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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

Commission file number 1-13879

OCTEL CORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 011-44-161-498-8889

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 Securities Exchange Act of 1934).    Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the close of the period covered by this report.

TABLE OF CONTENTS

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CAUTIONARY STATEMENT RELATIVE TO FORWARD-LOOKING STATEMENTS

Certain written and oral statements made by our Company and subsidiaries or with the approval of an authorized executive officer of our Company, including statements made in the Management’s Discussion and Analysis of Financial Condition and Results of Operations or elsewhere in this report and in other filings with the Securities and Exchange Commission, may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Generally, the words “believe”, “expect”, “intend”, “estimate”, “project”, “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements which address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to volume growth, share of sales or earnings per share growth, and statements expressing general optimism about future operating results—are forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. As and when made, management believes that these forward-looking statements are reasonable. However, caution should be taken not to place undue reliance on such forward-looking statements since such statements speak only as of the date when made. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from our expectations. Among the risk factors which could cause actual results to differ materially from expectations are the risks and uncertainties discussed in the annual report on Form 10-K for the year ended December 31, 2004 and those described from time to time in the Company’s other filings with the SEC. These include, without limitation, the timing of orders received from customers, the gain or loss of significant customers, the effects of changing government regulations and economic and market conditions, competition from other manufacturers and changes in the demand for our products, including the rate of decline in demand for TEL, and business and legal risks inherent in non-US activities, including political and economic uncertainty, import and export limitations and market risks related to changes in interest rates and foreign exchange rates, successful completion of planned disposals, the impact of changes in senior management, government investigations and material fines or other penalties resulting from its voluntary disclosure to OFAC, and the existence and impact of any deficiencies or material weaknesses or remedial actions taken by the Company in respect of a potential violation of the Code of Ethics by the former Chief Executive Officer which may have resulted in a potential violation of certain laws and regulations by the former Chief Executive Officer and the Company, and compliance with Section 404 of the Sarbanes-Oxley Act of 2002. In addition, increases in the cost of product, changes in the market in general and significant changes in new product introduction could result in actual results varying from expectations. Should one or more of these risks materialize (or the consequences of such developments worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I    FINANCIAL INFORMATION

ITEM 1    Financial Statements

OCTEL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying footnotes are an integral part of these unaudited interim consolidated financial statements.

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OCTEL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

The accompanying footnotes are an integral part of these unaudited interim consolidated financial statements.

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OCTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

The accompanying footnotes are an integral part of these unaudited interim consolidated financial statements.

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OCTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying footnotes are an integral part of these unaudited interim consolidated financial statements.

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OCTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Total comprehensive income for the three months ended March 31:

The accompanying footnotes are an integral part of these unaudited interim consolidated financial statements.

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flows.

It is our opinion, however, that all material adjustments (consisting of normal recurring accruals) have been made which are necessary for a fair financial statement presentation. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K filed on March 31, 2005.

The results for the interim period are not necessarily indicative of the results to be expected for the full year.

We have reclassified the 2004 income statement where necessary to disclose separately the prior year results of discontinued operations (note 10).

NOTE 2—STOCKHOLDERS’ EQUITY AND STOCK OPTIONS

At March 31, 2005, we had authorized common stock of 40,000,000 shares (December 31, 2004—40,000,000). Issued shares at March 31, 2005, were 14,777,250 (December 31, 2004—14,777,250) and treasury stock amounted to 2,335,641 shares (December 31, 2004—2,439,737).

Movements in stock options in the first quarter, 2005 were as follows:

The weighted average prices of options exercised and cancelled in the quarter were $9.03 and $15.19, respectively. The weighted average exercise price of options granted in the quarter was $10.25. The weighted average fair value of options granted in the quarter was $12.47.

The following table summarizes the effect on net income and earnings per share had we recorded compensation expense consistently with the method prescribed by FAS 123:

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The fair value of options was calculated using the Black-Scholes model with the following assumptions:

NOTE 3—EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding during the period, while diluted earnings per share includes the effect of options and restricted stock that are dilutive and outstanding during the period. Per share amounts are computed as follows:

In the first quarter, 2005, 1,069,275 options were anti-dilutive and have been excluded from the calculation of the diluted earnings per share (2004—nil).

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 4—PENSION PLANS

The Company maintains a contributory defined benefit pension plan covering substantially all UK employees. The components of the net periodic benefit for the three months ended March 31, 2005 were as follows:

The Company expects to make contributions of approximately $4.6 million to its defined benefit pension plan in 2005. As of the three months ended March 31, 2005, contributions of $1.1 million have been made. Further contributions of $3.5 million are expected throughout the remainder of the year.

NOTE 5—SEGMENTAL REPORTING

The Company presently has one dominant industry segment, petroleum additives. The Company has three businesses for management and reporting purposes: TEL, Petroleum Specialties and Performance Chemicals.

This segmentation basis is consistent with the 2004 Annual Report to Shareholders.

The following table presents a summary of the Company’s reportable segments for the three months ended March 31, 2005 and 2004:

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 6—GOODWILL

Goodwill comprises the following:

Acquisitions

On January 14, 2005, the Company acquired a 100% interest in Finetex, Inc. (Finetex) for consideration of $20.9 million. The Company purchased 234 common shares which were valued at $17.4 million. The balance of the funds was used to separately acquire the two properties on which the business operates and to pay costs of the acquisition. Finetex is a manufacturer and supplier of specialty surfactants and emollients to the personal care, cosmetics and other industrial markets. The results of Finetex have been consolidated since the acquisition date and have been reported in the Performance Chemicals business segment. During this time Finetex has contributed $4.3 million of net sales and $0.2 million to consolidated net income ($0.02 basic earnings per share). Based on a provisional assessment of the fair values of the assets acquired, goodwill of $4.2 million arose.

Impairment of TEL business goodwill

The principal product of the TEL business segment is lead alkyl antiknock compound (TEL) which is used in leaded gasoline. Due to the legislation enacted in the USA and other countries there has been a trend away from the use of leaded gasoline which has resulted in a decline in the demand for TEL in the world market.

The Company expects to recognize an impairment charge in each successive year over the remaining life of the TEL business. The charge is non-cash in nature and has no impact on taxation. A total charge for impairment of $40.7 million was recognized in the income statement. Based on the latest review for the first quarter of 2005, a charge of $14.8 million was recognized for the three months ended March 31, 2005 (2004—$3.4 million).

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 7—INTANGIBLE ASSETS

In the quarter the Company acquired intangible assets valued at $7.1 million in relation to the acquisition of Finetex and $0.1 million related to software. $4.2 million related to the value of the customer relationships and $2.9 million related to the value of the patents. A charge of $2.5 million was recognized in the first quarter of both 2005 and 2004 in relation to the amortization of the Veritel intangible asset. The remaining $0.7 million charge recognized in the first quarter of 2005 relates to the amortization of intangible assets acquired in the acquisition of the remaining 50% of the shares of Octel Starreon LLC, Aroma & Fine Chemicals Limited and Finetex.

NOTE 8—PLANT CLOSURE PROVISIONS

The liability for estimated closure costs of Octel’s TEL manufacturing facilities includes costs for personnel reductions (severance) and decontamination and environmental remediation activities (remediation) as demand for TEL continues to diminish. The restructuring provision also includes provisions for the costs of reducing Specialty Chemicals production, selling and administrative costs. Costs related to the restructuring program are analyzed separately.

Movements in the provisions for the period are set out below:

Amounts due within one year refer to provisions where expenditure is expected to arise within one year after the balance sheet date. Severance charges are recognized in the income statement as restructuring costs. Remediation costs are recognized in cost of goods sold.

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Severance and other restructuring

The costs of restructuring in the first quarter mainly relate to UK costs of severance on the Ellesmere Port manufacturing site ($0.4 million) and the costs of closure of the Adastra business ($2.0 million). This has resulted in the loss of 13 jobs in the UK and a total cost of closure of $2.0 million including write-offs of both inventory and plant ($1.6 million) and severance payments ($0.4 million).

All restructuring amounts provided are expected to crystallize as cash expenditure within one year. The remaining provision at March 31, 2005 relates to amounts payable to 64 current or former UK employees who had contracted to leave the Company by September 30, 2004, 16 employees in the Company’s European sites and 4 employees in the USA.

Remediation

The remediation charge of $0.4 million relates to the accretion expense required following the adoption of FAS 143 on January 1, 2003.

NOTE 9—DEBT

Our principal credit facility was agreed in January 2004 and comprised a term loan of $100 million and an additional revolving credit facility of $50 million. Both of these facilities expire on July 30, 2007. The original term loan was fully drawn down on agreement in January 2004. $30 million of the term loan was repaid on schedule on January 30, 2005, leaving a balance of $70 million as at March 31, 2005. This revolving credit facility was agreed with a syndicate of banks on January 30, 2004 and was amended on August 31, 2004. As a result of this amendment the revolving credit facility increased from $50 million to $110 million. At December 31, 2004 $19 million of the revolving facility was drawn down. A further $51 million of the revolving credit facility has been drawn down in the three months to March 31, 2005 leaving an outstanding balance on this facility of $70 million. This credit facility contains terms which, if breached, would result in the loan becoming repayable on demand. It requires, among other matters, compliance with certain financial ratio covenants, specifically a ratio of net debt to EBITDA (a non US GAAP measure that represents liquidity) and a ratio of net interest expense to EBITA (another non US GAAP measure). Management does not believe the Company will breach these covenants in 2005.

On acquisition of Aroma & Fine Chemicals Limited, on August 26, 2004, the Company issued £2.5 million ($4.7 million) of loan notes to the vendors. These loan notes are due for repayment in two equal tranches in January and September 2006 and are secured by an equivalent amount of restricted cash in escrow.

The debt profile at March 31, 2005, including the principal facility and other group debt, is set out below:

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 10—DISCONTINUED OPERATIONS

On November 15, 2004, the Company disposed of a non-core business, Bycosin Mexico, for consideration of $0.9 million. The loss on disposal was $3.9 million which includes the net income of Bycosin Mexico for 2004 up to the date of disposal of $0.4 million, professional fees of $0.2 million and a tax charge of $0.2 million. The comparative results for the three months ended March 31, 2004, have been restated to include the loss of $0.1 million generated by Bycosin Mexico within discontinued operations.

On March 18, 2004, the Company disposed of its 49% interest in Joss Holdings BV for a cash consideration of $4.2 million. The principal function of this company had been to sell TEL into certain territories and this function has now been taken over by another subsidiary of the Company. A loss after income tax of $1.0 million was recognized on this disposal including a $0.6 million tax charge in the holding company that held the investment. The $4.7 million asset disposed of had previously been shown in other assets on the consolidated balance sheet.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Guarantees

The company and certain of its consolidated subsidiaries were contingently liable at March 31, 2005 for $5.9 million, primarily relating to guarantees of debt of affiliated companies and performance under contracts entered into as a normal business practice. This included guarantees of non-US excise taxes and customs duties.

Under the terms of the guarantee arrangements, generally the company would be required to perform should the affiliated company fail to fulfil its obligations under the arrangements. In some cases, the guarantee arrangements have recourse provisions that would enable the company to recover any payments made under the terms of the guarantees from securities held of the guaranteed parties’ assets.

The company and its affiliates have numerous long-term sales and purchase commitments in their various business activities, which are expected to be fulfilled with no adverse consequences material to the company. The delayed scale down of TEL production has reduced the liability.

On acquisition of Aroma & Fine Chemicals Limited, on August 26, 2004, the Company issued £2.5 million ($4.7 million) of loan notes to the vendors. These loan notes are due for repayment in two equal tranches in January and September 2006 and are secured by an equivalent amount of restricted cash in escrow.

Environmental Liabilities

We record environmental liabilities when they are probable and costs can be estimated reasonably. In addition to the remediation provisions at March 31, 2005, which amounted to $20.3 million, we view the costs of vacating our main UK site, which were estimated at $27.8 million at March 31, 2005, as a contingent liability because we have no present intention to exit the site.

Indemnities and warranties

In connection with the disposal of Octel Waste Management Limited (OWM) on June 23, 2003, the company indemnified the purchaser in respect of the environmental liability arising from the possible historic contamination of their leased site at Ellesmere Port, UK up to a maximum of £2.0 million ($3.8 million). In general, the environmental conditions or events that are subject to this indemnity must have arisen prior to June 23, 2003 and there is no time limit on when claims must be asserted. This potential liability is included in the company’s remediation provision.

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, the company provided certain warranties in respect of the disposal of OWM. The company would be required to perform should the contingent liabilities in respect of the warranties become actual and could be required to make maximum future payments of £3.7 million ($7.0 million).

There are no recourse provisions enabling recovery of any amounts from third parties nor are any assets held as collateral in respect of the indemnity or warranties.

Litigation

Infineum Patents

In April 2002, the Company commenced proceedings in the Patents Court in the UK against Infineum USA L.P. (“Infineum”) for the revocation of the UK equivalent of European Patent No. 0807155 (“155”), European Patent No. 0743972 (“972”) and European Patent No. 0743974 (“974”).

Octel and Infineum have agreed that the issues between them concerning the validity of certain patents should be determined at the European Patent Office (EPO), and not in the UK courts. Accordingly Octel and Infineum have agreed that the UK proceedings for revocation of the patents and Infineum’s counterclaim for infringement should be stayed while this determination at the European Patent Office takes place.

The EPO revoked Infineum’s patent 974 completely. Infineum has appealed to the EPO’s Board of Appeal. Octel, along with three other respondents, BASF, Clariant and Ethyl, will make representations to the Board of Appeal. It is unlikely that the appeal will be heard in 2005.

With regard to Infineum’s patents 155 and 972, all “composition” claims were revoked. Certain “use” claims were permitted. All five parties (Infineum and the respondents, Octel, BASF, Clariant and Ethyl) have appealed. The 972 appeal is scheduled to be heard in August 2005. All four parties (Infineum, Octel, Clariant and Ethyl) have appealed the 155 patent decision. This appeal is unlikely to be heard in 2005.

In addition Octel have opposed the following Infineum patents in the EPO:

Octel commenced opposition proceedings in the EPO on January 7, 2005, against Rhodia’s patent European Patent No. 1090211. Infineum have opposed Octel’s diesel particulate fuel patent, European Patent No. 1047755.

Bycosin Disposal

Given the international scope of its operations, the Company is subject to laws of many different jurisdictions, including laws relating to the imposition of restrictions on trade and investment with various entities, persons and countries, some of which laws are conflicting. In 2004 the Company reviewed, as it does periodically, aspects of its operations in respect of such restrictions, and determined to dispose of certain non-core, non-US subsidiaries of Bycosin AB which had been engaged, since prior to the acquisition in 2001 of Bycosin AB by the Company, in transactions and activities, including the sale of certain fuel additives, with entities and persons that are in or associated with Cuba. Consequently, on November 15, 2004, Bycosin AB, a wholly-owned subsidiary of the Company organized under the laws of Sweden (now known as Octel Sweden AB, the “Seller”), entered into a Business and Asset Purchase Agreement (the “Agreement”) with Pesdo

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OCTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Swedcap Holdings AB (the “Purchaser”), Håkan Byström and others as the Purchaser’s guarantors, and Octel Petroleum Specialties Limited as the Seller’s guarantor, and completed the all-cash transaction contemplated thereby (together with related transactions, the “Transaction”). The Agreement provided for, among other things: (i) the disposal of certain non-core Petroleum Specialties businesses and related manufacturing and other assets of the Seller; and (ii) the supply and distribution of certain power products to certain geographic regions. The net consideration paid by the Purchaser was approximately $2.9 million.

Following completion of the Transaction, the Company made a voluntary disclosure to the U.S. Office of Foreign Assets Control (OFAC) regarding such transactions and activities engaged in by certain non-core non-US subsidiaries of the Seller. The Company has conducted an internal review of such transactions and activities and has disclosed to OFAC the results of such review. Recently, OFAC requested certain limited additional information and we expect to respond in due course. The Company intends to cooperate with OFAC. While the Company believes that it is no longer engaged in business with certain entities, persons and countries that are subject to restrictions and sanctions under U.S. trade laws and regulations and that it has taken appropriate steps to achieve compliance with applicable U.S. laws and regulations relating to trade and investment, if the Company or its subsidiaries (current or former) were found not to have complied with such laws or regulations, or any other applicable laws or regulations, including those of jurisdictions the laws of which are conflicting, the Company or its subsidiaries could be subject to fines or other civil or criminal penalties which could be material.

United Color Manufacturing

On April 20, 2004, United Color Manufacturing filed a claim for damages and injunctive relief under the federal Lanham Act and Pennsylvania common law alleging false advertising by Octel Starreon concerning Octel Starreon’s Oil Red B Dyes. Octel Starreon’s management is pursuing and responding to this litigation vigorously, working closely with its legal representation to contest and defend the allegations of the Complaint. Although Octel Starreon views these claims as legally and factually unfounded, the Company has taken affirmative action to limit and cap prospective impact on the Company’s business and monetary exposure, if any. The litigation is in the discovery phase, and there have been no rulings from the Court at this time as to the merits of the claims or defenses.

NOTE 12—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2005, the SEC approved a new rule that delays the effective date of FASB Statement no. 123 (R) Share Based Payment. This standard is now effective for public companies for annual periods that begin after June 15, 2005. In the light of this announcement the Company has decided to delay its adoption of this standard until 2006.

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This discussion should be read in conjunction with our unaudited interim consolidated financial Statements and the notes thereto, included elsewhere herein.

FACTORS AFFECTING OUR RESULTS

TEL Goodwill Impairment

At the end of each of the quarters of 2004, the Company performed an impairment test to establish whether the current book value of the goodwill attached to the TEL business could be supported by the anticipated future discounted after-tax cash flows of that business. As the analysis showed that the current book value exceeded the future cash flows, the implied fair value of the goodwill was calculated by deducting the fair value of assets directly associated with the TEL business from the net present value (NPV) of the cash flows. This resulted in an impairment charge of $40.7 million being recognized for the full year. Having repeated the calculation at the end of the first quarter of 2005 the Company has recognized a further charge of $14.8 million for the three months to March 31, 2005. This calculation will be repeated each quarter because our current demand and cash flow forecasts show that impairment will continue gradually over the remaining life of the TEL business. The Company expects to recognize an impairment charge of approximately $60.0 million in 2005 but this will be heavily dependent on the exact timing of cash flows and developments in the demand forecast for TEL.

Acquisition of Finetex, Inc.

On January 14, 2005 the Company completed the acquisition of Finetex, Inc. (Finetex) for total consideration of $20.9 million. Finetex is a manufacturer and supplier of specialty surfactants and emollients to the personal care, cosmetics and other industrial markets and is based in New Jersey, USA and North Carolina, USA. The results of Finetex for the period from the date of acquisition to March 31, 2005 are consolidated in the Performance Chemicals business segment. The acquisition was financed by a drawdown of the Revolving Credit Facility.

Resignation of Dennis Kerrison

A special investigation relating to a transaction between the Chief Executive Officer and the Associated Octel Company (South Africa) (Pty) Limited, a wholly owned indirect subsidiary of the Company, by members of the Company’s Audit Committee and the Company’s Corporate Governance and Nominating Committee (the “Special Committee”) was recently completed. As a result of the investigation, the Board of Directors and Mr. Kerrison agreed on Mr. Kerrison’s resignation from the Board and from the positions of Chief Executive Officer and President of the Company effective April 15, 2005. Mr. Kerrison will not seek re-election to the Board of the Company. Mr. Kerrison will however remain available to the Board as an advisor until April 2007.

The terms of Mr. Kerrison’s resignation are governed by an agreement between the Company and Mr. Kerrison dated April 8, 2005 (the Agreement). Under the Agreement, Mr. Kerrison will receive his salary and bonus for the period up to and including December 31, 2005 and thereafter until April 2007 he will receive his salary and a discretionary bonus. Mr. Kerrison will have twelve months from the date of resignation to exercise any options due to him under the Octel Corp. Performance Related Share Option Plan and the Octel Corp. Company Share Option Plan and will receive a proportion of the matching shares under the Co Investment Plan. Mr. Kerrison has no other outstanding options. Mr. Kerrison will serve as an advisor to the Board until 2007, but has resigned from any positions he holds as Chief Executive Officer, President, Board member or trustee of the Company or its affiliates.

Paul Jennings, Executive Vice President and Chief Financial Officer, is currently exercising the administrative and authorization responsibilities of the Chief Executive Officer while a formal search for a new Chief Executive Officer is conducted.

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The costs of the special investigation of $0.8 million have been recognized in the financial results of the first quarter. However the costs of the Agreement have not been recognized in the results of the first quarter as it was not signed until April 11, 2005. A cost of approximately $3.9 million will be recognized in the financial results of the second quarter of 2005 for the salary and other emoluments of Mr. Kerrison.

Closure of Octel Exhaust Systems Ltd. (Adastra)

Following a decision made on March 23, 2005 on April 7, 2005 the Company announced the closure of the Octel Exhaust Systems Ltd. (Adastra) business. This business was engaged in manufacturing systems to remove particulate matter from commercial diesel exhausts. Customers of this product had previously been significantly supported by financial grants from the UK government but the recent removal of these grants has made the business economically non-viable in its current form. For a limited period Octel will continue to engage in the supply of the technology via third party franchise arrangements. This arrangement will be reviewed regularly. The closure has resulted in the loss of 13 jobs in the UK and a total cost of closure of $2.0 million including write-offs of both inventory and plant ($1.6 million) and severance payments ($0.4 million).

Market Uncertainty

Recent developments in one of our major markets have indicated that there is a possibility that they may exit the TEL market earlier than had been expected. A senior team is currently visiting the country to better understand and discuss the position.

RESULTS OF OPERATIONS

Consolidated Income: