---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D. C. 20549



FORM 10-Q



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



For the quarterly period ended June 30, 2003



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



ETHYL CORPORATION

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(Exact name of registrant as specified in its charter)



|VIRGINIA                                                       |  | 54-0118820                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|330 SOUTH FOURTH STREET                                        |  |                                     
|RICHMOND, VIRGINIA                                             |  | 23218-2189                          
|(Address of principal executive offices)                       |  | (Zip Code)                          



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



Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and
(2) has been subject to such filing requirements for the past 90 days.



Yes  x                    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



Yes  x                    No ̈



Number of shares of common stock, $1 par
value, outstanding as of July 31, 2003:    16,750,009.



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ETHYL CORPORATION



I N D E X



|                                                                                                 |  | PageNumber
|------------------------------------------------------------------------------------------------ |  | ----------
|                                                                                                 | 
|PART I.    FINANCIAL INFORMATION                                                                 |  |           
|                                                                                                 | 
|ITEM 1.    Financial Statements                                                                  |  |           
|                                                                                                 | 
|Consolidated Statements of IncomeThree Months and Six Months Ended June 30, 2003 and 2002       |  | 3         
|                                                                                                 | 
|Consolidated Balance Sheets  June 30, 2003 and December 31, 2002                                |  | 4         
|                                                                                                 | 
|Condensed Consolidated Statements of Cash FlowsSix Months Ended June 30, 2003 and 2002          |  | 5         
|                                                                                                 | 
|Notes to Financial Statements                                                                    |  | 6-22      
|                                                                                                 | 
|ITEM 2.    Managements Discussion and Analysis of Results of Operations and Financial Condition |  | 23-36     
|                                                                                                 | 
|ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk                            |  | 37        
|                                                                                                 | 
|ITEM 4.    Controls and Procedures                                                               |  | 37-38     
|                                                                                                 | 
|PART II.    OTHER INFORMATION                                                                    |  |           
|                                                                                                 | 
|ITEM 2.    Changes in Securities and Use of Proceeds                                             |  | 39        
|                                                                                                 | 
|ITEM 4.    Submission of Matters to a Vote of Security Holders                                   |  | 39        
|                                                                                                 | 
|ITEM 6.    Exhibits and Reports on Form 8-K                                                      |  | 39-40     
|                                                                                                 | 
|SIGNATURES                                                                                       |  | 41        



2



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PART I.    FINANCIAL INFORMATION



ITEM 1.    Financial Statements



ETHYL CORPORATION AND SUBSIDIARIES

C
ONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

(Unaudited)

|                                                                                                                |  | Three Months EndedJune 30 |         |      | Six Months EndedJune 30 |        
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ---- | ----------------------- | -------
|                                                                                                                |  | 2003                      |         | 2002 |                         |        
|Net sales                                                                                                       |  | $                         | 180,574 |      | $                       | 170,943
|Cost of goods sold                                                                                              |  |                           | 136,576 |      |                         | 135,665
|                                                                                                                |  |                           |         |      |                         |        
|Gross profit                                                                                                    |  |                           | 43,998  |      |                         | 35,278 
|                                                                                                                |  |                           |         |     
|TEL marketing agreements services                                                                               |  |                           | 7,931   |      |                         | 4,446  
|                                                                                                                |  |                           |         |     
|Selling, general, and administrative expenses                                                                   |  |                           | 21,904  |      |                         | 18,978 
|Research, development, and testing expenses                                                                     |  |                           | 15,021  |      |                         | 13,160 
|                                                                                                                |  |                           |         |      |                         |        
|Operating profit                                                                                                |  |                           | 15,004  |      |                         | 7,586  
|                                                                                                                |  |                           |         |     
|Interest and financing expenses                                                                                 |  |                           | 6,402   |      |                         | 6,562  
|Other income (expense), net                                                                                     |  |                           | 56      |      |                         | (3,734 
|                                                                                                                |  |                           |         |      |                         |        
|                                                                                                                |  |                           |         |     
|Income (loss) from continuing operations before income taxes                                                    |  |                           | 8,658   |      |                         | (2,710 
|Income tax expense                                                                                              |  |                           | 2,913   |      |                         | 374    
|                                                                                                                |  |                           |         |      |                         |        
|Income (loss) from continuing operations                                                                        |  |                           | 5,745   |      |                         | (3,084 
|                                                                                                                |  |                           |         |     
|Discontinued operations                                                                                         |  |                           |         |      |                         |        
|Gain on disposal of business (net of tax of $8,391)                                                             |  |                           |        |      |                         |       
|Income from operations of discontinued business (net of tax of $365 for second quarter and $877 for six months) |  |                           |        |      |                         | 622    
|                                                                                                                |  |                           |         |      |                         |        
|Income (loss) before cumulative effect of accounting changes                                                    |  |                           | 5,745   |      |                         | (2,462 
|                                                                                                                |  |                           |         |     
|Cumulative effect of accounting changes (net of tax of $925 in 2003 and $615 in 2002)                           |  |                           |        |      |                         |       
|                                                                                                                |  |                           |         |      |                         |        
|Net income (loss)                                                                                               |  | $                         | 5,745   |      | $                       | (2,462 
|                                                                                                                |  |                           |         |      |                         |        
|                                                                                                                |  |                           |         |     
|Basic earnings (loss) per share:                                                                                |  |                           |         |      |                         |        
|Earnings (loss) from continuing operations                                                                      |  | $                         | 0.34    |      | $                       | (0.18  
|Discontinued operations (net of tax)                                                                            |  |                           |        |      |                         | 0.04   
|Cumulative effect of accounting changes (net of tax)                                                            |  |                           |        |      |                         |       
|                                                                                                                |  |                           |         |      |                         |        
|Basic earnings (loss) per share                                                                                 |  | $                         | 0.34    |      | $                       | (0.14  
|                                                                                                                |  |                           |         |      |                         |        
|                                                                                                                |  |                           |         |     
|Diluted earnings (loss) per share:                                                                              |  |                           |         |      |                         |        
|Earnings (loss) from continuing operations                                                                      |  | $                         | 0.34    |      | $                       | (0.18  
|Discontinued operations (net of tax)                                                                            |  |                           |        |      |                         | 0.04   
|Cumulative effect of accounting changes (net of tax)                                                            |  |                           |        |      |                         |       
|                                                                                                                |  |                           |         |      |                         |        
|Diluted earnings (loss) per share                                                                               |  | $                         | 0.34    |      | $                       | (0.14  
|                                                                                                                |  |                           |         |      |                         |        
|Shares used to compute basic earnings (loss) per share                                                          |  |                           | 16,724  |      |                         | 16,691 
|                                                                                                                |  |                           |         |      |                         |        
|Shares used to compute diluted earnings (loss) per share                                                        |  |                           | 16,969  |      |                         | 16,691 
|                                                                                                                |  |                           |         |      |                         |        



See accompanying notes to financial
statements.



3



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ETHYL CORPORATION AND SUBSIDIARIES

C
ONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                   |  | June 30     |         |   | December 31 |  
|-------------------------------------------------------------------------------------------------- |  | ----------- | ------- | - | ----------- | -
|                                                                                                   |  | 2003        |         |   | 2002        |  
|                                                                                                   |  | (unaudited) |         |   | (audited)   |  
|ASSETS                                                                                             |  |             |         |   |             |  
|Current assets:                                                                                    |  |             |         |   |             |  
|Cash and cash equivalents                                                                          |  | $           | 26,856  |   |             | $
|Restricted cash                                                                                    |  |             | 408     |   |             |  
|Trade and other accounts receivable, less allowance for doubtful accounts ($2,0582003; $9112002) |  |             | 126,170 |   |             |  
|ReceivableTEL marketing agreements services                                                       |  |             | 7,591   |   |             |  
|Inventories:                                                                                       |  |             |         |   |             |  
|Finished goods and work-in-process                                                                 |  |             | 102,093 |   |             |  
|Raw materials                                                                                      |  |             | 12,784  |   |             |  
|Stores, supplies and other                                                                         |  |             | 8,303   |   |             |  
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |             | 123,180 |   |             |  
|                                                                                                   |  |            
|Prepaid expenses                                                                                   |  |             | 7,551   |   |             |  
|Deferred income taxes                                                                              |  |             | 12,044  |   |             |  
|Assets of discontinued operations                                                                  |  |             |        |   |             |  
|                                                                                                   |  |             |         |   |             |  
|Total current assets                                                                               |  |             | 303,800 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |            
|Property, plant and equipment, at cost                                                             |  |             | 744,685 |   |             |  
|Less accumulated depreciation and amortization                                                     |  |             | 564,939 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|Net property, plant and equipment                                                                  |  |             | 179,746 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |            
|Prepaid pension cost                                                                               |  |             | 24,755  |   |             |  
|Deferred income taxes                                                                              |  |             | 9,541   |   |             |  
|Other assets and deferred charges                                                                  |  |             | 82,708  |   |             |  
|Intangibles, net of amortization                                                                   |  |             | 66,777  |   |             |  
|                                                                                                   |  |             |         |   |             |  
|Total assets                                                                                       |  | $           | 667,327 |   |             | $
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |            
|LIABILITIES AND SHAREHOLDERS EQUITY                                                               |  |             |         |   |             |  
|Current liabilities:                                                                               |  |             |         |   |             |  
|Accounts payable                                                                                   |  | $           | 53,429  |   |             | $
|Accrued expenses                                                                                   |  |             | 39,739  |   |             |  
|Long-term debt, current portion                                                                    |  |             | 9,517   |   |             |  
|Income taxes payable                                                                               |  |             | 13,147  |   |             |  
|                                                                                                   |  |             |         |   |             |  
|Total current liabilities                                                                          |  |             | 115,832 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |            
|Long-term debt                                                                                     |  |             | 246,276 |   |             |  
|Other noncurrent liabilities                                                                       |  |             | 125,107 |   |             |  
|Commitments and contingencies (Note 4)                                                             |  |             |         |   |             |  
|                                                                                                   |  |            
|Shareholders equity                                                                               |  |             |         |   |             |  
|Common stock ($1 par value)                                                                        |  |             |         |   |             |  
|Issued16,734,009 in 2003 and 16,689,009 in 2002                                                   |  |             | 16,734  |   |             |  
|Additional paid-in capital                                                                         |  |             | 66,916  |   |             |  
|Accumulated other comprehensive loss                                                               |  |             | (24,492 | ) |             |  
|Retained earnings                                                                                  |  |             | 120,954 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|                                                                                                   |  |             | 180,112 |   |             |  
|                                                                                                   |  |             |         |   |             |  
|Total liabilities and shareholders equity                                                         |  | $           | 667,327 |   |             | $
|                                                                                                   |  |             |         |   |             |  



See accompanying notes to financial
statements.



4



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ETHYL CORPORATION AND SUBSIDIARIES

C
ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

|                                                                                    |  | Six Months Ended June 30 |         
|----------------------------------------------------------------------------------- |  | ------------------------ | --------
|                                                                                    |  | 2003                     |         
|Cash and cash equivalents at beginning of year                                      |  | $                        | 15,478  
|                                                                                    |  |                          |         
|                                                                                    |  |                         
|Cash flows from operating activities:                                               |  |                          |         
|Net income (loss)                                                                   |  |                          | 22,037  
|Adjustments to reconcile net income (loss) to cash flows from operating activities: |  |                          |         
|Depreciation and other amortization                                                 |  |                          | 23,285  
|Amortization of deferrred financing costs                                           |  |                          | 3,228   
|Gain on sale of phenolic antioxidant business                                       |  |                          | (23,196 
|Cumulative effect of accounting changes                                             |  |                          | (2,549  
|Prepaid pension cost                                                                |  |                          | 2,780   
|TEL working capital advance                                                         |  |                          | 1,300   
|Deferred income tax expense (benefit)                                               |  |                          | 118     
|Net loss on impairments                                                             |  |                          |        
|Working capital changes                                                             |  |                          | (7,877  
|Proceeds from legal settlement                                                      |  |                          | 4,825   
|Proceeds from contract settlement                                                   |  |                          |        
|Other, net                                                                          |  |                          | 1,519   
|                                                                                    |  |                          |         
|Cash provided from operating activities                                             |  |                          | 25,470  
|                                                                                    |  |                          |         
|                                                                                    |  |                         
|Cash flows from investing activities:                                               |  |                          |         
|Capital expenditures                                                                |  |                          | (4,104  
|Proceeds from sale of phenolic antioxidant business                                 |  |                          | 27,770  
|Proceeds from sale of certain assets                                                |  |                          | 12,576  
|Prepayment for TEL marketing agreements services                                    |  |                          | (3,200  
|Other, net                                                                          |  |                          | 13      
|                                                                                    |  |                          |         
|Cash provided from (used in) investing activities                                   |  |                          | 33,055  
|                                                                                    |  |                          |         
|                                                                                    |  |                         
|Cash flows from financing activities:                                               |  |                          |         
|Repayment of debtold agreements                                                    |  |                          | (284,519
|Net borrowingsold agreements                                                       |  |                          |        
|Issuance of senior notes and term loan                                              |  |                          | 265,000 
|Repayments on term loan                                                             |  |                          | (14,490 
|Debt issuance costs                                                                 |  |                          | (13,094 
|Other, net                                                                          |  |                          | (44     
|                                                                                    |  |                          |         
|Cash used in financing activities                                                   |  |                          | (47,147 
|                                                                                    |  |                          |         
|                                                                                    |  |                         
|Increase in cash and cash equivalents                                               |  |                          | 11,378  
|                                                                                    |  |                          |         
|                                                                                    |  |                         
|Cash and cash equivalents at end of period                                          |  | $                        | 26,856  
|                                                                                    |  |                          |         



See accompanying notes to financial
statements.



5



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ETHYL CORPORATION AND SUBSIDIARIES

N
OTES TO FINANCIAL STATEMENTS

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

(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 June 30, 2003, as well as the consolidated results of operations for the three- and six-month periods ended June 30, 2003 and 2002, and the consolidated cash flows for the
six-months ended June 30, 2003 and 2002. The financial statements are subject to normal year-end audit adjustments and do not include the comprehensive footnotes. All adjustments are of a normal, recurring nature. These financial statements should
be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (2002 Annual Report). The results of operations for the six-month period ended
June 30, 2003 are not necessarily indicative of the results to be expected for the full year.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



As part of the transaction, we sold accounts receivable and inventory, as well as fixed assets at our Orangeburg, South Carolina facility. The accounts
receivable and inventory, which were sold, are reported as Assets of discontinued operations on our December 31, 2002 Consolidated Balance Sheet. The net book value of the fixed assets was zero. The cost and accumulated depreciation of
these fixed assets have been removed from the property, plant, and equipment captions on the December 31, 2002 Consolidated Balance Sheet. The net sales of the discontinued business were $4.5 million for the second quarter of 2002 and $8.9 million
for the first six months of last year.



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



|3. |  | The cumulative effect of accounting change in six months 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
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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



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



|Asset retirement obligation, December 31, 2002 |  | $ | 14,828 |  
|---------------------------------------------- |  | - | ------ | -
|Gain upon implementation of SFAS No. 143       |  |   | (2,549 | )
|Accretion expense                              |  |   | 461    |  
|Liabilities settled                            |  |   | (431   | )
|Foreign currency impact                        |  |   | 867    |  
|                                               |  |   |        |  
|Asset retirement obligation, June 30, 2003     |  | $ | 13,176 |  
|                                               |  |   |        |  



Had we adopted SFAS
No. 143 on January 1, 2002, accretion expense would have been approximately $200 thousand ($100 thousand after tax or $.01 per share) for the second quarter 2002 and $400 thousand ($200 thousand after tax or $.02 per share) for six months 2002.



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



|4. |  | There have been no significant changes in our commitments and contingencies, including legal proceedings, from those reported in our 2002 Annual Report, except for the
sale-leaseback transaction described in Note 12. This transaction will result in increased annual rental expense of approximately $1.1 million.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our accruals for environmental remediation were $24 million at June 30, 2003 and $23 million at December 31, 2002. We recorded expected insurance
reimbursement assets for these amounts of $4 million at both June 30, 2003 and December 31, 2002. When significant events or circumstances occur that might impair the value of this insurance receivable, we evaluate recoverability of the recorded
amounts. In addition to the accruals for environmental remediation, we also have accruals for dismantling and decommissioning costs of $11 million at June 30, 2003 and $13 million at December 31, 2002.





7



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|5. |  | We account for the stock-based compensation plan using the intrinsic-value method. Under this method, we do not record compensation cost unless the quoted market price of the stock
at grant date or other measurement date exceeds the amount the employee must pay to exercise the stock option. See Note 14 in our 2002 Annual Report for further information on our stock-based compensation plan. The following table illustrates
the effect on net income (loss) and earnings (loss) per share as if we had applied the fair-value method of accounting for the stock-based compensation plan.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                |  | Three Months Ended |       |   |      |   | Six Months Ended |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ---- | - | ---------------- | -
|                                                                                                                                |  | June 30            |       |   |      |   | June 30          |  
|                                                                                                                                |  | 2003               |       |   | 2002 |   |                  |  
|Net income (loss), as reported                                                                                                  |  | $                  | 5,745 |   |      | $ | (2,462           | )
|Less:    Total stock-based employee compensation expense determined under the fair-value based method net of
related tax effect |  |                    | (82   | ) |      |   | (157             | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  
|Net income (loss), pro forma                                                                                                    |  | $                  | 5,663 |   |      | $ | (2,619           | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  
|Earnings (loss) per share:                                                                                                      |  |                    |       |   |      |   |                  |  
|Basic, as reported                                                                                                              |  | $                  | 0.34  |   |      | $ | (0.14            | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  
|Basic, pro forma                                                                                                                |  | $                  | 0.34  |   |      | $ | (0.15            | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  
|Diluted, as reported                                                                                                            |  | $                  | 0.34  |   |      | $ | (0.14            | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  
|Diluted, pro forma                                                                                                              |  | $                  | 0.33  |   |      | $ | (0.15            | )
|                                                                                                                                |  |                    |       |   |      |   |                  |  



|6. |  | 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.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net
Sales by Segment

(in millions)



|                       |  | Three Months Ended |       |  |   | Six Months Ended
|---------------------- |  | ------------------ | ----- |  | - | ----------------
|                       |  | June 30            |       |  |   | June 30         
|                       |  | 2003               |       |  |   | 2003            
|Petroleum additives    |  | $                  | 178.8 |  | $ | 167.9           
|Tetraethyl lead        |  |                    | 1.8   |  |   | 3.0             
|                       |  |                    |       |  |   |                 
|Consolidated net sales |  | $                  | 180.6 |  | $ | 170.9           
|                       |  |                    |       |  |   |                 



8



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Segment Operating Profit

(in millions)



|                                                                                                        |  | Three Months Ended |      |   |      |   |      |   | Six Months Ended | 
|------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ---- | - | ---- | - | ---------------- | 
|                                                                                                        |  | June 30            |      |   |      |   |      |   | June 30          | 
|                                                                                                        |  | 2003               |      |   | 2002 |   |      |   |                  | 
|Petroleum additives                                                                                     |  | $                  | 16.6 |   |      | $ | 12.6 |   |                  | 
|Tetraethyl lead                                                                                         |  |                    | 6.3  |   |      |   | 3.4  |   |                  | 
|                                                                                                        |  |                    |      |   |      |   |      |   |                  | 
|Segment operating profit                                                                                |  |                    | 22.9 |   |      |   | 16.0 |   |                  | 
|(Deduct) add back nonrecurring itemsto reconcile Segment Reporting to Consolidated Statements of Income |  |                    |     |   |      |   |     |   |                  | 
|Corporate unallocated expense                                                                           |  |                    | (4.4 | ) |      |   | (4.0 | ) |                  | 
|Interest expense                                                                                        |  |                    | (6.4 | ) |      |   | (6.6 | ) |                  | 
|Writedown investments and property                                                                      |  |                    |     |   |      |   | (4.1 | ) |                  | 
|Pension expense                                                                                         |  |                    | (1.4 | ) |      |   | (1.5 | ) |                  | 
|Other expense, net                                                                                      |  |                    | (2.0 | ) |      |   | (2.5 | ) |                  | 
|                                                                                                        |  |                    |      |   |      |   |      |   |                  | 
|Income (loss) from continuing operations before income taxes                                            |  | $                  | 8.7  |   |      | $ | (2.7 | ) |                  | 
|                                                                                                        |  |                    |      |   |      |   |      |   |                  | 



Depreciation and
Amortization

(in millions)



|                                    |  | Three Months Ended |      |      |   |      |  | Six Months Ended
|----------------------------------- |  | ------------------ | ---- | ---- | - | ---- |  | ----------------
|                                    |  | June 30            |      |      |   |      |  | June 30         
|                                    |  | 2003               |      | 2002 |   |      |  |                 
|Petroleum additives                 |  | $                  | 9.0  |      | $ | 8.6  |  |                 
|Tetraethyl lead                     |  |                    | 2.6  |      |   | 2.7  |  |                 
|Other long-lived assets             |  |                    | 2.3  |      |   | 1.6  |  |                 
|                                    |  |                    |      |      |   |      |  |                 
|Total depreciation and amortization |  | $                  | 13.9 |      | $ | 12.9 |  |                 
|                                    |  |                    |      |      |   |      |  |                 



|7. |  | Other income (expense), net included expenses related to debt refinancing activities of $300 thousand for six months 2003. Second quarter 2002 and six months 2002 included a loss on
the impairment of nonoperating assets of $4.1 million. Expenses related to debt refinancing activities for six months 2002 amounted to $1.0 million.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



---

|8. |  | Basic and diluted earnings (loss) per share are calculated as shown in the table below. Options are not included in the computation of diluted earnings per share when the option
exercise price exceeds the average market price of the common share. At June 30, 2003 and June 30, 2002, we had outstanding options to purchase 303,200 shares of common stock at $62.50 per share, as well as 50,000 shares of common stock at $44.40
per share. In addition, at June 30, 2002, there were outstanding options to purchase 4,177 shares of common stock at $64.15 per share. None of these options were included in the computation of diluted earnings per share for any period.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                     |  | Three Months Ended |        |      |   |        | Six Months Ended | 
|---------------------------------------------------- |  | ------------------ | ------ | ---- | - | ------ | ---------------- | 
|                                                     |  | June 30            |        |      |   |        | June 30          | 
|                                                     |  | 2003               |        | 2002 |   |        |                  | 
|Basic earnings per share                             |  |                    |        |      |   |        |                  | 
|Numerator:                                           |  |                    |        |      |   |        |                  | 
|Net income (loss)                                    |  | $                  | 5,745  |      | $ | (2,462 | )                | 
|                                                     |  |                    |        |      |   |        |                  | 
|                                                     |  |                    |        |      |  
|Denominator:                                         |  |                    |        |      |   |        |                  | 
|Average number of shares of common stock outstanding |  |                    | 16,724 |      |   | 16,691 |                  | 
|                                                     |  |                    |        |      |   |        |                  | 
|Basic earnings (loss) per share                      |  | $                  | .34    |      | $ | (.14   | )                | 
|                                                     |  |                    |        |      |   |        |                  | 
|                                                     |  |                    |        |      |  
|Diluted earnings per share                           |  |                    |        |      |   |        |                  | 
|Numerator:                                           |  |                    |        |      |   |        |                  | 
|Net income (loss)                                    |  | $                  | 5,745  |      | $ | (2,462 | )                | 
|                                                     |  |                    |        |      |   |        |                  | 
|                                                     |  |                    |        |      |  
|Denominator:                                         |  |                    |        |      |   |        |                  | 
|Average number of shares of common stock outstanding |  |                    | 16,724 |      |   | 16,691 |                  | 
|Shares issuable upon exercise of stock options       |  |                    | 245    |      |   |       |                  | 
|                                                     |  |                    |        |      |   |        |                  | 
|Total shares                                         |  |                    | 16,969 |      |   | 16,691 |                  | 
|                                                     |  |                    |        |      |   |        |                  | 
|Diluted earnings (loss) per share                    |  | $                  | .34    |      | $ | (.14   | )                | 
|                                                     |  |                    |        |      |   |        |                  | 



10



---

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



|                                |  | June 302003              |         | December 312002        
|------------------------------- |  | ------------------------ | ------- | -----------------------
|                                |  | Identifiable Intangibles
|                                |  | GrossCarryingAmount      |         | AccumulatedAmortization
|Amortizing intangible assets    |  |                          |         |                        
|Formulas                        |  | $                        | 85,910  |                        
|Contracts                       |  |                          | 40,873  |                        
|                                |  |                          |         |                        
|                                |  | $                        | 126,783 |                        
|                                |  |                          |         |                        
|Nonamortizing intangible assets |  |                          |         |                        
|Minimum pension liabilities     |  | $                        | 5,596   |                        
|                                |  |                          |         |                        
|Aggregate amortization expense  |  |                          |         |                        
|                                |  |                          |         |                        



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



| |  |  | 2003    $5,896
| | - |  | --------------

| |  |  | 2004    $6,540
| | - |  | --------------

| |  |  | 2005    $5,365
| | - |  | --------------

| |  |  | 2006    $4,524
| | - |  | --------------

| |  |  | 2007    $4,524
| | - |  | --------------



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



|10. |  | Long-term debt consisted of the following:
|--- |  | ------------------------------------------



|                                |  | June 30 |         |   | December 31 |  
|------------------------------- |  | ------- | ------- | - | ----------- | -
|                                |  | 2003    |         |   | 2002        |  
|Senior notes                    |  | $       | 150,000 |   |             | $
|Term loan agreements            |  |         | 100,510 |   |             |  
|Revolving credit agreement      |  |         |        |   |             |  
|Private borrowing               |  |         |        |   |             |  
|                                |  |         |         |   |             |  
|                                |  |         | 250,510 |   |             |  
|Obligations under capital lease |  |         | 5,283   |   |             |  
|                                |  |         |         |   |             |  
|Total debt                      |  |         | 255,793 |   |             |  
|Less current portion            |  |         | (9,517  | ) |             |  
|                                |  |         |         |   |             |  
|Long-term debt                  |  | $       | 246,276 |   |             | $
|                                |  |         |         |   |             |  



11



---

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



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



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



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



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



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



For a more detailed description of the long-term debt structure, see Item 2,
Managements Discussion and Analysis of Results of Operations and Financial ConditionCash Flows, Financial Condition and Liquidity.



12



---

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



|                                                       |  | Three Months Ended |       |      |   |        | Six Months Ended | 
|------------------------------------------------------ |  | ------------------ | ----- | ---- | - | ------ | ---------------- | 
|                                                       |  | June 30            |       |      |   |        | June 30          | 
|                                                       |  | 2003               |       | 2002 |   |        |                  | 
|Net income (loss)                                      |  | $                  | 5,745 |      | $ | (2,462 | )                | 
|Other comprehensive income (loss), net of tax          |  |                    |       |      |   |        |                  | 
|Unrealized gain (loss) on marketable equity securities |  |                    | 606   |      |   | 113    |                  | 
|Unrealized gain on derivative instruments              |  |                    | 26    |      |   |       |                  | 
|Foreign currency translation adjustments               |  |                    | 3,426 |      |   | 5,252  |                  | 
|                                                       |  |                    |       |      |   |        |                  | 
|Other comprehensive income                             |  |                    | 4,058 |      |   | 5,365  |                  | 
|                                                       |  |                    |       |      |   |        |                  | 
|Comprehensive income                                   |  | $                  | 9,803 |      | $ | 2,903  |                  | 
|                                                       |  |                    |       |      |   |        |                  | 



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



|                                                  |  | June 30 |         |   |  |  | December 31 |  
|------------------------------------------------- |  | ------- | ------- | - |  |  | ----------- | -
|                                                  |  | 2003    |         |   |  |  | 2002        |  
|Unrealized (loss) on marketable equity securities |  | $       | (354    | ) |  |  |             | $
|Minimum pension liability adjustment              |  |         | (10,902 | ) |  |  |             |  
|Unrealized gain on derivative instruments         |  |         | 26      |   |  |  |             |  
|Foreign currency translation adjustments          |  |         | (13,262 | ) |  |  |             |  
|                                                  |  |         |         |   |  |  |             |  
|Accumulated other comprehensive loss              |  | $       | (24,492 | ) |  |  |             | $
|                                                  |  |         |         |   |  |  |             |  



|12. |  | In June 2003, we entered into a sale-leaseback transaction for the land, buildings, and certain equipment located at our Bracknell, England facility. We received $11.1 million for
the assets, which had a net book value of $9.6 million. The resulting operating lease is for ten years with a break option after five years. The gain of $1.5 million was deferred and will be amortized over the term of the lease agreement.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|13. |  | The Financial Accounting Standards Board (FASB) issued two new accounting standards during the second quarter of 2003. Statement of Financial Accounting Standard Number 149 (SFAS
149), Amendment of Statement 133 on Derivative Instruments and Hedging Activities clarifies accounting and reporting requirements for derivative instruments and hedging activities. The statement is generally effective for derivative and
hedging activities entered into after June 30, 2003. Statement of Financial Accounting Standards Number 150 (SFAS 150), Accounting for Certain Financial Instruments with
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





13



---

Characteristics of Both Liabilities and Equity establishes standards for classifying and measuring
certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective at the beginning of the first interim period after June 15, 2003. We do not expect either of these statements to have a significant impact
on Ethyl.



FASB Interpretation Number 46 (FIN 46),
Consolidation of Variable Interest Entities, was released in January 2003. FIN 46 expands existing accounting guidance that specifies when a company should include the assets, liabilities, and activities of another entity in the
companys financial statements. Generally, the interpretation requires that a variable interest entity be consolidated if the company has the majority of either the risk of loss or benefit of returns of the variable interest entitys
activities. Certain of the requirements of FIN 46 are effective immediately. All of the requirements are effective for interim or annual periods beginning after June 15, 2003. We do not expect this interpretation to have a significant impact on
Ethyl.



|14. |  | The 8.875% senior notes due 2010 are fully and unconditionally guaranteed by certain of our subsidiaries (Guarantor Subsidiaries) on a joint and several unsecured senior basis. The
Guarantor Subsidiaries include all of our existing and future wholly-owned domestic restricted subsidiaries and certain of our existing wholly-owned foreign subsidiaries. The Guarantor Subsidiaries and the Non-Guarantor subsidiaries are wholly-owned
by Ethyl Corporation (the Parent Company). The Guarantor Subsidiaries consist of the following.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Domestic Subsidiaries

Ethyl Asia Pacific Company

Ethyl Export Corporation

Ethyl Interamerica Corporation

Ethyl Petroleum Additives, Inc.

Ethyl Ventures, Inc.

Interamerica Terminals Corporation

The Edwin Cooper Corporation

Ethyl Additives Corporation



Foreign Subsidiaries

Ethyl Europe SPRL

Ethyl Brasil Aditivos, LTDA

Ethyl Administration GmbH

Ethyl Services, GmbH



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



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



14



---

Subsidiaries and Non-Guarantor Subsidiaries. The financial information is based on our understanding of
the Securities and Exchange Commissions interpretation and application of Rule 3-10 of the Securities and Exchange Commissions Regulation S-X.



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



Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended June 30, 2003

(in
thousands of dollars, unaudited)



|                                                                                               |  |        |         |   |              |   |               |  |   | Total         |   |  |             
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | ------------ | - | ------------- |  | - | ------------- | - |  | ------------
|                                                                                               |  |        |         |   | Guarantor    |   | Non-Guarantor |  |   | Consolidating |   |  |             
|                                                                                               |  | Parent |         |   | Subsidiaries |   | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated
|Net sales                                                                                      |  | $      | 1,470   |   |              | $ | 142,829       |  | $ | 98,697        |   |  | $           
|Cost of goods sold                                                                             |  |        | 3,140   |   |              |   | 108,978       |  |   | 86,943        |   |  |             
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             
|Gross (loss) profit                                                                            |  |        | (1,670  | ) |              |   | 33,851        |  |   | 11,754        |   |  |             
|                                                                                               |  |        |         |   |             
|TEL marketing agreements services                                                              |  |        | (826    | ) |              |   | 4,259         |  |   | 4,498         |   |  |             
|Intercompany service fee income (expense) from TEL marketing agreement                         |  |        | 4,232   |   |              |   | 193           |  |   | (4,425        | ) |  |             
|                                                                                               |  |        |         |   |             
|Selling, general, and administrative expenses                                                  |  |        | 7,595   |   |              |   | 5,992         |  |   | 8,317         |   |  |             
|Research, development, and testing expenses                                                    |  |        |        |   |              |   | 12,095        |  |   | 2,926         |   |  |             
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             
|Operating (loss) profit                                                                        |  |        | (5,859  | ) |              |   | 20,216        |  |   | 584           |   |  |             
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             
|                                                                                               |  |        |         |   |             
|Interest and financing expenses                                                                |  |        | 6,087   |   |              |   | 315           |  |   |              |   |  |             
|Other (expense) income, net                                                                    |  |        | (15     | ) |              |   | 58            |  |   | 13            |   |  |             
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             
|                                                                                               |  |        |         |   |             
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (11,961 | ) |              |   | 19,959        |  |   | 597           |   |  |             
|Income tax (benefit) expense                                                                   |  |        | (3,567  | ) |              |   | 6,083         |  |   | 408           |   |  |             
|Equity income of subsidiaries                                                                  |  |        | 14,139  |   |              |   |              |  |   |              |   |  |             
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             
|Net income                                                                                     |  | $      | 5,745   |   |              | $ | 13,876        |  | $ | 189           |   |  | $           
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |             



15



---

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended June 30, 2002

(in thousands of dollars, unaudited)



|                                                                                               |  |        |         |   |              |   |         |               |  |   | Total         |   |  |              |        
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | ------------ | - | ------- | ------------- |  | - | ------------- | - |  | ------------ | -------
|                                                                                               |  |        |         |   | Guarantor    |   |         | Non-Guarantor |  |   | Consolidating |   |  |              |        
|                                                                                               |  | Parent |         |   | Subsidiaries |   |         | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated |        
|Net sales                                                                                      |  | $      | 2,857   |   |              | $ | 135,912 |               |  | $ | 95,951        |   |  | $            | (63,777
|Cost of goods sold                                                                             |  |        | 5,002   |   |              |   | 100,523 |               |  |   | 90,549        |   |  |              | (60,409
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|Gross (loss) profit                                                                            |  |        | (2,145  | ) |              |   | 35,389  |               |  |   | 5,402         |   |  |              | (3,368 
|                                                                                               |  |        |         |   |             
|TEL marketing agreements services                                                              |  |        | (797    | ) |              |   | (1,673  | )             |  |   | 6,916         |   |  |              |       
|Intercompany service fee income (expense) from TEL marketing agreement                         |  |        | 6,578   |   |              |   | (2      | )             |  |   | (6,576        | ) |  |              |       
|                                                                                               |  |        |         |   |             
|Selling, general, and administrative expenses                                                  |  |        | 7,384   |   |              |   | 5,335   |               |  |   | 6,259         |   |  |              |       
|Research, development, and testing expenses                                                    |  |        |        |   |              |   | 10,107  |               |  |   | 3,053         |   |  |              |       
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|Operating (loss) profit                                                                        |  |        | (3,748  | ) |              |   | 18,272  |               |  |   | (3,570        | ) |  |              | (3,368 
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|                                                                                               |  |        |         |   |             
|Interest and financing expenses                                                                |  |        | 6,211   |   |              |   | 351     |               |  |   |              |   |  |              |       
|Other (expense) income, net                                                                    |  |        | (216    | ) |              |   | (3,516  | )             |  |   | (2            | ) |  |              |       
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|                                                                                               |  |        |         |   |             
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (10,175 | ) |              |   | 14,405  |               |  |   | (3,572        | ) |  |              | (3,368 
|Income tax (benefit) expense                                                                   |  |        | (5,280  | ) |              |   | 7,543   |               |  |   | (620          | ) |  |              | (1,269 
|Equity income of subsidiaries                                                                  |  |        | 1,811   |   |              |   |        |               |  |   |              |   |  |              | (1,811 
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|                                                                                               |  |        |         |   |             
|(Loss) income from continuing operations                                                       |  |        | (3,084  | ) |              |   | 6,862   |               |  |   | (2,952        | ) |  |              | (3,910 
|Income from operations of discontinued business (net of tax)                                   |  |        | 622     |   |              |   | 515     |               |  |   | 163           |   |  |              | (678   
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        
|Net (loss) income                                                                              |  | $      | (2,462  | ) |              | $ | 7,377   |               |  | $ | (2,789        | ) |  | $            | (4,588 
|                                                                                               |  |        |         |   |              |   |         |               |  |   |               |   |  |              |        



16



---

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Six Months Ended June 30, 2003

(in thousands of dollars, unaudited)



|                                                                                               |  |        |         |   |              |   |               |  |   | Total         |   |  |              |         
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | ------------ | - | ------------- |  | - | ------------- | - |  | ------------ | --------
|                                                                                               |  |        |         |   | Guarantor    |   | Non-Guarantor |  |   | Consolidating |   |  |              |         
|                                                                                               |  | Parent |         |   | Subsidiaries |   | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated |         
|Net sales                                                                                      |  | $      | 3,008   |   |              | $ | 271,259       |  | $ | 197,432       |   |  | $            | (117,659
|Cost of goods sold                                                                             |  |        | 7,587   |   |              |   | 210,825       |  |   | 174,854       |   |  |              | (119,284
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|Gross (loss) profit                                                                            |  |        | (4,579  | ) |              |   | 60,434        |  |   | 22,578        |   |  |              | 1,625   
|                                                                                               |  |        |         |   |             
|TEL marketing agreements services                                                              |  |        | 27      |   |              |   | 4,012         |  |   | 6,893         |   |  |              |        
|Intercompany service fee income (expense) from TEL marketing agreement                         |  |        | 6,421   |   |              |   | 1             |  |   | (6,422        | ) |  |              |        
|                                                                                               |  |        |         |   |             
|Selling, general, and administrative expenses                                                  |  |        | 16,283  |   |              |   | 10,720        |  |   | 15,489        |   |  |              |        
|Research, development, and testing expenses                                                    |  |        |        |   |              |   | 22,905        |  |   | 5,798         |   |  |              |        
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|Operating (loss) profit                                                                        |  |        | (14,414 | ) |              |   | 30,822        |  |   | 1,762         |   |  |              | 1,625   
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|                                                                                               |  |        |         |   |             
|Interest and financing expenses                                                                |  |        | 10,521  |   |              |   | 683           |  |   |              |   |  |              |        
|Other (expense) income, net                                                                    |  |        | (93     | ) |              |   | 114           |  |   | (163          | ) |  |              |        
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|                                                                                               |  |        |         |   |             
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (25,028 | ) |              |   | 30,253        |  |   | 1,599         |   |  |              | 1,625   
|Income tax (benefit) expense                                                                   |  |        | (8,787  | ) |              |   | 9,997         |  |   | 1,042         |   |  |              | 589     
|Equity income of subsidiaries                                                                  |  |        | 21,849  |   |              |   |              |  |   |              |   |  |              | (21,849 
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|                                                                                               |  |        |         |   |             
|Income from continuing operations                                                              |  |        | 5,608   |   |              |   | 20,256        |  |   | 557           |   |  |              | (20,813 
|                                                                                               |  |        |         |   |             
|Gain on disposal of business (net of tax)                                                      |  |        | 14,805  |   |              |   |              |  |   |              |   |  |              |        
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|                                                                                               |  |        |         |   |             
|Income before cumulative effect of accounting change                                           |  |        | 20,413  |   |              |   | 20,256        |  |   | 557           |   |  |              | (20,813 
|                                                                                               |  |        |         |   |             
|Cumulative effect of accounting change (net of tax)                                            |  |        | 1,624   |   |              |   | 74            |  |   | 438           |   |  |              | (512    
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         
|Net income                                                                                     |  | $      | 22,037  |   |              | $ | 20,330        |  | $ | 995           |   |  | $            | (21,325 
|                                                                                               |  |        |         |   |              |   |               |  |   |               |   |  |              |         



17



---

Consolidating Statements of Income

Six Months Ended June 30, 2002

(in thousands of dollars, unaudited)

|                                                                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |         
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | --------
|Net sales                                                                                      |  | $      | 4,267   |   |                       | $ | 247,878 |                           |  | $ | 175,972                       |   |  | $            | (110,998
|Cost of goods sold                                                                             |  |        | 8,192   |   |                       |   | 187,178 |                           |  |   | 160,328                       |   |  |              | (103,915
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Gross (loss) profit                                                                            |  |        | (3,925  | ) |                       |   | 60,700  |                           |  |   | 15,644                        |   |  |              | (7,083  
|                                                                                               |  |        |         |   |                      
|TEL marketing agreements services                                                              |  |        | (796    | ) |                       |   | (1,558  | )                         |  |   | 12,516                        |   |  |              |        
|Intercompany service fee income (expense) from TEL marketing agreement                         |  |        | 12,017  |   |                       |   | 25      |                           |  |   | (12,042                       | ) |  |              |        
|                                                                                               |  |        |         |   |                      
|Selling, general, and administrative expenses                                                  |  |        | 13,081  |   |                       |   | 9,922   |                           |  |   | 12,105                        |   |  |              |        
|Research, development, and testing expenses                                                    |  |        |        |   |                       |   | 20,011  |                           |  |   | 5,155                         |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Operating (loss) profit                                                                        |  |        | (5,785  | ) |                       |   | 29,234  |                           |  |   | (1,142                        | ) |  |              | (7,083  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|                                                                                               |  |        |         |   |                      
|Interest and financing expenses                                                                |  |        | 12,888  |   |                       |   | 712     |                           |  |   |                              |   |  |              |        
|Other (expense) income, net                                                                    |  |        | (984    | ) |                       |   | (3,485  | )                         |  |   | 49                            |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|                                                                                               |  |        |         |   |                      
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (19,657 | ) |                       |   | 25,037  |                           |  |   | (1,093                        | ) |  |              | (7,083  
|Income tax (benefit) expense                                                                   |  |        | (8,782  | ) |                       |   | 11,483  |                           |  |   | 219                           |   |  |              | (2,642  
|Equity income of subsidiaries                                                                  |  |        | 7,801   |   |                       |   |        |                           |  |   |                              |   |  |              | (7,801  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|                                                                                               |  |        |         |   |                      
|(Loss) income from continuing operations                                                       |  |        | (3,074  | ) |                       |   | 13,554  |                           |  |   | (1,312                        | ) |  |              | (12,242 
|                                                                                               |  |        |         |   |                      
|Income from operations of discontinued business (net of tax)                                   |  |        | 1,495   |   |                       |   | 1,262   |                           |  |   | 358                           |   |  |              | (1,620  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|                                                                                               |  |        |         |   |                      
|(Loss) income before cumulative effect of accounting change                                    |  |        | (1,579  | ) |                       |   | 14,816  |                           |  |   | (954                          | ) |  |              | (13,862 
|                                                                                               |  |        |         |   |                      
|Cumulative effect of accounting change (net of tax)                                            |  |        | (2,505  | ) |                       |   |        |                           |  |   | (853                          | ) |  |              | 853     
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Net (loss) income                                                                              |  | $      | (4,084  | ) |                       | $ | 14,816  |                           |  | $ | (1,807                        | ) |  | $            | (13,009 
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         



18



---

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

June 30, 2003

(in thousands of dollars, unaudited )



|                                             |  |        |         |   |              |   |         |               |  |   | Total         |   |  |              |           
|-------------------------------------------- |  | ------ | ------- | - | ------------ | - | ------- | ------------- |  | - | ------------- | - |  | ------------ | ----------
|                                             |  |        |         |   | Guarantor    |   |         | Non-Guarantor |  |   | Consolidating |   |  |              |           
|                                             |  | Parent |         |   | Subsidiaries |   |         | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated |           
|ASSETS                                       |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Cash and cash equivalents                    |  | $      | 8,561   |   |              | $ | 7,251   |               |  | $ | 11,044        |   |  | $            |          
|Restricted cash                              |  |        | 408     |   |              |   |        |               |  |   |              |   |  |              |          
|Trade and other accounts receivable, net     |  |        | 4,537   |   |              |   | 64,707  |               |  |   | 56,926        |   |  |              |          
|ReceivableTEL marketing agreements services |  |        |        |   |              |   | 3,892   |               |  |   | 3,699         |   |  |              |          
|Amounts due from affiliated companies        |  |        | 242,901 |   |              |   | 313,424 |               |  |   | 42,952        |   |  |              | (599,277  
|Inventories                                  |  |        | 4,364   |   |              |   | 74,493  |               |  |   | 53,522        |   |  |              | (9,199    
|Deferred income taxes                        |  |        | 4,625   |   |              |   | 3,248   |               |  |   | 668           |   |  |              | 3,503     
|Prepaid expenses                             |  |        | 5,938   |   |              |   | 516     |               |  |   | 1,097         |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total current assets                         |  |        | 271,334 |   |              |   | 467,531 |               |  |   | 169,908       |   |  |              | (604,973  
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|                                             |  |        |         |   |             
|Amounts due from affiliated companies        |  |        | 27,917  |   |              |   |        |               |  |   | 2,500         |   |  |              | (30,417   
|                                             |  |        |         |   |             
|Property, plant and equipment, at cost:      |  |        | 227,998 |   |              |   | 452,094 |               |  |   | 64,593        |   |  |              |          
|Less accumulated depreciation & amortization |  |        | 157,672 |   |              |   | 345,896 |               |  |   | 61,371        |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Net property, plant and equipment            |  |        | 70,326  |   |              |   | 106,198 |               |  |   | 3,222         |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|                                             |  |        |         |   |             
|Investment in consolidated subsidiaries      |  |        | 415,837 |   |              |   |        |               |  |   |              |   |  |              | (415,837  
|Prepaid pension cost                         |  |        | 18,407  |   |              |   | 538     |               |  |   | 5,810         |   |  |              |          
|Deferred income taxes                        |  |        | 15,034  |   |              |   | (8,597  | )             |  |   | 3,104         |   |  |              |          
|Other assets and deferred charges            |  |        | 33,658  |   |              |   | 42,747  |               |  |   | 6,303         |   |  |              |          
|Intangibles-net of amortization              |  |        | 1,711   |   |              |   | 62,770  |               |  |   | 2,296         |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total assets                                 |  | $      | 854,224 |   |              | $ | 671,187 |               |  | $ | 193,143       |   |  | $            | (1,051,227
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|                                             |  |        |         |   |             
|LIABILITIES AND SHAREHOLDERS EQUITY         |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Accounts payable                             |  | $      | 2,088   |   |              | $ | 33,093  |               |  | $ | 18,248        |   |  | $            |          
|Accrued expenses                             |  |        | 17,102  |   |              |   | 17,284  |               |  |   | 5,353         |   |  |              |          
|Amounts due to affiliated companies          |  |        | 304,605 |   |              |   | 228,896 |               |  |   | 65,776        |   |  |              | (599,277  
|Long-term debt, current portion              |  |        | 8,963   |   |              |   | 554     |               |  |   |              |   |  |              |          
|Income taxes payable                         |  |        | 9,290   |   |              |   | 2,725   |               |  |   | 1,132         |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total current liabilities                    |  |        | 342,048 |   |              |   | 282,552 |               |  |   | 90,509        |   |  |              | (599,277  
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Long-term debt                               |  |        | 241,546 |   |              |   | 4,730   |               |  |   |              |   |  |              |          
|Amounts due to affiliated companies          |  |        |        |   |              |   | 30,417  |               |  |   |              |   |  |              | (30,417   
|Other noncurrent liabilities                 |  |        | 90,518  |   |              |   | 8,209   |               |  |   | 26,380        |   |  |              |          
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total liabilities                            |  |        | 674,112 |   |              |   | 325,908 |               |  |   | 116,889       |   |  |              | (629,694  
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Shareholders equity:                        |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Common stock                                 |  |        | 16,734  |   |              |   | 32,268  |               |  |   | 35,498        |   |  |              | (67,766   
|Additional paid-in capital                   |  |        | 66,916  |   |              |   | 240,320 |               |  |   | 5,793         |   |  |              | (246,113  
|Accumulated other comprehensive loss         |  |        | (24,492 | ) |              |   | (11,982 | )             |  |   | (8,814        | ) |  |              | 20,796    
|Retained earnings                            |  |        | 120,954 |   |              |   | 84,673  |               |  |   | 43,777        |   |  |              | (128,450  
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total shareholders equity                   |  |        | 180,112 |   |              |   | 345,279 |               |  |   | 76,254        |   |  |              | (421,533  
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           
|Total liabilities and shareholders equity   |  | $      | 854,224 |   |              | $ | 671,187 |               |  | $ | 193,143       |   |  | $            | (1,051,227
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |           



19



---

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

December 31, 2002

(in thousands of dollars)



|                                             |  |        |         |   |              |   |         |               |  |   | Total         |   |  |              |         
|-------------------------------------------- |  | ------ | ------- | - | ------------ | - | ------- | ------------- |  | - | ------------- | - |  | ------------ | --------
|                                             |  |        |         |   | Guarantor    |   |         | Non-Guarantor |  |   | Consolidating |   |  |              |         
|                                             |  | Parent |         |   | Subsidiaries |   |         | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated |         
|ASSETS                                       |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Cash and cash equivalents                    |  | $      | 1,366   |   |              | $ | 4,206   |               |  | $ | 9,906         |   |  | $            |        
|Restricted cash                              |  |        | 683     |   |              |   |        |               |  |   |              |   |  |              |        
|Trade and other accounts receivable, net     |  |        | 13,306  |   |              |   | 58,825  |               |  |   | 52,299        |   |  |              |        
|ReceivableTEL marketing agreements services |  |        |        |   |              |   | (962    | )             |  |   | 8,380         |   |  |              |        
|Amounts due from affiliated companies        |  |        | 60,696  |   |              |   | 103,369 |               |  |   | 41,543        |   |  |              | (205,608
|Inventories                                  |  |        | 2,958   |   |              |   | 61,153  |               |  |   | 50,759        |   |  |              | (10,824 
|Deferred income taxes                        |  |        | 4,558   |   |              |   | 5,042   |               |  |   | 647           |   |  |              | 4,092   
|Prepaid expenses                             |  |        | 923     |   |              |   | 280     |               |  |   | 1,029         |   |  |              |        
|Assets of discontinued operations            |  |        |        |   |              |   | 2,722   |               |  |   | 1,601         |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total current assets                         |  |        | 84,490  |   |              |   | 234,635 |               |  |   | 166,164       |   |  |              | (212,340
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|                                             |  |        |         |   |             
|Amounts due from affiliated companies        |  |        | 29,694  |   |              |   |        |               |  |   | 2,500         |   |  |              | (32,194 
|                                             |  |        |         |   |             
|Property, plant and equipment, at cost:      |  |        | 227,453 |   |              |   | 443,399 |               |  |   | 75,385        |   |  |              |        
|Less accumulated depreciation & amortization |  |        | 154,283 |   |              |   | 330,463 |               |  |   | 62,772        |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Net property, plant and equipment            |  |        | 73,170  |   |              |   | 112,936 |               |  |   | 12,613        |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|                                             |  |        |         |   |             
|Investment in consolidated subsidiaries      |  |        | 389,444 |   |              |   |         |               |  |   |              |   |  |              | (389,444
|Prepaid pension cost                         |  |        | 20,777  |   |              |   | 538     |               |  |   | 3,680         |   |  |              |        
|Deferred income taxes                        |  |        | 15,364  |   |              |   | (9,483  | )             |  |   | 3,613         |   |  |              |        
|Other assets and deferred charges            |  |        | 25,625  |   |              |   | 48,473  |               |  |   | 6,658         |   |  |              |        
|Intangibles-net of amortization              |  |        | 1,710   |   |              |   | 65,397  |               |  |   | 2,231         |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total assets                                 |  | $      | 640,274 |   |              | $ | 452,496 |               |  | $ | 197,459       |   |  | $            | (633,978
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|                                             |  |        |         |   |             
|LIABILITIES AND SHAREHOLDERS EQUITY         |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Accounts payable                             |  | $      | 2,180   |   |              | $ | 22,039  |               |  | $ | 19,911        |   |  | $            |        
|Accrued expenses                             |  |        | 17,922  |   |              |   | 16,630  |               |  |   | 4,226         |   |  |              |        
|Amounts due to affiliated companies          |  |        | 87,965  |   |              |   | 43,871  |               |  |   | 73,772        |   |  |              | (205,608
|Long-term debt, current portion              |  |        | 40,000  |   |              |   | 537     |               |  |   |              |   |  |              |        
|Income taxes payable                         |  |        | 2,415   |   |              |   | 1,561   |               |  |   | 2,312         |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total current liabilities                    |  |        | 150,482 |   |              |   | 84,638  |               |  |   | 100,221       |   |  |              | (205,608
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Long-term debt                               |  |        | 244,519 |   |              |   | 5,011   |               |  |   |              |   |  |              |        
|Amounts due to affiliated companies          |  |        |        |   |              |   | 32,194  |               |  |   |              |   |  |              | (32,194 
|Other noncurrent liabilities                 |  |        | 92,195  |   |              |   | 8,032   |               |  |   | 23,683        |   |  |              |        
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total liabilities                            |  |        | 487,196 |   |              |   | 129,875 |               |  |   | 123,904       |   |  |              | (237,802
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Shareholders equity:                        |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Common stock                                 |  |        | 16,689  |   |              |   | 32,268  |               |  |   | 35,498        |   |  |              | (67,766 
|Additional paid-in capital                   |  |        | 66,766  |   |              |   | 240,320 |               |  |   | 5,793         |   |  |              | (246,113
|Accumulated other comprehensive loss         |  |        | (29,294 | ) |              |   | (14,309 | )             |  |   | (10,517       | ) |  |              | 24,826  
|Retained earnings                            |  |        | 98,917  |   |              |   | 64,342  |               |  |   | 42,781        |   |  |              | (107,123
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total shareholders equity                   |  |        | 153,078 |   |              |   | 322,621 |               |  |   | 73,555        |   |  |              | (396,176
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         
|Total liabilities and shareholders equity   |  | $      | 640,274 |   |              | $ | 452,496 |               |  | $ | 197,459       |   |  | $            | (633,978
|                                             |  |        |         |   |              |   |         |               |  |   |               |   |  |              |         



20



---

Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

For the Six Months Ended
June 30, 2003

(in thousands of dollars, unaudited )



|                                                    |  |        |          |   |              |   |        |               |  |   | Total         |   |  |              |       
|--------------------------------------------------- |  | ------ | -------- | - | ------------ | - | ------ | ------------- |  | - | ------------- | - |  | ------------ | ------
|                                                    |  |        |          |   | Guarantor    |   |        | Non-Guarantor |  |   | Consolidating |   |  |              |       
|                                                    |  | Parent |          |   | Subsidiaries |   |        | Subsidiaries  |  |   | Adjustments   |   |  | Consolidated |       
|Cash provided from operating activities             |  | $      | 22,955   |   |              | $ | 12,242 |               |  | $ | (9,727        | ) |  |              |      
|                                                    |  |        |          |   |             
|Cash flows from investing activities                |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|Capital expenditures                                |  |        | (709     | ) |              |   | (3,158 | )             |  |   | (237          | ) |  |              |      
|Proceeds from sale of phenolic antioxidant business |  |        | 27,770   |   |              |   |       |               |  |   |              |   |  |              |      
|Proceeds from sale of certain assets                |  |        | 1,500    |   |              |   |       |               |  |   | 11,076        |   |  |              |      
|Prepayment for TEL marketing agreements services    |  |        |         |   |              |   | (3,200 | )             |  |   |              |   |  |              |      
|Decrease in intercompany loans                      |  |        | 2,574    |   |              |   |       |               |  |   |              |   |  |              | (2,574
|Other, net                                          |  |        | 13       |   |              |   |       |               |  |   |              |   |  |              |      
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|Cash provided from (used in) investing activities   |  |        | 31,148   |   |              |   | (6,358 | )             |  |   | 10,839        |   |  |              | (2,574
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|                                                    |  |        |          |   |             
|Cash flows from financing activities                |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|Repayments of debt                                  |  |        | (284,519 | ) |              |   |       |               |  |   |              |   |  |              |      
|Issuance of senior notes and term loan              |  |        | 265,000  |   |              |   |       |               |  |   |              |   |  |              |      
|Repayments on term loan                             |  |        | (14,490  | ) |              |   |        |               |  |   |               |   |  |              |      
|Repayment of intercompany notes payable             |  |        |         |   |              |   | (5,774 | )             |  |   |              |   |  |              | 5,774 
|Financing from parent                               |  |        |         |   |              |   | 3,200  |               |  |   |              |   |  |              | (3,200
|Debt issuance costs                                 |  |        | (13,094  | ) |              |   |       |               |  |   |              |   |  |              |      
|Other, net                                          |  |        | 195      |   |              |   | (265   | )             |  |   | 26            |   |  |              |      
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|Cash (used in) provided from financing activities   |  |        | (46,908  | ) |              |   | (2,839 | )             |  |   | 26            |   |  |              | 2,574 
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|                                                    |  |        |          |   |             
|Increase in cash and cash equivalents               |  |        | 7,195    |   |              |   | 3,045  |               |  |   | 1,138         |   |  |              |      
|Cash and cash equivalents at beginning of year      |  |        | 1,366    |   |              |   | 4,206  |               |  |   | 9,906         |   |  |              |      
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       
|                                                    |  |        |          |   |             
|Cash and cash equivalents at end of period          |  | $      | 8,561    |   |              | $ | 7,251  |               |  | $ | 11,044        |   |  | $            |      
|                                                    |  |        |          |   |              |   |        |               |  |   |               |   |  |              |       



21



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Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

For the Six Months Ended
June 30, 2002

(in thousands of dollars, unaudited )



|                                                  |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |        
|------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | -------
|Cash provided from operating activities           |  | $      | 30,381  |   |                       | $ | 6,884   |                           |  | $ | 1,069                         |   |  | $            |       
|                                                  |  |        |         |   |                      
|Cash flows from investing activities              |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Capital expenditures                              |  |        | (3,232  | ) |                       |   | (3,794  | )                         |  |   | (222                          | ) |  |              |       
|Prepayment for TEL marketing agreements services  |  |        |        |   |                       |   | (12,800 | )                         |  |   |                              |   |  |              |       
|Increase in intercompany loans                    |  |        | (10,585 | ) |                       |   |        |                           |  |   |                              |   |  |              | 10,585 
|Cash dividends from subsidiaries                  |  |        | 4,405   |   |                       |   |        |                           |  |   |                              |   |  |              | (4,405 
|Other, net                                        |  |        | 7       |   |                       |   |        |                           |  |   |                              |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash used in investing activities                 |  |        | (9,405  | ) |                       |   | (16,594 | )                         |  |   | (222                          | ) |  |              | 6,180  
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|                                                  |  |        |         |   |                      
|Cash flows from financing activities              |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Repayments of debt                                |  |        | (43,640 | ) |                       |   |        |                           |  |   |                              |   |  |              |       
|Net borrowings                                    |  |        | 30,340  |   |                       |   |        |                           |  |   |                              |   |  |              |       
|Repayment of intercompany notes payable           |  |        |        |   |                       |   | (2,215  | )                         |  |   |                              |   |  |              | 2,215  
|Financing from parent                             |  |        |        |   |                       |   | 12,800  |                           |  |   |                              |   |  |              | (12,800
|Debt issuance costs                               |  |        | (1,982  | ) |                       |   |        |                           |  |   |                              |   |  |              |       
|Cash dividends paid                               |  |        |        |   |                       |   |        |                           |  |   | (4,405                        | ) |  |              | 4,405  
|Other, net                                        |  |        |        |   |                       |   | (248    | )                         |  |   |                              |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash (used in) provided from financing activities |  |        | (15,282 | ) |                       |   | 10,337  |                           |  |   | (4,405                        | ) |  |              | (6,180 
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|                                                  |  |        |         |   |                      
|Increase (decrease) in cash and cash equivalents  |  |        | 5,694   |   |                       |   | 627     |                           |  |   | (3,558                        | ) |  |              |       
|Cash and cash equivalents at beginning of year    |  |        | (4,476  | ) |                       |   | 5,759   |                           |  |   | 11,099                        |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|                                                  |  |        |         |   |                      
|Cash and cash equivalents at end of period        |  | $      | 1,218   |   |                       | $ | 6,386   |                           |  | $ | 7,541                         |   |  | $            |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        



22



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|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 additive market, the level of future declines in the market for
tetraethyl lead, and other trends in the petroleum additive market, our ability to maintain or increase our market share and our future capital expenditure levels.



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



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



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



Results of Operations

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



23



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Net Sales

Our consolidated net sales for the second quarter 2003 amounted to $180.6 million, representing an increase of 6% from the 2002 level of $170.9 million.
The six months 2003 consolidated net sales of $354.0 million were 12% higher than the six months 2002 amount of $317.1 million. The table below shows our consolidated net sales by segment.



Net Sales by Segment

(in millions)

|                       |  | Three Months Ended |       |      |   | Six Months Ended
|---------------------- |  | ------------------ | ----- | ---- | - | ----------------
|                       |  | June 30            |       |      |   | June 30         
|                       |  | 2003               |       | 2002 |   |                 
|Petroleum additives    |  | $                  | 178.8 |      | $ | 167.9           
|Tetraethyl lead        |  |                    | 1.8   |      |   | 3.0             
|                       |  |                    |       |      |   |                 
|Consolidated net sales |  | $                  | 180.6 |      | $ | 170.9           
|                       |  |                    |       |      |   |                 



Petroleum Additives
Segment

Petroleum additives net sales in the second quarter 2003 of $178.8 million were up $10.9 million (6%) from $167.9 million in
the second quarter 2002. Total volumes shipped were 3% lower for the second quarter 2003 as compared to the same period in 2002 reflecting lower shipments of engine oil additive products, which more than offset shipment increases across all other
product lines. Volumes were lower overall, but combined with product mix, resulted in higher sales of $5.7 million. The remaining increase in net sales primarily resulted from higher prices and a favorable foreign currency effect.



The six months 2003 net sales were $38.2 million (12%) higher than the six
months 2002. Similarly to second quarter 2003, shipments were higher across all product lines except for engine oil additive products. The overall increase of 5% in volumes shipped, combined with product mix resulted in higher sales of $29.0
million. Higher selling prices and favorable foreign currency caused the remaining increase in net sales.



Tetraethyl Lead Segment

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



Total TEL sales in the second quarter 2003 and six months 2003 were lower when compared to the same periods in 2002. There were no sales to Octel for either of the six months ended June 30, 2003 or June 30, 2002.



24



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Segment Operating Profit

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



The table below reports operating profit by
segment.



Segment Operating Profit

(in millions)

|                                              |  | Three Months Ended |      |      |   | Six Months Ended | 
|--------------------------------------------- |  | ------------------ | ---- | ---- | - | ---------------- | 
|                                              |  | June 30            |      |      |   | June 30          | 
|                                              |  | 2003               |      | 2002 |   |                  | 
|Petroleum additives before nonrecurring items |  | $                  | 16.6 |      | $ | 12.3             | 
|Nonrecurring items                            |  |                    |     |      |   | 0.3              | 
|                                              |  |                    |      |      |   |                  | 
|Total petroleum additives                     |  |                    | 16.6 |      |   | 12.6             | 
|Tetraethyl lead before nonrecurring items     |  |                    | 6.3  |      |   | 3.4              | 
|Nonrecurring items                            |  |                    |     |      |   |                 | 
|                                              |  |                    |      |      |   |                  | 
|Total tetraethyl lead                         |  |                    | 6.3  |      |   | 3.4              | 
|                                              |  |                    |      |      |   |                  | 
|Segment operating profit                      |  | $                  | 22.9 |      | $ | 16.0             | 
|                                              |  |                    |      |      |   |                  | 



Second quarter 2003
operating profit of $22.9 million did not include any nonrecurring items. Operating profit for the same 2002 period was $16.0 million, including a nonrecurring income item of $255 thousand for a change in the estimate of the restructuring accrual
for the engine oil additive rationalization. Excluding the nonrecurring item, combined operating profit for the second quarter 2003 was $7.2 million higher than second quarter 2002. This reflects increases in both the petroleum additives and
tetraethyl lead segments.



Six months 2003 segment operating
profit was $38.6 million and included nonrecurring income of $2.5 million related to the implementation of Statement of Financial Accounting Standards (SFAS) No. 143  Accounting for Asset Retirement Obligations. Six months 2002
segment operating profit was $26.6 million and included a nonrecurring charge of $3.1 million for the impairment of goodwill upon the adoption of SFAS 142  Goodwill and Other Intangible Assets. In addition, six months 2002 included
a nonrecurring income item of $255 thousand for a change in the estimate of the restructuring accrual for the engine oil additive rationalization. Excluding these nonrecurring items, combined segment operating profit was $6.7 million higher
than 2002 levels, reflecting an increase in petroleum additives operating profit.



25



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Petroleum Additives Segment

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



Second Quarter 2003 vs. Second Quarter 2002Petroleum additives second quarter 2003 operating profit was $16.6 million as compared to
$12.6 million for second quarter 2002. Excluding nonrecurring items, petroleum additives operating profit for the second quarter 2003 of $16.6 million increased 34% from second quarter 2002 operating profit of $12.3 million on the same basis.



The improved second quarter profits this year are
primarily in the fuels product line. While overall shipments were down 3%, shipments of higher margin products increased over second quarter 2002. The improved profit also benefited from improved production cost including an increase in inventory
levels during the period. A favorable foreign exchange impact, primarily from the stronger Euro, also contributed to improved operating results. Raw material costs were up between the two quarters resulting mostly from an increase in raw material
prices. Energy costs have also increased. These higher costs had the effect of compressing gross margins, as price increases were only able to offset a portion of the cost increases.



The nonrecurring income of $255 thousand in the second quarter 2002 was a change in the estimate for the restructuring
accrual related to the 2001 engine oil additive rationalization charge.



Research, development, and testing expenses (R&D) in the petroleum additives segment were $2.1 million higher when comparing second quarter 2003 to the same period in 2002. In addition to an unfavorable foreign currency effect,
increases in personnel supporting specialty additives, as well as outside testing for this product line, generated most of the increase as we continue to support growth and customer requirements.



Selling, general, and administrative expenses (SG&A) increased $3.2
million or 25.4% from second quarter 2002 levels. SG&A expenses included an increase in our allowance for doubtful accounts. As a percentage of net sales, SG&A expenses combined with R&D expenses, increased from 15.2% for the second
quarter 2002 to 17.2% for the same period this year. This increase reflects the 25.4% increase in SG&A, as compared to a smaller increase in net sales from second quarter 2002.



Six Months 2003 vs. Six Months 2002  Petroleum additives six months 2003 operating profit was $28.4
million as compared to $20.4 million for six months 2002. Excluding nonrecurring items, petroleum additives operating profit for the six months 2003 of $28.3 million increased 31% from six months 2002 operating profit of $21.6 million on the same
basis.



The improved six months profits this year are
across all major product lines and reflect an increase of 5% in shipments. The improved profit also reflects improved production



26



---

costs as noted in the second quarter discussion, including a build-up of inventory levels. Operating
profit also improved due to favorable foreign currency impact, primarily from the Euro. Raw material costs were also up between the two six month periods resulting from the higher shipments and an increase in raw material prices. Energy costs
continue to be higher than last year.



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



Research, development, and testing expenses (R&D) in the petroleum additives segment were $3.8 million higher when
comparing six months 2003 to the same period in 2002. In addition to an unfavorable foreign currency impact, the higher expenses primarily resulted from increases in outside testing and personnel support for the specialty additives product line, as
well as fleet tests and health tests in the methylcyclopentadienyl manganese tricarbonyl (MMT) product line.



Selling, general, and administrative expenses (SG&A) increased $5.0 million or 20.9% from six months 2002 levels. SG&A expenses included an
increase in our allowance for doubtful accounts. As a percentage of net sales, SG&A expenses combined with R&D expenses, increased from 15.7% for the six months 2002 to 16.5% for six months this year. This increase reflects the 20.9%
increase in SG&A expenses from six months 2002, as compared to a 12% increase in net sales.



TEL Segment

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



The operating profit from our marketing agreements for the second quarter 2003 was $7.9 million, which was $3.5 million
higher than the second quarter last year. The marketing agreement operating profit was $10.9 million for six months 2003 and $10.2 million for six months 2002. This segment is characterized by large swings in quarterly profitability, and these
results reflect the timing of shipments. Second quarter and six months results for both 2003 and 2002 also include certain cost adjustments in accordance with the marketing agreements.



Other TEL operations not included in the marketing agreements declined $500 thousand from the second quarter last year and
$800 thousand compared to the six-month period of 2002. These declines reflect increased charges related to environmental and premises asbestos liabilities.



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



27



---

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

Second quarter 2003 interest and financing expenses
were $6.4 million as compared to $6.6 million in 2002. Lower average debt resulted in a decrease in interest and financing expenses of $1.2 million. Higher average interest rates resulted in an increase of $300 thousand. Fees and amortization of
financing costs were $700 thousand higher.



Interest and
financing expenses of $11.2 million for six months 2003 were $2.4 million lower than the same 2002 period. Similarly to the second quarter, lower average debt caused a reduction of $2.2 million and slightly higher interest rates negatively impacted
interest and financing expenses $300 thousand. Fees and amortization were $500 thousand favorable when comparing six months 2003 to 2002.



On April 30, 2003, we entered into a new long-term debt structure. Interest costs under the long-term debt structure will vary from our former credit
facility. The interest on the seven year $150 million senior notes is at a fixed rate of 8.875%. The interest rates on the remaining debt are at variable rates of LIBOR plus a premium of 400 to 450 basis points.



Other Income (Expense), Net

Other income (expense), net was $56 thousand income for second quarter 2003 and $142 thousand expense for six months 2003. Both periods were comprised of
a number of small items, including $300 thousand for expenses related to debt refinancing activities for the six months.



The second quarter 2002 amounted to $3.7 million expense and included a $4.1 million impairment of nonoperating assets. Six months 2002 was $4.4 million
expense, including the $4.1 million impairment of nonoperating assets, as well as $1.0 million for debt refinancing activities.



Income Taxes

Income taxes for
second quarter 2003 were $2.9 million with an effective income tax rate 33.6%.



Total income taxes for six months 2003, including taxes on the gain on the sale of the phenolic antioxidant business in 2003 and the cumulative effect of accounting change, were $12.2 million with an effective income
tax rate 35.6%.



Second quarter 2002 income tax expense was
$400 thousand, while income taxes for the first half of last year were an expense of $300 thousand. The effective tax rates in 2002 are not relevant as both periods include unusual items, which impacted income tax expense. The tax expense for second
quarter and six months 2002, combined with a



28



---

before-tax book loss, results from the then nondeductibility of the capital losses related to the
impairment of certain nonoperating assets. A valuation allowance of approximately $1.4 million was recorded at June 30, 2002, primarily due to the uncertainty of whether the capital loss carryforward related to the impairments would ultimately be
realized. This valuation allowance was released in December 2002. In addition, the effective income tax rate for six months 2002 was impacted by the nondeductibility of a portion of the goodwill impairment charge.



While our deferred taxes are in a net asset position, 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. The accounts receivable and inventory, which were sold, are reported as Assets of discontinued operations on our Consolidated Balance Sheets. The net book value of the
fixed assets was zero. The cost and accumulated depreciation of these fixed assets have been removed from the property, plant, and equipment captions on our Consolidated Balance Sheets.



The income from operations of discontinued business reflected in our Consolidated Statements of Income is on an after-tax
basis. The net sales of the discontinued business were $4.5 million for the second quarter 2002 and $8.9 million for six months 2002. We recognized a gain of $23.2 million ($14.8 million after tax) in first quarter 2003 related to this transaction.



Cumulative Effect of Accounting Changes

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



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



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



Net Income (Loss)

Net income for the second quarter 2003 was $5.7 million ($.34 per share),
while the net loss for second quarter 2002 was $2.5 million ($.14 per share). On a combined basis, nonrecurring items and discontinued operations were expense of $3.3 million for second quarter 2002. There were no significant nonrecurring
items for the same period in 2003.



29



---

For the first half of this year, net income was $22.0 million ($1.32 per share) compared to a net loss of
$4.1 million ($.24 per share) for the first half of 2002. Nonrecurring items and discontinued operations totaled income of $16.4 million for six months 2003 and expense of $4.9 million for the same 2002 period.



The first half 2003 results include an increase of $2.7 million in corporate
unallocated general and administrative expenses from the first half 2002, primarily reflecting increased insurance and legal expenses.



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



|                                                                                                              |  | Three Months Ended |      |      |   |       | Six Months Ended | 
|------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | ---- | - | ----- | ---------------- | 
|                                                                                                              |  | June 30            |      |      |   |       | June 30          | 
|                                                                                                              |  | 2003               |      | 2002 |   |       |                  | 
|Net income (loss):                                                                                            |  |                    |      |      |   |       |                  | 
|Earnings excluding discontinued operations and nonrecurring items                                             |  | $                  | 5.7  |      | $ | 0.8   |                  | 
|Discontinued operations                                                                                       |  |                    |     |      |   | 0.6   |                  | 
|Nonrecurring items (a)                                                                                        |  |                    |     |      |   | (3.9  | )                | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|Net income (loss)                                                                                             |  | $                  | 5.7  |      | $ | (2.5  | )                | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|Basic earnings (loss) per share (b):                                                                          |  |                    |      |      |   |       |                  | 
|Earnings excluding discontinued operations and nonrecurring items                                             |  | $                  | 0.34 |      | $ | 0.05  |                  | 
|Discontinued operations                                                                                       |  |                    |     |      |   | 0.04  |                  | 
|Nonrecurring items (a)                                                                                        |  |                    |     |      |   | (0.23 | )                | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|Net income (loss)                                                                                             |  | $                  | 0.34 |      | $ | (0.14 | )                | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|                                                                                                             
|(a)    Nonrecurring items after income taxes:                                                                
|                                                                                                              |  |                    |      |      |   |       |                  | 
|Gain on implementation of SFAS No. 143                                                                        |  | $                  |     |      | $ |      |                  | 
|SFAS No. 142impairment of goodwill                                                                           |  |                    |     |      |   |      |                  | 
|Loss on impairments of nonoperating assets                                                                    |  |                    |     |      |   | (4.1  | )                | 
|Engine oil additives rationalization                                                                          |  |                    |     |      |   | 0.2   |                  | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|                                                                                                              |  | $                  |     |      | $ | (3.9  | )                | 
|                                                                                                              |  |                    |      |      |   |       |                  | 
|                                                                                                             
|(b)    Information on diluted earnings (loss) per share is provided on the Consolidated Statements
of Income.





30



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Cash Flows, Financial Condition, and Liquidity

Cash and cash equivalents at June 30, 2003 were $26.9 million, which was an increase of $11.4 million since December 31, 2002. The increase in cash and
cash equivalents is temporary and due to transitional issues as we move to our new loan agreement. Our cash flows were more than sufficient to cover operating activities during the 2003 period. Cash flows from operating activities for the six months
2003 were $25.5 million, while the proceeds from the sale of the phenolic antioxidant business were $27.8 million and the proceeds from the sale of certain other assets were $12.6 million. We used these cash flows to pay $13.1 million in debt
issuance costs, fund capital expenditures of $4.1 million, and make the final payment of $3.2 million to Octel for TEL marketing agreements services. In addition, we made a net repayment on debt of $34.0 million and increased our cash and cash
equivalents $11.4 million. Our cash from operations included $4.8 million received from a lawsuit settlement. This settlement was related to the recovery of operating costs of $2.4 million, as well as interest income on the settlement of $2.4
million. Ethyl expects that cash from operations will continue to be sufficient to cover our operating expenses.



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



We had restricted cash of $400 thousand at
June 30, 2003 and $700 thousand at December 31, 2002. These funds represent a portion of the funds we received from the demutualization of MetLife, Inc. in 2000. We are using this cash to reduce the employee portion of retiree health benefit costs.



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



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



The 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:



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| |  |  | 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 investments;
| | - |  | -----------------



| |  |  | sell assets or consolidate or merge with or into other companies; and
| | - |  | ---------------------------------------------------------------------



| |  |  | engage in transactions with affiliates.
| | - |  | ---------------------------------------



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



The senior
credit facility requires mandatory prepayments of:



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



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



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



| |  |  | a minimum net worth;
| | - |  | --------------------



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



| |  |  | a maximum senior debt to EBITDA;
| | - |  | --------------------------------



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



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| |  |  | an interest coverage ratio; and
| | - |  | -------------------------------



| |  |  | restrictions on the payment of dividends or repurchases of capital stock.
| | - |  | -------------------------------------------------------------------------



The bank term loan is for $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 beginning 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 400 basis points.



The new facility will cause Ethyl to incur higher cash interest cost than the previous facility, but provides the long-term capital structure we need to
manage our business. The proceeds from the senior notes and the bank term loan were used to repay our former credit facility, which on April 30, 2003 included a term loan of $178.3 million and a revolving line of credit of $55.3 million, as
well as a loan in the amount of $18.6 million made by Bruce C. Gottwald, Chairman of the Board of Directors.



We had combined current and noncurrent long-term debt of $255.8 million at June 30, 2003 and $290.1 million at December 31, 2002. This is a net reduction
of $34.3 million in our total debt. The net reduction in debt includes the full payment of the debt under our previous agreement of $265.9 million and full payment of our private borrowing of $18.6 million. These payments were offset by new
borrowing amounting to $150 million on the 8.875% senior notes and $115 million on the term loan. Subsequent to the refinancing of our debt, we have made payments of $14.5 million on the term loan. Capital lease obligations also decreased $300
thousand. We expect to make further reductions in debt during the year.



As a percentage of total capitalization, our total debt decreased from 65.5% at the end of 2002 to 58.7% at June 30, 2003. Normally, we repay debt with cash from operations, as well as with proceeds from occasional sales of business units,
plant sites, or other assets.



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



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



We had working capital at June 30,
2003 of $188.0 million resulting in a current ratio of 2.62 to 1. At December 31, 2002, the working capital was $143.2 million and the current ratio was 2.10 to 1. The increase in working capital and the current ratio primarily reflect a decrease in
the current portion of long-term debt, as well as increases in cash and cash equivalents, inventories, and prepaid expenses. Offsetting these were smaller increases in accounts payable and income taxes payable, as well as a decrease in assets of
discontinued operations. The increase in inventory is the result of new business.



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Reverse Stock Split

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



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



Following the effective date of the reverse stock split, the par value of the common stock remained at $1 per share. As a result, we reduced the common
stock in our Consolidated Balance Sheet as of the effective date by approximately $66.8 million, with a corresponding increase in the additional paid-in capital. All previously reported per-share amounts have been retroactively adjusted to reflect
the 1-for-5 reverse stock split.



Critical Accounting
Policies

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



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



As discussed in our 2002 Annual Report, we have made certain payments
related to our TEL marketing agreements and have made the final payment of $3.2 million in May 2003. The unamortized total at June 30, 2003 is $34.3 million. We are amortizing these costs on an accelerated method using a declining balance method
over the life of the contracts. We feel this is the appropriate methodology and time period for this amortization based on the facts and circumstances of our TEL operations and the estimated product life of TEL. The customer base of TEL is
significantly concentrated in a few countries and if conditions change that cause a shorter product life or other restrictions outside of our control, the amortization period would have to be adjusted accordingly. Any adjustment to the amortization
period would impact earnings, but would have no effect on cash flows. While we feel the basis being used is appropriate, we continue to keep our accounting for this issue current with the business conditions.



We also have certain identifiable intangibles amounting to $61.2 million at
June 30, 2003. These intangibles relate to our petroleum additives business and are being



34



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amortized over periods with up to thirteen years of remaining life. We continue to assess the market
related to these intangibles, as well as their specific values, and conclude the amortization periods and values are appropriate. During the second quarter 2003, due to a change in a contract, we modified the amortization period of one of the
identifiable intangibles from nine remaining years to two remaining years. This change will result in additional annual amortization of expense approximately $1.5 million over the next 24 months. We also evaluate these intangibles for any potential
impairment. These evaluations continue to support the value at which these identifiable intangibles are carried on our financial statements. However, if conditions were to substantially deteriorate in this market, it could possibly cause a reduction
in the periods of this amortization charge or could possibly result in a noncash write-off of a portion of the intangibles carrying value. A reduction in the amortization period would have no cash effect. While we do not anticipate such a
change in the market conditions, this disclosure is provided to enhance the understanding of the factors involved.



We have made disclosure of our environmental issues in Part I, Item I of our 2002 Annual Report, as well as in the Notes to Consolidated Financial
Statements of our 2002 Annual Report. We feel our environmental accruals are appropriate for the exposures and regulatory guidelines under which we currently operate. While we currently do not anticipate significant changes to the many factors that
could impact our environmental requirements, we continue to keep our accruals consistent with these requirements as they change.



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



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



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



Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) issued two new accounting standards during the second quarter of 2003. Statement of Financial Accounting Standard Number 149 (SFAS 149), Amendment of Statement 133 on Derivative
Instruments and Hedging Activities clarifies accounting and reporting requirements for derivative instruments and hedging activities. The statement is generally effective for derivative and hedging





35



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activities entered into after June 30, 2003. Statement of Financial Accounting Standards Number 150 (SFAS
150), Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity.
SFAS 150 is effective at the beginning of the first interim period after June 15, 2003. We do not expect either of these statements to have a significant impact on Ethyl.



FASB Interpretation Number 46 (FIN 46), Consolidation of Variable Interest Entities, was released in January
2003. FIN 46 expands existing accounting guidance that specifies when a company should include the assets, liabilities, and activities of another entity in the companys financial statements. Generally, the interpretation requires that a
variable interest entity be consolidated if the company has the majority of either the risk of loss or benefit of returns of the variable interest entitys activities. Certain of the requirements of FIN 46 are effective immediately. All of the
requirements are effective for interim or annual periods beginning after June 15, 2003. We do not expect this interpretation to have a significant impact on Ethyl.



Other Matters

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



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



36



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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, 2002, except for interest rate risk and foreign currency risk, which are
discussed below.



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



Based on $101 million of debt at variable rates under the new debt structure and holding all other variables constant, if LIBOR rates increased a
hypothetical 10% (currently approximately 13 basis points), the annual effect on our earnings and cash flows would be higher interest expense of approximately $100 thousand.



In June 2003, we entered into two Euro denominated forward contracts for $1.7 million to minimize currency exposure from
expected cash flows from foreign operations. These contracts have maturity dates during the third quarter 2003. With all other variables held constant, a hypothetical 10% adverse change in the June 30, 2003 forward Euro rates would result in about a
$200 thousand negative impact in the value of our forward contracts. Subsequent to June 30, 2003, we have entered into a series of additional Euro denominated forward contracts for $5.2 million. All of these contracts have maturity dates in 2003.



ITEM 4.    Controls and Procedures



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



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



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



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



37



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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 June 30, 2003 that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting.



38



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PART IIOther Information



ITEM 2.    C
hanges in Securities and Use of Proceeds



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



ITEM 4.    
Submission of Matters to a Vote of Security Holders



At the annual meeting of shareholders held on May 22, 2003, the shareholders elected the directors nominated in the Proxy with the following affirmative votes and votes withheld:



|Director            |  | Affirmative Votes |  | Votes Withheld
|------------------- |  | ----------------- |  | --------------
|William W. Berry    |  | 15,579,301        |  | 260,617       
|Phyllis L. Cothran  |  | 15,584,267        |  | 255,651       
|Bruce C. Gottwald   |  | 15,137,359        |  | 702,559       
|Thomas E. Gottwald  |  | 15,623,236        |  | 216,682       
|James E. Rogers     |  | 15,707,939        |  | 131,979       
|Sidney Buford Scott |  | 15,585,444        |  | 254,474       
|Charles B. Walker   |  | 15,718,457        |  | 121,461       



The shareholders also
approved the selection of PricewaterhouseCoopers LLP as the Companys auditors with 15,618,096 affirmative votes; 206,400 votes against; and 15,422 abstentions.



ITEM 6.    
Exhibits and Reports on Form 8-K



|   |   | 
|-- | - | 
|(a | ) | 
|   |   | 
|   |   | 



39



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|   |   | 
|-- | - | 
|   |   | 
|   |   | 
|   |   | 
|   |   | 
|   |   | 
|   |  
|(b | ) | 

| | (i) |  | Dated April 30, 2003, reporting under Item 5, Other Events and Required FD Disclosure, a press release announcing (1) the completion of an offering of $150 million of
8.875% senior notes due 2010 and (2) the execution of $115 million bank term loan due 2009 and a $50 million revolving credit facility.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | Dated May 6, 2003, reporting under Item 9, Regulation FD Disclosure, a press release announcing the Companys earnings for the first quarter ended March 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.)



| | (iii) |  | Dated June 30, 2003, reporting under Item 5, Other Events and Required FD Disclosure, a press release reporting the commencement by the Company of an offer to exchange
up to $150 million aggregate principal amount of 8.875% Senior Notes due 2010 that have been registered under the Securities Act of 1933, as amended, for a like principal amount of the original unregistered 8.875% Senior Notes due 2010.
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40



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S
IGNATURES



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:    August 8, 2003 |  |  |  | By: /s/ D. A. Fiorenza         |  | 
|                        |  |  |  |                                |  | 
|                        |  |  |  | David A. Fiorenza              |  | 
|                        |  |  |  | Vice President and             |  | 
|                        |  |  |  | Treasurer                      |  | 
|                        |  |  |  | (Principal Financial Officer)  |  | 
|                        |  |  | 
|Date:    August 8, 2003 |  |  |  | By:  /s/  Wayne C. Drinkwater  |  | 
|                        |  |  |  |                                |  | 
|                        |  |  |  | Wayne C. Drinkwater            |  | 
|                        |  |  |  | Controller                     |  | 
|                        |  |  |  | (Principal Accounting Officer) |  | 



41



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EXHIBIT INDEX



|              | 
|------------- | 
|Exhibit 10.1  | 
|              | 
|Exhibit 31(a) | 
|              | 
|Exhibit 31(b) | 
|              | 
|Exhibit 32(a) | 
|              | 
|Exhibit 32(b) | 



|* |  | Subject to a request for confidential treatment, certain portions of this agreement have been intentionally omitted. A complete version of this agreement has been filed separately
with the Securities and Exchange Commission.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42