UNITED STATES

                      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 September 29, 2002

                                       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 8, 2002, 65,138,376 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 OPERATIONS (UNAUDITED)
                      (Thousands, except per share amounts)

<TABLE>
<CAPTION>

                                       Third Quarter Ended    Nine Months Ended
                                      ---------------------  -------------------
                                      Sept. 30,   Sept. 29,  Sept. 30,  Sept. 29,
                                         2001        2002       2001      2002
                                      ---------   ---------  --------   ---------
<S>                                   <C>         <C>        <C>        <C>
Net sales............................ $ 188,633   $ 208,363  $ 595,124  $ 642,211
                                       --------    --------   --------   --------
Costs and Expenses:
  Cost of products sold..............  (114,896)   (132,105)  (370,491)  (416,137)
  Selling, general and administrative   (39,177)    (40,606)  (120,485)  (126,972)
  Gain on sale of assets.............         -           -          -      5,468
  Gains on settlement of contracts...         -           -          -      6,760
  Amortization of goodwill and
    intangibles......................    (4,048)       (125)   (12,144)      (680)
                                      ---------   ---------  ---------  ---------
     Total costs and expenses .......  (158,121)   (172,836)  (503,120)  (531,561)
                                      ---------   ---------  ---------  ---------
Operating income.....................    30,512      35,527     92,004    110,650
Interest expense.....................   (25,052)    (20,569)   (62,780)   (64,604)
Investment income (loss), net of
  investment-related expenses of
  $1,009, $1,006, $3,569 and $3,504,
  respectively.......................    (7,312)      1,227     13,481     26,467
Other expense, net...................    (1,014)     (4,364)   (10,054)    (6,541)
                                      ---------   ---------  ---------  ---------
Income (loss) before income taxes....    (2,866)     11,821     32,651     65,972
Income tax (provision) benefit.......       989      (4,052)   (11,473)   (22,427)
                                      ---------   ---------  ---------  ---------
Income (loss) before extraordinary
   item and cumulative effect of
   accounting change.................    (1,877)      7,769     21,178     43,545

Extraordinary item - loss on early
  retirement of debt, net of income
  tax benefit of $2,434..............         -           -          -     (4,725)

Cumulative effect of change in
  accounting principle, net of
  income tax benefit of $216 in 2001.         -           -       (440)  (155,400)
                                      ---------   ---------  ---------  ---------
Net income (loss).................... $  (1,877)  $   7,769  $  20,738  $(116,580)
                                      =========   =========  =========  =========
</TABLE>





                                       1

<PAGE>


                      INTERNATIONAL SPECIALTY PRODUCTS INC.

          CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - (CONTINUED)
                      (Thousands, except per share amounts)

<TABLE>
<CAPTION>

                                        Third Quarter Ended    Nine Months Ended
                                        --------------------  -------------------
                                        Sept. 30,  Sept. 29,   Sept. 30, Sept. 29,
                                          2001       2002        2001      2002
                                        --------  ---------    --------  --------
<S>                                    <C>         <C>         <C>        <C>
Earnings per common share:
  Basic:
    Income (loss) before extraordinary
      item and cumulative effect of
      accounting change..............  $    (.03)  $     .12   $    .32   $   .67
    Extraordinary item...............         -           -          -       (.07)
    Cumulative effect of accounting
       change........................         -           -        (.01)    (2.40)
                                       ---------   ---------  ---------   -------
    Net income (loss)................  $    (.03)  $     .12  $     .31   $ (1.80)
                                       =========   =========  =========   =======
  Diluted:
    Income (loss) before extraordinary
      item and cumulative effect of
      accounting change..............  $    (.03)  $     .12  $     .32   $   .67
    Extraordinary item...............         -           -          -       (.07)
    Cumulative effect of accounting
       change........................         -           -        (.01)    (2.40)
                                       ---------   ---------  ---------   -------
    Net income (loss)................  $    (.03)  $     .12  $     .31   $ (1.80)
                                       =========   =========  =========   =======


 Weighted average number of common
 and common equivalent shares
 outstanding:

  Basic..............................     65,641      64,959     66,050    64,873
                                       =========   =========   ========   =======
  Diluted............................     65,770      65,038     66,137    64,929
                                       =========   =========   ========   =======
</TABLE>







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




                                       2
<PAGE>


                      INTERNATIONAL SPECIALTY PRODUCTS INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                       Sept. 29,
                                                         December 31,     2002
                                                             2001     (Unaudited)
                                                         ------------ -----------
                                                                (Thousands)
<S>                                                      <C>          <C>
ASSETS
Current Assets:
  Cash and cash equivalents..........................    $   79,509   $   65,820
  Investments in trading securities..................        54,437      233,667
  Investments in available-for-sale securities.......       239,273      227,409
  Other short-term investments.......................         2,299            -
  Restricted cash....................................       307,866            -
  Accounts receivable, trade, net....................        86,574       90,861
  Accounts receivable, other.........................        20,357       24,322
  Receivable from related parties, net...............         9,009       14,537
  Inventories........................................       190,582      177,584
  Deferred income tax benefits.......................        32,929       36,844
  Other current assets...............................         8,635       10,089
                                                         ----------   ----------
    Total Current Assets.............................     1,031,470      881,133
Property, plant and equipment, net...................       560,844      563,202
Goodwill, net........................................       502,607      330,911
Intangible assets, net...............................        15,167        8,385
Other assets.........................................        62,480       63,074
                                                         ----------   ----------
Total Assets.........................................    $2,172,568   $1,846,705
                                                         ==========   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt....................................    $      143   $   89,190
  Current maturities of long-term debt...............       310,265        2,609
  Accounts payable...................................        49,088       75,200
  Accrued liabilities................................        97,659       96,044
  Income taxes.......................................         9,799       15,906
                                                         ----------   ----------
    Total Current Liabilities........................       466,954      278,949
                                                         ----------   ----------
Long-term debt less current maturities...............       919,557      834,332
                                                         ----------   ----------
Deferred income taxes................................       109,297      136,916
                                                         ----------   ----------
Other liabilities....................................        72,703       66,887
                                                         ----------   ----------
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.........................       487,156      488,096
  Unearned compensation - restricted stock awards....        (1,166)      (3,063)
  Treasury stock, at cost - 4,831,939 and
    4,457,964 shares, respectively...................       (35,621)     (33,050)
  Retained earnings..................................       214,095       97,515
  Accumulated other comprehensive loss...............       (61,102)     (20,572)
                                                         ----------   ----------
    Total Stockholders' Equity.......................       604,057      529,621
                                                         ----------   ----------
Total Liabilities and Stockholders' Equity...........    $2,172,568   $1,846,705
                                                         ==========   ==========
</TABLE>

       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)
<TABLE>
<CAPTION>

                                                                Nine Months Ended
                                                               -------------------
                                                               Sept. 30, Sept. 29,
                                                                  2001      2002
                                                               --------  ---------
                                                                     (Thousands)
<S>                                                            <C>       <C>
Cash and cash equivalents, beginning of period...............  $ 18,181  $ 79,509
                                                               --------  --------
Cash provided by (used in) operating activities:
  Net income (loss)..........................................    20,738  (116,580)
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Extraordinary item.....................................         -     4,725
      Cumulative effect of change in accounting principle....       440   155,400
      Gain on sale of assets.................................         -    (5,468)
      Depreciation...........................................    39,542    42,503
      Amortization of goodwill and intangibles...............    12,144       680
      Deferred income taxes..................................      (785)   12,004
      Unrealized (gains) losses on securities and other
        short-term investments...............................     4,584    (1,445)
  (Increase) decrease in working capital items...............   (46,949)   27,066
  Purchases of trading securities............................  (405,621) (456,059)
  Proceeds from sales of trading securities..................   610,191   302,682
  Proceeds (repayments) from sale of accounts receivable.....    (7,791)    3,932
  Increase in net receivable from related parties............    (4,074)   (5,372)
  Change in cumulative translation adjustment................      (734)    9,469
  Other, net.................................................     5,441    (4,151)
                                                               --------  --------
Net cash provided by (used in) operating activities..........   227,126   (30,614)
                                                               --------  --------
Cash provided by (used in) investing activities:
  Capital expenditures and acquisitions......................   (58,716)  (42,551)
  Net proceeds from sale of assets...........................         -    27,271
  Purchases of available-for-sale securities.................  (298,850) (205,050)
  Proceeds from sales of available-for-sale securities.......    92,456   236,321
  Proceeds from sales of other short-term investments........    12,765     2,299
                                                               --------  --------
Net cash provided by (used in) investing activities..........  (252,345)   18,290
                                                               --------  --------
Cash provided by (used in) financing activities:
  Increase (decrease) in short-term debt.....................   (27,037)   89,047
  Proceeds from issuance of debt.............................   527,332         -
  Decrease in borrowings under revolving credit facility.....  (115,400)  (85,250)
  Repayments of long-term debt...............................   (65,059) (308,045)
  Call premium on redemption of debt.........................         -    (4,621)
  (Increase) decrease in restricted cash.....................  (257,649)  307,866
  Financing fees and expenses................................   (13,789)   (1,613)
  Repurchases of common stock................................   (12,257)   (1,506)
  Other, net.................................................     1,284     2,121
                                                               --------  --------
Net cash provided by (used in) financing activities..........    37,425    (2,001)
                                                               --------  --------
Effect of exchange rate changes on cash......................      (219)      636
                                                               --------  --------
Net change in cash and cash equivalents......................    11,987   (13,689)
                                                               --------  --------
Cash and cash equivalents, end of period.....................  $ 30,168  $ 65,820
                                                               ========  ========
</TABLE>
                                       4

<PAGE>


                      INTERNATIONAL SPECIALTY PRODUCTS INC.

        CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- (CONTINUED)


                                                            Nine Months Ended
                                                           -------------------
                                                           Sept. 30, Sept. 29,
                                                              2001      2002
                                                           --------- ---------
                                                                (Thousands)

Supplemental Cash Flow Information:
  Cash paid during the period for:
    Interest (net of amount capitalized).................   $ 49,874  $ 72,054
    Income taxes.........................................      7,114     5,351

Acquisition of FineTech Ltd.:
    Fair market value of assets acquired.................   $ 26,547
    Purchase price of acquisition........................     22,450
                                                            --------
    Liabilities assumed..................................   $  4,097
                                                            ========

Acquisition of mineral products facility:
    Fair market value of assets acquired.................             $ 11,421
    Purchase price of acquisition........................               11,421
                                                                      --------
    Liabilities assumed..................................             $      -
                                                                      ========
























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







                                       5
<PAGE>




                      INTERNATIONAL SPECIALTY PRODUCTS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


     The consolidated financial statements for International  Specialty Products
Inc. and its consolidated  subsidiaries (the "Company")  reflect, in the opinion
of  management,  all  adjustments  necessary  to present  fairly  the  financial
position of the Company and its consolidated subsidiaries at September 29, 2002,
and the  results of  operations  and cash flows for the third  quarter  and nine
months ended September 30, 2001 and September 29, 2002. All adjustments are of a
normal recurring nature. These consolidated  financial statements should be read
in  conjunction  with the annual  consolidated  financial  statements  and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (the "Form 10-K").


NOTE 1.  RETIREMENT OF DEBT

     On January 14, 2002,  the Company  redeemed the  remaining  $307.9  million
aggregate  principal  amount of its 9% Senior Notes due 2003 (the "2003 Notes").
The 2003 Notes were  redeemed at a redemption  price of 101.5% of the  principal
amount plus accrued and unpaid interest to the redemption date. As a result, the
Company recorded an  extraordinary  loss on the early retirement of debt of $4.7
million ($7.1 million  before income tax benefit of $2.4  million),  or $.07 per
diluted share.  The  extraordinary  charge was comprised of $4.6 million of call
premium,  $0.2 million of remaining  discount  amortization and the write-off of
$2.3 million of unamortized  deferred  financing fees. The redemption was funded
utilizing a restricted cash escrow account which had been established in 2001 in
connection with the issuances of long-term debt.


NOTE 2.  RECENT ACCOUNTING DEVELOPMENT

     On June 30,  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and  Other
Intangible  Assets".  With the  adoption of SFAS No. 142,  goodwill is no longer
subject to amortization over its estimated useful life.  However,  goodwill will
be subject to at least an annual  assessment for impairment and more  frequently
if  circumstances  indicate  a possible  impairment.  Companies  must  perform a
fair-value-based  goodwill impairment test. In addition,  under SFAS No. 142, an
acquired intangible asset should be separately  recognized if the benefit of the
intangible is obtained  through  contractual  or other legal  rights,  or if the
intangible  asset can be sold,  transferred,  licensed,  rented,  or  exchanged.
Intangible assets will be amortized over their useful lives. The Company adopted
SFAS No. 142 effective as of January 1, 2002. Accordingly, the Company completed
a  transitional  impairment  test,  effective  January 1, 2002, and recognized a
goodwill  impairment loss of $155.4 million as the cumulative effect of a change
in accounting  principle.  The Statement of Operations  for the first quarter of
2002 has been  restated  to reflect  this loss.  The  write-off  represents  the
goodwill associated with the Company's Performance Chemicals, Fine Chemicals and
Industrial  business  segment and was based upon the Company's  estimate of fair
value  for  these  businesses,   considering  expected  future  cash  flows  and
profitability. The Company intends to complete its annual test for impairment by
the end of the year 2002.

                                       6

<PAGE>



                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 2.  RECENT ACCOUNTING DEVELOPMENT - (CONTINUED)

     Following is a reconciliation showing "Income (loss) before extraordinary
item and cumulative effect of accounting change," "Net income (loss)" and
related earnings per share, as reported for the third quarters and nine months
ended September 30, 2001 and September 29, 2002, and as adjusted to exclude
amortization of goodwill.


                                      Third Quarter Ended   Nine Months Ended
                                      -------------------- ------------------
                                      Sept. 30, Sept. 29,  Sept. 30, Sept. 29,
                                         2001      2002       2001      2002
                                      --------  ---------  --------  --------
                                       (Thousands, except per share amounts)
Income (loss) before extraordinary
  item and cumulative effect of
  accounting change, as reported..... $  (1,877) $  7,769  $21,178  $  43,545
Add back: goodwill amortization......     4,048        -    12,144         -
                                      ---------  --------  -------  ---------
Income before extraordinary item and
  cumulative effect of accounting
  change, as adjusted................ $   2,171  $  7,769  $33,322  $  43,545
                                      =========  ========  =======  =========

Net income (loss), as reported....... $  (1,877) $  7,769  $20,738  $(116,580)
Add back: goodwill amortization......     4,048        -    12,144         -
                                      ---------  --------  -------  ---------

Net income (loss), as adjusted....... $   2,171  $  7,769  $32,882  $(116,580)
                                      =========  ========  =======  =========

Earnings per common share:
  Basic:
    Net income (loss), as reported .. $    (.03) $    .12  $   .31  $   (1.80)
    Goodwill amortization ...........       .06         -      .19          -
                                      ---------  --------  -------  ---------
    Net income (loss), as adjusted... $     .03  $    .12  $   .50  $   (1.80)
                                      =========  ========  =======  =========

  Diluted:
    Net income (loss), as reported .. $    (.03) $    .12  $   .31  $   (1.80)
    Goodwill amortization ...........       .06         -      .19          -
                                      ---------  --------  -------  ---------
    Net income (loss), as adjusted... $     .03  $    .12  $   .50  $   (1.80)
                                      =========  ========  =======  =========





                                       7

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 3.  GAIN ON SALE OF ASSETS

     In April 2002,  the Company  sold its Haifa,  Israel-based  FineTech,  Ltd.
business to Pharmaceutical  Resources, Inc. ("PRI") for $32 million. The Company
recorded a second quarter pre-tax gain, after expenses,  of $5.5 million related
to this transaction. Also see Note 4.


NOTE 4.  GAINS ON SETTLEMENT OF CONTRACTS

     In December 2001, the Company  entered into a letter  agreement to sell its
pharmaceutical  fine  chemicals  business,  including  its  Haifa,  Israel-based
FineTech Ltd. business and its Columbus,  Ohio manufacturing facility to PRI. In
February 2002, the Company received a $250,000 payment from PRI in consideration
of extending the negotiations  pursuant to the letter agreement.  In March 2002,
the Company  announced that the sale would not be consummated due to the failure
of PRI to proceed with the  transaction in a timely  manner.  Under the terms of
the  letter  agreement,  the  Company  received  a $3.0  million  break-up  fee.
Accordingly,  the Company  recognized a first  quarter 2002 pre-tax gain of $2.8
million,  representing  the total cash  received in February  and March of $3.25
million less related expenses of $0.4 million.

     In the  second  quarter  of 2002,  the  Company  received  $4.0  million in
settlement of a  manufacturing  and supply  contract with a customer of the Fine
Chemicals business.  After related expenses,  a pre-tax gain of $3.9 million was
recognized.


NOTE 5.  INVESTMENT INCOME (LOSS)

     Investment  income  (loss) for the third  quarter  and first nine months of
2002 reflects a $39.0 million other than temporary  impairment charge related to
an   available-for-sale   equity  security  held  in  the  Company's  investment
portfolio.  The Company regularly reviews  investment  securities for impairment
based on criteria  that includes the length of time and the extent to which cost
exceeds market value.


NOTE 6.  ACQUISITION

     In April 2002,  the Company  acquired  the roofing  granules  manufacturing
operations  in  Ione,   California  of  Reed  Minerals,  a  division  of  Harsco
Corporation.  In a related  transaction,  the Company also acquired the adjacent
quarry operations and certain mining assets from Hanson Aggregates  Mid-Pacific,
Inc. The total purchase price of the acquisitions was $11.4 million.



                                       8

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 7.  COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>

                                               Third Quarter Ended    Nine Months Ended
                                              --------------------   --------------------
                                               Sept. 30,  Sept. 29,  Sept. 30,  Sept. 29,
                                                 2001       2002       2001       2002
                                               --------   --------   ---------  ---------
                                                               (Thousands)
<S>                                             <C>        <C>       <C>        <C>
Net income (loss)............................   $ (1,877)  $ 7,769   $ 20,738   $(116,580)
                                                --------   -------   --------   ---------
Other comprehensive income (loss), net of tax:
  Change in unrealized losses on
    available-for-sale securities:
  Unrealized holding gains (losses) arising
    during the period, net of income tax
    (provision) benefit of $17,154, $8,435,
    $58,890 and $(3,639), respectively........   (33,478)  (13,803)  (114,365)     13,147
  Less: reclassification adjustment for
    losses included in net income, net of
    income tax benefit of $1,223, $13,405,
    $1,534 and $10,723, respectively..........    (1,526)  (25,815)    (2,100)    (16,314)
                                                --------   -------   --------   ---------
  Total change for the period.................   (31,952)   12,012   (112,265)     29,461
                                                --------   -------   --------   ---------
  Change in unrealized losses on derivative
    hedging instruments - cash flow hedges:
  Net derivative losses, net of income tax
    benefit of $443, $0, $1,070
    and $12, respectively.....................      (819)        -     (1,979)        (22)
  Less: reclassification adjustment for
    losses included in net income, net of
    income tax benefit of $151, $0, $341
    and $534, respectively....................      (280)        -       (630)       (986)
                                                --------   -------   --------   ---------
  Total change for the period.................      (539)        -     (1,349)        964
                                                --------   -------   --------   ---------
Foreign currency translation adjustment.......     8,023    (1,127)      (953)     10,105
                                                --------   -------   --------   ---------
Total other comprehensive income (loss).......   (24,468)   10,885   (114,567)     40,530
                                                --------   -------   --------   ---------
Comprehensive income (loss)...................  $(26,345)  $18,654   $(93,829)  $ (76,050)
                                                ========   =======   ========   =========
</TABLE>


     Changes in the components of "Accumulated other comprehensive loss" for the
nine months ended September 29, 2002 are as follows:
<TABLE>
<CAPTION>

                               Unrealized      Unrealized     Cumulative
                               Gains (Losses)  Losses on      Foreign      Accumulated
                               on Available-   Derivative     Currency     Other
                               for-Sale        Hedging        Translation  Comprehensive
                               Securities      Instruments    Adjustment   Loss
                               ------------    -----------    -----------  -------------
                                                        (Thousands)
<S>                            <C>             <C>            <C>          <C>
Balance, December 31, 2001..   $    (32,443)   $   (964)      $ (27,695)   $ (61,102)
Change for the period.......         29,461         964          10,105       40,530
                               ------------    --------       ---------    ---------
Balance, September 29, 2002.   $     (2,982)   $      -       $ (17,590)   $ (20,572)
                               =============   ========       =========    ==========
</TABLE>


                                       9

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 8.  BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>

                                                Third Quarter Ended     Nine Months Ended
                                               ---------------------   --------------------
                                               Sept. 30,   Sept. 29,    Sept. 30,  Sept. 29,
                                                 2001        2002         2001       2002
                                               ---------   ---------    --------  ---------
                                                                (Thousands)
<S>                                             <C>        <C>          <C>        <C>
Net sales (1):
  Personal Care.............................   $  45,487   $  51,047    $ 150,599  $ 156,164
  Pharmaceutical, Food and Beverage.........      57,846      62,269      169,645    181,039
  Performance Chemicals, Fine Chemicals and
    Industrial..............................      61,510      70,493      211,068    230,751
                                               ---------   ---------    ---------  ---------
    Total Specialty Chemicals...............     164,843     183,809      531,312    567,954
  Mineral Products (2)......................      23,790      24,554       63,812     74,257
                                               ---------   ---------    ---------  ---------
Net sales...................................   $ 188,633   $ 208,363    $ 595,124  $ 642,211
                                               =========   =========    =========  =========

Operating income(1):
  Personal Care.............................   $   5,743   $  10,008    $  27,026  $  28,101
  Pharmaceutical, Food and Beverage.........      12,430      16,990       39,354     43,429
  Performance Chemicals, Fine Chemicals and
    Industrial (3)..........................       7,322       2,959       16,907     20,776
                                               ---------   ---------    ---------   --------
    Total Specialty Chemicals...............      25,495      29,957       83,287     92,306
  Mineral Products..........................       5,078       5,540        8,434     18,428
                                               ---------   ---------    ---------   --------
  Total segment operating income............      30,573      35,497       91,721    110,734
  Unallocated corporate office..............         (61)         30          283        (84)
                                               ---------   ---------    ---------  ---------
Total operating income......................      30,512      35,527       92,004    110,650
Interest expense, investment income (loss)
  and other expense, net....................     (33,378)    (23,706)     (59,353)   (44,678)
                                               ---------   ---------    ---------  ---------
Income (loss) before income taxes...........   $  (2,866)  $  11,821    $  32,651  $  65,972
                                               =========  ==========   ==========  =========
</TABLE>


(1)  Net sales and operating income for the third quarter and the first nine
     months of 2001 for the three Specialty Chemicals business segments have
     been restated to conform to the 2002 presentation. In 2002, the Company
     realigned its Alginates business based on the markets for its products.
     Sales and operating income for the Alginates business are now included in
     the Personal Care, Pharmaceutical, Food and Performance Chemicals
     businesses. Prior to 2001, the sales and operating income of the Alginates
     business represented the Food business of the Pharmaceutical, Food and
     Beverage business segment.

(2)  Includes sales to Building Materials Corporation of America, an affiliate,
     and its subsidiaries, of $18.7 and $19.1 million for the third quarter of
     2001 and 2002, respectively, and $50.5 and $57.9 million for the first nine
     months of 2001 and 2002, respectively.

(3)  Operating income for the Performance Chemicals, Fine Chemicals and
     Industrial business segment for the first nine months of 2002 includes a
     gain of $5.5 million from the sale of the FineTech business (see Note 3)
     and a $3.9 million gain from the settlement of a manufacturing and supply
     contract (see Note 4). For the first nine months of 2002, operating income
     for the Performance Chemicals, Fine Chemicals and Industrial business
     segment also includes a gain of $2.8 million from the termination of a
     contract related to the sale of the FineTech business (see Note 4).



                                       10

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


Note 9.  HEDGING AND DERIVATIVES

     In June 2001, ISP Chemco Inc., an indirect  wholly owned  subsidiary of the
Company, entered into $450.0 million of Senior Credit Facilities,  which include
a $225.0 million term loan. The Company  designated  interest rate swaps, with a
notional  amount of $100  million,  as a hedge of its exposure to changes in the
eurodollar  rate under the term loan.  The interest rate swaps are structured to
receive  interest based on the eurodollar  rate and pay interest on a fixed rate
basis. A cash flow hedging  relationship  was  established  whereby the interest
rate  swaps  hedged  the risk of  changes  in the  eurodollar  rate  related  to
borrowings  against the term loan through July 2002. These swaps matured in June
and July of 2002.  During the first nine months of 2002, $1.9 million related to
the interest rate swaps was reclassified and charged against interest expense.


NOTE 10.  INVENTORIES

     Inventories comprise the following:

                                       December 31,   September 29,
                                           2001            2002
                                       ------------   -------------
                                              (Thousands)
     Finished goods................     $120,797         $110,739
     Work-in-process...............       36,960           31,943
     Raw materials and supplies....       32,825           34,902
                                        --------         --------
     Inventories...................     $190,582         $177,584
                                        ========         ========

     At December  31, 2001 and  September  29,  2002,  $60.1 and $61.6  million,
respectively,  of domestic inventories were valued using the LIFO method. If the
FIFO  inventory  method  had  been  used for  these  inventories,  the  value of
inventories  would have been $3.7 and $2.1  million  higher at December 31, 2001
and September 29, 2002, respectively.










                                       11

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11.  CONTINGENCIES

Environmental Litigation

     The  Company,  together  with other  companies,  is a party to a variety of
proceedings  and  lawsuits  involving   environmental  matters   ("Environmental
Claims")  under  the  Comprehensive   Environmental  Response  Compensation  and
Liability Act, Resource Conservation and Recovery Act and similar state laws, in
which  recovery  is sought  for the cost of  cleanup  of  contaminated  sites or
remedial  obligations are imposed, a number of which Environmental Claims are in
the early stages or have been dormant for protracted periods.

     While the Company cannot predict  whether  adverse  decisions or events can
occur in the future, 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 increases in remedial  costs,
discovery of new contamination,  assertion of natural resource damages,  and 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 those 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 19 to Consolidated Financial Statements contained in the Form 10-K.

Tax Claim Against G-I Holdings Inc.

     The Company and certain of its subsidiaries  were members of a consolidated
group for Federal income tax purposes that included G-I Holdings Inc., (the "G-I
Holdings  Group") in certain  prior years and,  accordingly,  would be severally
liable for any tax liability of the G-I Holdings Group in respect of those prior
years.  Effective  as of January 1, 1997,  neither  the  Company  nor any of its
subsidiaries  are  members  of the G-I  Holdings  Group.  In January  2001,  G-I
Holdings filed a voluntary petition for  reorganization  under Chapter 11 of the
U.S. Bankruptcy Code due to its  asbestos-related  bodily injury claims relating
to the inhalation of asbestos fiber.

     On  September  15, 1997,  G-I Holdings  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  G-I  Holdings  held  an
interest.  G-I Holdings  has advised the Company  that it believes  that it will
prevail in the tax matter arising out of the surfactants  partnership,  although
there can be no assurance in this

                                       12

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE 11. CONTINGENCIES - (CONTINUED)

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.  On September  21, 2001,  the IRS filed a proof of claim
with  respect  to such  deficiency  against  G-I  Holdings  in the G-I  Holdings
bankruptcy.  On May 7, 2002,  G-I  Holdings  filed an objection to that proof of
claim. On July 13, 2002, the IRS filed a motion with the U.S. District Court for
a withdrawal of the reference to the bankruptcy court of G-I Holdings' objection
to the proof of claim,  which motion remains pending.  If such proof of claim is
sustained, the Company and/or some of the Company's subsidiaries,  together with
G-I Holdings and several current and former subsidiaries of G-I Holdings,  would
be severally  liable for such taxes and interest in the amount of  approximately
$250.0  million  should G-I  Holdings be unable to satisfy such  liability.  For
additional  information relating to G-I Holdings,  reference is made to Notes 8,
16 and 19 to Consolidated Financial Statements contained in the Form 10-K.


NOTE 12.  NEW ACCOUNTING PRONOUNCEMENTS

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations."  SFAS No. 143  establishes  accounting  and  reporting
standards for legal  obligations  associated  with the  retirement of long-lived
assets that  result  from the  acquisition,  construction,  development  and the
normal  operation of a  long-lived  asset.  SFAS No. 143 requires  that the fair
value of a liability  for an asset  retirement  obligation  be recognized in the
period in which it is incurred.  Upon initial recognition of such liability,  an
entity must  capitalize  the asset  retirement  cost by increasing  the carrying
amount of the related  long-lived asset and subsequently  depreciating the asset
retirement  cost over the  useful  life of the  related  asset.  SFAS No. 143 is
effective  for fiscal  years  beginning  after June 15, 2002,  although  earlier
application is encouraged. The Company is in the process of assessing the impact
of this Statement on its financial statements.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44,  and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections."  SFAS No. 145 eliminates the  requirement of SFAS No. 4 that gains
and losses on the early  extinguishments of debt be recorded as an extraordinary
item  unless  such  gains  and  losses  meet  the  criteria  of APB  No.  30 for
classification as  extraordinary.  The rescission of SFAS No. 4 is effective for
fiscal  years  beginning  after May 15,  2002,  although  early  application  is
encouraged. The Company intends to adopt SFAS No. 145 effective January 1, 2003,
which will result in the  Company's  first  quarter  2002  pre-tax  loss of $7.1
million on the early extinguishment of debt being reclassified to other expense,
net.

     In July  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities." SFAS No. 146 addresses  financial
accounting  and  reporting  for  costs  associated  with  exit or

                                       13

<PAGE>

                      INTERNATIONAL SPECIALTY PRODUCTS INC.

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)


NOTE  12.  NEW ACCOUNTING PRONOUNCEMENTS - (CONTINUED)

disposal   activities  and  supercedes  Emerging  Issues Task  Force  Issue  No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs  to  Exit  an   Activity   (including   Certain   Costs   Incurred   in  a
Restructuring)."  SFAS No. 146 requires that a liability  for a cost  associated
with an exit or disposal  activity be recognized when the liability is incurred,
and  concludes  that an entity's  commitment  to an exit plan does not by itself
create a present  obligation  that meets the  definition  of a  liability.  This
Statement  also  establishes  that  fair  value  is  the  objective  of  initial
measurement  of the  liability.  SFAS No. 146 is effective  for exit or disposal
activities that are initiated  after December 31, 2002,  with early  application
encouraged.  The  Company  is in the  process  of  assessing  the impact of this
Statement on its financial statements.


NOTE 13.  PROPOSED PURCHASE OF SHARES OF COMMON STOCK

     On July 8, 2002,  the Company  announced  that its Board of  Directors  had
received a letter from Samuel J. Heyman,  the  Chairman of the Board,  proposing
that the Board consider a going private transaction whereby holders of shares of
the Company's  common stock (other than those shares  beneficially  owned by Mr.
Heyman)  would  receive $10 in cash per share.  The Board of Directors  formed a
Special Committee that consists of Company directors who are not officers of the
Company to evaluate this proposal.

     On November 7, 2002, the Company  announced that the Special  Committee and
Mr. Heyman reached an agreement on such  transaction  whereby the holders of the
Company's publicly traded shares (other than Mr. Heyman) would receive $10.30 in
cash per share.

     On  November  8,  2002,  the  Company's  Board of  Directors  approved  the
agreement  reached by the Special Committee and Mr. Heyman and also approved the
definitive  merger  agreement,  as the  transaction  is expected to proceed as a
merger.  Completion of the merger will be subject to certain closing conditions,
including  approval by holders of a majority of the Company's shares and holders
of a majority of the votes cast by holders of shares not  beneficially  owned by
Mr. Heyman or the Directors or officers of the Company.  The  transaction  has a
value of approximately $130 million.






                                       14
<PAGE>



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


     Unless  otherwise  indicated by the  context,  "we," "us," "our," and "ISP"
refer  to   International   Specialty   Products   Inc.  and  its   consolidated
subsidiaries.

CRITICAL ACCOUNTING POLICIES

     The  preparation of our financial  statements in conformity with accounting
principles  generally  accepted in the United States  requires our management to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues,  and  expenses,  and related  disclosure  of  contingent
liabilities. On an on-going basis, we evaluate our estimates,  including but not
limited to those related to doubtful accounts, inventory valuation, investments,
environmental  liabilities,  goodwill and intangible assets,  pensions and other
postemployment  benefits, and contingent  liabilities.  We base our estimates on
historical  experience  adjusted for current  conditions,  and on various  other
assumptions that are believed to be reasonable under the current  circumstances,
the  results  of which form the basis for making  judgments  about the  carrying
values of assets and liabilities. Actual results may differ from these estimates
under different  assumptions or conditions.  We do not anticipate any changes in
management  estimates  that  would  have a  material  impact on our  operations,
liquidity or capital  resources.  We believe the following  critical  accounting
policies are the most important to the portrayal of our financial  condition and
results of operations and require our management's  more  significant  judgments
and estimates in the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts

     We maintain allowances for doubtful accounts for estimated losses resulting
from the  inability  of our  customers  to make  required  payments.  Management
continuously  assesses the financial  condition of our customers and the markets
in  which  these  customers  participate.  If  the  financial  condition  of our
customers  were to  deteriorate,  resulting in an impairment of their ability to
make payments, additional allowances may be required.

Inventories

     Inventories  are valued at the lower of cost or market.  The LIFO (last-in,
first-out)  method is utilized to determine cost for  substantially all domestic
acetylene-based  finished  goods and  work-in-process  and the raw  materials to
produce these products.  All other inventories are valued on the FIFO (first-in,
first out) method.  We write down our inventories for estimated  obsolescence or
unmarketable inventories equal to the difference between the cost of inventories
and their estimated market value based upon assumptions  about future demand and
market  conditions.  If actual market  conditions  are less favorable than those
projected by management, additional inventory write-downs may be required.


                                       15

<PAGE>


Short-Term Investments

     Our investment  strategy is to seek returns in excess of money market rates
on our available cash while minimizing  market risks.  There can be no assurance
that we will be successful in implementing such a strategy.  We invest primarily
in international and domestic  arbitrage and securities of companies involved in
acquisition  or  reorganization  transactions.  From time to time,  we invest in
securities of companies that we consider undervalued. With respect to our equity
positions, we are exposed to the risk of market loss.

     Our  short-term  investments  are  reported at fair value.  For  securities
classified as "trading" (including short positions), unrealized gains and losses
are  reflected  in the  results of  operations.  For  securities  classified  as
"available-for-sale," unrealized gains and losses, net of income tax effect, are
included in a separate  component of shareholder's  equity,  "Accumulated  other
comprehensive  income (loss)." The  determination of cost in computing  realized
and unrealized gains and losses is based on the specific  identification method.
We periodically  review  available-for-sale  securities for other than temporary
impairment when the cost basis of a security exceeds the market value.  Declines
in the value of these  investments or adverse changes in market conditions could
result in impairment charges in the future.

Goodwill and Other Intangibles

     Through  December  31,  2001,  we  amortized  goodwill  and  certain  other
intangible assets on a straight-line basis over the expected useful lives of the
underlying  assets.  In accordance with the provisions of Statement of Financial
Accounting  Standards No. 142, "Goodwill and Other Intangible Assets," effective
January 1, 2002, goodwill is no longer being amortized over its estimated useful
life, but rather will be subject to at least an annual assessment for impairment
and more frequently if circumstances indicate a possible impairment.  We adopted
SFAS No. 142 on  January  1, 2002.  Accordingly,  we  completed  a  transitional
impairment test, effective January 1, 2002, and recognized a goodwill impairment
loss of $155.4  million  as the  cumulative  effect  of a change  in  accounting
principle. The write-off represents the goodwill associated with our Performance
Chemicals,  Fine Chemicals and Industrial business segment. We use both a market
comparable  approach  and income  approach  to  determine  the fair value of our
reporting  units. We will perform our annual test for impairment  before the end
of the year 2002.

     Other  intangible  assets will be amortized  over their useful  lives.  The
useful  life  of an  intangible  asset  is  based  on  management's  assumptions
regarding  the  expected  use of the asset and other  assumptions.  If events or
circumstances  indicate  that the life of an  intangible  asset has changed,  it
could  result  in  higher  future  amortization  charges  or  recognition  of an
impairment loss.

Environmental Liability

     We accrue  environmental  costs when it is probable that we have incurred a
liability  and the  expected  amount  can be  reasonably  estimated.  The amount
accrued reflects our assumptions about remedial requirements at

                                       16

<PAGE>

the  contaminated  site, the  nature of the remedy, the  outcome  of discussions
with regulatory agencies and other potential  responsible parties at multi-party
sites, and the number and financial  viability of other potentially  responsible
parties.  Adverse decisions or events,  particularly as to increases in remedial
costs,  discovery of new  contamination,  assertion of natural resource damages,
plans for development of our Linden, New Jersey property,  and the liability and
the financial  responsibility  of our insurers and of the other parties involved
at each site and their  insurers,  could  cause us to increase  our  estimate of
liability in respect of those matters.  It is not currently possible to estimate
the amount or range of any additional liability.

Pension and Other Postemployment Benefits

     We maintain  defined  benefit plans that provide  eligible  employees  with
retirement   benefits.   In   addition,   while  we  generally  do  not  provide
postretirement  medical and life insurance benefits,  we subsidize such benefits
for certain employees and certain retirees. The costs and obligations related to
these benefits reflect our assumptions  related to general  economic  conditions
(particularly  interest  rates),  expected  return on plan  assets,  and rate of
compensation   increases   for   employees.   Projected   health  care  benefits
additionally  reflect our assumptions about health care cost trends. The cost of
providing  plan  benefits  also  depends on  demographic  assumptions  including
retirements,  mortality, turnover, and plan participation.  If actual experience
differs from these  assumptions,  the cost of  providing  these  benefits  could
increase or decrease.


RESULTS OF OPERATIONS - THIRD QUARTER 2002 COMPARED WITH
                        THIRD QUARTER 2001

     We recorded  third  quarter 2002 net income of $7.8 million  ($.12  diluted
earnings per share)  compared  with a net loss of $1.9 million ($.03 per diluted
share) in the third quarter of 2001.  Third quarter 2001 results  reflected $4.0
million of  goodwill  amortization.  Net  income for the third  quarter of 2001,
adjusted to exclude the goodwill  amortization,  was $2.1 million  ($.03 diluted
earnings per share).  On a comparable  basis, the improved results for the third
quarter of 2002 reflected $8.5 million higher  investment  income,  $4.5 million
lower  interest  expense and $1.0 million  higher  operating  income,  partially
offset by $3.4 million increased other expense, net.

     Net sales for the third quarter of 2002 were $208.4  million  compared with
$188.6 million for the same period in 2001. The 10.5% increase in sales resulted
primarily  from the  contribution  to sales  from the  biocides  business  ($7.9
million),  which was acquired on December  31, 2001,  higher unit volumes in the
Personal Care,  Pharmaceutical,  Performance Chemicals and Industrial businesses
(totaling $13.4 million),  and the favorable impact of the weaker U.S. dollar in
Europe  ($4.4  million).  Lower  pricing in the  Industrial  and  Personal  Care
businesses (totaling $4.7 million) partially offset the sales gains.

     Gross margins for the third quarter of 2002 were 36.6%  compared with 39.1%
in the third quarter of 2001. The decline in margins

                                       17

<PAGE>

resulted  primarily  from  a reduction  in  the Fine Chemicals  business due  to
the Polaroid bankruptcy and price declines in the Industrial business.

     Operating  income for the third quarter of 2002 was $35.5 million  compared
with $30.5 million for the third quarter of 2001.  Excluding the $4.0 million of
goodwill  amortization in the third quarter of 2001,  operating income was $34.5
million for the third quarter of 2001. On a comparable  basis,  operating income
in the Personal Care business was up $3.0 million mainly due to higher  volumes,
while  in the  Pharmaceutical,  Food and  Beverage  business,  operating  income
increased   $3.5  million   primarily  due  to  improved   volumes  and  mix  in
pharmaceutical  products.  Operating income was lower in Performance  Chemicals,
Fine Chemicals and  Industrial,  as strength in  Performance  Chemicals (up $3.9
million),  which includes the additional  profit  contribution from the biocides
business,  did not offset unfavorable pricing and higher  manufacturing costs in
Industrial  (totaling  $5.8 million) and lower volumes in Fine  Chemicals  ($7.0
million).  Operating income for the Mineral Products business  decreased by $0.3
million  on 3%  higher  sales due to  increased  manufacturing  costs.  Selling,
general and  administrative  expenses for the third quarter of 2002 increased 4%
to $40.6 million from $39.2 million in the same period last year,  primarily due
to the biocides  acquisition and to higher selling and  distribution  costs, but
those  expenses as a percentage of sales were 19.5%  compared with 20.8% in last
year's third quarter.

     Interest  expense for the third  quarter of 2002 was $20.6  million  versus
$25.1  million for the same period last year.  The 18% decrease was due to lower
average  borrowings.  Investment  income in the third  quarter  of 2002 was $1.2
million compared with investment  losses of $7.3 million in the same period last
year.  Investment  income for the third quarter of 2002 reflects a $39.0 million
impairment charge related to an  available-for-sale  equity security held in our
investment portfolio. Other expense, net, for the third quarter of 2002 was $4.3
million  compared  with $1.0  million in last  year's  third  quarter,  with the
increased expense due to unfavorable foreign exchange.

Business Segment Review

     A  discussion  of  operating  results  for  each of our  business  segments
follows.  We operate our Specialty  Chemicals  business through three reportable
business  segments,  in addition to the Mineral Products segment.  Each business
segment was  favorably  impacted in the third  quarter of 2002 by the absence of
goodwill amortization. The business segment discussion that follows excludes the
impact  of  goodwill  amortization  on  third  quarter  2001  results.  Goodwill
amortization  in the third  quarter of 2001 by business  segment was as follows:

                                          (Millions)
                                          ----------
   Personal Care                             $1.2
   Pharmaceutical, Food and Beverage          1.0
   Performance Chemicals, Fine Chemicals
      and Industrial                          1.0
   Mineral Products                           0.8

                                       18

<PAGE>

Personal Care

     Sales in the third quarter of 2002 were $51.0  million  compared with $45.5
million  for the same  period last year,  while  operating  income for the third
quarter of 2002  increased  to $10.0  million  from $7.0  million in last year's
third  quarter.  The 12% increase in sales  resulted from higher unit volumes in
both hair care and skin care products  ($5.2  million),  mainly in North America
and  Europe,  and also as a result of the  favorable  impact of the weaker  U.S.
dollar in Europe ($1.2 million).  The higher  operating income resulted from the
favorable  volumes ($3.7  million),  the  favorable  impact of the weaker dollar
($0.9 million) and $1.0 million lower operating  expenses,  partially  offset by
unfavorable manufacturing costs ($1.8 million).

Pharmaceutical, Food and Beverage

     Sales for the Pharmaceutical,  Food and Beverage segment were $62.3 million
for the third  quarter of 2002 compared with $57.8 million for the third quarter
of 2001.  The 8% sales  growth  reflected  higher unit volumes  ($3.1  million),
primarily in the pharmaceutical excipients market in North America and Asia, and
also  reflected  the  favorable  impact of the weaker U.S dollar in Europe ($1.4
million).

     Operating  income for the  Pharmaceutical,  Food and  Beverage  segment was
$17.0  million in the third  quarter of 2002  compared with $13.5 million in the
same period last year.  The 26%  increase in earnings  primarily  resulted  from
improved volumes ($3.3 million) in  pharmaceutical  products,  and the favorable
impact of the weaker  dollar ($1.1  million),  partially  offset by  unfavorable
manufacturing costs ($0.9 million).

Performance Chemicals, Fine Chemicals and Industrial

     Sales in the third quarter of 2002 were $70.5  million  compared with $61.5
million in the third  quarter of 2001.  The 15% increase in sales was  primarily
attributable  to the biocides  business  ($7.9  million),  which was acquired on
December  31,  2001.  The  increased  sales also  reflected  higher  Performance
Chemicals and  Industrial  volumes  (totaling  $5.5  million) in the  industrial
specialty,  agriculture  and  specialty  coatings  markets,  in  addition to the
favorable impact of the weaker U.S dollar in Europe ($1.8 million).  These sales
increases  were  partially  offset by lower pricing in the  Industrial  business
($3.9 million).  In the Fine Chemicals  business,  the lack of sales to Polaroid
more  than  offset   increased  sales  volumes  of  bulk   pharmaceuticals   and
pharmaceutical intermediates.

     Operating  income  for  the  Performance  Chemicals,   Fine  Chemicals  and
Industrial  segment was $3.0 million in the third  quarter of 2002 compared with
$8.4 million for the third quarter of 2001.  The  reduction in operating  income
was  attributable to losses from the Fine Chemicals  business due to unfavorable
volumes and the loss of sales to Polaroid (totaling $7.0 million).  In addition,
Industrial  profits were lower due to the impact of  unfavorable  pricing  ($3.9
million)  and  unfavorable   manufacturing   costs  ($2.0  million).   Partially
offsetting  these  reductions  in  operating  profits  was $3.9  million  higher
operating  income in  Performance  Chemicals due to

                                       19

<PAGE>

higher  volumes  and  favorable   manufacturing   efficiencies   (totaling  $1.9
million)  and also to the  additional  profit  contribution  from  the  biocides
business.

Mineral Products

     Sales for the Mineral  Products  segment for the third quarter of 2002 were
$24.6 million  compared with $23.8 million for the third quarter of 2001. The 3%
increase was due equally to higher sales to Building  Materials  Corporation  of
America,  an  affiliate,  and to higher third party sales.  We are  beginning to
experience  competitive  pricing pressures in the Mineral Products business as a
result of additional capacity coming on stream in the industry.

     Operating  income for the third  quarter of 2002 was $5.5 million  compared
with  $5.8  million  for the  third  quarter  of  2001,  reflecting  unfavorable
manufacturing  costs due to start-up costs associated with the Ione,  California
roofing granules plant acquired in April 2002.


RESULTS OF OPERATIONS - FIRST NINE MONTHS 2002 COMPARED WITH
                        FIRST NINE MONTHS 2001

     For the first nine months of 2002, we recorded a net loss of $116.6 million
($1.80  per  diluted  share)  compared  with net income of $20.7  million  ($.31
diluted earnings per share) in the first nine months of 2001. In accordance with
the adoption of SFAS No. 142, we completed a transitional test for impairment of
goodwill, and, accordingly,  recorded a $155.4 million ($2.40 per diluted share)
charge,  effective  January 1, 2002,  for the  cumulative  effect of a change in
accounting principle.  The write-off represents the goodwill associated with our
Performance  Chemicals,  Fine Chemicals and Industrial  business segment and was
based upon our estimate of fair value for these businesses, considering expected
future cash flows and profitability.

     First nine months 2002 results  also  include a $5.5  million  pre-tax gain
from the sale of the  FineTech  business,  $6.8  million of  pre-tax  gains from
contract settlements and an after-tax extraordinary charge of $4.7 million ($.07
per  diluted  share) on the early  retirement  of debt.  First nine  months 2001
results included $12.1 million of goodwill  amortization,  prior to the adoption
of SFAS No.  142,  and an  after-tax  charge of $0.4  million  ($.01 per diluted
share) for the  cumulative  effect of  adopting  SFAS No. 133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities."  Excluding  such  charges and
nonrecurring gains discussed above,  adjusted "Income before  extraordinary item
and  cumulative  effect of accounting  change" for the first nine months of 2002
was $35.5 million ($.55 diluted  earnings per share) compared with $33.3 million
($.50  diluted  earnings  per  share) for the first  nine  months of 2001.  On a
comparable  basis,  the higher  results  for the first nine  months of 2002 were
attributable  to $13.0 million higher  investment  income and $3.5 million lower
other expense,  net,  partially offset by $5.7 million lower adjusted  operating
income  (excluding  the  nonrecurring  gains) and $1.8 million  higher  interest
expense.

                                       20

<PAGE>


     Net sales for the first nine  months of 2002 were $642.2  million  compared
with $595.1 million for the same period in 2001. The 8% increase in sales in the
first nine months of 2002 resulted primarily from the contribution to sales from
the biocides business ($25.6 million),  which was acquired on December 31, 2001,
and by higher unit volumes in the  Pharmaceutical,  Mineral  Products,  Personal
Care and Industrial businesses (totaling $35.6 million).  The weaker U.S. dollar
in Europe also had a favorable  impact  ($5.2  million) on net sales.  Partially
offsetting  these increases was lower pricing in the Industrial,  Fine Chemicals
and Personal Care businesses (totaling $19.2 million).

     Gross  margins for the first nine months of 2002 were 35.2%  compared  with
37.7% in the  first  nine  months  of 2001.  The  decline  in  margins  resulted
primarily  from a reduction in the Fine  Chemicals  business due to the Polaroid
bankruptcy,  unfavorable  manufacturing  costs,  and the  lower  pricing  in the
Industrial, Fine Chemicals and Personal Care businesses.

     Operating  income  for the first  nine  months of 2002 was  $110.7  million
compared  with $92.0  million for the first nine months of 2001.  Excluding  the
$12.2 million of nonrecurring pre-tax gains on the sale of the FineTech business
and the  settlements  of  contracts  in the first nine  months of 2002 and $12.1
million of  goodwill  amortization  in the first nine  months of 2001,  adjusted
operating  income was $98.4  million for the first nine months of 2002  compared
with $104.1  million for the first nine months of 2001.  On a comparable  basis,
the $5.7 million  decrease in operating  income in the first nine months of 2002
was primarily  attributable to lower results in the Fine  Chemicals,  Industrial
and Personal Care  businesses  (totaling $19.7  million).  Partially  offsetting
these lower results were improved  operating profits in the Mineral Products and
Pharmaceutical  businesses  (totaling  $10.2  million) and the  contribution  to
income from the biocides business.  Selling, general and administrative expenses
increased  5% in the first nine  months of 2002 to $127.0  million  from  $120.5
million in the same period last year,  primarily due to the biocides acquisition
and higher selling and distribution costs, but those expenses as a percentage of
sales were 19.8% compared with 20.2% last year.

     Interest expense for the first nine months of 2002 was $64.6 million versus
$62.8  million  for the same period last year.  The  increase  was due to higher
average interest rates, partially offset by lower average borrowings. Investment
income for the first nine months of 2002 was $26.5  million  compared with $13.5
million  in the same  period  last  year.  Investment  income for the first nine
months  of 2002  reflects  a  $39.0  million  impairment  charge  related  to an
available-for-sale  equity  security  held in our  investment  portfolio.  Other
expense,  net, for the first nine months of 2002 was $6.5 million  compared with
other  expense,  net,  of $10.1  million in last year's  period,  with the lower
expense due to the impact of a weaker U.S.  dollar in Europe and Asia and a $1.4
million higher provision for  environmental  liability in last year's first nine
months.


                                       21

<PAGE>

Business Segment Review

     A  discussion  of  operating  results  for  each of our  business  segments
follows.  We operate our Specialty  Chemicals  business through three reportable
business  segments,  in addition to the Mineral Products segment.  Each business
segment was  favorably  impacted in the first nine months of 2002 by the absence
of goodwill amortization.  The business segment discussion that follows excludes
the impact of  goodwill  amortization  on nine  months  2001  results.  Goodwill
amortization  in the  first  nine  months  of 2001 by  business  segment  was as
follows:
                                          (Millions)
                                          ----------
   Personal Care                             $3.6
   Pharmaceutical, Food and Beverage          3.1
   Performance Chemicals, Fine Chemicals
      and Industrial                          3.1
   Mineral Products                           2.3


Personal Care

     Sales in the first nine months of 2002 were $156.2  million  compared  with
$150.6  million in the same period  last year,  while  operating  income for the
first nine months of 2002  decreased to $28.1  million from $30.7 million in the
same  period  last year.  The 4%  increase  in sales  resulted  from higher unit
volumes in both hair care and skin care products ($7.3 million), mainly in North
America and Europe,  and also as a result of the favorable  impact of the weaker
U.S.  dollar in Europe  ($1.3  million).  The lower  operating  income  resulted
primarily  from  unfavorable  manufacturing  costs and pricing  ($7.0  million),
partially  offset by the impact of the favorable  volumes ($3.5 million) and the
favorable impact of the weaker U.S. dollar ($0.9 million).

Pharmaceutical, Food and Beverage

     Sales for the Pharmaceutical, Food and Beverage segment were $181.0 million
for the first nine months of 2002, a 7% increase  compared  with $169.6  million
for the  first  nine  months  of 2001.  Sales  for the  Pharmaceutical  business
increased  by 11.5% in the first nine  months of 2002,  reflecting  higher  unit
volumes  ($11.1  million),  primarily in the excipients and oral care markets in
Europe and North America.  Sales for the Beverage and alginates food  businesses
decreased  by 2% and 4%,  respectively,  due to lower unit  volumes  and pricing
(totaling $1.7 million), primarily in Europe and Latin America.

     Operating  income for the  Pharmaceutical,  Food and  Beverage  segment was
$43.4  million in the first nine months of 2002  compared  with $42.4 million in
the same  period last year.  Operating  income for the  Pharmaceutical  business
increased 8% in the first nine months of 2002  compared  with the same period in
2001.  The  improvement  reflected  the impact of the higher unit volumes  ($5.0
million) and the  favorable  impact of the weaker U.S.  dollar  ($0.9  million),
partially offset by unfavorable  manufacturing  costs ($0.9 million).  Operating
results for the Beverage and alginates food  businesses  decreased by a

                                       22

<PAGE>

total  of  $2.7  million  in the  first  nine  months of 2002 due  primarily  to
unfavorable  manufacturing  costs ($1.5 million) and, to a lesser extent, to the
lower volumes and pricing.

Performance Chemicals, Fine Chemicals and Industrial

     Sales in the first nine months of 2002 were $230.8  million  compared  with
$211.1  million  in the first  nine  months of 2001.  The 9% higher  sales  were
attributable  to the biocides  business ($25.6  million),  which was acquired on
December 31, 2001.  Sales for the  Performance  Chemicals,  Fine  Chemicals  and
Industrial businesses,  excluding biocides, decreased by a total of $5.9 million
(3%) due to lower  pricing in  Industrial  and Fine  Chemicals  (totaling  $16.2
million).  Partially  offsetting  these sales  declines  were higher  Industrial
volumes  ($8.7  million) and the favorable  impact of the weaker U.S.  dollar in
Europe ($2.5  million).  Market  selling  prices of butanediol  decreased in the
first nine months of 2002  compared  with  average  2001 levels due to weakening
demand and in anticipation of new capacity coming on stream in Europe. Sales for
the  Fine  Chemicals  business  were  unfavorably  impacted  due to the  loss of
Polaroid sales as a result of Polaroid's bankruptcy.

     Operating  income  for  the  Performance  Chemicals,   Fine  Chemicals  and
Industrial  segment was $20.8  million in the first nine months of 2002 compared
with $20.0 million for the first nine months of 2001. Excluding the $5.5 million
gain on the  sale of the  FineTech  business  and the $6.8  million  of gains on
contract  settlements,  operating  income for the first nine  months of 2002 was
$8.5 million.  The decline in operating  profits was primarily  attributable  to
losses in the Fine  Chemicals  business  due to the loss of  Polaroid  sales and
unfavorable  pricing  ($3.1  million).  Operating  profits  for  the  Industrial
business  were 56% lower for the first nine  months of 2002 due to the impact of
unfavorable  pricing ($13.0 million).  Partially  offsetting  these  unfavorable
factors  were  favorable  manufacturing   efficiencies  ($4.4  million)  due  to
consolidation  of our  butanediol  production  at our  Marl,  Germany  facility,
together with lower methanol and natural gas prices. The lower operating profits
from the Fine Chemicals and Industrial  businesses were partially offset by $5.7
million higher operating income in Performance  Chemicals,  primarily reflecting
the profit  contribution from the biocides  business,  and also due to favorable
manufacturing efficiencies and volumes (totaling $2.2 million).

Mineral Products

     Sales for the  Mineral  Products  segment for the first nine months of 2002
were $74.3  million  compared  with $63.8  million  for the first nine months of
2001. The $10.5 million (16%) increase reflected $7.4 million (15%) higher sales
to Building  Materials  Corporation of America,  an affiliate,  and $3.1 million
(23%)  higher third party  sales.  The  increased  sales  reflected  higher unit
volumes ($8.6  million)  resulting  from an increased  market demand for roofing
granules.  We are beginning to experience  competitive  pricing pressures in the
Mineral Products business as a result of additional capacity coming on stream in
the industry.

                                       23

<PAGE>


     Operating income for the first nine months of 2002 was $18.4 million, a 72%
increase  compared  with $10.7  million for the same period in 2001,  reflecting
favorable manufacturing efficiencies and lower natural gas costs ($3.9 million),
as well as the impact of the higher volumes.


LIQUIDITY AND FINANCIAL CONDITION

     During the first nine months of 2002, our net cash outflow before financing
activities  was  $12.3  million,  reflecting  $30.6  million  of  cash  used  in
operations,  the  reinvestment  of $42.6  million for capital  programs  and the
acquisition of a Mineral Products  manufacturing  facility, net cash proceeds of
$27.3  million from the sale of the FineTech  business and $33.6 million of cash
generated from net sales of  available-for-sale  securities and other short-term
investments.

     Cash used in  operations in the first nine months of 2002 included a $153.4
million  net cash  outflow  related  to net  purchases  of  trading  securities.
Excluding  this cash  outflow,  cash  provided from  operations  totaled  $122.8
million.  Cash generated from a decrease in working  capital items totaled $27.1
million  during the first nine months of 2002,  reflecting  a $27.5  million net
increase in payables and accrued  liabilities  and a $13.8  million  decrease in
inventories,  partially offset by a $12.8 million  increase in receivables.  The
higher payables  reflect a $16.7 million  payable for investments  purchased but
not  settled as of the end of the third  quarter,  and the  reduced  inventories
resulted from an inventory  reduction program.  The higher receivables  resulted
from $16.3  million  higher sales in the third quarter of 2002 versus the fourth
quarter of 2001.

     Net cash used in financing  activities during the first nine months of 2002
totaled  $2.0  million,  primarily  reflecting  an  $85.3  million  decrease  in
borrowings  under our bank  revolving  credit  facility  and a $4.6 million call
premium  on the  redemption  of debt,  offset by an $89.0  million  increase  in
short-term  borrowings.  On January 14, 2002, we redeemed the  remaining  $307.9
million  aggregate  principal  amount of our 9% Senior Notes due 2003,  which we
refer to as the "2003 Notes." The 2003 Notes were redeemed at a redemption price
of 101.5% of the  principal  amount  plus  accrued  and unpaid  interest  to the
redemption  date. The redemption was funded  utilizing a restricted  cash escrow
account which had been  established in 2001 in connection  with the issuances of
long-term debt. In addition,  financing  activities included a $1.5 million cash
outlay for  repurchases  of 177,600  shares of our common stock  pursuant to our
repurchase  program.  At  September  29,  2002,  771,462  shares of common stock
remained available for purchase under our repurchase program.

     As a result of the foregoing factors,  cash and cash equivalents  decreased
by $13.7  million  during  the  first  nine  months  of 2002 to  $65.8  million,
excluding $461.1 million of trading and available-for-sale securities.


                                       24

<PAGE>


     On July 8, 2002,  we announced  that our Board of Directors  had received a
letter from Samuel J.  Heyman,  the  Chairman of the Board,  proposing  that the
Board  consider a going  private  transaction  whereby  holders of shares of our
common stock (other than those shares  beneficially  owned by Mr.  Heyman) would
receive $10 in cash per share.  Such shares  total  approximately  12.5  million
shares, or approximately 19% of our outstanding  shares.  The Board of Directors
formed a Special  Committee  that  consists  of  Company  directors  who are not
officers of ISP to evaluate this proposal.

     On November 7, 2002, we announced that the Special Committee and Mr. Heyman
reached an  agreement  on such  transaction  whereby the holders of our publicly
traded  shares (other than Mr.  Heyman) would receive  $10.30 in cash per share.
The  agreement  followed  a  determination  by the  Special  Committee  that the
transaction  consideration  is  fair to our  public  shareholders.  The  Special
Committee  has  been  negotiating  with  Mr.  Heyman  regarding  his  previously
announced  proposal of $10 per share.  Lehman  Brothers Inc. served as financial
advisor to the Special Committee.

     On November 8, 2002, our Board of Directors  approved the agreement reached
by the Special  Committee and Mr. Heyman and also approved the definitive merger
agreement as the  transaction is expected to proceed as a merger.  Completion of
the merger will be subject to certain closing conditions,  including approval by
holders of a majority  of our shares and holders of a majority of the votes cast
by holders of shares not  beneficially  owned by Mr.  Heyman or the Directors or
officers of ISP. The total  consideration for such shares of approximately  $130
million would be paid out of our available funds.

     In  December  2001,  we  entered  into  a  letter  agreement  to  sell  our
pharmaceutical fine chemicals business to Pharmaceutical Resources Incorporated,
which we refer to as "PRI,",  including our Haifa,  Israel-based FineTech,  Ltd.
business and our Columbus,  Ohio  manufacturing  facility.  In February 2002, we
received  a  $250,000  payment  from  PRI  in  consideration  of  extending  the
negotiations pursuant to the letter agreement.  In March 2002, we announced that
the sale would not be consummated  due to the failure of PRI to proceed with the
transaction  in a timely  manner.  Under the terms of the letter  agreement,  we
received a $3.0 million  break-up fee, which was recorded as income in the first
quarter of 2002 (see Note 4 to  Consolidated  Financial  Statements).  Following
negotiations  with PRI, in April 2002, we sold the  Haifa-based  business to PRI
for $32 million.  We recorded a second quarter pre-tax gain, after expenses,  of
$5.5 million related to this sale.

     In April 2002, we acquired the roofing granules manufacturing operations in
Ione,  California  of Reed  Minerals,  a division  of Harsco  Corporation.  In a
related transaction, we also acquired the adjacent quarry operations and certain
mining assets from Hanson Aggregates Mid-Pacific,  Inc. The total purchase price
of the acquisitions was $11.4 million.

     As part of our acquisition of our Freetown, Massachusetts plant in 1998, we
entered into a multi-year agreement to supply the imaging dyes and polymers used
by Polaroid in its instant film  business.  In October 2001,  Polaroid filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. In the third quarter of
2002,  the  majority of  Polaroid's

                                       25

<PAGE>

assets  were  acquired  by  a  new  owner.  As a result,  we  no  longer  have a
long-term supply contract with Polaroid.  These events have negatively  impacted
the sale of our fine  chemicals  products  and  reduced the  utilization  of our
Freetown plant.

     We have an operating lease for a sale-leaseback  transaction related to the
Freetown facility, which was entered into in 1998. The lease had an initial term
of four years and, at our option,  up to three  one-year  renewal  periods.  The
lease  provides for a  substantial  guaranteed  payment by us at the end of each
renewal  period and includes  purchase and return  options at fair market values
determined  at the  inception  of the  lease.  We have the right to  exercise  a
purchase  option with  respect to the leased  facility,  or the  facility can be
returned  to the lessor and sold to a third  party.  We are  obligated  to pay a
maximum  guaranteed  payment  amount upon the return of the facility,  currently
$35.8 million,  reduced by 50% of any proceeds from the  subsequent  sale of the
facility  in  excess  of  $5.2  million.  Under  generally  accepted  accounting
principles,   we  cannot  recognize  this  future  obligation  or  recognize  an
impairment loss relative to the Freetown  facility since, as an operating lease,
the Freetown facility is not carried as a long-lived asset on our balance sheet.
However,  given the current  utilization of the Freetown facility as a result of
the Polaroid bankruptcy, if we should exercise the purchase option at the end of
any future renewal  period or at the  termination of the lease in 2005, we would
anticipate having to recognize a material  impairment  charge.  However,  we are
working  toward  increasing  the  utilization  of the  Freetown  plant  and have
transferred production of certain personal care products to this facility.

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations."  SFAS No. 143  establishes  accounting  and  reporting
standards for legal  obligations  associated  with the  retirement of long-lived
assets that  result  from the  acquisition,  construction,  development  and the
normal  operation of a  long-lived  asset.  SFAS No. 143 requires  that the fair
value of a liability  for an asset  retirement  obligation  be recognized in the
period in which it is incurred.  Upon initial recognition of such liability,  an
entity must  capitalize  the asset  retirement  cost by increasing  the carrying
amount of the related  long-lived asset and subsequently  depreciating the asset
retirement  cost over the  useful  life of the  related  asset.  SFAS No. 143 is
effective  for fiscal  years  beginning  after June 15, 2002,  although  earlier
application is encouraged. We are in the process of assessing the impact of this
Statement on our financial statements.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44,  and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections."  SFAS No. 145 eliminates the  requirement of SFAS No. 4 that gains
and losses on the early  extinguishments of debt be recorded as an extraordinary
item  unless  such  gains  and  losses  meet  the  criteria  of APB  No.  30 for
classification as  extraordinary.  The rescission of SFAS No. 4 is effective for
fiscal  years  beginning  after May 15,  2002,  although  early  application  is
encouraged.  We intend to adopt SFAS No. 145  effective  January 1, 2003,  which
will result in our first  quarter 2002 pre-tax loss of $7.1 million on the early
extinguishment of debt being reclassified to other expense, net.


                                       26

<PAGE>


     In July  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities." SFAS No. 146 addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and supercedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the  liability  is  incurred,  and  concludes  that an entity's
commitment to an exit plan does not by itself create a present  obligation  that
meets the definition of a liability.  This Statement also  establishes that fair
value is the objective of initial measurement of the liability.  SFAS No. 146 is
effective for exit or disposal  activities that are initiated after December 31,
2002, with early application encouraged.  We are in the process of assessing the
impact of this Statement on our financial statements.

     See Note 11 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 our objectives,
plans or goals also are forward-looking  statements.  Our 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.
The  forward-looking  statements included herein are made only as of the date of
this  Quarterly  Report on Form 10-Q and we undertake 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.











                                       27

<PAGE>


                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 our Annual Report on Form 10-K for the
fiscal year ended  December 31,  2001,  for a  discussion  of  "Market-Sensitive
Instruments  and Risk  Management."  As of  December  31,  2001,  equity-related
financial  instruments  employed  by us to  reduce  market  risk  included  long
contracts valued at $13.5 million and short contracts valued at $7.2 million. At
September 29, 2002,  the value of long  contracts was $0.9 million and the value
of short contracts was $0.1 million.  Such instruments are marked-to-market each
month,  with unrealized  gains and losses included in the results of operations.
The unrealized gain (loss) on equity-related long contracts at December 31, 2001
and  September  29, 2002 was  $176,000  and  $(244,000),  respectively,  and the
unrealized  gain on  equity-related  short contracts was $45,000 and $109,000 at
December 31, 2001 and September 29, 2002, respectively.



                         ITEM 4. CONTROLS AND PROCEDURES

     The  Company's  Chief  Executive  Officer and Chief  Financial  Officer are
responsible for the design, maintenance and effectiveness of disclosure controls
and  procedures  (as  defined  in  the  Rules  13a-14(c)  and  15d-14(c)  of the
Securities Exchange Act of 1934).

     The  effectiveness  of the  disclosure  controls and  procedures  have been
evaluated by the Chief Executive  Officer and Chief Financial  Officer within 90
days of the filing  date of this  report.  Based on this  evaluation,  the Chief
Executive Officer and Chief Financial Officer have concluded that the disclosure
controls and procedures are adequate and effective.

     There have been no  significant  changes in  internal  controls or in other
factors that could  significantly  affect these internal controls  subsequent to
the date of the evaluation in connection  with the preparation of this Quarterly
Report on Form 10-Q.













                                       28
<PAGE>


                                    PART II


                               OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     On July 8, 2002, the Company announced that its Board of Directors received
a letter from Samuel J. Heyman,  the Chairman of the Board,  proposing  that the
Board  consider a going  private  transaction  whereby  holders of shares of the
Company's  common  stock  (other  than those  shares  beneficially  owned by Mr.
Heyman)  would receive $10 in cash per share.  On November 7, 2002,  the Company
announced that the Special Committee and Mr. Heyman reached an agreement on such
transaction  whereby the holders of the Company's  publicly traded shares (other
than Mr. Heyman) would receive $10.30 in cash per share. The agreement  followed
a determination by the Special  Committee that the transaction  consideration is
fair to the Company's  public  shareholders.  On November 8, 2002, the Company's
Board of Directors approved the agreement.

     Subsequent to the July 8, 2002  announcement,  six purported  class actions
were filed in Chancery Court in New Castle County,  Delaware,  and one purported
class action was filed in the United States  District  Court for the District of
New  Jersey  against  the  Company  and the  individual  members of the Board of
Directors.  These various actions allege generally that the defendants  breached
their fiduciary duties to the Company's public  shareholders with respect to the
proposed  transaction  and seek to enjoin or rescind the  transaction and obtain
unspecified damages and attorneys' fees.

     The Company intends and has been advised that the individual directors also
intend to vigorously  defend against these  purported  class  actions.  With the
November 7 and November 8 announcements, respectively, the Company believes that
the ultimate  outcome of these various actions will not have a material  adverse
effect on the Company's business, financial position or results of operations.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

     Exhibit Number
     --------------

     99.1   Certification of CEO and CFO pursuant to 18 U.S.C. Section
            1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
            Act of 2002.


(b) Reports on Form 8-K filed during the current quarter:

    No reports on Form 8-K were filed during the three-month period ended
    September 29, 2002.



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<PAGE>

                                  SIGNATURES



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


                             INTERNATIONAL SPECIALTY PRODUCTS INC.




DATE:  November 13, 2002      BY:   /s/Neal E. Murphy
       -----------------            -----------------

                                    Neal E. Murphy
                                    Senior Vice President and
                                      Chief Financial Officer
                                    (Principal Financial Officer)


DATE:  November 13, 2002      BY:   /s/Kenneth M. McHugh
       -----------------            --------------------

                                    Kenneth M. McHugh
                                    Vice President and Controller
                                    (Principal Accounting Officer)












                                       30

<PAGE>

                                  CERTIFICATION


I, Sunil Kumar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of International Specialty
Products Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal

                                       31

<PAGE>

controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:   November 13, 2002

  /s/ Sunil Kumar
----------------------------
Name:  Sunil Kumar
Title: President and Chief Executive Officer









































                                       32

<PAGE>


                                  CERTIFICATION


I, Neal E. Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of International Specialty
Products Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal

                                       33

<PAGE>

controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:   November 13, 2002

  /s/ Neal E. Murphy
-------------------------------
Name:   Neal E. Murphy
Title:  Senior Vice President and
          Chief Financial Officer
























                                       34

<PAGE>