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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

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

OR

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

For Transition Period from                        to                     
For Quarter Ended September 30, 2002   Commission File Number 1-5112

ETHYL CORPORATION
(Exact name of registrant as specified in its charter)

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

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

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

  Yes X   No   

Number of shares of common stock, $1 par value, outstanding as of October 31, 2002: 16,689,009.

Table of Contents

ETHYL CORPORATION
INDEX

  Page
Number
 
PART I. FINANCIAL INFORMATION
  
   
ITEM 1. Financial Statements
  
   
Consolidated Statements of Income - Three Months and Nine Months
Ended September 30, 2002 and 2001
 3
   
Consolidated Balance Sheets - September 30, 2002 and December 31, 2001
 4
   
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001
 5
   
Notes to Financial Statements
 6-11
   
ITEM 2. Management’s Discussion and Analysis of Results of
Operations and Financial Condition
 12-25
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
 25
   
ITEM 4. Controls and Procedures
 25-26
   
PART II. OTHER INFORMATION
  
   
ITEM 6. Exhibits and Reports on Form 8-K
 27
   
SIGNATURES
 28
   
CERTIFICATIONS
 29-32

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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 Ended
September 30		   Nine Months Ended
September 30
 
 
  2002   2001     2002     2001  
 
 
 
 
Net sales
 $ 177,582   $ 166,043     $ 503,642     $ 560,946  
Cost of goods sold
   133,925     139,059       391,152       499,508  
 
 
 
 
Gross profit
   43,657     26,984       112,490       61,438  
TEL marketing agreements services
   8,325     5,916       18,487       25,530  
Selling, general, and administrative expenses
   18,566     16,653       54,376       51,840  
Research, development, and testing expenses
   12,164     12,387       37,753       44,666  
Special items income (expense), net
   -     3,070       -       (113,898 )
 
 
 
 
Operating profit (loss)
   21,252     6,930       38,848       (123,436 )
Interest and financing expenses
   6,352     7,792       19,952       25,769  
Other income (expense), net
   1,390     87       (3,030 )     (308 )
 
 
 
 
Income (loss) before income taxes
   16,290     (775 )     15,866       (149,513 )
Income tax expense (benefit)
   5,423     (1,436 )     6,578       (44,123 )
Income (loss) before cumulative effect of
 
   
   
 
accounting change
   10,867     661       9,288       (105,390 )
Cumulative effect of accounting change for
                            
goodwill write-off (net of $615 tax)
   -     -       (2,505 )     -  
 
 
 
 
Net income (loss)
 $ 10,867   $ 661     $ 6,783     $ (105,390 )
 
 
 
 
Basic and diluted earnings (loss) per share:
                            
Earnings (loss) before cumulative effect of
                            
accounting change
 $ 0.65   $ 0.04     $ 0.56     $ (6.31 )
Cumulative effect of accounting change
                            
for goodwill write-off (net of tax)
   -     -       (0.15 )     -  
 
 
 
 
Basic and diluted earnings (loss) per share
 $ 0.65   $ 0.04     $ 0.41     $ (6.31 )
 
 
 
 
Shares used to compute basic
                            
earnings (loss) per share
   16,689     16,689       16,689       16,689  
 
 
 
 
Shares used to compute diluted
                            
earnings (loss) per share
   16,689     16,689       16,728       16,689  
 
 
 
 
See accompanying notes to financial statements.
                            

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ETHYL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

      September 30
2002		   December 31
        (unaudited)       2001  
     
     
 
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
     $ 15,508     $ 12,382  
Restricted cash
       680       996  
Trade and other accounts receivable, less allowance
                  
for doubtful accounts ($897 - 2002; $889 - 2001)
       132,984       121,261  
Receivable - TEL marketing agreements services
       6,989       16,935  
Inventories:
                  
Finished goods and work-in-process
       96,153       98,995  
Raw materials
       13,015       14,066  
Stores, supplies and other
       7,875       8,397  
     
   
 
        117,043       121,458  
Deferred income taxes and prepaid expenses
       16,901       11,742  
     
   
 
Total current assets
       290,105       284,774  
     
   
 
Property, plant and equipment, at cost
       760,472       760,649  
Less accumulated depreciation and amortization
       557,887       544,892  
     
   
 
Net property, plant and equipment
       202,585       215,757  
     
   
 
Prepaid pension cost
       23,961       25,731  
Other assets and deferred charges
       93,623       114,447  
Goodwill and other intangibles, net of amortization
       71,491       78,916  
     
   
 
Total assets
     $ 681,765     $ 719,625  
     
   
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
     $ 42,697     $ 54,376  
Accrued expenses
       55,812       59,907  
Long-term debt, current portion
       284,993       30,504  
Income taxes payable
       14,263       14,648  
     
   
 
Total current liabilities
       397,765       159,435  
     
   
 
Long-term debt
       23,796       305,453  
Other noncurrent liabilities
       105,152       109,444  
Shareholders’ equity
                  
Common stock ($1 par value)
                  
Issued - 16,689,009 in 2002 and 83,454,650 in 2001
       16,689      
83,455
  
Additional paid-in capital
       66,766      
-
  
Accumulated other comprehensive loss
       (24,194 )     (27,170 )
Retained earnings
       95,791       89,008  
     
   
 
        155,052       145,293  
     
   
 
Total liabilities and shareholders’ equity
     $ 681,765     $ 719,625  
     
   
 

See accompanying notes to financial statements.

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ETHYL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

    Nine Months Ended
    September 30
   
    2002   2001
   
 
                 
Cash and cash equivalents at beginning of year
   $ 12,382     $ 4,470  
   
 
                 
Cash flows from operating activities:
                
Net income (loss)
     6,783       (105,390 )
Adjustments to reconcile net income (loss) to cash flows
                
from operating activities:
                
Depreciation and amortization
     39,763       85,685  
Write-off of goodwill
     3,120       -  
Accrued severance, early retirement, and other
                
engine oil additives rationalization charges
     -       24,874  
Deferred income taxes
     (7,710 )     (93,899 )
Prepaid pension cost
     3,442       (5,149 )
Net loss (gain) on impairments and sale of assets
     4,033       (4,381 )
Pension reversion
     -       130,801  
Loss on pension contract settlements
     -       62,000  
TEL working capital advance
     772       -  
Contract settlement
     2,700       -  
Working capital changes
     (950 )     50,098  
Other, net
     3,388       4,623  
   
 
Cash provided from operating activities
     55,341       149,262  
   
 
                 
Cash flows from investing activities:
                
Capital expenditures
     (10,290 )     (6,620 )
Prepayment for TEL marketing agreements services
     (12,800 )     -  
Proceeds from sale of certain assets
     -       10,873  
Equity investments
     -       (1,250 )
Other, net
     25       114  
   
 
Cash (used in) provided from investing activities
     (23,065 )     3,117  
   
 
                 
Cash flows from financing activities:
                
Repayment of term loans
     (58,640 )     (115,695 )
Net borrowings
     31,840       (15,000 )
Debt issuance costs
     (1,982 )     (8,584 )
Other, net
     (368 )     (346 )
   
 
Cash used in financing activities
     (29,150 )     (139,625 )
   
 
                 
Increase in cash and cash equivalents
     3,126       12,754  
   
 
                 
Cash and cash equivalents at end of period
   $ 15,508     $ 17,224  
   
 

See accompanying notes to financial statements.

5

Table of Contents

ETHYL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. In the opinion of management, the accompanying consolidated financial statements of Ethyl Corporation and Subsidiaries contain all necessary adjustments for the fair presentation of, in all material respects, our consolidated financial position as of September 30, 2002, as well as the consolidated results of operations and the consolidated cash flows for the nine-months ended September 30, 2002 and 2001. The financial statements are subject to normal year-end audit adjustments and do not include the comprehensive footnotes. All adjustments are of a normal, recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2001 Annual Report on Form 10-K. The results of operations for the nine-month period ended September 30, 2002 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.
     
2. 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 annual meeting on June 4, 2002.
     
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 are making cash payments for fractional shares to holders who have 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, the common stock in our Consolidated Balance Sheet as of September 30, 2002 was reduced by approximately $66.8 million, with a corresponding increase in the additional paid-in capital. All per-share amounts have been retroactively adjusted for all periods presented to reflect the 1-for-5 reverse stock split.
     
3. The tables below show our consolidated net sales by segment, operating profit by segment, and reconciliation to income (loss) before income taxes.

6

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Net Sales by Segment
(in millions)

    Three Months Ended   Nine Months Ended
    September 30   September 30
   
 
    2002   2001   2002   2001
   
 
 
 
                         
Petroleum additives
   $ 175.5   $ 164.0   $ 496.8   $ 545.4
Tetraethyl lead
     2.1     2.0     6.8     15.5
   
 
 
 
Consolidated net sales
   $ 177.6   $ 166.0   $ 503.6   $ 560.9
   
 
 
 

Segment Operating Profit
(in millions)

    Three Months Ended   Nine Months Ended
    September 30   September 30
   
 
    2002   2001   2002   2001
   
 
 
 
Petroleum additives before
                                
nonrecurring items
   $ 25.0     $ 6.2     $ 49.0     $ 25.0  
Nonrecurring items
     -         2.9       (1.2 )     (70.6 )
   
 
 
 
Total petroleum additives
     25.0       9.1       47.8       (45.6 )
Tetraethyl lead before
                                
nonrecurring items
     3.1       3.4       10.9       24.0  
Nonrecurring items
     -         -        (1.6 )     -   
   
 
 
 
Total tetraethyl lead
     3.1       3.4       9.3       24.0  
   
 
 
 
Segment operating profit (loss)
     28.1       12.5       57.1       (21.6 )
Add back current year nonrecurring
                                
item to reconcile Segment Reporting
                                
to Consolidated Statements of Income
     -         -        3.1       -   
Corporate unallocated expense
     (3.9 )