SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D.C. 20549

                                  FORM 10-Q

(Mark One)
  /X/           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 2000

                                     OR

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

                       COMMISSION FILE NUMBER 000-29764

                     INTERNATIONAL SPECIALTY PRODUCTS INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


        DELAWARE                                               51-0376469
(State of Incorporation)                                  (I. R. S. Employer
                                                           Identification No.)

 300 DELAWARE AVENUE, SUITE 303, WILMINGTON, DELAWARE            19801
(Address of principal executive offices)                       (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE           (302) 427-5715

     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 / /


     As of November  10,  2000,  66,271,764  shares of  International  Specialty
Products Inc. common stock (par value $.01 per share) were outstanding.












<PAGE>








                         PART I - FINANCIAL INFORMATION
                         ITEM 1 - FINANCIAL STATEMENTS

                     INTERNATIONAL SPECIALTY PRODUCTS INC.

                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>


                                        THIRD QUARTER ENDED    NINE MONTHS ENDED
                                       ---------------------  --------------------
                                       OCTOBER 3,  OCTOBER 1, OCTOBER 3, OCTOBER 1,
                                          1999        2000       1999       2000
                                       ----------  ---------  --------- ----------
<S>                                    <C>         <C>        <C>        <C>
Net sales............................  $ 188,172   $ 195,886  $ 583,003  $ 594,084
Cost of products sold................   (106,855)   (129,680)  (337,664)  (386,080)
Selling, general and administrative..    (37,317)    (38,268)  (116,322)  (116,618)
Gain on sale of assets ..............        -           -        8,541        -
Provision for restructuring and staff
   reduction ........................     (1,473)        -       (1,473)       -
Goodwill amortization................     (4,010)     (4,049)   (12,296)   (12,144)
                                       ---------   ---------  ---------   --------
Operating income.....................     38,517      23,889    123,789     79,242
Interest expense.....................    (19,070)    (21,810)   (58,830)   (62,725)
Gain on contract settlement .........        -           -          -        3,450
Other income, net ...................      4,057      39,451      1,228     48,548
                                        --------   ---------  ---------   --------
Income from continuing operations
  before income taxes................     23,504      41,530     66,187     68,515
Income taxes.........................     (8,249)    (14,566)   (23,231)   (24,020)
                                       ---------   ---------  ---------   --------
Income from continuing operations....     15,255      26,964     42,956     44,495
                                       ---------   ---------  ---------   --------
Discontinued operation (Note 2):
   Income from discontinued operation,
      net of income tax .............        369         -        1,769        -
   Gain on sale of discontinued
      operation,net of income taxes
      of $13,246 ....................     24,491         -       24,491        -
                                       ---------   ---------  ---------   --------
Income from discontinued operation ..     24,860         -       26,260        -
                                       ---------   ---------  ---------   --------
Net income...........................  $  40,115   $  26,964  $  69,216   $ 44,495
                                       =========   =========  =========   ========
</TABLE>











                                       1
<PAGE>





                     INTERNATIONAL SPECIALTY PRODUCTS INC.

          CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)- (CONTINUED)
                     (THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                       THIRD QUARTER ENDED    NINE MONTHS ENDED
                                      ---------------------  --------------------
                                      OCTOBER 3,  OCTOBER 1, OCTOBER 3, OCTOBER 1,
                                         1999        2000       1999       2000
                                      ----------  ---------  --------- ----------
<S>                                    <C>         <C>        <C>         <C>
Earnings per common share:
  Basic:
    Continuing operations............  $     .23   $    .40   $     .63   $   .65
    Discontinued operation...........        .36          -         .38         -
                                       ---------   --------   ---------   -------
    Net income.......................  $     .59   $    .40     $  1.01   $   .65
                                       =========   ========   =========   =======
  Diluted:
    Continuing operations............  $     .23   $    .40     $   .63   $   .65
    Discontinued operation...........        .36          -         .38         -
                                       ---------   --------   ---------   -------
    Net income.......................  $     .59   $    .40   $    1.01   $   .65
                                       =========   ========   =========   =======
 Weighted average number of common
   and common equivalent shares
   outstanding:

  Basic..............................     68,341      67,951     68,470     68,518
                                       =========   =========   ========   ========
  Diluted............................     68,522      67,951     68,644     68,518
                                       =========   =========   ========   ========
</TABLE>



















The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.



                                       2
<PAGE>


                     INTERNATIONAL SPECIALTY PRODUCTS INC.

                          CONSOLIDATED BALANCE SHEETS
                                                                    OCTOBER 1,
                                                  DECEMBER 31,         2000
                                                      1999         (UNAUDITED)
                                                  ------------     -----------
                                                           (THOUSANDS)
ASSETS
Current Assets:
  Cash and cash equivalents ..................... $   23,309       $  15,419
  Investments in trading securities..............     10,395           7,092
  Investments in available-for-sale securities...    344,905         493,901
  Other short-term investments...................     41,900          52,049
  Accounts receivable, trade, net................     82,201          94,415
  Accounts receivable, other.....................     23,410          23,742
  Receivable from related parties, net...........     16,901          18,238
  Inventories....................................    151,775         148,757
  Other current assets...........................     20,569          22,448
                                                  ----------      ----------
     Total Current Assets........................    715,365         876,061
Property, plant and equipment, net...............    570,218         568,581
Goodwill, net....................................    510,578         498,434
Other assets.....................................     39,147          33,556
                                                  ----------      ----------
Total Assets..................................... $1,835,308      $1,976,632
                                                  ==========      ==========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt................................ $   82,531      $   88,297
  Current maturities of long-term debt...........     38,543         325,213
  Accounts payable...............................     63,852          63,965
  Accrued liabilities............................     86,350          84,669
  Income taxes...................................      6,006          12,204
                                                  ----------      ----------
    Total Current Liabilities....................    277,282         574,348
                                                  ----------      ----------
Long-term debt less current maturities...........    820,141         524,908
                                                  ----------      ----------
Deferred income taxes............................     89,796         135,771
                                                  ----------      ----------
Other liabilities................................     60,828          59,945
                                                  ----------      ----------
Stockholders' Equity:
  Preferred stock, $.01 par value per share;
    20,000,000 shares authorized:
    no shares issued.............................       -               -
  Common stock, $.01 par value per share;
    300,000,000 shares authorized:  69,546,456
    shares issued ...............................        695             695
  Additional paid-in capital.....................    486,137         485,946
  Treasury stock, at cost - 754,199 and
    2,096,692 shares, respectively.................   (7,344)        (14,428)
  Retained earnings..............................    119,822         164,317
  Accumulated other comprehensive income(loss)...    (12,049)         45,130
                                                  ----------      ----------
    Total Stockholders' Equity...................    587,261         681,660
                                                  ----------      ----------
Total Liabilities and Stockholders' Equity....... $1,835,308      $l,976,632
                                                  ==========      ==========


The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.



                                       3
<PAGE>


                     INTERNATIONAL SPECIALTY PRODUCTS INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                           NINE MONTHS ENDED
                                                          --------------------
                                                          OCTOBER 3, OCTOBER 1,
                                                             1999      2000
                                                          ---------  ---------
                                                               (THOUSANDS)

Cash and cash equivalents, beginning of period...........  $ 23,130  $ 23,309
                                                           --------  --------
Cash provided by operating activities:
  Net income.............................................    69,216    44,495
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Income from discontinued operation.................   (26,260)      -
      Gain on sale of assets.............................    (8,541)      -
      Depreciation.......................................    35,983    38,039
      Goodwill amortization..............................    12,296    12,144
      Deferred income taxes..............................     1,672    10,118
      Unrealized gains on trading securities and other
        short-term investments...........................    (7,580)  (20,191)
  Increase in working capital items......................    (6,443)   (2,819)
  Purchases of trading securities  ......................  (157,071)  (41,740)
  Proceeds from sales of trading securities .............   179,096    87,839
  Increase in net receivable from related parties........   (10,949)   (1,337)
  Change in cumulative translation adjustment............   (12,267)  (12,790)
  Other, net.............................................     4,008    12,901
                                                           --------  --------
    Net cash provided by continuing operations...........    73,160   126,659
    Net cash provided by discontinued operation..........     4,336      -
                                                           --------  --------
Net cash provided by operating activities................    77,496   126,659
                                                           --------  --------
Cash provided by (used in) investing activities:
  Capital expenditures and acquisition ..................   (46,289)  (39,380)
  Proceeds from sale of assets...........................    11,533       -
  Proceeds from sale of discontinued operation ..........    62,000       -
  Purchases of available-for-sale securities ............  (342,453) (296,448)
  Purchases of held-to-maturity securities ..............    (3,459)      -
  Purchases of other short-term investments .............    (5,600)      -
  Proceeds from sales of available-for-sale securities...   300,252   217,388
  Proceeds from held-to-maturity securities..............    15,746       -
  Proceeds from sales of other short-term investments....    14,717       -
                                                           --------  --------
Net cash provided by (used in) investing activities......     6,447  (118,440)
                                                           --------  --------
Cash provided by (used in) financing activities:
  Proceeds (repayments)from sale of accounts receivable..       -      (5,128)
  Increase (decrease)in short-term debt..................      (111)    5,766
  Increase (decrease) in borrowings under revolving
    credit facility......................................   127,400     1,800
  Repayments of long-term debt...........................  (200,285)  (10,461)
  Repurchases of common stock............................    (4,987)   (8,616)
  Other, net.............................................     1,188       530
                                                           --------  --------
Net cash used in financing activities....................   (76,795)  (16,109)
                                                           --------  --------
Net change in cash and cash equivalents..................     7,148    (7,890)
                                                           --------  --------
Cash and cash equivalents, end of period.................  $ 30,278  $ 15,419
                                                           ========  ========


                                       4
<PAGE>

                     INTERNATIONAL SPECIALTY PRODUCTS INC.
        CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)-- (CONTINUED)


                                                       NINE MONTHS ENDED
                                                      --------------------
                                                      OCTOBER 3, OCTOBER 1,
                                                         1999       2000
                                                      ---------- ---------
                                                           (THOUSANDS)

Supplemental Cash Flow Information:
  Cash paid during the period for:
    Interest (net of amount capitalized).............   $ 62,586  $ 59,799
    Income taxes.....................................     21,688    10,212

































The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.



                                       5
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated financial statements for International  Specialty Products
Inc. (the  "Company")  reflect,  in the opinion of management,  all  adjustments
necessary to present fairly the financial  position of the Company at October 1,
2000, and the results of operations and cash flows for the periods ended October
3, 1999 and October 1, 2000. All adjustments are of a normal  recurring  nature.
These  financial  statements  should  be read in  conjunction  with  the  annual
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999 (the "Form 10-K").

NOTE 1.  INVESTMENTS IN DEXTER CORPORATION AND LIFE TECHNOLOGIES, INC.

     Included in "Investments in available-for-sale  securities" at December 31,
1999 were  investments  (based on market  value)  of $91.4  million  and  $149.5
million,  respectively,  in Dexter Corporation ("Dexter") and Life Technologies,
Inc.("Life  Technologies"),  a 75%-owned  subsidiary of Dexter.  Dexter and Life
Technologies were acquired by Invitrogen Corporation  ("Invitrogen") in a merger
completed in September  2000. The Company sold its shares of Dexter common stock
prior to the  merger  and also has sold all of the  Invitrogen  common  stock it
received in the merger for its Life Technologies  shares. The total gain related
to these investments was approximately $150 million prior to expenses,  of which
$36.8 million,  after expenses,  was recognized in the third quarter of 2000 and
is included in "Other  income,  net," and $16.4 million was  recognized in prior
periods.  The remaining  portion of this gain,  after  expenses,  not previously
recognized  by the Company in prior  periods  will be  recognized  in the fourth
quarter of 2000.


NOTE 2.  DISCONTINUED OPERATION

     On October  1,  1999,  the  Company  sold the stock of its filter  products
("Filter  Products")  subsidiaries  to Hayward  Industrial  Products  Inc. for a
purchase price of $62 million. Accordingly, the Filter Products business segment
is  reported  as  a  discontinued  operation,  and  the  consolidated  financial
statements have been  reclassified to report separately the operating results of
the Filter  Products  business  segment.  The  Company's  prior  year  financial
statements have been restated to reflect continuing operations.











                                       6
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Summary  operating  results for the Filter Products  business for the third
quarter and nine months of 1999 are as follows:

                                          Third           Nine
                                         Quarter         Months
                                          1999            1999
                                       -----------    -----------
                                               (Thousands)
Sales...............................    $  8,447        $ 28,729
Income before income taxes..........         569           2,726
Income taxes........................        (200)           (957)
Net income..........................         369           1,769

NOTE 3.  GAIN ON CONTRACT SETTLEMENT

         In the first  quarter of 2000,  the Company  received $3.5 million from
the  settlement  of a pre-1997  contract  termination  dispute  relating  to the
Company's Mineral Products business.

NOTE 4.  COMPREHENSIVE INCOME
<TABLE>
<CAPTION>

                                              Third Quarter Ended   Nine Months Ended
                                              --------------------  -----------------
                                                Oct. 3,   Oct. 1,    Oct. 3,  Oct. 1,
                                                 1999      2000       1999     2000
                                               -------   --------   -------   -------
                                                             (Thousands)
<S>                                            <C>       <C>       <C>       <C>
Net income...................................  $ 40,115  $ 26,964  $ 69,216  $ 44,495
                                               --------   -------  --------  --------
Other comprehensive income (loss), net of tax:
  Change in unrealized gains on
    available-for-sale securities:
  Unrealized holding gains arising
    during the period, net of income tax
    (provision) benefit of $ 207, $ (26,933),
    $(4,708) and $(44,297) ...................    (984)    54,748    11,525    90,644
  Less: reclassification adjustment for
    gains (losses) included in net income,
    net of income tax (provision) benefit of
    $(2,583), $(13,228), $1,341 and $(2,583)..    4,395    24,390      (854)   20,675
                                               --------   -------  --------  --------
  Total.......................................   (5,379)   30,358    12,379    69,969
  Foreign currency translation adjustment.....    2,480    (6,081)  (12,267)  (12,790)
                                               --------   -------  --------  --------
Total other comprehensive income (loss).......   (2,899)   24,277       112    57,179
                                               --------   -------  --------  --------
Comprehensive income ......................... $ 37,216   $51,241  $ 69,328 $ 101,674
                                               ========   =======  ======== =========
</TABLE>





                                       7
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




      Changes in the  components  of  "Accumulated  other  comprehensive  income
(loss)" for the nine months ended October 1, 2000 are as follows:

                               Unrealized   Cumulative
                               Gains on     Foreign      Accumulated
                               Available-   Currency     Other
                               for-sale     Translation  Comprehensive
                               Securities   Adjustment   Income (Loss)
                               ----------   -----------  -------------
                                           (Thousands)
Balance, December 31, 1999..   $  1,844     $(13,893)    $(12,049)
Change for the period.......     69,969      (12,790)      57,179
                               --------     --------     --------
Balance, October 1, 2000....   $ 71,813     $(26,683)    $ 45,130
                               ========     ========     ========

























                                       8
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 5.  BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                Third Quarter Ended     Nine Months Ended
                                               ---------------------   --------------------
                                                Oct. 3,     Oct. 1,      Oct. 3,    Oct. 1,
                                                 1999        2000         1999       2000
                                               ---------   ---------   ---------  ---------
                                                               (Thousands)
<S>                                            <C>         <C>          <C>       <C>
Net sales:
  Personal Care.............................   $  43,707   $   44,532  $ 143,366  $ 139,999
  Pharmaceutical, Food and Beverage.........      41,012       55,616    125,561    174,589
  Performance Chemicals, Fine Chemicals and
    Industrial..............................      80,176       75,530    242,360    222,551
                                               ---------   ----------  ---------  ---------
    Total Specialty Chemicals...............     164,895      175,678    511,287    537,139
  Mineral Products (1)......................      23,277       20,208     71,716     56,945
                                               ---------   ----------  ---------  ---------
Net sales...................................   $ 188,172   $  195,886  $ 583,003  $ 594,084
                                               =========   ==========  =========  =========
Operating income(2):
  Personal Care(3)..........................   $  10,082   $    7,503  $  41,561  $  22,011
  Pharmaceutical, Food and Beverage.........      11,411       12,725     34,367     37,580
  Performance Chemicals, Fine Chemicals and
    Industrial..............................      14,062            3     35,893     10,758
                                               ---------   ----------  ---------  ---------
    Total Specialty Chemicals...............      35,555       20,231    111,821     70,349
  Mineral Products..........................       4,895        3,358     14,872      8,661
                                                --------   ----------  ---------   --------
  Total segment operating income............      40,450       23,589    126,693     79,010
  Unallocated corporate office..............        (460)         300     (1,431)       232
  Provision for restructuring and staff
    reduction  .............................      (1,473)         -       (1,473)       -
                                               ---------   ----------   ---------  --------
Total operating income......................      38,517       23,889    123,789     79,242
Interest expense and other, net.............     (15,013)      17,641    (57,602)   (10,727)
                                               ---------   ----------  ---------  ---------
Income from continuing operations before
 income taxes...............................   $  23,504   $   41,530  $  66,187  $  68,515
                                               =========   ==========  =========  =========
</TABLE>


(1)  Includes sales to Building Materials  Corporation of America, an affiliate,
     and its  subsidiaries,  of $15.2 and $15.7 million for the third quarter of
     1999 and 2000, respectively, and $47.9 and $47.6 million for the first nine
     months of 1999 and 2000, respectively.

(2)  Operating  income for the third  quarter  and first nine months of 1999 for
     the three Specialty  Chemicals  business segments have been reclassified to
     conform  to the 2000  presentation,  based  on a  reallocation  of  certain
     manufacturing costs.

(3)  Personal Care operating income for the first nine months of 1999 includes a
     pre-tax  gain of $8.5  million  from the sale of the  pearlescent  pigments
     product line.




                                       9
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 6.  INVENTORIES

     Inventories comprise the following:
                                       December 31,   October 1,
                                           1999          2000
                                       ------------   ----------
                                              (Thousands)
     Finished goods................     $107,583      $  91,908
     Work-in-process...............       18,457         13,739
     Raw materials and supplies....       25,735         43,110
                                        --------      ---------
     Inventories...................     $151,775      $ 148,757
                                        ========      =========

         At  December  31,  1999 and October 1, 2000,  $47.7 and $38.3  million,
respectively,  of domestic inventories were valued using the LIFO method. If the
FIFO inventory method had been used for these inventories,  they would have been
$2.7 million  higher at December  31, 1999 and $1.6 million  lower at October 1,
2000.


NOTE 7.  LONG-TERM DEBT

     On April 11, 2000,  the Company  repaid $10.0  million of the $38.1 million
mortgage  on its  headquarters  property.  The  Company  received  a  nine-month
extension,  to January 11, 2001, on the remaining  $28.1 million of the mortgage
obligation.



NOTE 8.  RESTRUCTURING RESERVES

     The Company recorded $73.0 million in 1998 for provisions for restructuring
and  impairment  loss,  primarily  related  to its  decision  to shut  down  its
butanediol production unit at its Calvert City, Kentucky  manufacturing facility
and a writedown to fair value of certain butanediol assets at its Texas City and
Seadrift, Texas manufacturing  facilities.  The total charge included an accrual
of $7.5 million for cash costs to be incurred,  principally for decommissioning,
demolition and remediation,  and severance costs.  During 1999 and the first six
months of 2000,  $5.4 million of costs were charged  against  this  reserve.  In
addition, in 1999, the Company reversed $1.9 million of such previously recorded
restructuring  reserves,  representing  an  excess  demolition  reserve  of $0.8
million and $1.1 million of other  reserves,  mainly for raw materials  contract
terminations,  which were no longer required.  This program was completed in the
third quarter of 2000.

     In the third quarter of 1999,  the Company  implemented  a staff  reduction
program impacting  corporate and worldwide  executive and  administrative  staff
positions.  As a result, a total of 79 positions were eliminated in 1999 through
normal attrition or termination, for which the Company recorded a pre-


                                       10
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

tax provision for severance of $2.3 million.  This program was completed in the
second quarter of 2000.


NOTE 9.  NEW ACCOUNTING STANDARD

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting  standards  requiring that every derivative  instrument be recorded in
the balance  sheet as either an asset or  liability  measured at its fair value.
SFAS No. 133 requires  that changes in a  derivative's  fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting  for  qualifying  hedges  allows a  derivative's  gains and losses to
offset related results on the hedged item in the income statement. SFAS No. 133,
as amended by SFAS No.  137 and SFAS No.  138,  is  effective  for fiscal  years
beginning  after June 15,  2000.  If the Company had adopted  SFAS No. 133 as of
October 1, 2000, the impact on the Company's  Consolidated  Financial Statements
would  not have  been  significant.  Adoption  of SFAS No.  133  could  increase
volatility in earnings and other comprehensive income.


NOTE 10.  CONTINGENCIES

Environmental Litigation

     The  Company,  together  with other  companies,  is a party to a variety of
proceedings  and  lawsuits  involving   environmental  matters   ("Environmental
Claims"),  in which  recovery is sought for the cost of cleanup of  contaminated
sites,  a number of which  Environmental  Claims are in the early stages or have
been dormant for protracted periods.

     In  the  opinion  of  the  Company's  management,  the  resolution  of  the
Environmental Claims should not be material to the business,  liquidity, results
of operations, cash flows or financial position of the Company. However, adverse
decisions  or  events,  particularly  as to  the  liability  and  the  financial
responsibility  of the Company's  insurers and of the other parties  involved at
each site and their  insurers,  could cause the Company to increase its estimate
of its  liability in respect of such matters.  It is not  currently  possible to
estimate the amount or range of any additional liability.

          For further information regarding environmental matters,  reference is
made to Note 17 to Consolidated Financial Statements contained in the Form 10-K.

Tax Claim against GAF

     Certain  subsidiaries  of the Company were  members of the GAF  Corporation
("GAF")  consolidated  Federal  income tax group (the "GAF  Group") in 1990 and,
accordingly, would be severally liable for any tax liability of the GAF Group


                                       11
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

in respect of such year.  Effective as of January 1, 1997, neither the Company
nor any of its subsidiaries are members of the GAF Group.

     On  September  15, 1997,  GAF  received a notice from the Internal  Revenue
Service (the "IRS") of a deficiency in the amount of $84.4 million (after taking
into account the use of net operating  losses and foreign tax credits  otherwise
available  for use in later years) in  connection  with the formation in 1990 of
Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants partnership"),
a partnership in which a subsidiary of GAF, GAF Fiberglass Corporation,  held an
interest.  The claim of the IRS for  interest and  penalties,  after taking into
account the effect on the use of net  operating  losses and foreign tax credits,
could  result  in GAF  incurring  liabilities  significantly  in  excess  of the
deferred tax liability of $131.4  million that it recorded in 1990 in connection
with this  matter.  GAF has advised the  Company  that it believes  that it will
prevail in this matter,  although there can be no assurance in this regard.  The
Company  believes that the ultimate  disposition  of this matter will not have a
material  adverse  effect on its  business,  financial  position  or  results of
operations.  GAF and  certain  subsidiaries  of GAF have  agreed to jointly  and
severally  indemnify the Company  against any tax liability  associated with the
surfactants  partnership,  which the  Company  would be  severally  liable  for,
together with GAF and several current and former subsidiaries of GAF, should GAF
be unable to satisfy such liability. For additional information relating to GAF,
reference is made to Note 17 to Consolidated  Financial  Statements contained in
the Form 10-K. GAF has advised the Company that the trends described in the Form
10-K relating to the asbestos  litigation  against GAF have  continued and, as a
result, have had a material adverse effect on GAF's financial condition.



















                                       12
<PAGE>




            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS - THIRD QUARTER 2000 COMPARED WITH
                        THIRD QUARTER 1999

     The Company  recorded third quarter 2000 income from continuing  operations
of $27.0 million ($.40 diluted  earnings per share)  compared with $15.3 million
($.23 diluted  earnings per share) in the third quarter of 1999. The increase in
income  from  continuing   operations  was  primarily   attributable  to  higher
investment  income,  partially  offset  by lower  operating  income  and  higher
interest expense.  Including income from discontinued operation of $24.9 million
($.36 diluted earnings per share), which reflected an after-tax gain on the sale
of the Company's Filter Products  business of $24.5 million,  net income for the
third quarter of 1999 was $40.1 million ($.59 diluted earnings per share).

     Net sales for the third quarter of 2000 were $195.9  million  compared with
$188.2  million for the same  period in 1999.  The  increase  in sales  resulted
primarily  from  $15.1  million of sales from the  Alginates  business  that was
acquired in October 1999,  and, to a lesser  extent,  higher sales of butanediol
and solvents due to higher volumes.  Partially  offsetting these sales increases
were  lower  sales for the Fine  Chemicals  business  and the  Mineral  Products
business  segment as a result of customer  contracts that expired in each of the
businesses at the end of 1999, lower pricing in butanediol and solvents, and the
adverse effect of the stronger U.S. dollar in Europe ($7.5 million).  The higher
sales  reflected 14%, 24% and 3% sales increases in Europe and the Latin America
and Asia-Pacific  regions,  respectively,  partially offset by 3% lower sales in
the U.S.

     Operating  income for the third quarter of 2000 was $23.9 million  compared
with $38.5 million for the third quarter of 1999, which reflected a $1.5 million
charge related to a staff reduction program and restructuring  program (see Note
8 to Consolidated Financial  Statements).  The unfavorable operating results for
the third quarter of 2000 were attributable primarily to higher raw material and
energy costs,  lower pricing in the Industrial  business,  the adverse effect of
the stronger U.S. dollar ($4.2  million),  the impact of the lower sales volumes
for Fine Chemicals and Mineral  Products due to the expired  customer  contracts
previously  mentioned,  and an  unfavorable  product  mix in the  Personal  Care
business  segment,  partially  offset by the contribution to operating income by
the Alginates business.  Selling,  general and administrative expenses increased
slightly in the third quarter of 2000, as a reduction in administrative expenses
that resulted from the Company's third quarter 1999 reduction in corporate staff
and  other  expense   reduction  efforts  were  offset  by  higher  selling  and
distribution expenses and higher research and development spending.

                                       13
<PAGE>

     Interest  expense for the third  quarter of 2000 was $21.8  million  versus
$19.1  million for the same period last year.  The increase was due primarily to
higher  average  interest  rates  and,  to  a  lesser  extent,   higher  average
borrowings.  "Other  income,  net",  for the third  quarter  was  $39.5  million
compared with $4.1 million in last year's third  quarter,  with the increase the
result of higher investment income,  reflecting a pre-tax gain of $36.8 million,
after expenses,  from the sale of the Company's investment in Dexter Corporation
("Dexter").  Dexter  and  Life  Technologies,  Inc.  ("Life  Technologies"),   a
75%-owned  subsidiary  of  Dexter,  were  acquired  by  Invitrogen   Corporation
("Invitrogen")  in a merger  completed in September  2000.  The Company sold its
shares of Dexter  common  stock prior to the merger and also has sold all of the
Invitrogen  common  stock it  received  in the merger for its Life  Technologies
shares.  The total gain  related to these  investments  was  approximately  $150
million  prior to  expenses,  of which the  $36.8  million  mentioned  above was
recognized  in the third  quarter of 2000 and $16.4  million was  recognized  in
prior  periods.  The  remaining  portion  of  this  gain,  after  expenses,  not
previously recognized by the Company will be recognized in the fourth quarter of
2000. See also Note 1 to Consolidated Financial Statements.


Business Segment Review

     A  discussion  of  operating  results  for each of the  Company's  business
segments follows.  The Company operates its Specialty Chemicals business through
three reportable business segments, in addition to the Mineral Products segment.


Personal Care

         Sales in the third  quarter of 2000 were $44.5  million  compared  with
$43.7 million for the same period last year. The higher sales resulted primarily
from  improved  sales  volumes in hair care  products,  partially  offset by the
unfavorable impact of the stronger U.S. dollar in Europe($1.5 million).

         Operating  income  for the  third  quarter  of 2000  was  $7.5  million
compared  with $10.1  million in last  year's  quarter,  with the lower  results
reflecting an  unfavorable  product mix and higher  manufacturing  and operating
costs,  together with the adverse  impact of the stronger U.S.  dollar in Europe
($1.3 million).


Pharmaceutical, Food and Beverage ("PFB")

         Sales for the PFB segment were $55.6  million for the third  quarter of
2000, a 36% increase  compared with $41.0 million for the third quarter of 1999,
while operating  income increased to $12.7 million from $11.4 million last year.
The increase in sales was  attributable to the Alginates

                                       14
<PAGE>

business,  acquired  in  October 1999,  which  recorded  sales  of $15.1 million
in the  third  quarter  of 2000.  Sales  for the  remainder  of the PFB  segment
decreased  by $0.5  million as  favorable  volumes,  mainly in the oral care and
antiseptics markets,  were offset by the unfavorable impact of the stronger U.S.
dollar in Europe($1.6 million).

         Operating  income  for  the  Pharmaceutical  and  Beverage   businesses
decreased  19% in the third  quarter of 2000  compared  with the same  period in
1999.  The  principal  factors  for the decline  were the adverse  effect of the
stronger U.S.  dollar in Europe ($1.4 million),  unfavorable  pricing and higher
operating expenses.  The unfavorable results for the Pharmaceutical and Beverage
businesses were offset by the  contribution to operating income by the Alginates
business.

Performance Chemicals, Fine Chemicals and Industrial

         Sales in the third  quarter of 2000 were $75.5  million  compared  with
$80.2  million in the third  quarter  of 1999.  The lower  sales were  primarily
attributable to a 39% sales decrease for the Fine Chemicals business,  which was
significantly  impacted by the expiration of a substantial custom  manufacturing
agreement  at the end of 1999.  Higher  sales  volumes of other  Fine  Chemicals
products partially offset the impact of this contract expiration.  Sales for the
Performance  Chemicals  business  decreased by 2%,  primarily due to unfavorable
pricing  and the  adverse  effect of the  stronger  U.S.  dollar in  Europe($0.6
million).  Mostly  offsetting  these sales declines were 6% higher sales for the
Industrial  business,  reflecting increased volumes for butanediol and solvents,
including $5.9 million in sales from product exchange  arrangements  pursuant to
which the Company  sold  butanediol,  at cost,  to other  butanediol  producers,
partially offset by continued  unfavorable  pricing for butanediol and solvents,
and by the adverse effect of the stronger U.S. dollar in Europe ($3.7 million).

         Operating  income for the  Performance  Chemicals,  Fine  Chemicals and
Industrial  segment was  breakeven  for the third  quarter of 2000 versus  $14.1
million  income for the same period last year.  The  principal  factors for this
decline were higher raw material and energy costs,  significantly  lower pricing
in the  Industrial  business,  and the adverse impact from the expiration of the
Fine Chemicals custom manufacturing agreement.


Mineral Products

         Sales for the Mineral  Products  segment for the third  quarter of 2000
were $20.2  million  compared  with $23.3 million for the third quarter of 1999.
The lower sales were attributable to substantially lower trade sales,  resulting
from the loss of two major trade customers for colored  roofing  granules in the
fourth  quarter of 1999.  Sales to  Building  Materials  Corporation  of America
("BMCA"), an affiliate,  increased 3% in the third quarter of 2000 compared with
the same period last year due to higher volumes.  Operating income for the third
quarter  of 2000 was $3.4  million  compared  with  $4.9  million  for the third
quarter of 1999, reflecting the

                                       15
<PAGE>

impact  of  the  trade  contract  expirations  and, to  a lesser extent,  higher
energy costs.



RESULTS OF OPERATIONS - FIRST NINE MONTHS 2000 COMPARED WITH
                        FIRST NINE MONTHS 1999


     For the first  nine  months  of 2000,  the  Company  recorded  income  from
continuing  operations  of $44.5  million  ($.65  diluted  earnings  per  share)
compared  with $43.0  million  ($.63  diluted  earnings  per share) for the same
period in 1999.  The results for the first nine months of 2000 include a pre-tax
gain of $3.5  million from the  settlement  of a pre-1997  contract  termination
dispute relating to the Mineral Products business segment, while the results for
the first nine months of 1999  included an $8.5  million  pre-tax  gain from the
sale of the Company's  pearlescent  pigments  business and a $1.5 million charge
related to staff reduction and restructuring  programs.  Excluding the effect of
such non-recurring items in each period,  income from continuing  operations for
the first nine  months of 2000 was $42.3  million  ($.62  diluted  earnings  per
share)  compared with $38.4  million  ($.56 diluted  earnings per share) for the
first nine months of 1999.  On a comparable  basis,  the  improved  results were
attributable to higher  investment  income,  partially offset by lower operating
income and higher interest expense. Including income from discontinued operation
of $26.3 million ($.38 diluted earnings per share), which reflected an after-tax
gain on the sale of the Company's Filter Products business of $24.5 million, net
income  for the  first  nine  months of 1999 was $69.2  million  ($1.01  diluted
earnings per share).

     Net sales for the first nine  months of 2000 were $594.1  million  compared
with $583.0  million for the same period in 1999. The increase in sales resulted
primarily  from  $50.0  million of sales from the  Alginates  business  that was
acquired in October 1999 and, to a lesser extent, higher sales of butanediol and
solvents due to higher  volumes.  Offsetting  these sales  increases  were lower
sales for the Fine Chemicals  business and the Mineral Products business segment
as a result of customer  contracts that expired in each of the businesses at the
end of 1999, lower sales volumes in the Performance  Chemicals  business,  lower
pricing in butanediol  and solvents and in the Personal  Care business  segment,
and the adverse effect of the stronger U.S. dollar in Europe($18.3 million). The
higher  sales  reflected  7%,  9% and 18%  sales  increases  in  Europe  and the
Asia-Pacific  and Latin America  regions,  respectively,  partially offset by 4%
lower sales in the U.S.

     Operating  income  for the first  nine  months  of 2000 was  $79.2  million
compared  with  $116.7  million   (excluding   nonrecurring  gains  and  charges
previously  discussed)  for the first nine months of 1999.  The lower  operating
results for the first nine months of 2000 were  attributable  primarily to lower
results in the Personal Care business segment due to an unfavorable  product mix
and higher manufacturing  costs, lower sales volumes

                                       16
<PAGE>


in  Fine  Chemicals,  Mineral  Products  and  Performance Chemicals,  higher raw
material and energy costs,  continued  lower pricing in butanediol and solvents,
and the adverse effect of the stronger U.S.  dollar ($10.0  million),  partially
offset  by the  contribution  to  operating  income by the  Alginates  business.
Selling,  general and  administrative  expenses  increased slightly in the first
nine months of 2000,  as a reduction in  administrative  expenses  that resulted
from the  Company's  third quarter 1999  reduction in corporate  staff and other
expense  reduction  efforts  were  offset by  higher  research  and  development
spending and higher selling and distribution expenses.

     Interest  expense  for the first  nine  months  of 2000 was  $62.7  million
compared with $58.8 million for the same period last year.  The increase was due
to higher average interest rates,  partially offset by lower average borrowings.
Other income,  net, for the first nine months of 2000 was $48.5 million compared
with $1.2 million for the first nine months of 1999,  with the  improvement  the
result  of  higher  investment  income,  reflecting  the  pre-tax  gain of $36.8
million, after expenses, from the sale of the Company's investment in Dexter.

Business Segment Review

     A  discussion  of  operating  results  for each of the  Company's  business
segments follows.  The Company operates its Specialty Chemicals business through
three reportable business segments, in addition to the Mineral Products segment.

Personal Care

     Sales for the first nine months of 2000 were $140.0  million  compared with
$143.4 million for the same period last year. The lower sales resulted primarily
from the unfavorable impact of the stronger U.S. dollar in Europe($3.8 million),
and the  continued  lower  average  pricing  in both  skin  care and  hair  care
products,  and also reflected the absence of sales from the pearlescent pigments
business,  which  recorded  $1.3  million of sales in the first  quarter of 1999
prior to its sale.

     Operating  income  for the first  nine  months  of 2000 was  $22.0  million
compared with $41.6 million in last year's nine-month period, which included the
$8.5 million  pre-tax gain from the sale of the pearlescent  pigments  business.
Excluding the effect of that gain,  operating income decreased by $11.0 million,
with the unfavorable  results  reflecting an unfavorable  product mix and higher
manufacturing and operating costs,  lower average pricing and the adverse impact
of the stronger U.S. dollar in Europe($3.0 million).

Pharmaceutical, Food and Beverage ("PFB")

     Sales for the PFB segment were $174.6  million for the first nine months of
2000, a 39% increase  compared with $125.6  million for the first nine months of
1999,  while  operating  income  increased to $37.6 million


                                       17
<PAGE>

versus  $34.4  million  last year. The  increase  in sales and operating  income
were both  attributable  to the  Alginates  business,  acquired in October 1999,
which  recorded  sales of $50.0 million in the first nine months of 2000.  Sales
for the  remainder  of the PFB segment  decreased by $1.0 million as a result of
the  unfavorable  impact of the stronger U.S.  dollar in Europe ($4.3  million),
partially  offset by increased  volumes in the  excipients and oral care markets
and the Beverage business.

     Operating income for the Pharmaceutical and Beverage  businesses  decreased
16% in the first nine months of 2000 compared with the same period in 1999.  The
principal  factors for the decline were the adverse  effect of the stronger U.S.
dollar  in  Europe  ($3.4   million),   a  lower  gross  margin  due  to  higher
manufacturing costs, and higher operating expenses.

Performance Chemicals, Fine Chemicals and Industrial

     Sales in the first nine months of 2000 were $222.6  million  compared  with
$242.4  million  in the same  period in 1999.  The lower  sales  were  primarily
attributable to a 32% sales decrease for the Fine Chemicals business,  which was
significantly  impacted by the expiration of a substantial custom  manufacturing
agreement  at the end of 1999.  Higher  sales  volumes of other  Fine  Chemicals
products partially offset the impact of this contract expiration.  Sales for the
Performance  Chemicals  business  decreased by 10%, primarily due to lower sales
volumes of agricultural  and polymer  products in Europe and North America,  and
the adverse effect of the stronger U.S.  dollar in Europe($1.9  million).  Sales
for the Industrial business increased by 3%, reflecting  increased sales volumes
for  butanediol  and  solvents,  including  $10.7  million in sales from product
exchange arrangements pursuant to which the Company sold butanediol, at cost, to
other butanediol  producers,  partially offset by continued  unfavorable pricing
for butanediol and solvents.

     Operating  income  for  the  Performance  Chemicals,   Fine  Chemicals  and
Industrial  segment  was $10.8  million for the first nine months of 2000 versus
$35.9  million  for the same period last year.  The  principal  factors for this
decline were the adverse impact from the expiration of the Fine Chemicals custom
manufacturing  agreement,  the unfavorable  pricing in the Industrial  business,
higher raw material and energy costs in the Industrial  business,  and 29% lower
Performance  Chemicals results due to the lower sales volumes,  partially offset
by the impact of the higher volumes for the Industrial business.

Mineral Products

     Sales for the Mineral  Products  segment  were $56.9  million for the first
nine months of 2000  compared  with $71.7 million for the same period last year.
The  decline in sales was  attributable  to  substantially  lower  trade  sales,
resulting  from  the loss of two  major  trade  customers  for  colored  roofing
granules  in the  fourth  quarter of 1999.  Operating  income for the first nine
months of 2000 decreased 42% to $8.7 million compared with $14.9 million for the
same  period  last year,  mainly  reflecting  the


                                       18
<PAGE>

impact  of  the  trade  contract  expirations  and, to  a lesser extent,  higher
energy costs.


LIQUIDITY AND FINANCIAL CONDITION

         During  the first  nine  months of 2000,  the  Company's  net cash flow
before financing  activities was $8.2 million,  including $126.7 million of cash
generated  from  operations,  the  reinvestment  of $44.2  million  for  capital
programs,  a $4.9 million cash arbitration award which resulted in an adjustment
of the purchase price of the  acquisition of the Kelco Alginates  business,  and
the use of  $79.1  million  of  cash  for net  purchases  of  available-for-sale
securities.

         Cash invested in additional working capital totaled $2.8 million during
the first nine months of 2000,  mainly  reflecting  a $7.4  million  increase in
receivables and a $1.8 million  increase in inventories,  partially  offset by a
$4.0  million net  increase in payables  and accrued  liabilities.  The net cash
generated  from operating  activities  also included a $46.1 million cash inflow
from  net  sales  of  trading   securities  and  a  $6.6  million  loan  against
Company-owned insurance policies.

         Net cash used in financing  activities  during the first nine months of
2000 totaled $16.1  million,  mainly  reflecting  $10.5 million in repayments of
long-term  debt and a $5.1 million  repayment  related to the Company's  sale of
domestic trade accounts receivable,  partially offset by a $5.8 million increase
in short-term  borrowings  and a $1.8 million  increase in borrowings  under the
Company's bank revolving  credit  facility.  In addition,  financing  activities
included an $8.6 million cash outlay for repurchases of common stock pursuant to
the Company's repurchase program.

         As a  result  of the  foregoing  factors,  cash  and  cash  equivalents
decreased by $7.9 million during the first nine months of 2000 to $15.4 million,
excluding $553.0 million of trading and available-for-sale  securities and other
short-term investments.

         The  Company   recorded  $73.0  million  in  1998  for  provisions  for
restructuring  and impairment  loss,  primarily  related to its decision to shut
down its butanediol production unit at its Calvert City, Kentucky  manufacturing
facility and a writedown to fair value of certain butanediol assets at its Texas
City and Seadrift, Texas manufacturing facilities.  The total charge included an
accrual  of  $7.5  million  for  cash  costs  to be  incurred,  principally  for
decommissioning,  demolition and remediation,  and severance costs.  During 1999
and the first six months of 2000,  $5.4  million of costs were  charged  against
this reserve.  In addition,  in 1999, the Company  reversed $1.9 million of such
previously recorded  restructuring  reserves,  representing an excess demolition
reserve  of $0.8  million  and $1.1  million of other  reserves,  mainly for raw
materials contract terminations, which were no longer required. This program was
completed in the third quarter of 2000.



                                       19
<PAGE>

     See Note 9 to Consolidated  Financial Statements for information  regarding
contingencies.



                                   * * *

FORWARD-LOOKING STATEMENTS

         This  Quarterly  Report  on Form  10-Q  contains  both  historical  and
forward-looking  statements.  All statements other than statements of historical
fact are, or may be deemed to be, forward-looking  statements within the meaning
of section 27A of the  Securities  Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These forward-looking  statements are only predictions and
generally can be identified  by use of statements  that include  phrases such as
"believe", "expect", "anticipate", "intend", "plan", "foresee" or other words or
phrases of similar  import.  Similarly,  statements  that describe the Company's
objectives,  plans or goals also are forward-looking  statements.  The Company's
operations  are  subject to certain  risks and  uncertainties  that could  cause
actual  results to differ  materially  from those  contemplated  by the relevant
forward-looking  statement.  Important factors that could cause such differences
are discussed in the  Company's  filings with the U.S.  Securities  and Exchange
Commission.  The forward-looking  statements included herein are made only as of
the date of this  Quarterly  Report on Form 10-Q and the Company  undertakes  no
obligation  to  publicly  update  such  forward-looking  statements  to  reflect
subsequent  events or  circumstances.  No assurances can be given that projected
results or events will be achieved.



               Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                              ABOUT MARKET RISK


     Reference  is made to  Management's  Discussion  and  Analysis of Financial
Condition  and  Results  of  Operations  in the Form  10-K for a  discussion  of
"Market-Sensitive  Instruments  and Risk  Management."  As of December 31, 1999,
equity-related  financial  instruments  employed by the Company to reduce market
risk included long contracts  valued at $50.1 million and short contracts valued
at $6.5 million.  All short  contracts  were  terminated in the first quarter of
2000. Since such instruments are  marked-to-market  each month,  with unrealized
gains and losses  included in the results of  operations,  there was no economic
cost to the Company to terminate these instruments.















                                       20
<PAGE>







                                   PART II


                              OTHER INFORMATION




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27   - Financial Data Schedule for the nine months ended October 1,
            2000, which is submitted electronically to the
            Securities and Exchange Commission for information only.


(b)  No Reports on Form 8-K were filed during the quarter ended October 1, 2000.




















                                       21
<PAGE>



                                 SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.


                             INTERNATIONAL SPECIALTY PRODUCTS INC.




DATE:  November 14, 2000         BY:   /s/Randall R. Lay
       -----------------               -----------------

                                       Randall R. Lay
                                       Executive Vice President and
                                         Chief Financial Officer
                                       (Principal Financial and
                                         Accounting Officer)




















                                       22
<PAGE>