedMarch 31 |     
|                                   |  | 2004                       |      |   | 2003 |  
|                                   |  | (in thousands)             |     
|Service cost                       |  | $                          | 398  |   |      | $ | 311  |  
|Interest cost                      |  |                            | 932  |   |      |   | 747  |  
|Expected return on plan assets     |  |                            | (749 | ) |      |   | (509 | )
|Amortization of prior service cost |  |                            | 78   |   |      |   | 71   |  
|Amortization of transition asset   |  |                            | (10  | ) |      |   | (5   | )
|Amortization of net loss           |  |                            | 262  |   |      |   | 233  |  
|                                   |  |                            |      |   |      |   |      |  
|Net periodic foreign benefit cost  |  | $                          | 911  |   |      | $ | 848  |  
|                                   |  |                            |      |   |      |   |      |  



|7. | Basic and diluted earnings per share are calculated as shown in the table below. Amounts, except per share, are in thousands of dollars. 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 March 31, 2004, we had outstanding options to purchase 50,000 shares of common stock at $44.375 per share. At March 31, 2003, we
had outstanding options to purchase 303,200 shares of common stock at $62.50 per share and 50,000 shares of common stock at $44.375 per share. None of these options were included in the computation of diluted earnings per share for any period.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                                     |  |                                         |        |      |   |       
|---------------------------------------------------- |  | --------------------------------------- | ------ | ---- | - | ------
|                                                     |  | Three Months EndedMarch 31             
|                                                     |  | 2004                                    |        | 2003
|                                                     |  | (in thousands, exceptper share amounts)
|Basic earnings per share                             |  |                                         |        |      |   |       
|Numerator:                                           |  |                                         |        |      |   |       
|Income available to stockholders, as reported        |  | $                                       | 5,818  |      | $ | 16,292
|                                                     |  |                                         |        |      |   |       
|Denominator:                                         |  |                                         |        |      |   |       
|Average number of shares of common stock outstanding |  |                                         | 16,813 |      |   | 16,689
|                                                     |  |                                         |        |      |   |       
|Basic earnings per share                             |  | $                                       | .35    |      | $ | .98   
|                                                     |  |                                         |        |      |   |       
|Diluted earnings per share                           |  |                                         |        |      |   |       
|Numerator:                                           |  |                                         |        |      |   |       
|Income available to stockholders, as reported        |  | $                                       | 5,818  |      | $ | 16,292
|                                                     |  |                                         |        |      |   |       
|Denominator:                                         |  |                                         |        |      |   |       
|Average number of shares of common stock outstanding |  |                                         | 16,813 |      |   | 16,689
|Shares issuable upon exercise of stock options       |  |                                         | 308    |      |   |      
|                                                     |  |                                         |        |      |   |       
|Total shares                                         |  |                                         | 17,121 |      |   | 16,689
|                                                     |  |                                         |        |      |   |       
|Diluted earnings per share                           |  | $                                       | .34    |      | $ | .98   
|                                                     |  |                                         |        |      |   |       



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|8. | The following table provides certain information related to our intangible assets.
|-- | ----------------------------------------------------------------------------------



|                                |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|------------------------------- |  | ------------------------ | ------- | ----------------------- | - | ------------------- |  | ----------------------- | ------- |  | - | ------
|                                |  | March 31 2004            |         | December 31 2003       
|                                |  | Identifiable Intangibles
|                                |  | GrossCarryingAmount      |         | AccumulatedAmortization |   | GrossCarryingAmount |  | AccumulatedAmortization
|                                |  | (in thousands)          
|Amortizing intangible assets    |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|Formulas                        |  | $                        | 85,910  |                         | $ | 38,519              |  | $                       | 85,910  |  | $ | 30,859
|Contracts                       |  |                          | 40,873  |                         |   | 31,989              |  |                         | 40,873  |  |   | 38,015
|                                |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|                                |  | $                        | 126,783 |                         | $ | 70,508              |  | $                       | 126,783 |  | $ | 68,874
|                                |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|Nonamortizing intangible assets |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|Minimum pension liabilities     |  | $                        | 4,997   |                         |   |                     |  | $                       | 4,940   |  |   |       
|                                |  |                          |         |                         |   |                     |  |                         |         |  |   |       
|Aggregate amortization expense  |  |                          |         |                         | $ | 1,634               |  |                         |         |  | $ | 5,897 
|                                |  |                          |         |                         |   |                     |  |                         |         |  |   |       



Estimated amortization
expense in thousands for the next five year is expected to be:



|  |  |      |  |   |      
|- |  | ---- |  | - | -----
| |  | 2004 |  | $ | 6,540
| |  | 2005 |  | $ | 5,365
| |  | 2006 |  | $ | 4,524
| |  | 2007 |  | $ | 4,524
| |  | 2008 |  | $ | 4,524



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



During 2003, we were notified by DSM Copolymer, Inc., our supplier of olefin copolymer viscosity index improvers, of their intent to terminate a supply contract with us in mid-2005. The contract was initially
scheduled to terminate in 2012. We have adjusted the amortization period of the intangible asset associated with this contract to coincide with the 2005 termination date. This change results in additional monthly amortization of $100 thousand
through mid-2005.



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|9. | Long-term debt consisted of the following:
|-- | ------------------------------------------



|                          |  |                |         |   |                  |   |         |  
|------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                          |  | March 312004   |         |   | December 31 2003 |  
|                          |  | (in thousands) |        
|Senior notes              |  | $              | 150,000 |   |                  | $ | 150,000 |  
|Term loan agreement       |  |                | 39,205  |   |                  |   | 53,807  |  
|Capital lease obligations |  |                | 4,871   |   |                  |   | 5,010   |  
|                          |  |                |         |   |                  |   |         |  
|                          |  |                | 194,076 |   |                  |   | 208,817 |  
|Current maturities        |  |                | (5,871  | ) |                  |   | (6,978  | )
|                          |  |                |         |   |                  |   |         |  
|                          |  | $              | 188,205 |   |                  | $ | 201,839 |  
|                          |  |                |         |   |                  |   |         |  



On April 30, 2003, we
entered into a 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. This debt structure will cause Ethyl to incur higher cash interest costs
than the previous facility, but provides the long-term debt structure we believe we need to manage our business. We incurred financing costs of approximately $11.5 million in obtaining the new credit facilities, which are being amortized over
periods of five to seven years.



We sold 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.



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 325 to 425 basis points and matures in April 2008. At March 31, 2004 we had
outstanding letters of credit of $26 million resulting in the unused portion of the revolver amounting to $24 million.



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



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.



|10. | There have been no significant changes in our commitments and contingencies from those reported in our 2003 Annual Report.
|--- | --------------------------------------------------------------------------------------------------------------------------



Our accruals for environmental remediation were $22 million at March 31,
2004 and $23 million at December 31, 2003. We also have expected insurance reimbursement assets related to these accruals of $2 million at March 31, 2004 and $3 million at December 31, 2003. When significant events or circumstances occur that might
impair the value of this insurance receivable, we evaluate recoverability of the recorded amounts. If we determine an asset is impaired, we adjust the asset to net realizable value. In addition to the accruals for environmental remediation, we also
have accruals for dismantling and decommissioning costs of $10 million at both March 31, 2004 and December 31, 2003.



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



|                                                       |  |                             |       |   |      |   |        |  
|------------------------------------------------------ |  | --------------------------- | ----- | - | ---- | - | ------ | -
|                                                       |  | Three Months Ended March 31 |      
|                                                       |  | 2004                        |       |   | 2003 |  
|                                                       |  | (in thousands)              |      
|Net income                                             |  | $                           | 5,818 |   |      | $ | 16,292 |  
|Other comprehensive income (loss), net of tax          |  |                             |       |   |      |   |        |  
|Unrealized gain (loss) on marketable equity securities |  |                             | 67    |   |      |   | (340   | )
|Foreign currency translation adjustments               |  |                             | (552  | ) |      |   | 1,084  |  
|                                                       |  |                             |       |   |      |   |        |  
|Other comprehensive (loss) income                      |  |                             | (485  | ) |      |   | 744    |  
|                                                       |  |                             |       |   |      |   |        |  
|Comprehensive income                                   |  | $                           | 5,333 |   |      | $ | 17,036 |  
|                                                       |  |                             |       |   |      |   |        |  



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



|                                                       |  |                |         |   |                  |   |         |  
|------------------------------------------------------ |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                                       |  | March 312004   |         |   | December 31 2003 |  
|                                                       |  | (in thousands) |        
|Unrealized gain (loss) on marketable equity securities |  | $              | 35      |   |                  | $ | (32     | )
|Minimum pension liability adjustment                   |  |                | (11,921 | ) |                  |   | (11,921 | )
|Foreign currency translation adjustments               |  |                | (8,763  | ) |                  |   | (8,211  | )
|                                                       |  |                |         |   |                  |   |         |  
|Accumulated other comprehensive loss                   |  | $              | (20,649 | ) |                  | $ | (20,164 | )
|                                                       |  |                |         |   |                  |   |         |  



|12. | FASB Interpretation No. 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. The FASB issued a revision to FIN 46 (FIN 46-R) in December 2003. FIN46-R deferred the effective date of the interpretation until the
first reporting period ending after March 15, 2004. The implementation of this interpretation had no effect on Ethyl.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In January 2004, the FASB issued FASB Staff Position FAS 106-1 (FSP FAS 106-1), Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act). FSP FAS 106-1 is effective for interim or annual financial statements for fiscal years ending after December 7, 2003. It permits a sponsor of a postretirement health care
plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act. Because of various uncertainties related to this legislation and the appropriate accounting methodology for this event, we
have elected to defer financial recognition of this legislation until the FASB issues final accounting guidance. Subsequently, in March 2004, the FASB proposed guidance to address accounting issues related to the Act. The proposed guidance is
expected become final during 2004. When issued, that final guidance could require us to change previously reported information.



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##### Table of Contents

|13. | 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 Canada Holdings, Inc.



Ethyl Export Corporation



Ethyl Interamerica Corporation



Ethyl Japan Holdings, Inc.



Ethyl Petroleum Additives, Inc.



Ethyl Ventures, Inc.



Interamerica Terminals Corporation



The Edwin Cooper Corporation



Ethyl Additives Corporation



Foreign Subsidiaries



Ethyl Europe S.P.R.L.



Ethyl Brasil Industria de 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 March 31, 2004 and December 31, 2003; results of
operations for the three months ended March 31, 2004 and 2003; and cash flows for the three months ended March 31, 2004 and 2003 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.



15



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##### Table of Contents

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended March 31, 2004

(in thousands)



|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        
|---------------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | ------- | - |  | - | -------
|                                                                                               |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated
|Net sales                                                                                      |  | $      | 2,146  |   |                       | $ | 157,512 |                           |  | $ | 112,397                       |   |  | $            | (55,285 | ) |  | $ | 216,770
|Cost of goods sold                                                                             |  |        | 2,152  |   |                       |   | 123,891 |                           |  |   | 100,752                       |   |  |              | (55,886 | ) |  |   | 170,909
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        
|Gross (loss) profit                                                                            |  |        | (6     | ) |                       |   | 33,621  |                           |  |   | 11,645                        |   |  |              | 601     |   |  |   | 45,861 
|                                                                                               |  |        |        |   |                      
|TEL marketing agreements services                                                              |  |        | 5,806  |   |                       |   | (3,091  | )                         |  |   | 4,597                         |   |  |              |        |   |  |   | 7,312  
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 4,546  |   |                       |   |        |                           |  |   | (4,546                        | ) |  |              |        |   |  |   |       
|Selling, general, and administrative expenses                                                  |  |        | 7,650  |   |                       |   | 4,816   |                           |  |   | 11,052                        |   |  |              |        |   |  |   | 23,518 
|Research, development, and testing expenses                                                    |  |        |       |   |                       |   | 12,541  |                           |  |   | 3,208                         |   |  |              |        |   |  |   | 15,749 
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        
|Operating (loss) profit                                                                        |  |        | 2,696  |   |                       |   | 13,173  |                           |  |   | (2,564                        | ) |  |              | 601     |   |  |   | 13,906 
|Interest and financing expenses                                                                |  |        | 4,925  |   |                       |   | 231     |                           |  |   |                              |   |  |              |        |   |  |   | 5,156  
|Other income, net                                                                              |  |        | 11     |   |                       |   | 122     |                           |  |   | 33                            |   |  |              |        |   |  |   | 166    
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (2,218 | ) |                       |   | 13,064  |                           |  |   | (2,531                        | ) |  |              | 601     |   |  |   | 8,916  
|Income tax (benefit) expense                                                                   |  |        | (1,506 | ) |                       |   | 5,164   |                           |  |   | (779                          | ) |  |              | 219     |   |  |   | 3,098  
|Equity income of subsidiaries                                                                  |  |        | 6,530  |   |                       |   |        |                           |  |   |                              |   |  |              | (6,530  | ) |  |   |       
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        
|Net income                                                                                     |  | $      | 5,818  |   |                       | $ | 7,900   |                           |  | $ | (1,752                        | ) |  | $            | (6,148  | ) |  | $ | 5,818  
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |        



16



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##### Table of Contents

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended March 31, 2003

(in thousands)



|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |        
|Net sales                                                                                      |  | $      | 1,538   |   |                       | $ | 128,430 |                           |  | $ | 98,735                        |   |  | $            | (55,237 | ) |  | $ | 173,466 |  
|Cost of goods sold                                                                             |  |        | 4,447   |   |                       |   | 101,847 |                           |  |   | 87,911                        |   |  |              | (56,799 | ) |  |   | 137,406 |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|Gross (loss) profit                                                                            |  |        | (2,909  | ) |                       |   | 26,583  |                           |  |   | 10,824                        |   |  |              | 1,562   |   |  |   | 36,060  |  
|                                                                                               |  |        |         |   |                      
|TEL marketing agreements services                                                              |  |        | 853     |   |                       |   | (247    | )                         |  |   | 2,395                         |   |  |              |        |   |  |   | 3,001   |  
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 2,189   |   |                       |   | (192    | )                         |  |   | (1,997                        | ) |  |              |        |   |  |   |        |  
|Selling, general, and administrative expenses                                                  |  |        | 8,688   |   |                       |   | 4,728   |                           |  |   | 7,172                         |   |  |              |        |   |  |   | 20,588  |  
|Research, development, and testing expenses                                                    |  |        |        |   |                       |   | 10,810  |                           |  |   | 2,872                         |   |  |              |        |   |  |   | 13,682  |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|Operating (loss) profit                                                                        |  |        | (8,555  | ) |                       |   | 10,606  |                           |  |   | 1,178                         |   |  |              | 1,562   |   |  |   | 4,791   |  
|Interest and financing expenses                                                                |  |        | 4,434   |   |                       |   | 368     |                           |  |   |                              |   |  |              |        |   |  |   | 4,802   |  
|Other (expense) income, net                                                                    |  |        | (78     | ) |                       |   | 56      |                           |  |   | (176                          | ) |  |              |        |   |  |   | (198    | )
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (13,067 | ) |                       |   | 10,294  |                           |  |   | 1,002                         |   |  |              | 1,562   |   |  |   | (209    | )
|Income tax (benefit) expense                                                                   |  |        | (5,220  | ) |                       |   | 3,914   |                           |  |   | 634                           |   |  |              | 600     |   |  |   | (72     | )
|Equity income of subsidiaries                                                                  |  |        | 7,710   |   |                       |   |        |                           |  |   |                              |   |  |              | (7,710  | ) |  |   |        |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|Income from continuing operations                                                              |  |        | (137    | ) |                       |   | 6,380   |                           |  |   | 368                           |   |  |              | (6,748  | ) |  |   | (137    | )
|Income from operations of discontinued business (net of tax)                                   |  |        | 14,805  |   |                       |   |        |                           |  |   |                              |   |  |              |        |   |  |   | 14,805  |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|Income before cumulative effect of accounting change                                           |  |        | 14,668  |   |                       |   | 6,380   |                           |  |   | 368                           |   |  |              | (6,748  | ) |  |   | 14,668  |  
|Cumulative effect of accounting change (net of tax)                                            |  |        | 1,624   |   |                       |   | 74      |                           |  |   | 438                           |   |  |              | (512    | ) |  |   | 1,624   |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  
|Net income                                                                                     |  | $      | 16,292  |   |                       | $ | 6,454   |                           |  | $ | 806                           |   |  | $            | (7,260  | ) |  | $ | 16,292  |  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         |   |  |   |         |  



17



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##### Table of Contents

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

March 31, 2004

(in thousands)



|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|---------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | -------- | - |  | - | ------- | -
|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |         
|ASSETS                                         |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Cash and cash equivalents                      |  | $      | (175    | ) |                       | $ | 6,787   |                           |  | $ | 15,678                        |   |  | $            |         |   |  | $ | 22,290  |  
|Restricted cash                                |  |        | 1,304   |   |                       |   | 501     |                           |  |   |                              |   |  |              |         |   |  |   | 1,805   |  
|Trade and other accounts receivable, net       |  |        | 7,446   |   |                       |   | 66,958  |                           |  |   | 61,544                        |   |  |              |         |   |  |   | 135,948 |  
|Receivable - TEL marketing agreements services |  |        |        |   |                       |   | 40      |                           |  |   | 2,188                         |   |  |              |         |   |  |   | 2,228   |  
|Amounts due from affiliated companies          |  |        | 181,688 |   |                       |   | 240,882 |                           |  |   | 32,704                        |   |  |              | (455,274 | ) |  |   |        |  
|Inventories                                    |  |        | 1,436   |   |                       |   | 70,588  |                           |  |   | 56,594                        |   |  |              | (6,314   | ) |  |   | 122,304 |  
|Deferred income taxes                          |  |        | 3,247   |   |                       |   | 3,998   |                           |  |   | 1,303                         |   |  |              | 2,453    |   |  |   | 11,001  |  
|Prepaid expenses                               |  |        | 7,745   |   |                       |   | 224     |                           |  |   | 1,092                         |   |  |              |         |   |  |   | 9,061   |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total current assets                           |  |        | 202,691 |   |                       |   | 389,978 |                           |  |   | 171,103                       |   |  |              | (459,135 | ) |  |   | 304,637 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Amounts due from affiliated companies          |  |        | 10,704  |   |                       |   |        |                           |  |   |                              |   |  |              | (10,704  | ) |  |   |        |  
|                                               |  |        |         |   |                      
|Property, plant and equipment, at cost         |  |        | 229,521 |   |                       |   | 463,046 |                           |  |   | 60,853                        |   |  |              |         |   |  |   | 753,420 |  
|Less accumulated depreciation & amortization   |  |        | 162,742 |   |                       |   | 363,331 |                           |  |   | 57,408                        |   |  |              |         |   |  |   | 583,481 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Net property, plant and equipment              |  |        | 66,779  |   |                       |   | 99,715  |                           |  |   | 3,445                         |   |  |              |         |   |  |   | 169,939 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|                                               |  |        |         |   |                      
|Investment in consolidated subsidiaries        |  |        | 371,737 |   |                       |   |        |                           |  |   |                              |   |  |              | (371,737 | ) |  |   |        |  
|Prepaid pension cost                           |  |        | 21,114  |   |                       |   |        |                           |  |   | 1,640                         |   |  |              |         |   |  |   | 22,754  |  
|Deferred income taxes                          |  |        | 16,058  |   |                       |   | (7,799  | )                         |  |   | 268                           |   |  |              |         |   |  |   | 8,527   |  
|Other assets and deferred charges              |  |        | 33,390  |   |                       |   | 31,488  |                           |  |   | 2,191                         |   |  |              |         |   |  |   | 67,069  |  
|Intangibles-net of amortization                |  |        | 1,353   |   |                       |   | 57,630  |                           |  |   | 2,289                         |   |  |              |         |   |  |   | 61,272  |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total assets                                   |  | $      | 723,826 |   |                       | $ | 571,012 |                           |  | $ | 180,936                       |   |  | $            | (841,576 | ) |  | $ | 634,198 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY           |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Accounts payable                               |  | $      | 1,838   |   |                       | $ | 37,611  |                           |  | $ | 19,851                        |   |  | $            |         |   |  | $ | 59,300  |  
|Accrued expenses                               |  |        | 19,710  |   |                       |   | 17,003  |                           |  |   | 5,632                         |   |  |              |         |   |  |   | 42,345  |  
|Amounts due to affiliated companies            |  |        | 205,152 |   |                       |   | 183,430 |                           |  |   | 66,692                        |   |  |              | (455,274 | ) |  |   |        |  
|Long-term debt, current portion                |  |        | 5,298   |   |                       |   | 573     |                           |  |   |                              |   |  |              |         |   |  |   | 5,871   |  
|Income taxes payable                           |  |        | 11,146  |   |                       |   | 3,727   |                           |  |   | 784                           |   |  |              |         |   |  |   | 15,657  |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total current liabilities                      |  |        | 243,144 |   |                       |   | 242,344 |                           |  |   | 92,959                        |   |  |              | (455,274 | ) |  |   | 123,173 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Long-term debt                                 |  |        | 183,907 |   |                       |   | 4,298   |                           |  |   |                              |   |  |              |         |   |  |   | 188,205 |  
|Amounts due to affiliated companies            |  |        |        |   |                       |   | 10,704  |                           |  |   |                              |   |  |              | (10,704  | ) |  |   |        |  
|Other noncurrent liabilities                   |  |        | 91,562  |   |                       |   | 6,935   |                           |  |   | 19,110                        |   |  |              |         |   |  |   | 117,607 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total liabilities                              |  |        | 518,613 |   |                       |   | 264,281 |                           |  |   | 112,069                       |   |  |              | (465,978 | ) |  |   | 428,985 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Shareholders equity:                          |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Common stock                                   |  |        | 16,832  |   |                       |   | 20,687  |                           |  |   | 35,334                        |   |  |              | (56,021  | ) |  |   | 16,832  |  
|Additional paid-in capital                     |  |        | 67,242  |   |                       |   | 251,895 |                           |  |   | 5,014                         |   |  |              | (256,909 | ) |  |   | 67,242  |  
|Accumulated other comprehensive loss           |  |        | (20,649 | ) |                       |   | (11,242 | )                         |  |   | (5,129                        | ) |  |              | 16,371   |   |  |   | (20,649 | )
|Retained earnings                              |  |        | 141,788 |   |                       |   | 45,391  |                           |  |   | 33,648                        |   |  |              | (79,039  | ) |  |   | 141,788 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total shareholders equity                     |  |        | 205,213 |   |                       |   | 306,731 |                           |  |   | 68,867                        |   |  |              | (375,598 | ) |  |   | 205,213 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total liabilities and shareholders equity     |  | $      | 723,826 |   |                       | $ | 571,012 |                           |  | $ | 180,936                       |   |  | $            | (841,576 | ) |  | $ | 634,198 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  



18



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##### Table of Contents

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

December 31, 2003

(in thousands)



|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|---------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | -------- | - |  | - | ------- | -
|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |         
|ASSETS                                         |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Cash and cash equivalents                      |  | $      | 6,009   |   |                       | $ | 7,365   |                           |  | $ | 15,678                        |   |  | $            |         |   |  | $ | 29,052  |  
|Restricted cash                                |  |        | 1,391   |   |                       |   | 512     |                           |  |   |                              |   |  |              |         |   |  |   | 1,903   |  
|Trade and other accounts receivable, net       |  |        | 5,673   |   |                       |   | 63,216  |                           |  |   | 63,653                        |   |  |              |         |   |  |   | 132,542 |  
|Receivable - TEL marketing agreements services |  |        |        |   |                       |   | 3       |                           |  |   | 2,453                         |   |  |              |         |   |  |   | 2,456   |  
|Amounts due from affiliated companies          |  |        | 77,880  |   |                       |   | 111,333 |                           |  |   | 40,337                        |   |  |              | (229,550 | ) |  |   |        |  
|Inventories                                    |  |        | 2,139   |   |                       |   | 68,130  |                           |  |   | 61,076                        |   |  |              | (6,917   | ) |  |   | 124,428 |  
|Deferred income taxes                          |  |        | 3,896   |   |                       |   | 3,576   |                           |  |   | 1,153                         |   |  |              | 2,671    |   |  |   | 11,296  |  
|Prepaid expenses                               |  |        | 2,123   |   |                       |   | 579     |                           |  |   | 1,108                         |   |  |              |         |   |  |   | 3,810   |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total current assets                           |  |        | 99,111  |   |                       |   | 254,714 |                           |  |   | 185,458                       |   |  |              | (233,796 | ) |  |   | 305,487 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Amounts due from affiliated companies          |  |        | 15,863  |   |                       |   |        |                           |  |   |                              |   |  |              | (15,863  | ) |  |   |        |  
|Property, plant and equipment, at cost         |  |        | 229,321 |   |                       |   | 462,085 |                           |  |   | 60,513                        |   |  |              |         |   |  |   | 751,919 |  
|Less accumulated depreciation & amortization   |  |        | 161,071 |   |                       |   | 359,541 |                           |  |   | 57,074                        |   |  |              |         |   |  |   | 577,686 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Net property, plant and equipment              |  |        | 68,250  |   |                       |   | 102,544 |                           |  |   | 3,439                         |   |  |              |         |   |  |   | 174,233 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Investment in consolidated subsidiaries        |  |        | 375,532 |   |                       |   |        |                           |  |   |                              |   |  |              | (375,532 | ) |  |   |        |  
|Prepaid pension cost                           |  |        | 20,239  |   |                       |   |        |                           |  |   | 1,590                         |   |  |              |         |   |  |   | 21,829  |  
|Deferred income taxes                          |  |        | 15,450  |   |                       |   | (9,614  | )                         |  |   | (365                          | ) |  |              |         |   |  |   | 5,471   |  
|Other assets and deferred charges              |  |        | 32,514  |   |                       |   | 37,214  |                           |  |   | 5,836                         |   |  |              |         |   |  |   | 75,564  |  
|Intangibles-net of amortization                |  |        | 1,354   |   |                       |   | 59,264  |                           |  |   | 2,231                         |   |  |              |         |   |  |   | 62,849  |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total assets                                   |  | $      | 628,313 |   |                       | $ | 444,122 |                           |  | $ | 198,189                       |   |  | $            | (625,191 | ) |  | $ | 645,433 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY           |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Accounts payable                               |  | $      | 2,385   |   |                       | $ | 33,082  |                           |  | $ | 18,122                        |   |  | $            |         |   |  | $ | 53,589  |  
|Accrued expenses                               |  |        | 23,119  |   |                       |   | 22,100  |                           |  |   | 5,472                         |   |  |              |         |   |  |   | 50,691  |  
|Amounts due to affiliated companies            |  |        | 92,608  |   |                       |   | 64,539  |                           |  |   | 72,403                        |   |  |              | (229,550 | ) |  |   |        |  
|Long-term debt, current portion                |  |        | 6,414   |   |                       |   | 564     |                           |  |   |                              |   |  |              |         |   |  |   | 6,978   |  
|Income taxes payable                           |  |        | 12,934  |   |                       |   | (3,901  | )                         |  |   | 1,022                         |   |  |              |         |   |  |   | 10,055  |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total current liabilities                      |  |        | 137,460 |   |                       |   | 116,384 |                           |  |   | 97,019                        |   |  |              | (229,550 | ) |  |   | 121,313 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Long-term debt                                 |  |        | 197,393 |   |                       |   | 4,446   |                           |  |   |                              |   |  |              |         |   |  |   | 201,839 |  
|Amounts due to affiliated companies            |  |        |        |   |                       |   | 15,863  |                           |  |   |                              |   |  |              | (15,863  | ) |  |   |        |  
|Other noncurrent liabilities                   |  |        | 93,777  |   |                       |   | 7,600   |                           |  |   | 21,221                        |   |  |              |         |   |  |   | 122,598 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total liabilities                              |  |        | 428,630 |   |                       |   | 144,293 |                           |  |   | 118,240                       |   |  |              | (245,413 | ) |  |   | 445,750 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Shareholders equity:                          |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Common stock                                   |  |        | 16,786  |   |                       |   | 32,268  |                           |  |   | 35,334                        |   |  |              | (67,602  | ) |  |   | 16,786  |  
|Additional paid-in capital                     |  |        | 67,091  |   |                       |   | 240,320 |                           |  |   | 5,013                         |   |  |              | (245,333 | ) |  |   | 67,091  |  
|Accumulated other comprehensive loss           |  |        | (20,164 | ) |                       |   | (10,250 | )                         |  |   | (4,854                        | ) |  |              | 15,104   |   |  |   | (20,164 | )
|Retained earnings                              |  |        | 135,970 |   |                       |   | 37,491  |                           |  |   | 44,456                        |   |  |              | (81,947  | ) |  |   | 135,970 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total shareholders equity                     |  |        | 199,683 |   |                       |   | 299,829 |                           |  |   | 79,949                        |   |  |              | (379,778 | ) |  |   | 199,683 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  
|Total liabilities and shareholders equity     |  | $      | 628,313 |   |                       | $ | 444,122 |                           |  | $ | 198,189                       |   |  | $            | (625,191 | ) |  | $ | 645,433 |  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |          |   |  |   |         |  



19



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##### Table of Contents

Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31,
2004

(in thousands)



|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------ | ------------------------- |  | - | ----------------------------- | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                        |  | Parent |         |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |       
|Cash provided from operating activities                 |  | $      | 3,533   |   |                       | $ | 7,396  |                           |  | $ | 2,178                         |   |  | $            |       |   |  | $ | 13,107  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Cash flows from investing activities                    |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Capital expenditures                                    |  |        | (325    | ) |                       |   | (2,782 | )                         |  |   | (188                          | ) |  |              |       |   |  |   | (3,295  | )
|Increase in intercompany loans                          |  |        | 5,281   |   |                       |   |       |                           |  |   |                              |   |  |              | (5,281 | ) |  |   |        |  
|Other, net                                              |  |        | 11      |   |                       |   |       |                           |  |   |                              |   |  |              |       |   |  |   | 11      |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Cash provided from (used in) investing activities       |  |        | 4,967   |   |                       |   | (2,782 | )                         |  |   | (188                          | ) |  |              | (5,281 | ) |  |   | (3,284  | )
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Cash flows from financing activities                    |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Repayments of debt                                      |  |        | (14,602 | ) |                       |   |       |                           |  |   |                              |   |  |              |       |   |  |   | (14,602 | )
|Repayment of intercompany notes payable                 |  |        |        |   |                       |   | (5,281 | )                         |  |   |                              |   |  |              | 5,281  |   |  |   |        |  
|Other, net                                              |  |        | 197     |   |                       |   | (139   | )                         |  |   |                              |   |  |              |       |   |  |   | 58      |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Cash used in financing activities                       |  |        | (14,405 | ) |                       |   | (5,420 | )                         |  |   |                              |   |  |              | 5,281  |   |  |   | (14,544 | )
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Effect of foreign exchange on cash and cash equivalents |  |        | (279    | ) |                       |   | 228    |                           |  |   | (1,990                        | ) |  |              |       |   |  |   | (2,041  | )
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Decrease in cash and cash equivalents                   |  |        | (6,184  | ) |                       |   | (578   | )                         |  |   |                              |   |  |              |       |   |  |   | (6,762  | )
|Cash and cash equivalents at beginning of year          |  |        | 6,009   |   |                       |   | 7,365  |                           |  |   | 15,678                        |   |  |              |       |   |  |   | 29,052  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  
|Cash and cash equivalents at end of period              |  | $      | (175    | ) |                       | $ | 6,787  |                           |  | $ | 15,678                        |   |  | $            |       |   |  | $ | 22,290  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |  |              |        |   |  |   |         |  



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Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31,
2003



|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------ | ------------------------- |  | - | ----------------------------- | - | ------------ | - | - |  | - | ------- | -
|                                                        |  | Parent |         |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   | Consolidated |  
|Cash provided from (used in) operating activities       |  | $      | 15,660  |   |                       | $ | 4,070  |                           |  | $ | (2,110                        | ) |              | $ |  |  | $ | 17,620  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Cash flows from investing activities                    |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Capital expenditures                                    |  |        | (124    | ) |                       |   | (1,562 | )                         |  |   | (132                          | ) |              |   |  |  |   | (1,818  | )
|Proceeds from sale of phenolic antioxidant business     |  |        | 27,020  |   |                       |   |       |                           |  |   |                              |   |              |   |  |  |   | 27,020  |  
|Other, net                                              |  |        | 3       |   |                       |   |       |                           |  |   |                              |   |              |   |  |  |   | 3       |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Cash provided from (used in) investing activities       |  |        | 26,899  |   |                       |   | (1,562 | )                         |  |   | (132                          | ) |              |   |  |  |   | 25,205  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Cash flows from financing activities                    |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Repayments of debt                                      |  |        | (41,890 | ) |                       |   |       |                           |  |   |                              |   |              |   |  |  |   | (41,890 | )
|Debt issuance costs                                     |  |        | (1,756  | ) |                       |   |       |                           |  |   |                              |   |              |   |  |  |   | (1,756  | )
|Other, net                                              |  |        |        |   |                       |   | (131   | )                         |  |   |                              |   |              |   |  |  |   | (131    | )
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Cash (used in) financing activities                     |  |        | (43,646 | ) |                       |   | (131   | )                         |  |   |                              |   |              |   |  |  |   | (43,777 | )
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Effect of foreign exchange on cash and cash equivalents |  |        | 244     |   |                       |   | (268   | )                         |  |   | 1,101                         |   |              |   |  |  |   | 1,077   |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|(Decrease) increase in cash and cash equivalents        |  |        | (843    | ) |                       |   | 2,109  |                           |  |   | (1,141                        | ) |              |   |  |  |   | 125     |  
|Cash and cash equivalents at beginning of year          |  |        | 1,366   |   |                       |   | 4,206  |                           |  |   | 9,906                         |   |              |   |  |  |   | 15,478  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  
|Cash and cash equivalents at end of period              |  | $      | 523     |   |                       | $ | 6,315  |                           |  | $ | 8,765                         |   |              | $ |  |  | $ | 15,603  |  
|                                                        |  |        |         |   |                       |   |        |                           |  |   |                               |   |              |   |   |  |   |         |  



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##### Table of Contents

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, 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, 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
2003 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



Net Sales



Our consolidated net sales for the first quarter 2004 amounted to $216.8 million, representing an increase of 25% from the 2003 level of $173.5 million.
The table below shows our consolidated net sales by segment.



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##### Table of Contents

Net Sales by Segment

(in millions)



|                       |  |                             |       |      |   |      
|---------------------- |  | --------------------------- | ----- | ---- | - | -----
|                       |  | Three Months Ended March 31
|                       |  | 2004                        |       | 2003
|Petroleum additives    |  | $                           | 214.6 |      | $ | 171.8
|Tetraethyl lead        |  |                             | 2.2   |      |   | 1.7  
|                       |  |                             |       |      |   |      
|Consolidated net sales |  | $                           | 216.8 |      | $ | 173.5
|                       |  |                             |       |      |   |      



Petroleum Additives
Segment



Petroleum additives net sales in the first
quarter 2004 of $214.6 million were up $42.8 million from $171.8 million in the first quarter 2003. Shipments across most product lines were higher than first quarter 2003 resulting in an improvement of about 25% in total shipments during first
quarter 2004. This impact, along with product mix, resulted in higher sales of about $36 million. The remaining increase in petroleum additives net sales over first quarter 2003 was caused by favorable foreign currency.



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 from time to time 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 first quarter 2004 were
slightly higher than first quarter 2003. This increase was caused substantially by variation in the quarter to quarter timing of sales orders. There were no sales to Octel in the first quarter for either 2004 or 2003.



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. Certain measures presented in the table below are not recognized as financial measures calculated in
accordance with generally accepted accounting principles (GAAP). We believe this information provides transparency to investors and enhances period-to-period comparability of performance. We believe that this information enables the reader to have a
clear understanding of the results of operations included in the GAAP financial statements. Certain prior periods have been reclassified to conform to the current presentation.



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##### Table of Contents

Segment Operating Profit

(in millions)



|                                              |  |                             |      |      |   |     
|--------------------------------------------- |  | --------------------------- | ---- | ---- | - | ----
|                                              |  | Three Months Ended March 31
|                                              |  | 2004                        |      | 2003
|Petroleum additives before nonrecurring items |  | $                           | 14.9 |      | $ | 11.2
|Nonrecurring items                            |  |                             |     |      |   | 0.1 
|                                              |  |                             |      |      |   |     
|Total petroleum additives                     |  | $                           | 14.9 |      | $ | 11.3
|                                              |  |                             |      |      |   |     
|Tetraethyl lead before nonrecurring items     |  | $                           | 7.3  |      | $ | 1.4 
|Nonrecurring items                            |  |                             |     |      |   | 2.4 
|                                              |  |                             |      |      |   |     
|Total tetraethyl lead                         |  | $                           | 7.3  |      | $ | 3.8 
|                                              |  |                             |      |      |   |     



First quarter 2004
segment operating profit of $22.2 million increased $7.1 million over first quarter 2003. First quarter 2003 segment operating profit 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.



Petroleum Additives Segment



First Quarter 2004 vs. First Quarter 2003 - Petroleum additives first quarter 2004 operating profit was $14.9 million as compared to $11.3 million for first quarter 2003. Operating profit for first quarter 2004 was higher
across all product lines except engine oil additives and represented an increase of over 30% when compared to the first quarter 2003. The 2003 results included a nonrecurring item of $100 thousand for the gain recognized upon the implementation of
SFAS No. 143.



The improved first quarter profits this year
reflect an increase of about 25% in shipments. The improved results also included a favorable foreign exchange impact, as well as some improved pricing. Partially offsetting these factors, raw material prices were higher between the two quarters.



Research, development, and testing expenses (R&D) in the
petroleum additives segment were $2.0 million higher when comparing first quarter 2004 to the same period in 2003. The increase, which includes an unfavorable foreign currency impact, is primarily in the specialty additives and engine oil product
lines. The increases in both product lines are primarily the result of higher spending in support of product development.



Selling, general, and administrative expenses (SG&A) increased $2.4 million or 18% from first quarter 2003 levels. The increase was across all product
lines and includes an unfavorable foreign currency impact. As a percentage of net sales, SG&A expenses combined with R&D expenses, decreased from 15.6% for the first quarter 2003 to 14.6% for the same period this year. This decrease reflects
the 25% increase in net sales from first quarter 2003, partially offset by the higher SG&A expenses.



We have been informed by substantially all of our customers in Canada of their intention to suspend the use of the gasoline additive
Methylcyclopentadienyl Manganese Tricarbonyl (MMT) pending the results of an independent third-party review sponsored by the Government of Canada. A complete discussion of this is in Other Matters at the end of Item 2.



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We have been notified by DSM Copolymer, Inc., our supplier of olefin copolymer viscosity index improvers,
of their intent to terminate their supply contract with us in mid-2005. The contract was initially scheduled to terminate in 2012. We have adjusted amortization of the intangible asset associated with this contract 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.



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 first quarter 2004 was $7.3 million, which was $4.3 million higher than the first quarter last
year. These results reflect slightly higher volumes, as well as improved pricing when comparing first quarter 2004 with first quarter 2003. Amortization of the prepayment for services was also about $500 thousand lower for the first quarter 2004
than the same period in 2003 reflecting the declining balance method of amortization. This segment is characterized by large swings in profitability due to timing of shipments. The TEL market continues to decline.



Other TEL operations not included in the marketing agreements improved $1.6
million from the first quarter last year primarily reflecting lower environmental and premises asbestos expenses.



Also included in TEL for the first quarter 2003 is nonrecurring income of $2.4 million from the implementation of SFAS No. 143.



While the market for this product is continuing to decline, this 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



First quarter 2004 interest and financing expenses were $5.2 million as compared to $4.8 million in 2003. Lower average debt resulted in a decrease in
interest and financing expenses of $800 thousand, while higher average interest rates resulted in an increase of $1.4 million. The higher average interest rate results from $150 million of our total debt of $194 million being at a fixed rate of
8.875%. Fees and amortization of financing costs were $200 thousand lower.



Other Income (Expense), Net



Other income (expense), net was $200 thousand income for first quarter 2004 and was comprised of a number of small items. First quarter 2003 was also comprised of a number of small items and totaled $200 thousand
expense including $200 thousand for expenses related to debt refinancing activities.



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Income Taxes



The effective income tax rate for first quarter 2004 was 34.7% resulting in total income taxes of $3.1 million. Total income
taxes for first quarter 2003, including taxes on the gain on the sale of the phenolic antioxidant business in 2003 and the cumulative effect of accounting change, were $9.2 million with an effective income tax rate of 36.2%.



Our deferred taxes are in a net asset position and we believe that we will
recover the full benefit of our 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. 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. This item is reported as cumulative effect of accounting
change on an after-tax basis.



Net Income



Our net income for the first quarter 2004 was $5.8
million ($.35 per basic share), while first quarter 2003 was $16.3 million ($.98 per basic share). The first quarter 2004 results include an increase of $500 thousand in corporate unallocated general and administrative expenses from first quarter
2003 primarily reflecting increased legal expenses.



Cash
Flows, Financial Condition, and Liquidity



Cash and
cash equivalents at March 31, 2004 were $22.3 million, which was a decrease of $6.8 million since December 31, 2003. Our cash flows were more than sufficient to cover operating activities during the 2004 period. Cash flows from operating activities
for the three months 2004 were $13.1 million. We used these cash flows, as well as available cash, to fund capital expenditures of $3.3 million and make a net repayment on bank debt of $14.6 million. Ethyl expects that cash from operations will
continue to be sufficient to cover our operating expenses and planned capital expenses.



Cash



We had restricted
cash of $1.8 million at March 31, 2004 and $1.9 million at December 31, 2003. Of these funds at both March 31, 2004 and year-end 2003, $1.2 million was cash received from Metropolitan Life Insurance Company (Metropolitan) in 2003. The remaining
portion of the funds we received from the demutualization of Metropolitan in 2000 amounted to $100 thousand at March 31, 2004 and $200 thousand at December 31, 2003. The 2000 funds from Metropolitan are being used to reduce the employee portion of
retiree health benefits costs. The 2003 funds from Metropolitan will also be used for employee benefit purposes. The remaining $500 thousand of restricted cash represents funds related to the issuance of a European bank guarantee.



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##### Table of Contents

Debt



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 comprising a bank term loan and a revolving credit facility.



Senior Notes



On April 30, 2003, we sold 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.



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



The senior credit facility requires certain mandatory prepayments, including
generally:



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



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##### Table of Contents

| |  | 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 secured debt to EBITDA;
| | - | ----------------------------------------



| |  | limitations on capital expenditures;
| | - | ------------------------------------



| |  | a minimum 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 325 to 425 basis points and matures in April 2008. At March 31, 2004, we had
outstanding letters of credit under the revolver of $26 million resulting in the unused portion of the revolver amounting to $24 million.



We are currently investigating the possibility of amending the terms of our senior credit facility to better reflect our improved financial condition.



** *



This debt structure has caused Ethyl to incur higher cash interest cost than
the previous facility, but provides the long-term debt structure we believe 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 $194.1 million at
March 31, 2004, representing a net reduction of $14.7 million in our total debt since December 31, 2003. The net reduction in debt represents payments of $14.6 million on the term loan, as well as a decrease of $100 thousand in the capital lease
obligations.



As a percentage of total capitalization (total
long-term debt and shareholders equity), our total debt decreased from 51.1% at the end of 2003 to 48.6% at the March 31, 2004. The decrease reflects the reduction in total debt, as well as the increase in shareholders equity due to
earnings. Normally, we repay long-term debt with cash from operations, as well as with proceeds from occasional sales of business units, plant sites, or other assets.



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##### Table of Contents

Capital Expenditures



We estimate our capital spending during 2003 will be approximately $15 million. We will continue to finance capital spending
through cash provided from operations.



Working Capital



We had working capital at March 31, 2004 of $181.5 million
resulting in a current ratio of 2.47 to 1. At December 31, 2003, the working capital was $184.2 million and the current ratio was 2.52 to 1. The decrease in working capital and the current ratio primarily reflect an increase in the accounts payable
and income taxes payable, as well as decreases in cash and inventories. Offsetting these were smaller increases in accounts receivable and prepaid expenses, as well as decreases in accrued expenses and the current portion of long-term debt.



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 2003 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 2003 Annual
Report, we have made certain payments related to our TEL marketing agreements. The unamortized total at March 31, 2004 is $27.1 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 when conditions change that cause a shorter product life or other restrictions outside of our control, the amortization period is adjusted accordingly. Any adjustment to the amortization period would impact earnings, but would
have no effect on cash flows. We continue to keep our accounting for this issue current with the business conditions.



We also have certain identifiable intangibles amounting to $56.3 million at March 31, 2004. These intangibles relate to our petroleum additives business
and are being amortized over periods with up to twelve 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 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 of $100 thousand through
mid-2005. 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.



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We have made disclosure of our environmental issues in Part I, Item I of our 2003 Annual Report, as well
as in the Notes to Consolidated Financial Statements of our 2003 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 2003 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 19 of our 2003 Annual
Report. In addition, further disclosure on the impact of changes in these assumptions is provided in the Financial Position and Liquidity section of Item 7 of our 2003 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



FASB Interpretation No. 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. The FASB issued a revision to FIN 46 (FIN 46-R) in December 2003. FIN46-R deferred the effective date of
the interpretation until the first reporting period ending after March 15, 2004. The implementation of this interpretation had no effect on Ethyl.



In January 2004, the FASB issued FASB Staff Position FAS 106-1 (FSP FAS 106-1), Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act). FSP FAS 106-1 is effective for interim or annual financial statements for fiscal years ending after December 7, 2003. It permits a sponsor of a postretirement health care
plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act. Because of various uncertainties related to this legislation and the appropriate accounting methodology for this event, we
have elected to defer financial recognition of this legislation until the FASB issues final accounting guidance. Subsequently, in March 2004, the FASB proposed guidance to address accounting issues related to the Act. The proposed guidance is
expected become final during 2004. When issued, that final guidance could require us to change previously reported information.



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Other Matters



On August 8, 2003, Ethyl filed a request with the Internal Revenue Service (IRS) seeking rulings as to certain federal
income tax consequences of the creation of a holding company structure by Ethyl and a related internal restructuring. Ethyl received a private letter ruling on February 5, 2004, from the IRS stating that the holding company transaction and the
internal restructuring generally will qualify as tax-free for U.S. federal income tax purposes. On February 26, 2004, the Board of Directors determined that the creation of a holding company was in the best interests of Ethyl and its shareholders.
The Board then unanimously voted to adopt the merger agreement to create the holding company and recommended that the shareholders approve the transaction.



In July 2003, Ethyl completed its 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. Ethyl reported these conclusions in a paper presented
at the Society of Automotive Engineers (SAE) meeting in October 2003 in Pittsburgh, Pennsylvania. Nonetheless, 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 has more recently alleged that MMT may cause catalyst plugging in vehicles equipped with the most advanced emission control systems. However, no credible evidence to support this allegation has been
provided by the automobile industry to Ethyl. In December 2003, the Government of Canada released its Proposed Framework for an Independent Third-Party Review of New Information on the Effects of MMT on Vehicle Emissions. In their
proposal, the Canadian government provided no timetable for the commencement or completion of the review. Ethyl welcomes this independent third-party review of MMT, which we believe, when properly designed, conducted and interpreted, will reaffirm
that MMT is compatible with modern emission control devices.



Ethyl Corporation has been informed by substantially all of our customers in Canada of their intention to suspend the use of the gasoline additive MMT pending the results of the Government of Canada-sponsored independent third-party review.
While this suspension will have a negative impact on our Canadian business, Ethyls management believes that the suspension is not likely to have a material adverse effect upon the overall financial performance of the Company. MMT is one of the
most extensively tested fuel additives in history. While we are disappointed with the decision of our customers, we believe that MMT is an environmentally beneficial product that has proven its effectiveness in real-world use.



Outlook



Our petroleum additives segment has experienced success in its markets
through increased volumes resulting from specific gains with customer accounts, as well as some improvement due to increased economic activity. The improvements associated with these factors will be partially offset by the significant escalation in
the cost of raw materials. We have already experienced some of the raw material cost increases and expect further increases for the remainder of the year. We are in the process of attempting to recover some of these costs through price increases.
However, we do not expect the price increases to cover all of our additional raw material costs. Petroleum additives profits will also be affected by foreign currency and the announced suspension of purchases of MMT in Canada by certain of our
customers.



In the TEL segment, we expect volumes to decline
as the use of the product around the world continues to be phased out. Improved margins will partially offset the volume decline. Historically, TEL has had a high degree of variation in its quarter to quarter performance, which we expect to
continue.



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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 Form 10-K for the year ended December 31, 2003.



ITEM 4. Controls and Procedures



We maintain a system of internal controls 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, makes 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 March 31, 2004 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.



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PART II  Other Information



ITEM 1. Legal Proceedings



We were served as a defendant in a case filed in the Circuit Court for Baltimore City, Maryland, in September 1999. Smith, et al. v. Lead Industries Association, Inc., et al., alleged personal injuries for seven children from lead
exposure arising from lead paint and dust from tailpipe emissions due to leaded gasoline. The court dismissed Ethyl and some other defendants from the case in February 2002 and granted summary judgment to other defendants in November 2002. The
plaintiffs have appealed both decisions. We believe that Ethyl has strong defenses to Smithand will vigorously defend the case. Ethyl was served as a defendant in another case filed in the Circuit Court for Baltimore City, Maryland, in
November 2003, David Johnson et al. v. Clinton et al.The case claims damages attributable to lead similar to the Smithcase, for alleged personal injuries for two plaintiffs. The Court has granted a Consent Motion to Quash Service of
Process in the Johnson case, and therefore, Ethyl is not a current defendant in this case.



ITEM 6. Exhibits and Reports on Form 8-K



|    |  |               |  |                                                                                                                                                                               
|--- |  | ------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibit31(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 February 2, 2004, reporting under Item 12, Results of Operations and Financial Conditions, a press release announcing the Companys earnings for the year end
December 31, 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).



| | (ii) | Dated March 9, 2004, reporting under Item 5, Other Events and Required FD Disclosure, a press release announcing that the Company had been informed by two of its largest
customers in Canada of their intention to suspend the use of the gasoline additive Methylcyclopentadienyl Manganese Tricarbonyl (MMT) pending the results of the Government of Canada-sponsored independent third-party review of MMT.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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: May 4, 2004 |  | By:               |  | /s/ D. A. Fiorenza            
|                  |  |                   |  | David A. Fiorenza             
|                  |  |                   |  | Vice President and Treasurer  
|                  |  |                   |  | (Principal Financial Officer) 
|                  |  |                  
|Date: May 4, 2004 |  | By:               |  | /s/ Wayne C. Drinkwater       
|                  |  |                   |  | Wayne C. Drinkwater           
|                  |  |                   |  | Controller                    
|                  |  |                   |  | (Principal Accounting Officer)



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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 of 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 of 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.                                  



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