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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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FORM 10-Q



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



For the quarterly period ended September 30, 2003



OR



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



For the transition period from  to



Commission File Number 1-5112



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ETHYL CORPORATION

(Exact name of registrant as specified in its charter)



|VIRGINIA                                                       |  | 54-0118820                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|330 SOUTH FOURTH STREET RICHMOND, VIRGINIA |  | 23218-2189
|------------------------------------------ |  | ----------
|(Address of principal executive offices)   |  | (Zip Code)



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



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    
Yes  x     No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes  x     No ̈



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



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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 Nine Months Ended September 30, 2003 and 2002 |  | 3         
|                              |  |                                                                                                   
|                              |  | Consolidated Balance Sheets  September 30, 2003 and December 31, 2002                             |  | 4         
|                              |  |                                                                                                   
|                              |  | Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2003 and 2002    |  | 5         
|                              |  |                                                                                                   
|                              |  | Notes to Financial Statements                                                                      |  | 6-22      
|                              |  |                                                                                                   
|ITEM 2.                       |  | Managements Discussion and Analysis of Results of Operations and Financial Condition              |  | 23-36     
|                              |  |                                                                                                   
|ITEM 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                         |  | 37        
|                              |  |                                                                                                   
|ITEM 4.                       |  | Controls and Procedures                                                                            |  | 37-38     
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                   
|                              |  |                                                                                                   
|ITEM 1.                       |  | Legal Proceedings                                                                                  |  | 39        
|                              |  |                                                                                                   
|ITEM 2.                       |  | Changes in Securities and Use of Proceeds                                                          |  | 39        
|                              |  |                                                                                                   
|ITEM 6.                       |  | Exhibits and Reports on Form 8-K                                                                   |  | 39-40     
|                              | 
|SIGNATURES                    |  | 41                                                                                                



2



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PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements



ETHYL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share amounts)

(unaudited)



|                                                                                                                  |  | Three Months EndedSeptember 30 |         | Nine Months EndedSeptember 30 |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | ----------------------------- | -
|                                                                                                                  |  | 2003                           |         | 2002                          |  
|Net sales                                                                                                         |  | $                              | 197,095 |                               | $
|Cost of goods sold                                                                                                |  |                                | 151,839 |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Gross profit                                                                                                      |  |                                | 45,256  |                               |  
|                                                                                                                  |  |                                |         |                              
|TEL marketing agreements services                                                                                 |  |                                | 9,712   |                               |  
|                                                                                                                  |  |                                |         |                              
|Selling, general, and administrative expenses                                                                     |  |                                | 20,864  |                               |  
|Research, development, and testing expenses                                                                       |  |                                | 13,801  |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Operating profit                                                                                                  |  |                                | 20,303  |                               |  
|Interest and financing expenses                                                                                   |  |                                | 5,205   |                               |  
|Other income (expense), net                                                                                       |  |                                | 37      |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Income from continuing operations before income taxes                                                             |  |                                | 15,135  |                               |  
|Income tax expense                                                                                                |  |                                | 4,838   |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Income from continuing operations                                                                                 |  |                                | 10,297  |                               |  
|Discontinued operations                                                                                           |  |                                |         |                               |  
|Gain on disposal of business (net of tax of $8,391)                                                               |  |                                |        |                               |  
|Income from operations of discontinued business (net of tax of $424 for third quarter and $1,301 for nine months) |  |                                |        |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Income before cumulative effect of accounting changes                                                             |  |                                | 10,297  |                               |  
|Cumulative effect of accounting changes (net of tax of $925 in 2003and ($615) in 2002)                            |  |                                |        |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Net income                                                                                                        |  | $                              | 10,297  |                               | $
|                                                                                                                  |  |                                |         |                               |  
|Basic earnings per share:                                                                                         |  |                                |         |                               |  
|Earnings from continuing operations                                                                               |  | $                              | 0.61    |                               | $
|Discontinued operations (net of tax)                                                                              |  |                                |        |                               |  
|Cumulative effect of accounting changes (net of tax)                                                              |  |                                |        |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Basic earnings per share                                                                                          |  | $                              | 0.61    |                               | $
|                                                                                                                  |  |                                |         |                               |  
|Diluted earnings per share:                                                                                       |  |                                |         |                               |  
|Earnings from continuing operations                                                                               |  | $                              | 0.61    |                               | $
|Discontinued operations (net of tax)                                                                              |  |                                |        |                               |  
|Cumulative effect of accounting changes (net of tax)                                                              |  |                                |        |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Diluted earnings per share                                                                                        |  | $                              | 0.61    |                               | $
|                                                                                                                  |  |                                |         |                               |  
|Shares used to compute basic earnings per share                                                                   |  |                                | 16,753  |                               |  
|                                                                                                                  |  |                                |         |                               |  
|Shares used to compute diluted earnings per share                                                                 |  |                                | 17,020  |                               |  
|                                                                                                                  |  |                                |         |                               |  



See
accompanying notes to financial statements.





3



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ETHYL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                                                      |  | September 30 2003 |         |   | December 312002 |  
|----------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | --------------- | -
|                                                                                                      |  | (unaudited)       |         |   | (audited)       |  
|ASSETS                                                                                                |  |                   |         |   |                 |  
|Current assets:                                                                                       |  |                   |         |   |                 |  
|Cash and cash equivalents                                                                             |  | $                 | 22,061  |   |                 | $
|Restricted cash                                                                                       |  |                   | 880     |   |                 |  
|Trade and other accounts receivable, less allowance for doubtfulaccounts ($2,060 - 2003; $911 - 2002) |  |                   | 121,770 |   |                 |  
|Receivable - TEL marketing agreements services                                                        |  |                   | 10,819  |   |                 |  
|Inventories:                                                                                          |  |                   |         |   |                 |  
|Finished goods and work-in-process                                                                    |  |                   | 104,167 |   |                 |  
|Raw materials                                                                                         |  |                   | 12,709  |   |                 |  
|Stores, supplies and other                                                                            |  |                   | 8,350   |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|                                                                                                      |  |                   | 125,226 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Prepaid expenses                                                                                      |  |                   | 5,842   |   |                 |  
|                                                                                                      |  |                  
|Deferred income taxes                                                                                 |  |                   | 11,960  |   |                 |  
|Assets of discontinued operations                                                                     |  |                   |        |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Total current assets                                                                                  |  |                   | 298,558 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Property, plant and equipment, at cost                                                                |  |                   | 741,869 |   |                 |  
|Less accumulated depreciation and amortization                                                        |  |                   | 566,187 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Net property, plant and equipment                                                                     |  |                   | 175,682 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Prepaid pension cost                                                                                  |  |                   | 26,636  |   |                 |  
|Deferred income taxes                                                                                 |  |                   | 9,441   |   |                 |  
|Other assets and deferred charges                                                                     |  |                   | 78,982  |   |                 |  
|Intangibles, net of amortization                                                                      |  |                   | 65,155  |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Total assets                                                                                          |  | $                 | 654,454 |   |                 | $
|                                                                                                      |  |                   |         |   |                 |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                  |  |                   |         |   |                 |  
|Current liabilities:                                                                                  |  |                   |         |   |                 |  
|Accounts payable                                                                                      |  | $                 | 51,763  |   |                 | $
|Accrued expenses                                                                                      |  |                   | 49,264  |   |                 |  
|Long-term debt, current portion                                                                       |  |                   | 7,503   |   |                 |  
|Income taxes payable                                                                                  |  |                   | 15,958  |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Total current liabilities                                                                             |  |                   | 124,488 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Long-term debt                                                                                        |  |                   | 214,520 |   |                 |  
|Other noncurrent liabilities                                                                          |  |                   | 124,248 |   |                 |  
|                                                                                                      |  |                  
|Commitments and contingencies (Note 4)                                                                |  |                   |         |   |                 |  
|                                                                                                      |  |                  
|Shareholders equity:                                                                                 |  |                   |         |   |                 |  
|Common stock ($1 par value) Issued - 16,761,009 in 2003 and 16,689,009 in 2002                        |  |                   | 16,761  |   |                 |  
|Additional paid-in capital                                                                            |  |                   | 67,007  |   |                 |  
|Accumulated other comprehensive loss                                                                  |  |                   | (23,821 | ) |                 |  
|Retained earnings                                                                                     |  |                   | 131,251 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|                                                                                                      |  |                   | 191,198 |   |                 |  
|                                                                                                      |  |                   |         |   |                 |  
|Total liabilities and shareholders equity                                                            |  | $                 | 654,454 |   |                 | $
|                                                                                                      |  |                   |         |   |                 |  



See
accompanying notes to financial statements.



4



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ETHYL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                             |  | Nine Months EndedSeptember 30 |         
|---------------------------------------------------------------------------- |  | ----------------------------- | --------
|                                                                             |  | 2003                          |         
|Cash and cash equivalents at beginning of year                               |  | $                             | 15,478  
|                                                                             |  |                               |         
|Cash flows from operating activities:                                        |  |                               |         
|Net income                                                                   |  |                               | 32,334  
|Adjustments to reconcile net income to cash flows from operating activities: |  |                               |         
|Amortization of deferrred financing costs                                    |  |                               | 3,685   
|Depreciation and other amortization                                          |  |                               | 34,714  
|Gain on sale of phenolic antioxidant business                                |  |                               | (23,196 
|Cumulative effect of accounting changes                                      |  |                               | (2,549  
|Noncash pension expense                                                      |  |                               | 6,673   
|TEL working capital advance                                                  |  |                               | 1,270   
|Deferred income tax expense (benefit)                                        |  |                               | 18      
|Net loss on impairments                                                      |  |                               |        
|Working capital changes                                                      |  |                               | 5,200   
|Proceeds from legal settlement                                               |  |                               | 4,825   
|Cash pension contributions                                                   |  |                               | (7,802  
|Proceeds from contract settlement                                            |  |                               |        
|Other, net                                                                   |  |                               | 2,357   
|                                                                             |  |                               |         
|Cash provided from operating activities                                      |  |                               | 57,529  
|                                                                             |  |                               |         
|Cash flows from investing activities:                                        |  |                               |         
|Capital expenditures                                                         |  |                               | (7,236  
|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                                                                   |  |                               | 174     
|                                                                             |  |                               |         
|Cash provided from (used in) investing activities                            |  |                               | 30,084  
|                                                                             |  |                               |         
|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                                                      |  |                               | (48,124 
|Debt issuance costs                                                          |  |                               | (13,299 
|Other, net                                                                   |  |                               | (88     
|                                                                             |  |                               |         
|Cash used in financing activities                                            |  |                               | (81,030 
|                                                                             |  |                               |         
|Increase in cash and cash equivalents                                        |  |                               | 6,583   
|                                                                             |  |                               |         
|Cash and cash equivalents at end of period                                   |  | $                             | 22,061  
|                                                                             |  |                               |         



See
accompanying notes to financial statements.



5



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ETHYL CORPORATION AND SUBSIDIARIES

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



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



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



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



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



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



|3. | The cumulative effect of accounting change in nine months 2003 reflects the gain of $2.5 million ($1.6 million after tax, or $.10 per basic share) recognized upon
the January 1, 2003 adoption of Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations. This statement addresses the obligations and asset retirement costs associated with the retirement of
tangible long-lived assets. It requires that the fair value of the liability for an asset retirement obligation be recorded when incurred instead of ratably over the life of the asset. The asset retirement costs
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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



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



|Asset retirement obligation, December 31, 2002  |  | $ | 14,828 |  
|----------------------------------------------- |  | - | ------ | -
|Gain upon implementation of SFAS No. 143        |  |   | (2,549 | )
|Accretion expense                               |  |   | 679    |  
|Liabilities settled                             |  |   | (669   | )
|Foreign currency impact                         |  |   | 868    |  
|                                                |  |   |        |  
|Asset retirement obligation, September 30, 2003 |  | $ | 13,157 |  
|                                                |  |   |        |  



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



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



|4. | There have been no significant changes in our commitments and contingencies from those reported in our 2002 Annual Report, except for the legal proceedings described in Part II,
Item 1 and the sale-leaseback transaction described in Note 12. The sale-leaseback transaction will result in increased annual rental expense of approximately $1.1 million.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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 and earnings per share as if we had applied the fair-value method of accounting for the stock-based compensation plan.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                              |  | Three Months Ended September 30 |        |   | Nine Months Ended September 30 |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | -
|                                                                                                                              |  | 2003                            |        |   | 2002                           |  
|Net income, as reported                                                                                                       |  | $                               | 10,297 |   |                                | $
|Less: Total stock-based employee compensation expense determined under the fair-value based method, net of related tax
effect |  |                                 | (82    | ) |                                |  
|                                                                                                                              |  |                                 |        |   |                                |  
|Net income, pro forma                                                                                                         |  | $                               | 10,215 |   |                                | $
|                                                                                                                              |  |                                 |        |   |                                |  
|Earnings per share:                                                                                                           |  |                                 |        |   |                                |  
|Basic, as reported                                                                                                            |  | $                               | 0.61   |   |                                | $
|                                                                                                                              |  |                                 |        |   |                                |  
|Basic, pro forma                                                                                                              |  | $                               | 0.61   |   |                                | $
|                                                                                                                              |  |                                 |        |   |                                |  
|Diluted, as reported                                                                                                          |  | $                               | 0.61   |   |                                | $
|                                                                                                                              |  |                                 |        |   |                                |  
|Diluted, pro forma                                                                                                            |  | $                               | 0.60   |   |                                | $
|                                                                                                                              |  |                                 |        |   |                                |  



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



Net Sales by
Segment

(in millions)



|                       |  | Three Months Ended September 30 |       | Nine Months Ended September 30
|---------------------- |  | ------------------------------- | ----- | ------------------------------
|                       |  | 2003                            |       | 2002                          
|Petroleum additives    |  | $                               | 194.1 |                               
|Tetraethyl lead        |  |                                 | 3.0   |                               
|                       |  |                                 |       |                               
|Consolidated net sales |  | $                               | 197.1 |                               
|                       |  |                                 |       |                               



8



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Segment Operating Profit

(in millions)



|                                                                   |  | Three MonthsEnded September 30 |      |   | Nine MonthsEndedSeptember 30 |  
|------------------------------------------------------------------ |  | ------------------------------ | ---- | - | ---------------------------- | -
|                                                                   |  | 2003                           |      |   | 2002                         |  
|Petroleum additives                                                |  | $                              | 19.2 |   |                              | $
|Tetraethyl lead                                                    |  |                                | 9.4  |   |                              |  
|                                                                   |  |                                |      |   |                              |  
|Segment operating profit                                           |  |                                | 28.6 |   |                              |  
|Effect of accounting changes reflected in segment operating profit |  |                                |     |   |                              |  
|Corporate unallocated expense                                      |  |                                | (4.3 | ) |                              |  
|Interest expense                                                   |  |                                | (5.2 | ) |                              |  
|Loss on impairments of nonoperating assets                         |  |                                |     |   |                              |  
|Pension expense                                                    |  |                                | (1.6 | ) |                              |  
|Other expense, net                                                 |  |                                | (2.4 | ) |                              |  
|                                                                   |  |                                |      |   |                              |  
|Income from continuing operations before income taxes              |  | $                              | 15.1 |   |                              | $
|                                                                   |  |                                |      |   |                              |  



Depreciation and
Amortization

(in millions)



|                                    |  | Three MonthsEndedSeptember 30 |      | Nine MonthsEndedSeptember 30
|----------------------------------- |  | ----------------------------- | ---- | ----------------------------
|                                    |  | 2003                          |      | 2002                        
|Petroleum additives                 |  | $                             | 8.4  |                             
|Tetraethyl lead                     |  |                               | 2.7  |                             
|Other long-lived assets             |  |                               | 0.3  |                             
|                                    |  |                               |      |                             
|Total depreciation and amortization |  | $                             | 11.4 |                             
|                                    |  |                               |      |                             



|7. | Other income (expense), net in the Consolidated Statements of Income included expenses related to debt refinancing activities of $300 thousand for nine months 2003. Third quarter
2002 included $1.2 million interest income from a settlement with the Internal Revenue Service. In addition to the $1.2 million income, nine months 2002 also included a loss on the impairment of nonoperating assets of $4.1 million. Expenses related
to debt refinancing activities for nine months 2002 amounted to $1.1 million.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





9



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|8. | Basic and diluted earnings per share are calculated as shown in the table below. Options are not included in the computation of diluted earnings per share when the option exercise
price exceeds the average market price of the common share. At September 30, 2003, we had outstanding options to purchase 293,200 shares of common stock at $62.50 per share, as well as 50,000 shares of common stock at $44.375 per share. At September
30, 2002, we had outstanding options to purchase 303,200 shares of common stock at $62.50 per share; 50,000 shares of common stock at $44.375 per share; and 4,177 shares of common stock at $64.15 per share. None of these options were included in the
computation of diluted earnings per share for any period.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                     |  | Three Months Ended September 30 |        | Nine Months Ended September 30
|---------------------------------------------------- |  | ------------------------------- | ------ | ------------------------------
|                                                     |  | 2003                            |        | 2002                          
|Basic earnings per share                             |  |                                 |        |                               
|Numerator:                                           |  |                                 |        |                               
|Net income                                           |  | $                               | 10,297 |                               
|                                                     |  |                                 |        |                               
|Denominator:                                         |  |                                 |        |                               
|Average number of shares of common stock outstanding |  |                                 | 16,753 |                               
|                                                     |  |                                 |        |                               
|Basic earnings per share                             |  | $                               | .61    |                               
|                                                     |  |                                 |        |                               
|Diluted earnings per share                           |  |                                 |        |                               
|Numerator:                                           |  |                                 |        |                               
|Net income                                           |  | $                               | 10,297 |                               
|                                                     |  |                                 |        |                               
|Denominator:                                         |  |                                 |        |                               
|Average number of shares of common stock outstanding |  |                                 | 16,753 |                               
|                                                     |  |                                 |        |                               
|Shares issuable upon exercise of stock options       |  |                                 | 267    |                               
|                                                     |  |                                 |        |                               
|Total shares                                         |  |                                 | 17,020 |                               
|                                                     |  |                                 |        |                               
|Diluted earnings per share                           |  | $                               | .61    |                               
|                                                     |  |                                 |        |                               





10



---

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



|                                |  | Identifiable Intangibles
|------------------------------- |  | ------------------------
|                                |  | September 30 2003       
|                                |  | GrossCarryingAmount     
|Amortizing intangible assets    |  |                         
|Formulas                        |  | $                       
|Contracts                       |  |                         
|                                |  |                         
|                                |  | $                       
|                                |  |                         
|Nonamortizing intangible assets |  |                         
|Minimum pension liabilities     |  | $                       
|                                |  |                         
|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:
|--- | ------------------------------------------



|                                |  | September 302003 |         |   | December 31 2002 |  
|------------------------------- |  | ---------------- | ------- | - | ---------------- | -
|Senior notes                    |  | $                | 150,000 |   |                  | $
|Term loan agreements            |  |                  | 66,876  |   |                  |  
|Revolving credit agreement      |  |                  |        |   |                  |  
|Private borrowing               |  |                  |        |   |                  |  
|                                |  |                  |         |   |                  |  
|                                |  |                  | 216,876 |   |                  |  
|Obligations under capital lease |  |                  | 5,147   |   |                  |  
|                                |  |                  |         |   |                  |  
|Total debt                      |  |                  | 222,023 |   |                  |  
|Less current portion            |  |                  | (7,503  | ) |                  |  
|                                |  |                  |         |   |                  |  
|Long-term debt                  |  | $                | 214,520 |   |                  | $
|                                |  |                  |         |   |                  |  



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 September 30, 2003). The term loan matures in April 2009 and has scheduled quarterly payments, which began in June 2003.



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



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



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



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



12



---

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



|                                                       |  | Three Months EndedSeptember 30 |        |   | Nine Months EndedSeptember 30 |  
|------------------------------------------------------ |  | ------------------------------ | ------ | - | ----------------------------- | -
|                                                       |  | 2003                           |        |   | 2002                          |  
|                                                       |  |                                |        |  
|Net income                                             |  | $                              | 10,297 |   |                               | $
|Other comprehensive income (loss), net of tax:         |  |                                |        |   |                               |  
|Unrealized gain (loss) on marketable equity securities |  |                                | 79     |   |                               |  
|Unrealized gain on derivative instruments              |  |                                | (26    | ) |                               |  
|Foreign currency translation adjustments               |  |                                | 618    |   |                               |  
|                                                       |  |                                |        |   |                               |  
|Other comprehensive income (loss)                      |  |                                | 671    |   |                               |  
|                                                       |  |                                |        |   |                               |  
|Comprehensive income                                   |  | $                              | 10,968 |   |                               | $
|                                                       |  |                                |        |   |                               |  



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



|                                                  |  | September 30 2003 |         |   | December 31 2002 |  
|------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | -
|Unrealized (loss) on marketable equity securities |  | $                 | (275    | ) |                  | $
|Minimum pension liability adjustment              |  |                   | (10,902 | ) |                  |  
|Foreign currency translation adjustments          |  |                   | (12,644 | ) |                  |  
|                                                  |  |                   |         |   |                  |  
|Accumulated other comprehensive loss              |  | $                 | (23,821 | ) |                  | $
|                                                  |  |                   |         |   |                  |  



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



13



---

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



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



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



Domestic Subsidiaries

Ethyl Asia Pacific Company

Ethyl Export Corporation

Ethyl Interamerica Corporation

Ethyl Petroleum Additives, Inc.

Ethyl Ventures, Inc.

Interamerica Terminals Corporation

The Edwin Cooper Corporation

Ethyl Additives Corporation



Foreign Subsidiaries

Ethyl Europe SPRL

Ethyl Brasil Aditivos, LTDA

Ethyl Administration GmbH

Ethyl Services, GmbH



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



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



14



---

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



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



Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended September 30, 2003

(in thousands)



|                                                                                               |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated
|---------------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------
|Net sales                                                                                      |  | $      | 2,503  |   |                       | $ | 150,919 |                           |  | $ | 106,391                       |   |  | $           
|Cost of goods sold                                                                             |  |        | 4,040  |   |                       |   | 120,464 |                           |  |   | 91,210                        |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Gross (loss) profit                                                                            |  |        | (1,537 | ) |                       |   | 30,455  |                           |  |   | 15,181                        |   |  |             
|TEL marketing agreements services                                                              |  |        | (2,156 | ) |                       |   | 6,271   |                           |  |   | 5,597                         |   |  |             
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 5,416  |   |                       |   | (18     | )                         |  |   | (5,398                        | ) |  |             
|Selling, general, and administrative expenses                                                  |  |        | 8,432  |   |                       |   | 3,309   |                           |  |   | 9,123                         |   |  |             
|Research, development, and testing expenses                                                    |  |        |       |   |                       |   | 10,925  |                           |  |   | 2,876                         |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Operating (loss) profit                                                                        |  |        | (6,709 | ) |                       |   | 22,474  |                           |  |   | 3,381                         |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Interest and financing expenses                                                                |  |        | 3,282  |   |                       |   | 1,911   |                           |  |   | 12                            |   |  |             
|Other income (expense), net                                                                    |  |        | 21     |   |                       |   | 38      |                           |  |   | (22                           | ) |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (9,970 | ) |                       |   | 20,601  |                           |  |   | 3,347                         |   |  |             
|Income tax (benefit) expense                                                                   |  |        | (3,197 | ) |                       |   | 6,332   |                           |  |   | 1,285                         |   |  |             
|Equity income of subsidiaries                                                                  |  |        | 17,070 |   |                       |   |        |                           |  |   |                              |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Net income                                                                                     |  | $      | 10,297 |   |                       | $ | 14,269  |                           |  | $ | 2,062                         |   |  | $           
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             



15



---

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Three Months Ended September 30, 2002

(in thousands)



|                                                                                               |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated
|---------------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------
|Net sales                                                                                      |  | $      | 1,724  |   |                       | $ | 141,256 |                           |  | $ | 97,102                        |   |  | $           
|Cost of goods sold                                                                             |  |        | 7,629  |   |                       |   | 100,983 |                           |  |   | 86,877                        |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Gross (loss) profit                                                                            |  |        | (5,905 | ) |                       |   | 40,273  |                           |  |   | 10,225                        |   |  |             
|                                                                                               |  |        |        |   |                      
|TEL marketing agreements services                                                              |  |        | (901   | ) |                       |   | (1,181  | )                         |  |   | 10,407                        |   |  |             
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 10,159 |   |                       |   | (162    | )                         |  |   | (9,997                        | ) |  |             
|                                                                                               |  |        |        |   |                      
|Selling, general, and administrative expenses                                                  |  |        | 7,421  |   |                       |   | 4,052   |                           |  |   | 6,726                         |   |  |             
|Research, development, and testing expenses                                                    |  |        |       |   |                       |   | 9,574   |                           |  |   | 2,404                         |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Operating (loss) profit                                                                        |  |        | (4,068 | ) |                       |   | 25,304  |                           |  |   | 1,505                         |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Interest and financing expenses                                                                |  |        | 6,165  |   |                       |   | 187     |                           |  |   |                              |   |  |             
|Other income, net                                                                              |  |        | 1,344  |   |                       |   | 30      |                           |  |   | 16                            |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (8,889 | ) |                       |   | 25,147  |                           |  |   | 1,521                         |   |  |             
|Income tax (benefit) expense                                                                   |  |        | (2,924 | ) |                       |   | 8,259   |                           |  |   | 659                           |   |  |             
|Equity income of subsidiaries                                                                  |  |        | 16,110 |   |                       |   |        |                           |  |   |                              |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Income from continuing operations                                                              |  |        | 10,145 |   |                       |   | 16,888  |                           |  |   | 862                           |   |  |             
|                                                                                               |  |        |        |   |                      
|Income from operations of discontinued business (net of tax)                                   |  |        | 722    |   |                       |   | 437     |                           |  |   | 312                           |   |  |             
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             
|Net income                                                                                     |  | $      | 10,867 |   |                       | $ | 17,325  |                           |  | $ | 1,174                         |   |  | $           
|                                                                                               |  |        |        |   |                       |   |         |                           |  |   |                               |   |  |             



16



---

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Nine Months Ended September 30, 2003

(in thousands)



|                                                                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |         
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | --------
|Net sales                                                                                      |  | $      | 5,511   |   |                       | $ | 422,178 |                           |  | $ | 303,823                       |   |  | $            | (180,377
|Cost of goods sold                                                                             |  |        | 11,627  |   |                       |   | 331,289 |                           |  |   | 266,064                       |   |  |              | (183,159
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Gross (loss) profit                                                                            |  |        | (6,116  | ) |                       |   | 90,889  |                           |  |   | 37,759                        |   |  |              | 2,782   
|                                                                                               |  |        |         |   |                      
|TEL marketing agreements services                                                              |  |        | (2,129  | ) |                       |   | 10,283  |                           |  |   | 12,490                        |   |  |              |        
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 11,837  |   |                       |   | (17     | )                         |  |   | (11,820                       | ) |  |              |        
|                                                                                               |  |        |         |   |                      
|Selling, general, and administrative expenses                                                  |  |        | 24,715  |   |                       |   | 14,029  |                           |  |   | 24,612                        |   |  |              |        
|Research, development, and testing expenses                                                    |  |        |        |   |                       |   | 33,830  |                           |  |   | 8,674                         |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Operating (loss) profit                                                                        |  |        | (21,123 | ) |                       |   | 53,296  |                           |  |   | 5,143                         |   |  |              | 2,782   
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Interest and financing expenses                                                                |  |        | 13,803  |   |                       |   | 2,594   |                           |  |   | 12                            |   |  |              |        
|Other (expense) income, net                                                                    |  |        | (72     | ) |                       |   | 152     |                           |  |   | (185                          | ) |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (34,998 | ) |                       |   | 50,854  |                           |  |   | 4,946                         |   |  |              | 2,782   
|Income tax (benefit) expense                                                                   |  |        | (11,984 | ) |                       |   | 16,329  |                           |  |   | 2,327                         |   |  |              | 1,007   
|Equity income of subsidiaries                                                                  |  |        | 38,919  |   |                       |   |        |                           |  |   |                              |   |  |              | (38,919 
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Income from continuing operations                                                              |  |        | 15,905  |   |                       |   | 34,525  |                           |  |   | 2,619                         |   |  |              | (37,144 
|                                                                                               |  |        |         |   |                      
|Gain on disposal of business (net of tax)                                                      |  |        | 14,805  |   |                       |   |        |                           |  |   |                              |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Income before cumulative effect of accounting change                                           |  |        | 30,710  |   |                       |   | 34,525  |                           |  |   | 2,619                         |   |  |              | (37,144 
|Cumulative effect of accounting change (net of tax)                                            |  |        | 1,624   |   |                       |   | 74      |                           |  |   | 438                           |   |  |              | (512    
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Net income                                                                                     |  | $      | 32,334  |   |                       | $ | 34,599  |                           |  | $ | 3,057                         |   |  | $            | (37,656 
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         



17



---

Ethyl Corporation and Subsidiaries

Consolidating Statements of Income

Nine Months Ended September 30, 2002

(in thousands)



|                                                                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |         
|---------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | --------
|Net sales                                                                                      |  | $      | 5,991   |   |                       | $ | 389,134 |                           |  | $ | 273,074                       |   |  | $            | (178,330
|Cost of goods sold                                                                             |  |        | 15,821  |   |                       |   | 288,161 |                           |  |   | 247,205                       |   |  |              | (168,612
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Gross (loss) profit                                                                            |  |        | (9,830  | ) |                       |   | 100,973 |                           |  |   | 25,869                        |   |  |              | (9,718  
|                                                                                               |  |        |         |   |                      
|TEL marketing agreements services                                                              |  |        | (1,697  | ) |                       |   | (2,739  | )                         |  |   | 22,923                        |   |  |              |        
|Intercompany service fee income (expense) from TEL marketing agreements                        |  |        | 22,176  |   |                       |   | (137    | )                         |  |   | (22,039                       | ) |  |              |        
|                                                                                               |  |        |         |   |                      
|Selling, general, and administrative expenses                                                  |  |        | 20,502  |   |                       |   | 13,974  |                           |  |   | 18,831                        |   |  |              |        
|Research, development, and testing expenses                                                    |  |        |        |   |                       |   | 29,585  |                           |  |   | 7,559                         |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Operating (loss) profit                                                                        |  |        | (9,853  | ) |                       |   | 54,538  |                           |  |   | 363                           |   |  |              | (9,718  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Interest and financing expenses                                                                |  |        | 19,053  |   |                       |   | 899     |                           |  |   |                              |   |  |              |        
|Other income (expense), net                                                                    |  |        | 360     |   |                       |   | (3,455  | )                         |  |   | 65                            |   |  |              |        
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|(Loss) income from continuing operations before income taxes and equity income of subsidiaries |  |        | (28,546 | ) |                       |   | 50,184  |                           |  |   | 428                           |   |  |              | (9,718  
|Income tax (benefit) expense                                                                   |  |        | (11,706 | ) |                       |   | 19,742  |                           |  |   | 878                           |   |  |              | (3,637  
|Equity income of subsidiaries                                                                  |  |        | 23,911  |   |                       |   |        |                           |  |   |                              |   |  |              | (23,911 
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Income (loss) from continuing operations                                                       |  |        | 7,071   |   |                       |   | 30,442  |                           |  |   | (450                          | ) |  |              | (29,992 
|                                                                                               |  |        |         |   |                      
|Income from operations of discontinued business (net of tax)                                   |  |        | 2,217   |   |                       |   | 1,699   |                           |  |   | 670                           |   |  |              | (2,369  
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Income before cumulative effect of accounting change                                           |  |        | 9,288   |   |                       |   | 32,141  |                           |  |   | 220                           |   |  |              | (32,361 
|                                                                                               |  |        |         |   |                      
|Cumulative effect of accounting change (net of tax)                                            |  |        | (2,505  | ) |                       |   |        |                           |  |   | (853                          | ) |  |              | 853     
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         
|Net income (loss)                                                                              |  | $      | 6,783   |   |                       | $ | 32,141  |                           |  | $ | (633                          | ) |  | $            | (31,508 
|                                                                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |         



18



---

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

September 30, 2003

(in thousands)



|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |           
|---------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | ----------
|ASSETS                                         |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|                                               |  |        |         |   |                      
|Cash and cash equivalents                      |  | $      | 6,908   |   |                       | $ | 6,692   |                           |  | $ | 8,461                         |   |  | $            |          
|Restricted cash                                |  |        | 408     |   |                       |   | 472     |                           |  |   |                              |   |  |              |          
|Trade and other accounts receivable, net       |  |        | 4,426   |   |                       |   | 56,474  |                           |  |   | 60,870                        |   |  |              |          
|Receivable - TEL marketing agreements services |  |        | 1       |   |                       |   | 7,610   |                           |  |   | 3,208                         |   |  |              |          
|Amounts due from affiliated companies          |  |        | 337,155 |   |                       |   | 439,586 |                           |  |   | 41,918                        |   |  |              | (818,659  
|Inventories                                    |  |        | 3,455   |   |                       |   | 69,468  |                           |  |   | 60,345                        |   |  |              | (8,042    
|Deferred income taxes                          |  |        | 4,768   |   |                       |   | 3,406   |                           |  |   | 701                           |   |  |              | 3,085     
|Prepaid expenses                               |  |        | 3,793   |   |                       |   | 595     |                           |  |   | 1,454                         |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total current assets                           |  |        | 360,914 |   |                       |   | 584,303 |                           |  |   | 176,957                       |   |  |              | (823,616  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Amounts due from affiliated companies          |  |        | 23,084  |   |                       |   |        |                           |  |   |                              |   |  |              | (23,084   
|                                               |  |        |         |   |                      
|Property, plant and equipment, at cost         |  |        | 228,693 |   |                       |   | 454,702 |                           |  |   | 58,474                        |   |  |              |          
|Less accumulated depreciation & amortization   |  |        | 159,450 |   |                       |   | 351,465 |                           |  |   | 55,272                        |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Net property, plant and equipment              |  |        | 69,243  |   |                       |   | 103,237 |                           |  |   | 3,202                         |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Investment in consolidated subsidiaries        |  |        | 433,507 |   |                       |   |        |                           |  |   |                              |   |  |              | (433,507  
|Prepaid pension cost                           |  |        | 18,999  |   |                       |   | 1,588   |                           |  |   | 6,049                         |   |  |              |          
|Deferred income taxes                          |  |        | 14,908  |   |                       |   | (8,218  | )                         |  |   | 2,751                         |   |  |              |          
|Other assets and deferred charges              |  |        | 32,868  |   |                       |   | 40,002  |                           |  |   | 6,112                         |   |  |              |          
|Intangibles-net of amortization                |  |        | 1,711   |   |                       |   | 61,135  |                           |  |   | 2,309                         |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total assets                                   |  | $      | 955,234 |   |                       | $ | 782,047 |                           |  | $ | 197,380                       |   |  | $            | (1,280,207
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|                                               |  |        |         |   |                      
|LIABILITIES AND SHAREHOLDERS EQUITY           |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|                                               |  |        |         |   |                      
|Accounts payable                               |  | $      | 1,639   |   |                       | $ | 32,108  |                           |  | $ | 18,016                        |   |  | $            |          
|Accrued expenses                               |  |        | 23,574  |   |                       |   | 20,233  |                           |  |   | 5,457                         |   |  |              |          
|Amounts due to affiliated companies            |  |        | 427,649 |   |                       |   | 323,888 |                           |  |   | 67,122                        |   |  |              | (818,659  
|Long-term debt, current portion                |  |        | 6,948   |   |                       |   | 555     |                           |  |   |                              |   |  |              |          
|Income taxes payable                           |  |        | 4,811   |   |                       |   | 9,881   |                           |  |   | 1,266                         |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total current liabilities                      |  |        | 464,621 |   |                       |   | 386,665 |                           |  |   | 91,861                        |   |  |              | (818,659  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Long-term debt                                 |  |        | 209,927 |   |                       |   | 4,593   |                           |  |   |                              |   |  |              |          
|Amounts due to affiliated companies            |  |        |        |   |                       |   | 23,084  |                           |  |   |                              |   |  |              | (23,084   
|Other noncurrent liabilities                   |  |        | 89,488  |   |                       |   | 8,104   |                           |  |   | 26,656                        |   |  |              |          
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total liabilities                              |  |        | 764,036 |   |                       |   | 422,446 |                           |  |   | 118,517                       |   |  |              | (841,743  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Shareholders equity:                          |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Common stock                                   |  |        | 16,761  |   |                       |   | 32,268  |                           |  |   | 35,498                        |   |  |              | (67,766   
|Additional paid-in capital                     |  |        | 67,007  |   |                       |   | 240,320 |                           |  |   | 5,793                         |   |  |              | (246,113  
|Accumulated other comprehensive loss           |  |        | (23,821 | ) |                       |   | (11,924 | )                         |  |   | (8,270                        | ) |  |              | 20,194    
|Retained earnings                              |  |        | 131,251 |   |                       |   | 98,937  |                           |  |   | 45,842                        |   |  |              | (144,779  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total shareholders equity                     |  |        | 191,198 |   |                       |   | 359,601 |                           |  |   | 78,863                        |   |  |              | (438,464  
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           
|Total liabilities and shareholders equity     |  | $      | 955,234 |   |                       | $ | 782,047 |                           |  | $ | 197,380                       |   |  | $            | (1,280,207
|                                               |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |           



19



---

Ethyl Corporation and Subsidiaries

Consolidating Balance Sheets

December 31, 2002

(in thousands)



|                                               |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | 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 Nine Months Ended
September 30, 2003

(in thousands)



|                                                    |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |       
|--------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | ------
|Cash provided from (used in) operating activities   |  | $      | 50,746   |   |                       | $ | 21,293  |                           |  | $ | (14,510                       | ) |  | $            |      
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Cash flows from investing activities                |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Capital expenditures                                |  |        | (1,416   | ) |                       |   | (5,309  | )                         |  |   | (511                          | ) |  |              |      
|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  | )                         |  |   |                              |   |  |              |      
|Increase in intercompany loans                      |  |        | 7,397    |   |                       |   |        |                           |  |   | 2,500                         |   |  |              | (9,897
|Other, net                                          |  |        | 174      |   |                       |   |        |                           |  |   |                              |   |  |              |      
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Cash provided from (used in) investing activities   |  |        | 35,425   |   |                       |   | (8,509  | )                         |  |   | 13,065                        |   |  |              | (9,897
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Cash flows from financing activities                |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Repayments of debt                                  |  |        | (284,519 | ) |                       |   |        |                           |  |   |                              |   |  |              |      
|Issuance of senior notes and term loan              |  |        | 265,000  |   |                       |   |        |                           |  |   |                              |   |  |              |      
|Repayments on term loan                             |  |        | (48,124  | ) |                       |   |        |                           |  |   |                              |   |  |              |      
|Repayment of intercompany notes payable             |  |        |         |   |                       |   | (13,097 | )                         |  |   |                              |   |  |              | 13,097
|Financing from parent                               |  |        |         |   |                       |   | 3,200   |                           |  |   |                              |   |  |              | (3,200
|Debt issuance costs                                 |  |        | (13,299  | ) |                       |   |        |                           |  |   |                              |   |  |              |      
|Other, net                                          |  |        | 313      |   |                       |   | (401    | )                         |  |   |                              |   |  |              |      
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Cash (used in) provided from financing activities   |  |        | (80,629  | ) |                       |   | (10,298 | )                         |  |   |                              |   |  |              | 9,897 
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Increase (decrease) in cash and cash equivalents    |  |        | 5,542    |   |                       |   | 2,486   |                           |  |   | (1,445                        | ) |  |              |      
|Cash and cash equivalents at beginning of year      |  |        | 1,366    |   |                       |   | 4,206   |                           |  |   | 9,906                         |   |  |              |      
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       
|Cash and cash equivalents at end of period          |  | $      | 6,908    |   |                       | $ | 6,692   |                           |  | $ | 8,461                         |   |  | $            |      
|                                                    |  |        |          |   |                       |   |         |                           |  |   |                               |   |  |              |       



21



---

Ethyl Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended
September 30, 2002



|                                                  |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | TotalConsolidatingAdjustments |   |  | Consolidated |        
|------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----------------------------- | - |  | ------------ | -------
|Cash provided from operating activities           |  | $      | 42,031  |   |                       | $ | 11,746  |                           |  | $ | 1,564                         |   |  | $            |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash flows from investing activities              |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Capital expenditures                              |  |        | (4,117  | ) |                       |   | (5,763  | )                         |  |   | (410                          | ) |  |              |       
|Prepayment for TEL marketing agreements services  |  |        |        |   |                       |   | (12,800 | )                         |  |   |                              |   |  |              |       
|Increase in intercompany loans                    |  |        | (7,223  | ) |                       |   |        |                           |  |   |                              |   |  |              | 7,223  
|Cash dividends from subsidiaries                  |  |        | 4,405   |   |                       |   |        |                           |  |   |                              |   |  |              | (4,405 
|Other, net                                        |  |        | 25      |   |                       |   |        |                           |  |   |                              |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash used in investing activities                 |  |        | (6,910  | ) |                       |   | (18,563 | )                         |  |   | (410                          | ) |  |              | 2,818  
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash flows from financing activities              |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Repayments of debt                                |  |        | (58,640 | ) |                       |   |        |                           |  |   |                              |   |  |              |       
|Net borrowings                                    |  |        | 31,840  |   |                       |   |        |                           |  |   |                              |   |  |              |       
|Repayment of intercompany notes payable           |  |        |        |   |                       |   | (5,577  | )                         |  |   |                              |   |  |              | 5,577  
|Financing from parent                             |  |        |        |   |                       |   | 12,800  |                           |  |   |                              |   |  |              | (12,800
|Debt issuance costs                               |  |        | (1,982  | ) |                       |   |        |                           |  |   |                              |   |  |              |       
|Cash dividends paid                               |  |        |        |   |                       |   |        |                           |  |   | (4,405                        | ) |  |              | 4,405  
|Other, net                                        |  |        |        |   |                       |   | (368    | )                         |  |   |                              |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash (used in) provided from financing activities |  |        | (28,782 | ) |                       |   | 6,855   |                           |  |   | (4,405                        | ) |  |              | (2,818 
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Increase (decrease) in cash and cash equivalents  |  |        | 6,339   |   |                       |   | 38      |                           |  |   | (3,251                        | ) |  |              |       
|Cash and cash equivalents at beginning of year    |  |        | (4,476  | ) |                       |   | 5,759   |                           |  |   | 11,099                        |   |  |              |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        
|Cash and cash equivalents at end of period        |  | $      | 1,863   |   |                       | $ | 5,797   |                           |  | $ | 7,848                         |   |  | $            |       
|                                                  |  |        |         |   |                       |   |         |                           |  |   |                               |   |  |              |        



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



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



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



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



Results of Operations



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



23



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Net Sales



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



Net Sales by Segment

(in millions)



|                       |  | Three Months EndedSeptember 30 |       | Nine Months EndedSeptember 30
|---------------------- |  | ------------------------------ | ----- | -----------------------------
|                       |  | 2003                           |       | 2002                         
|Petroleum additives    |  | $                              | 194.1 |                              
|Tetraethyl lead        |  |                                | 3.0   |                              
|                       |  |                                |       |                              
|Consolidated net sales |  | $                              | 197.1 |                              
|                       |  |                                |       |                              



Petroleum Additives
Segment



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



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



Tetraethyl Lead Segment



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



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



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 EndedSeptember 30 |      | Nine Months EndedSeptember 30 |  
|--------------------------------------------- |  | ------------------------------ | ---- | ----------------------------- | -
|                                              |  | 2003                           |      | 2002                          |  
|Petroleum additives before nonrecurring items |  | $                              | 19.2 |                               | $
|Nonrecurring items                            |  |                                |     |                               |  
|                                              |  |                                |      |                               |  
|Total petroleum additives                     |  |                                | 19.2 |                               |  
|Tetraethyl lead before nonrecurring items     |  |                                | 9.4  |                               |  
|Nonrecurring items                            |  |                                |     |                               |  
|                                              |  |                                |      |                               |  
|Total tetraethyl lead                         |  |                                | 9.4  |                               |  
|                                              |  |                                |      |                               |  
|Segment operating profit                      |  | $                              | 28.6 |                               | $
|                                              |  |                                |      |                               |  



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



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



Petroleum Additives Segment



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



25



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



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



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



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



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



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



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



26



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



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



TEL Segment



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



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



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



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



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



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



Interest and Financing Expenses



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



27



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



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



Other Income (Expense), Net



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



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



Income Taxes



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



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



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



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



Discontinued Operations



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



28



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



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



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



Cumulative Effect of Accounting Changes



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



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



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



Net Income



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



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



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



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



29



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|                                                                  |  | Three MonthsEndedSeptember 30 |      | Nine MonthsEnded September 30 |  
|----------------------------------------------------------------- |  | ----------------------------- | ---- | ----------------------------- | -
|                                                                  |  | 2003                          |      | 2002                          |  
|Net income:                                                       |  |                               |      |                               |  
|Earnings excluding discontinued operations and nonrecurring items |  | $                             | 10.3 |                               | $
|Discontinued operations                                           |  |                               |     |                               |  
|Nonrecurring items (a)                                            |  |                               |     |                               |  
|                                                                  |  |                               |      |                               |  
|Net income                                                        |  | $                             | 10.3 |                               | $
|                                                                  |  |                               |      |                               |  
|Basic earnings per share (b):                                     |  |                               |      |                               |  
|Earnings excluding discontinued operations and nonrecurring items |  | $                             | 0.61 |                               | $
|Discontinued operations                                           |  |                               |     |                               |  
|Nonrecurring items (a)                                            |  |                               |     |                               |  
|                                                                  |  |                               |      |                               |  
|Net income                                                        |  | $                             | 0.61 |                               | $
|                                                                  |  |                               |      |                               |  
|(a) Nonrecurring items after income taxes:                        |  |                               |      |                               |  
|SFAS No. 143 - gain on implementation                             |  | $                             |     |                               | $
|SFAS No. 142 - impairment of goodwill                             |  |                               |     |                               |  
|Loss on impairments of nonoperating assets                        |  |                               |     |                               |  
|Engine oil additives rationalization                              |  |                               |     |                               |  
|                                                                  |  |                               |      |                               |  
|                                                                  |  | $                             |     |                               | $
|                                                                  |  |                               |      |                               |  



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



Cash Flows, Financial Condition, and Liquidity



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



30



---

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



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



Senior Notes



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



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



The senior notes and the subsidiary
guarantees rank:



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



| |  |  | equal in right of payment with any of our and the guarantors existing and future unsecured senior indebtedness; and
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | senior in right of payment to any of our and the guarantors existing and future subordinated indebtedness.
| | - |  | -----------------------------------------------------------------------------------------------------------



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



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | create liens;
| | - |  | -------------



31



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| |  |  | pay dividends or repurchase capital stock;
| | - |  | ------------------------------------------



| |  |  | make certain investments;
| | - |  | -------------------------



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



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



Senior Credit Facility



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



The senior
credit facility requires mandatory prepayments of:



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



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



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



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



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



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



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



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



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



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



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



* * *



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



32



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



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



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



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



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



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



Reverse Stock Split



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



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



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



33



---

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



Critical Accounting Policies



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



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



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



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



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



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



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



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



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



Recently Issued Accounting Standards



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



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



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Other Matters



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



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



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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 2002 Annual Report, except for interest rate risk, which is
discussed below.



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



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



|ITEM 4. | Controls and Procedures
|------- | -----------------------



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



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



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



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



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



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



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



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PART II  Other Information



|ITEM | 1. Legal Proceedings
|---- | --------------------



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



|ITEM 2. | Changes in Securities and Use of Proceeds
|------- | -----------------------------------------



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



|ITEM 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



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



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| | (b) | Current Reports on Form 8-K
| | --- | ---------------------------



| | (i) | Dated August 5, 2003, reporting under Item 12, Results of Operations and Financial Condition, a press release announcing the Companys earnings for the second
quarter ended June 30, 2003.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  | ETHYL CORPORATION             
|---------------------- |  | ------------------------------
|                       |  | (Registrant)                  
|                       | 
|Date: November 5, 2003 |  | By: /s/    D. A. Fiorenza     
|                       |  | David A. Fiorenza             
|                       |  | Vice President and            
|                       |  | Treasurer                     
|                       |  | (Principal Financial Officer) 
|                       | 
|Date: November 5, 2003 |  | By: /s/    Wayne C. Drinkwater
|                       |  | Wayne C. Drinkwater           
|                       |  | Controller                    
|                       |  | (Principal Accounting Officer)



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EXHIBIT INDEX



|Exhibit 31(a) |  | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Thomas E.
Gottwald.
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              | 
|Exhibit 31(b) |  | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David A.
Fiorenza. 
|              | 
|Exhibit 32(a) |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald.                                  
|              | 
|Exhibit 32(b) |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza.                                   



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