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

FORM 10-K

Commission file number 333-17827-01

ISP CHEMCO INC.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (302) 427-5818

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

        As of March 23, 2004, 100 shares of common stock, par value $.01 per share of the registrant were outstanding. There is no trading market for the common stock of the registrant. As of March 23, 2004, each of the additional registrants had the number of shares outstanding that is shown on the table below. There is no trading market for the common stock of the additional registrants. As of March 23, 2004, no shares of the registrant or the additional registrants were held by non-affiliates.

THE REGISTRANT AND THE ADDITIONAL REGISTRANTS MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

ISP CHEMCO INC.

Form 10-K
for the fiscal year ended December 31, 2003

Table of Contents

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PART I

        The Business section and other parts of this annual report on Form 10-K contain both historical and forward-looking statements that involve risks and uncertainties. Many of the forward-looking statements are located in "Management's Discussion and Analysis of Financial Condition and Results of Operations." These forward-looking statements are only predictions and generally can be identified by words such as "anticipates," "expects," "believes," "intends," "plans," "predicts," "foresees" and other related terms. Similarly, statements that describe our objectives, plans or goals are also 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. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. The forward-looking statements included herein are made only as of the date of this annual report on Form 10-K. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Item 1.    Business

General

        ISP Chemco Inc. is a leading multinational manufacturer and supplier of specialty and industrial chemicals and mineral products for a wide variety of personal care, pharmaceutical, food, beverage and industrial applications. We produce more than 400 specialty chemicals which we market and sell worldwide. We are an indirect wholly owned subsidiary of International Specialty Products Inc., or ISP. We were incorporated in Delaware in 1998. As a result of a proposal by Samuel J. Heyman, ISP's Chairman, to acquire beneficial ownership of all shares of ISP common stock that he did not already beneficially own, which was completed in February 2003, which we refer to as ISP's going private transaction, ISP's common stock is no longer publicly traded and Mr. Heyman is now the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of 100% of ISP's common stock and our common stock. Following the completion of ISP's going private transaction, ISP's common stock was delisted from the New York Stock Exchange and its registration with the Securities and Exchange Commission was terminated. Unless otherwise indicated by the context, "we," "us," "our," and "ISP Chemco" refers to ISP Chemco Inc. and its consolidated subsidiaries and "ISP" refers to International Specialty Products Inc. and its consolidated subsidiaries.

        ISP owns all of the issued and outstanding capital stock of International Specialty Holdings Inc., which we refer to as IS Holdings. IS Holdings was formed in 2001 in connection with an internal corporate restructuring ISP completed in June 2001. IS Holdings owns all of our and ISP Investco LLC's issued and outstanding capital stock. We operate ISP's businesses exclusively through our direct and indirect subsidiaries. ISP Investco was formed in 2001 for the purpose of holding all of ISP's investment assets and related liabilities.

        The address and telephone number of our principal executive offices is 300 Delaware Avenue, Suite 303, Wilmington, Delaware 19801, (302) 427-5818.

        Effective January 1, 2003, we changed the composition of our reportable business segments to be consistent with the current structure of our businesses. Over the last five years, we have moved toward increasing our focus on our consumer-oriented and service intensive businesses while consolidating and downsizing our low margin butanediol business and controlling costs. Consistent with that business focus, we now report three business segments: specialty chemicals, industrial chemicals and mineral products. Our specialty chemicals business segment consists of the personal care; pharmaceutical, food and beverage; performance chemicals; and fine chemicals product lines.

        We have and continue to increase our consumer-oriented focus through new, more profitable product offerings, enhanced technical capabilities and penetration into new markets. We also have

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supplemented our internal resources with strategic alliances and complementary acquisitions. We continue to lower our costs through operating efficiencies and plant consolidations.

        Product offerings include a hair care product that provides faster drying time and greater hold for styling flexibility and a solvent that improves the stability and absorption of pharmaceutical products. We have also introduced a patented, water-based micro-emulsion that more effectively disperses the active agricultural ingredient for easier application and improved environmental safety in crop spraying.

        To enhance support provided by our technical service team, we have added technical service laboratories to our current global network of applications. In this regard we opened a new technical service laboratory in Mexico.

        Strategic alliances have allowed us to leverage our core strengths in marketing, sales and technical services to obtain access to new technologies and expand the breadth and utility of our product offerings. These product offerings as a result of these strategic alliances include skin conditioners and other skin care products, pharmaceutical over-the counter, nutritional and oral care applications, personal care products, and a line of polymers.

        We continually explore possible acquisitions where we seek to acquire complementary technologies or products, expand our customer base and leverage our sales and distribution infrastructure and existing client relationships. For example, we acquired our alginates business and now provide naturally derived food thickeners and stabilizers to a variety of markets that complement our existing products and technology, such as the pharmaceutical ingredients, food and beverage markets. We also acquired our industrial biocides business that includes a product line of fungicides, preservatives, algaecides and biocides to expand our performance chemicals product line.

        In May 2003, we acquired Germinal S.A., a company that supplies the meat and dairy industry in Southern Latin America with ingredient systems. The acquisition adds to the expansion of our high-value specialty products in our food ingredients business.

        We expanded our Freetown, Massachusetts manufacturing facility's production capabilities to allow for the manufacture of some specialty chemical products for our personal care product line and to offer custom manufacturing capability to the pharmaceutical, biotechnology, agricultural and chemical process industries. In connection with the relocation of some of our production lines for our personal care product line to our Freetown facility, we shut down our manufacturing operation at our Belleville, New Jersey plant in 2001.

        During the last five years, we have invested approximately $300 million in maintaining and upgrading our manufacturing plants including equipment modifications and de-bottlenecking solutions which have significantly increased our manufacturing efficiency and capacity. We have also streamlined and consolidated our operations to increase efficiency and reduce our operating costs. For example, we shut down our high cost butanediol production at our Calvert City, Kentucky plant in 1999, at our Seadrift, Texas plant in 2000 and at our Texas City, Texas plant in 2001. In addition, we shifted butanediol production following these shutdowns to our lower cost Marl, Germany facility.

Business Segments

Specialty Chemicals

Products and Markets.

        We manufacture a broad spectrum of specialty chemicals having numerous applications in consumer and industrial products. We use proprietary technology to convert various raw materials, through a chain of one or more processing steps, into increasingly complex and higher value-added specialty chemicals specifically developed to meet customer requirements.

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        Our specialty chemicals segment is organized based upon the markets for our products. Accordingly, we manage our specialty chemicals segment through the following product lines:

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Personal Care—whose products are sold to the skin care and hair care markets;



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Pharmaceutical, Food and Beverage—whose products are sold to these three government-regulated industries;



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Performance Chemicals—whose products are sold to the medical, aerospace, defense, electronics and powder metallurgy markets and numerous consumer and agricultural markets; and



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Fine Chemicals—whose products are sold to the pharmaceutical, biotechnology, agricultural, imaging and numerous consumer markets.

        In each of the years ending December 31, 2001, 2002 and 2003, sales of our specialty chemicals represented approximately 70%, 71% and 70%, of our revenues respectively. For information about the amount of sales by each of our specialty chemical product lines, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" and Note 19 to our consolidated financial statements included in this annual report on Form 10-K.

        Most of our specialty chemical products fall within the following categories:

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vinyl ether monomers—includes several products for use in specialty and radiation-cured coatings. Our vinyl ether monomers are marketed by the performance chemicals group of our performance chemicals and fine chemicals product lines.



•

vinyl ether copolymers—includes our Gantrez® line of products. These products serve as a bioadhesive resin in consumer products such as tartar-control toothpaste, denture adhesives and facial pore strips. Vinyl ether copolymers are marketed by our personal care and pharmaceutical, food and beverage product lines.



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polyvinyl pyrrolidone (PVP) polymers and copolymers—represents our largest product group. These polymers and copolymers are marketed by all of our product lines. Our Plasdone®, Polyclar® and Gafquat® product lines, which are used as tablet binders, beverage clarifiers and hair fixative resins, respectively, are included in this group.



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alginates—includes sodium alginate, propylene glycol alginate and other alginate derivatives for use as thickeners, stabilizers and viscosity modifiers. These products are marketed by our personal care; pharmaceutical, food and beverage; and performance chemical product lines, with the majority of our sales to the food industry.

        The balance of our specialty chemical products are marketed by our performance chemicals, and fine chemicals product lines. In addition, our sunscreens, preservatives and emollients, are each marketed by our personal care product line.

        Personal Care.    Our personal care product line markets numerous specialty chemicals that serve as critical ingredients in the formulation of many well-known skin care, hair care, toiletry and cosmetic products. For example, our polyvinylpyrrolidone polymers, which are derived from acetylene, are critical components in hair styling gels. If this polymer were removed, hold, stiffness and styling would be lost.

        Our skin care ingredients include:

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ultraviolet (UV) light absorbing chemicals, which serve as sunscreens;



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emollients which provide skin softness;



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moisturizers, which enhance the skin's water balance;

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waterproofing agents, which enhance the performance of eye-liners and sunscreens in wet environments; and



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preservatives, which extend the shelf life of aqueous-based cosmetic formulations by preventing the growth of harmful bacteria.

        Our Escalol® sunscreen actives serve as the primary active ingredient in many of the most popular sunscreens today and increasingly find applications in many other products such as lipsticks and facial creams. Our Ceraphyl® line of emollients and moisturizers provides a variety of popular bath products with their softening and moisturizing characteristics. We produce a growing number of specialty preservatives, including Germall® Plus, a patented product that offers broad-spectrum anti-microbial activity, and Suttocide® A, a preservative gentle enough for infant care products.

        Our Bio-Functional Ingredients platform offers unique, clinically-proven and consumer-perceivable benefits that contribute to healthier skin. Vital ET™ is a Vitamin E phosphate complex that that has outstanding efficacy as an anti-inflammatory and anti-erythemal agent that offers particular benefits in our sun care formulations.

        Our hair care ingredients, marketed under the Gantrez®, Gafquat®, and PVP/VA family of products, include a number of specially formulated fixative resins which provide hairsprays, mousses and gels with their holding power, as well as thickeners and stabilizers for shampoos and conditioners. Utilizing our combined expertise in hair care and sunscreen applications, we developed the world's first high-performance hair protectant, Escalol® HP-610, to prevent sun damage to hair. We also developed a polymer, Aquaflex® FX-64, for use in styling products and low VOC hair sprays, which provides a soft feeling with a long lasting hold for both aerosol and pump spray applications.

        Pharmaceutical, Food and Beverage.    Our specialty chemicals for the pharmaceutical, food and beverage market provide a number of end-use products with their unique properties while enabling these products to meet increasingly strict regulatory requirements.

        In the pharmaceutical market, our specialty chemicals serve as key ingredients in the following types of products:

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prescription and over-the-counter tablets;



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injectable prescription drugs and serums;



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cough syrups;



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antiseptics;



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toothpastes; and



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denture adhesives.

        Our Plasdone® and Polyplasdone® polymers for tablet binders and tablet disintegrants are established excipients for use in the production of wet granulated tablets. Our Gantrez® bioadhesive polymers serve as critical ingredients in denture adhesives and tartar control toothpastes. In denture adhesives, Gantrez® provides the strength and duration of the hold of the denture to the gums. In tartar control toothpastes, Gantrez® inhibits enzyme activity in the mouth to increase the effectiveness of the product's tartar control.

        In the food and beverage markets, our alginates and acetylene-derived polymers serve as critical ingredients in the manufacture of numerous consumer products, including salad dressings, cheese sauces, fruit fillings, beer and health drinks. For example, our alginates products, marketed under the Kelcoloid® tradename, are used as stabilizers in many well-known consumer products and prevent the separation of oil emulsions. Our acetylene-based specialty polymers, marketed under the Polyclar®

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tradename, serve the beverage market by assuring the clarity and extending the shelf life of beer, wine and fruit juices.

        Performance Chemicals.    Our performance chemicals product line includes acetylene-based polymers, vinyl ether monomers and advanced materials for consumer, agricultural and industrial applications. Our acetylene-based chemistry produces a number of performance chemicals for use in a wide range of markets including:

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coatings;



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agriculture;



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imaging;



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detergents;



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electronics; and



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metalworking.

        ViviPrint™ is our line of polymers developed for specialty coating applications in ink jet printing. These products provide significant moisture and abrasion resistance, high gloss and excellent resolution for high-quality printers and photo reproductions.

        Our performance chemical product line also includes our biocides business which is comprised of a broad range of preservatives and fungicides for various product applications, including paint and coatings.

        Our advanced materials include the Ferronyl® brand of dietary iron supplement, which is marketed to the pharmaceutical industry and also includes high-purity carbonyl iron powders, sold under the Micropowder® name, for use in the aerospace, defense, electronics and powder metallurgy industries.

        Fine Chemicals.    Our fine chemicals product line focuses on the production of a variety of highly specialized products sold to the pharmaceutical, biotechnology, agricultural and imaging markets. We also offer custom manufacturing services for these industries.

Marketing and Sales.

        We market our specialty chemicals using a worldwide marketing and sales force, typically chemists or chemical engineers, who work closely with our customers to familiarize them with our customers' products, manufacturing processes and markets. We primarily sell our specialty chemicals directly to our customers through our global distribution network. We sell a limited portion of our specialty chemicals through distributors. We conduct our domestic marketing and sales efforts from our headquarters in Wayne, New Jersey and regional offices strategically located throughout the United States.

International Operations.

        We conduct our international operations through 46 subsidiaries and 50 sales offices located in Europe, Canada, Latin America and the Asia-Pacific region. We also use the services of local distributors to reach markets that might otherwise be unavailable to us.

        International sales of our specialty chemicals in 2001, 2002 and 2003 were approximately 48%, 47% and 52% of our total sales of the specialty chemicals segment for those periods, respectively. For more information about our international sales, see Note 20 to our consolidated financial statements included in this annual report on Form 10-K. International sales are subject to exchange rate fluctuation risks. For a discussion of our policy regarding the management of these risks, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity

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and Financial Condition." Other countries in which we have sales are subject to additional risks, including high rates of inflation, exchange controls, government expropriation and general instability.

        We operate an alginates manufacturing plant in Girvan, Scotland and a research and administrative center in Tadworth, England. In addition, we hold equity investments in three seaweed processing joint ventures located in Ireland, Iceland and Tasmania. These joint ventures serve to provide our alginates business with a steady supply of its primary raw material, seaweed.

        For information about the locations of our international long-lived assets, see Note 20 to our consolidated financial statements included in this annual report on Form 10-K.

Industrial Chemicals

Products and Markets.

        We manufacture a broad spectrum of industrial chemicals having numerous applications in industrial products. We use proprietary technology to convert various raw materials, through a chain of one or more processing steps, into increasingly complex and higher value-added products specifically developed to meet customer requirements.

        In each of the years ending December 31, 2001, 2002 and 2003, sales of industrial chemicals represented approximately 20%, 18% and 19% of our revenues respectively. For more information about industrial chemicals sales, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" and Note 19 to our consolidated financial statements included in this annual report on Form 10-K.

        Most of our industrial chemical products fall within the following categories and are all marketed by our industrial chemicals segment:

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intermediates—includes butanediol, butenediol, butynediol, and propargyl alcohol for use in numerous industrial applications. Our largest selling intermediate product is butanediol, which is utilized by industrial companies to manufacture polyesters, urethanes and polybutylene terephthalate (PBT) plastics for use in automobiles.



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solvents—includes our M-pyrol® brand of N-methyl pyrrolidone (NMP), for use in electronic chemicals, agricultural chemicals, cleaning and stripping applications and as a reaction solvent for engineering plastics, BLO® brand of gamma-butyrolactone, for use by electronics companies in the manufacture of semiconductors and micro-processing chips, and tetrahydrofuran (THF), which is used as solvent for PVC pipe cements, vinyl top coatings and a reaction solvent for pharmaceuticals.

        We market several intermediate and solvent products, such as butanediol, tetrahydrofuran (THF) and N-methyl pyrrolidone (NMP), for use in a variety of industries, including:

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high performance plastics;



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lubricating oil and chemical processing;



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electronics cleaning; and



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coatings.

        In addition, we offer a family of environmentally friendly products that can replace chlorinated and other volatile solvents for a variety of industrial uses, including cleaning, stripping and degreasing.

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Marketing and Sales.

        We market our industrial chemicals using a worldwide marketing and sales force, typically chemists or chemical engineers, who work closely with our customers to familiarize them with our customers' products, manufacturing processes and markets. We primarily sell our industrial chemicals directly to our customers through our global distribution network. We sell a limited portion of our industrial chemicals through distributors. We conduct our domestic marketing and sales efforts from our headquarters in Wayne, New Jersey and regional offices strategically located throughout the United States.

International Operations.

        We conduct our international operations through 46 subsidiaries and 50 sales offices located in Europe, Canada, Latin America and the Asia-Pacific region. We also use the services of local distributors to reach markets that might otherwise be unavailable to us.

        International sales of our industrial chemicals in 2001, 2002 and 2003 were approximately 81%, 83% and 83% of our total sales of the industrial chemicals segment for those periods, respectively. For more information about our international sales, see Note 20 to our consolidated financial statements included in this annual report on Form 10-K. International sales are subject to exchange rate fluctuation risks. For a discussion of our policy regarding the management of these risks, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Financial Condition." Other countries in which we have sales are subject to additional risks, including high rates of inflation, exchange controls, government expropriation and general instability.

        We own and operate ISP Marl GmbH, primarily a butanediol manufacturing facility, and ISP Acetylene GmbH, an acetylene production plant. We lease the property where this manufacturing facility and plant are located pursuant to a long-term ground lease. Both production facilities are located at Degussa's Chemiepark site in Marl, Germany, and each relies upon Degussa to provide specific services, including utilities, rail transport and waste handling. We believe that the production costs for butanediol and THF at ISP Marl are among the most competitive in the industry. ISP Acetylene operates a fully dedicated modern production facility that provides ISP Marl with its primary raw material, acetylene. ISP Acetylene, which employs electric arc technology for the production of acetylene from various hydrocarbon feedstocks, utilizes state-of-the-art gas separation technology. ISP Acetylene's entire production is dedicated to fulfilling ISP Marl's requirements and has no third-party sales.

        For information about the locations of our international long-lived assets, see Note 20 to our consolidated financial statements included in this annual report on Form 10-K.

Mineral Products

Products and Markets.

        We manufacture mineral products consisting of semi-ceramic-coated colored roofing granules, algae resistant granules and headlap granules, which are produced from rock deposits that are mined and crushed at our quarries. We utilize a proprietary process to produce our colored and algae resistant roofing granules. We sell our mineral roofing granules primarily to the United States roofing industry for use in the manufacture of asphalt roofing shingles. The granules help to provide weather resistance, decorative coloring, heat deflection and increased weight in the shingle. We believe that we are the second largest of only three major suppliers of colored roofing granules in the United States in terms of production capacity and sales revenue. For information about the amount of sales of our mineral products, see "Management's Discussion and Analysis of Financial Condition and Results of

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Operations" and Note 19 to our consolidated financial statements included in this annual report on Form 10-K.

        We believe that approximately 80% of the asphalt shingles currently produced by the roofing industry are sold for the re-roofing/replacement market, in which demand is driven not by the pace of new home construction but by the needs of homeowners to replace existing roofs. Homeowners generally replace their roofs either because they are worn, thereby creating concerns as to weather-tightness, or because of the homeowners' desire to upgrade the appearance of their homes. We believe that the balance of the roofing industry's asphalt shingle production historically has been sold primarily for use in new housing construction. Sales of our colored mineral granules have benefited from a trend toward the increased use of heavyweight, three-dimensional laminated roofing shingles which results in both functional and aesthetic improvements. These shingles require, on average, approximately 60% more granules than traditional three-tab, lightweight roofing shingles.

        Sales to Building Materials Corporation of America, or BMCA, our affiliate, and its subsidiaries constituted approximately 75% of our mineral products net sales in 2003.

        See Note 13 to our consolidated financial statements included in this annual report on Form 10-K. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations—2003 compared with 2002."

Marketing and Sales.

        We market our mineral products on a national basis to residential and commercial roofing manufacturers utilizing a direct sales team with expertise in product application and logistics. We ship finished products using rail and trucks from four manufacturing facilities strategically located throughout the United States. From our offices located in Hagerstown, Maryland, we provide logistical support and operate a customer design center to engineer product applications according to our customers' requirements. Our technical services and manufacturing teams provide support and consultation services upon specific requirements by our customers.

Raw Materials

        Because of the multi-step processes required to manufacture our specialty and industrial chemicals, we believe that our raw materials costs represent a smaller percentage of the cost of goods sold than for most other chemical companies. We estimate that approximately one-third of our manufacturing costs are for raw materials, including energy and packaging. As a result, we believe that fluctuations in the price of raw materials have less of an impact on our specialty chemicals business than on those chemical companies for which raw materials costs represent a larger percentage of manufacturing costs.

        The principal raw materials used in the manufacture of our acetylene-based specialty chemicals are acetylene, formaldehyde and methylamine. Most of the raw materials for consumption in the United States are obtained from third party sources pursuant to supply agreements. Acetylene, a significant raw material used in the production of most of our specialty chemicals, is obtained by us for domestic use from unaffiliated suppliers pursuant to supply contracts. We have a contract with a multinational supplier to supply a substantial amount of our acetylene requirements to our Texas City, Texas facility that expires at the end of March 2004. As a result of this contract expiration we have reduced our acetylene requirements at our Texas City facility by 50% through shifting production of acetylene-consuming products to our Calvert City, Kentucky manufacturing facility. We have also entered into a long-term supply agreement for the remaining Texas City facility requirements with a local acetylene producer. Under this agreement, we are obligated to purchase specified quantities of acetylene through the end of 2013. Pricing under the contract is on a fixed basis with escalators related to changes in the Producer Price Index.

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        We also have an acetylene supply contract for our requirements of acetylene delivery via pipeline to our Calvert City, Kentucky manufacturing facility. The current term of this contract expires December 31, 2009 and allows us, at our sole option, to extend the agreement for two additional terms of five years each. Pricing under the contract is on a fixed basis with escalators related to changes in the Producer Price Index.

        We believe that the diversity of our acetylene supply sources and our use of a number of acetylene production technologies provide us with a reliable supply of acetylene. In the event of a substantial interruption in the supply of acetylene from current sources, we cannot assure that we would be able to obtain as much acetylene from other sources as would be necessary to meet our supply requirements. To date, we have not experienced an interruption of our acetylene supply that has had a material adverse effect on our sales of specialty chemicals.

        Due to the nature of the manufacturing process, electricity and hydrocarbon feedstocks, primarily butane, are critical raw materials for the production of acetylene at our operations in Marl, Germany. The Marl facility obtains the majority of its critical supplies and services from Degussa including electricity and butane via a long term supplies and services agreement.

        In the event of a substantial interruption in the supply of electricity and hydrocarbon feedstocks to ISP Marl, we cannot assure that we would be able to obtain as much acetylene from other sources as would be necessary to meet our supply requirements.

        We use natural gas and raw materials derived from petroleum in many of our manufacturing processes. We experienced no significant problems in the purchase of these raw materials during 2003, although we experienced upward pressure on certain raw material pricing. Availability of other raw materials, including methanol and methylamine, remained adequate during 2003. Although it is impossible to predict future shortages of raw materials or the impact any such shortages would have, we believe that in the event of a supply interruption we could obtain adequate supplies of raw materials from alternate sources.

        The principal raw material used in the manufacture of alginates consists of select species of seaweed. We process seaweed in both wet and dry forms. We use our own specially designed vessels to harvest, under government license, wet seaweed from leased kelp beds in the Pacific Ocean to supply our San Diego, California facility. Our Girvan, Scotland facility processes primarily dry seaweed purchased from our joint ventures in Iceland, Ireland and Tasmania, as well as from independent suppliers in South America. We believe that the species of seaweed required to manufacture alginates will remain readily available and that we will have adequate access to this seaweed to provide us with adequate supplies of this raw material for the foreseeable future.

        Our mineral products business owns three quarries and leases one quarry with rock deposits that have specific performance characteristics, including weatherability, the ability to reflect UV light, abrasion-resistance, non-staining characteristics and the ability to absorb pigments. These quarries each have proven reserves, based on current production levels, of more than 20 years. We have a royalty arrangement based on the amount of rock deposits extracted annually from our Ione, California quarry.

Competition

        We believe that we are the second largest seller, based on revenues, worldwide of specialty chemicals derived from acetylene, other than butanediol and tetrahydrofuran, and we believe that we are the second largest seller, based on revenues, worldwide of alginates.

        In each end-use market, there are a limited number of companies that produce substitutable products for our acetylene-derived specialty chemicals. These companies compete with us in the personal care, pharmaceutical, beverage and industrial markets and have the effect of limiting our market penetration and pricing flexibility. For our specialty chemicals not derived from acetylene,

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including alginates, sunscreens, emollients, moisturizers and fine chemicals, a number of world-wide competitors can provide similar products or services.

        Butanediol, which we produce primarily for use as a raw material, is also manufactured by a limited number of companies throughout the world for both their captive use or to supply the merchant market. We believe that there are three competitors of significance for merchant market butanediol. BASF Corporation and Lyondell Corporation supply the merchant market from their plants in the United States and in Europe. British Petroleum currently supplies the merchant market from their single manufacturing plant in the United States. Tetrahydrofuran and N-methyl pyrrolidone are manufactured by a number of companies throughout the world.

        With regard to our mineral products, our primary competitors are the 3M Company and Reed Minerals. We believe that competition has been limited by the substantial capital expenditures associated with the construction of new mineral processing and coloring plants and the acquisition of suitable rock reserves; the limited availability of proven rock sources; the complexity associated with the construction of a mineral processing and coloring plant, together with the technical know-how required to operate such a plant; the need to obtain, prior to commencing operations, reliable data over a substantial period of time regarding the weathering of granules in order to assure the quality and durability of the product; and the difficulty in obtaining the necessary permits to mine and operate a quarry.

        Competition in the markets for our specialty chemicals, industrial chemicals and mineral products is largely based upon product and service quality, technology, distribution capability and price. We believe that we are well-positioned in the marketplace as a result of our broad product lines, sophisticated technology and worldwide distribution network.

        Financial information concerning our industry segments and foreign and domestic operations required by Item 1 is included in Notes 19 and 20 to our consolidated financial statements included in this annual report on Form 10-K.

Research and Development

        Our worldwide research and development expenditures were $25.4, $26.0 and $25.3 million in 2001, 2002 and 2003, respectively.

        Our research and development activities are conducted primarily at our worldwide technical center and laboratories in Wayne, New Jersey. Additional research and development is conducted at plant sites in Calvert City, Kentucky; Texas City, Texas; Chatham, New Jersey; Freetown, Massachusetts; Columbus, Ohio; San Diego, California; and Girvan, Scotland, as well as at technical centers in the United Kingdom, Canada, Brazil, Germany, China, Singapore and Mexico. Our mineral products research and development facility, together with our customer design and color center, is located in Hagerstown, Maryland.

Environmental Services

        We received approval from the New Jersey Turnpike Authority for a direct access ramp extension from the New Jersey Turnpike to our Linden, New Jersey property. With the planned New Jersey Turnpike access, it is likely that development alternatives such as warehousing will provide greater economic benefits than our previously considered development alternative of construction of a hazardous waste treatment, storage and disposal facility at this site. See Item 3, "Legal Proceedings—Environmental Claims and Proceedings."

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Patents and Trademarks

        As of December 31, 2003, we owned or licensed approximately 425 domestic and 605 foreign patents or patent applications and owned or licensed approximately 150 domestic and 1,525 foreign trademark registrations or applications related to our business. While we believe the patent protection covering some of our products is material to those products, we do not believe that any single patent, patent application or trademark is material to our business or operations. We believe that the duration of the existing patents and patent licenses is consistent with our business needs.

Environmental Compliance

        Since 1970, a wide variety of federal, state and local environmental laws and regulations relating to environmental matters have been adopted and amended. By reason of the nature of our operations and the operations of our predecessor and certain of the substances that are or have been used, produced or discharged at our or our predecessor's plants or at other locations, we are affected by these environmental laws and regulations. We have made capital expenditures of approximately $6.3 million in 2001, $3.6 million in 2002 and $7.0 million in 2003, in order to comply with these laws and regulations. These expenditures are included in additions to property, plant and equipment. We anticipate that aggregate capital expenditures relating to environmental compliance in 2004 and 2005 will be approximately $6.5 and $7.5 million, respectively.

        The environmental laws and regulations deal with air and water emissions or discharges into the environment, as well as the generation, storage, treatment, transportation and disposal of solid and hazardous waste, and the remediation of any releases of hazardous substances and materials to the environment. We believe that our manufacturing facilities comply in all material respects with applicable environmental laws and regulations, and, while we cannot predict whether more burdensome requirements will be adopted by governmental authorities in the future, we believe that any potential liability for compliance with environmental laws and regulations will not materially affect our business, liquidity, results of operations, cash flows or financial position.

Employees

        At December 31, 2003, we employed approximately 2,800 people worldwide. Approximately 758 employees in the United States were subject to seven union contracts. We believe that our relations with our employees and their unions are satisfactory.

Other Information

        We have not established and do not maintain an internet website. However, we do make our annual report on Form 10-K and current quarterly reports on Form 10-Q that are filed with the Securities and Exchange Commission (the "SEC") available electronically via ISP's internet website at www.ispcorp.com. Any materials that we have filed with the SEC may be read and copied by the public at the SEC's Public Reference Room located at 450 Fifth Street, N.W., Washington, DC 20549 or by telephoning the SEC at 1-800-SEC-0330. These reports are also available electronically on the SEC's EDGAR website at www.sec.gov. Alternatively, if you wish to receive a paper copy of our reports or any of the exhibits filed with or furnished to the Securities and Exchange Commission, they may be obtained by writing to: the Corporate Secretary, ISP Chemco Inc., c/o ISP Management Company, Inc., 1361 Alps Road, Wayne, New Jersey 07470.

13

Item 2.    Properties

        Our corporate headquarters and principal research and development laboratories are located at a 100-acre campus-like office and research park owned by one of our subsidiaries at 1361 Alps Road, Wayne, New Jersey 07470.

        The principal domestic and foreign real properties either owned by, or leased to, us are described below. Unless otherwise indicated, the properties are owned in fee. In addition to the principal facilities listed below, we maintain sales offices and warehouses in the United States and abroad, substantially all of which are in leased premises under relatively short-term leases.

*

Leased property

**

Long-term ground lease

        We believe that our plants and facilities, which are of varying ages and are of different construction types, have been satisfactorily maintained, are in good condition, are suitable for their respective operations and generally provide sufficient capacity to meet production requirements. Each plant has adequate transportation facilities for both raw materials and finished products. In 2003, we made capital expenditures in the amount of $62.7 million relating to plant, property and equipment.

14

Item 3.    Legal Proceedings

Environmental Claims and Proceedings

        We, together with other companies, are a party to a variety of proceedings and lawsuits involving environmental matters 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 are in the early stages or have been dormant for protracted periods. We refer to these claims in this report as "Environmental Claims."

        We estimate that our liability in respect of all Environmental Claims, including those relating to our closed Linden, New Jersey plant described below, and certain other environmental compliance expenses, as of December 31, 2003, is approximately $20.8 million, before reduction for insurance recoveries included in our balance sheet of $28.1 million that relate to both past expenses and estimated future liabilities, which we refer to as "estimated recoveries." While we cannot predict whether adverse decisions or events can occur in the future, in the opinion of management, the resolution of such matters should not be material to our business, liquidity, results of operations, cash flows or financial position. However, adverse decisions or events, particularly as to 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 our liability or decrease our estimate of insurance recoveries in respect of those matters. It is not currently possible to estimate the amount or range of any additional liability.

        After considering the relevant legal issues and other pertinent factors, we believe that it is probable that we will receive the estimated recoveries discussed above. We believe we are entitled to substantially full defense and indemnity under our insurance policies for most Environmental Claims, although our insurers have not affirmed a legal obligation under the policies to provide indemnity for these claims. In addition, the recoveries could be in excess of the current estimated liability for all Environmental Claims, although there can be no assurance in this regard.

        In June 1997, G-I Holdings Inc. commenced litigation on behalf of itself and its predecessors, successors, subsidiaries and related corporate entities, including ISP, in the Superior Court of New Jersey-Somerset County, seeking amounts substantially in excess of the estimated recoveries. This action was removed in February 2001 to the United States Bankruptcy Court for the District of New Jersey in connection with the filing of G-I Holdings' Chapter 11 petition. In November 2002, all parties consented to have the action remanded to the Superior Court of New Jersey-Somerset County, where it remains pending. While ISP believes that the claims are meritorious, it cannot be certain that it will prevail in its efforts to obtain amounts equal to, or in excess of, the estimated recoveries. Unless otherwise indicated by the context, "G-I Holdings" refers to G-I Holdings Inc. and any and all of its predecessors, including GAF Corporation and GAF Fiberglass Corporation.

        In June 1989, we entered into a Consent Order with the New Jersey Department of Environmental Protection requiring the development of a remediation plan for our closed Linden, New Jersey plant and the maintenance of financial assurances, currently $7.5 million, to guarantee our performance. This Consent Order does not address any potential natural resource damage claims for which an estimate cannot currently be made. In April 1993, the New Jersey Department of Environmental Protection issued orders which require the prevention of discharge of contaminated groundwater and stormwater from the site and the elimination of other potential exposure concerns. We believe, although we cannot be certain, that, taking into account our plans for development of the site, we can comply with the New Jersey Department of Environmental Protection order at a cost of approximately $13.2 million. See Item 1, "Business—Environmental Services."

15

Stockholder Litigation Against ISP

        In connection with ISP's going private transaction that was completed on February 28, 2003, six purported class action lawsuits were filed on behalf of ISP stockholders in July 2002 in the Court of Chancery of the State of Delaware against ISP and members of its board of directors, which were consolidated. We refer to these lawsuits as the Delaware action. Also in July 2002, a seventh purported class action lawsuit was filed on behalf of ISP stockholders in the United States District Court for the District of New Jersey against ISP and members of its board of directors, which we refer to as the New Jersey action. The plaintiffs in the Delaware action and the New Jersey action variously sought a court order enjoining the going private transaction, an award of unspecified damages and attorneys' fees, the unwinding of any transaction and other unspecified equitable relief.

        The parties to the Delaware action reached a settlement of that litigation and following a hearing on August 14, 2003, the settlement was approved by the Court of Chancery, which approval became a final order. As a result of the settlement, all claims were dismissed without any admission of fault by the defendants and all defendants were released from any and all claims made or that could have been made by the plaintiffs and all members of a purported plaintiff class consisting of all record and beneficial holders of ISP common stock related to the going private transaction (including the claims made in the New Jersey action). In September 2003, the New Jersey action was dismissed with prejudice based upon the final order of the Court of Chancery in the Delaware action.

        See Notes 8 and 22 to our consolidated financial statements included in this annual report on Form 10-K for additional information about legal proceedings.

Item 4.    Submission of Matters to a Vote of Security Holders

        Omitted pursuant to General Instruction 1(2)(c) of Form 10-K.

16

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

        All of our common stock is owned by IS Holdings. All of the common stock of each of the additional registrants is owned, directly or indirectly, by us. Accordingly, there is no public trading market for our or the additional registrants' common stock.

        In 2002 and 2003, we declared and paid dividends of $0 and $50 million, respectively, to IS Holdings. In 2003 we received a $50 million capital contribution from IS Holdings. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 14 to our consolidated financial statements included in this annual report on Form 10-K for information regarding restrictions on the payment of dividends set forth on pages F-2 to F-22 and page F-51 respectively. Any decision to pay dividends, and the timing and amount thereof, is dependent upon, among other things, our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our Board of Directors.

Item 6.    Selected Financial Data

        See page F-23.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        See page F-2.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Financial Condition—Market Sensitive Instruments and Risk Management" on page F-20.

Item 8.    Financial Statements and Supplementary Data

        See Index on page F-1 and Financial Statements and Supplementary Data on pages F-26 to F-81.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        There were no disagreements with accountants on accounting or financial disclosures during the last two fiscal years. On June 20, 2002, we replaced Arthur Andersen LLP as our independent public accountants and engaged KPMG LLP to serve as our independent public accountants. For more information with respect to this matter, see our current report on Form 8-K filed on June 24, 2002.

Item 9A.    Controls and Procedures

        Disclosure Controls and Procedures:    Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports filed, furnished or submitted under the Exchange Act.

        Internal Control Over Financial Reporting:    There were no significant changes in our internal control over financial reporting identified in management's evaluation during the fourth quarter of fiscal year 2003 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

17

PART III

Item 10.    Directors and Executive Officers of the Registrant

        Omitted pursuant to General Instruction 1(2)(c) of Form 10-K.

Item 11.    Executive Compensation

        Omitted pursuant to General Instruction 1(2)(c) of Form 10-K.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

        Omitted pursuant to General Instruction 1(2)(c) of Form 10-K.

Item 13.    Certain Relationships and Related Transactions

        Omitted pursuant to General Instruction 1(2)(c) of Form 10-K.

Item 14.    Principal Accountant Fees and Services

        The following table presents fees for professional services rendered by our independent public accountants, KPMG LLP, for the fiscal years ended December 31, 2002 and 2003.

Audit and Non-Audit Fees(1)

(1)

On June 20, 2002, we replaced Arthur Andersen LLP as our independent public accountants and appointed KPMG LLP as our new independent public accountants.

(2)

Audit fees relate to professional services rendered by KPMG in connection with the audit of our annual financial statements, quarterly review of financial statements included in our Forms 10-Q and audit services provided in connection with other statutory and regulatory filings.

(3)

Audit-related fees include professional services rendered by KPMG related to consultation on accounting standards or transactions including ISP's going private transaction, and audits of employee benefit plans.

(4)

Tax fees include professional services rendered by KPMG in connection with tax compliance, preparation of foreign tax returns, rendering advice with regard to tax audits and other tax consulting. We do not engage KPMG to perform personal tax services for our executive officers.

Policy on Pre-Approval of Audit and Non-Audit Services Performed by the Independent Auditors

        Our Board of Directors approves, prior to the audit engagement, consistent with the Sarbanes-Oxley Act of 2002 and the requirements of the Securities and Exchange Commission, any audit, audit-related and permitted non-audit services reasonably likely to be required by us from KPMG during the coming fiscal year. The Board may delegate the approval of unanticipated (but otherwise permitted) non-audit services during the coming fiscal year to our principal financial or accounting officer as required.

18

PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

        The following documents are filed as part of this report:

(a)

(1) Financial Statements: See Index on page F-1.



(a)

(2) Financial Statement Schedules: See Index on page F-1.



(a)

(3) Exhibits:

19

20

*

Filed herewith.

(b)

Reports on Form 8-K

        No current reports on Form 8-K were filed in the fourth quarter of 2003.

21

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 23, 2004

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 23, 2004, by the following persons on behalf of the registrant and in the capacities indicated.

22

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 23, 2004

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 23, 2004, by the following persons on behalf of the additional registrants and in the capacities indicated.

23

ISP CHEMCO INC.

FORM 10-K

INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS,
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

F-1

ISP CHEMCO INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

        ISP Chemco Inc. is a wholly owned subsidiary of International Specialty Holdings Inc., which is a wholly owned subsidiary of International Specialty Products Inc., which we refer to as "ISP." Unless otherwise indicated by the context, "we," "us" and "our" refer to ISP Chemco Inc. and its consolidated subsidiaries.

        We are a leading multinational manufacturer of a broad spectrum of specialty and industrial chemicals and mineral products. Over the last several years, we have increased our focus on our higher margin consumer-oriented and service intensive businesses while consolidating and downsizing our low margin butanediol business and controlling costs. We have increased our consumer-oriented focus through new, more profitable product offerings, enhanced technical capabilities and penetration into new markets. We also have supplemented our internal resources with strategic alliances and complementary acquisitions. We improved our costs through operating efficiencies and plant consolidations.

        Effective January 1, 2003, we changed the composition of our reportable segments to be consistent with the current structure of our businesses. Consistent with the business focus described above, we now report three business segments: specialty chemicals, industrial chemicals and mineral products. Sales and operating income by business segment for the years 2001 and 2002 have been restated to conform to the 2003 presentation.

        We continually explore possible acquisitions where we seek to acquire complementary technologies or products, expand our customer base and leverage our sales and distribution infrastructure and existing client relationships. For example, we acquired our alginates business and now provide naturally derived food thickeners and stabilizers to a variety of markets that complement our existing products and technology, such as pharmaceutical ingredients, food and beverage markets. We also acquired our industrial biocides business that includes a product line of fungicides, preservatives, algaecides and biocides to expand our performance chemicals product line.

        Our net sales for 2003 were $892.9 million, an increase of 6% from sales of $845.3 million in 2002. Our operating income, after excluding certain other operating gains and charges in each year (see "Non-GAAP Financial Measures" below), increased by 8% in 2003 to $132.0 million from $122.6 million in 2002.

Critical Accounting Policies

        The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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, goodwill and intangible assets, income taxes, environmental liabilities, pensions and other postemployment benefits, and contingent liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the 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

F-2

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 and adjusts credit limits or the allowance for doubtful accounts based on this periodic review. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, our ability to collect on accounts could be negatively impacted, in which case 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.

Goodwill and Other Intangible Assets

        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, which we refer to as "SFAS," No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002, goodwill is no longer being amortized over its estimated useful life. However, goodwill is subject to at least an annual assessment for impairment and more frequently if circumstances indicate a possible impairment. Other intangible assets are being 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.

Income Taxes

        The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. We account for our income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-3

        In the determination of our current year tax provision, we assume that all foreign earnings are remitted to the United States, net of applicable foreign tax credits, and since upon remittance such earnings are taxable, we provide federal income taxes on income from our foreign subsidiaries. Since significant judgment is required to assess the future tax consequences of events that have been recognized in our financial statements or tax returns, we consider such estimates to be critical to the preparation of our financial statements.

        We believe that our current assumptions and other considerations used to estimate the current year effective rate and deferred tax positions are appropriate. However, if the actual outcome of future tax consequences differs from our estimates and assumptions, the resulting change to the provision for income taxes could have a material adverse impact on our consolidated financial statements. A 1% change in the effective tax rate would change the 2003 income tax provision by $0.6 million.

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 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 or decrease our estimate of insurance recoveries in respect of those matters. It is not currently possible to estimate the amount or range of any additional liability. We recognize receivables for estimated environmental insurance recoveries that relate to both past expenses and estimated future liabilities. After considering the relevant legal issues and other pertinent factors, we believe that we will receive the estimated insurance recoveries and that the insurance recoveries could be in excess of the current estimated liability for all environmental claims, although there can be no assurance in this regard. Significant judgment is involved in estimating environmental liabilities and related insurance recoveries. See Note 22 to consolidated financial statements for further discussion with respect to environmental liabilities and estimated insurance recoveries.

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. We set the discount rate assumption annually for our retirement-related benefit plans at the measurement dates to reflect the yield of high-quality fixed-income debt instruments. The expected long-term rate of return on assets is derived from a detailed periodic study conducted by our actuaries and our financial management. The study includes a review of anticipated future long-term performance of individual asset categories. While the study gives appropriate consideration to recent plan performance and historical returns, the assumption is primarily a long-term prospective rate. We revised the expected long-term rate of return assumption for our domestic hourly retirement plan in 2003 to 9.5%, a reduction from its previous level of 11.0%. A 25 basis points increase or decrease in the discount rate would result in a plus or minus $0.1 million annual impact on pension expense and a plus or minus

F-4

$0.9 million impact on the projected benefit obligation. A 25 basis points increase or decrease in the expected long-term rate of return on assets would result in a plus or minus $0.1 million annual impact on pension expense.

        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

2003 Compared With 2002

Overview

        We recorded net income of $46.8 million in 2003 compared with a net loss of $118.3 million in 2002. The results for 2003 include a $1.0 million after-tax cumulative effect of a change in accounting principle from the adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations." The results for 2002 included a $155.4 million goodwill impairment charge, effective January 1, 2002, for the cumulative effect of a change in accounting principle related to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets."

        Income before the cumulative effect of changes in accounting principles was $47.8 million in 2003 compared with $37.1 million in 2002. The results for 2003 include $3.6 million of other operating charges, including a $2.1 million charge for the write-off of production assets related to a discontinued product in the industrial chemicals business segment and a $1.5 million charge for stock option payments related to ISP's going private transaction in the first quarter of 2003 (see Note 17 to consolidated financial statements). The results for 2002 included $12.2 million of other operating gains related to the sale of our FineTech business and to the termination and settlement of contracts and a $7.6 million other operating charge for the write-off of deferred costs related to our Linden, New Jersey property (see Note 6 to consolidated financial statements). The year 2002 also included a $4.3 million pre-tax charge for the early retirement of debt.

        As previously discussed, effective January 1, 2003, we changed the composition of our reportable segments to be consistent with the current structure of our businesses. Sales and operating income by business segment for the year 2002 have been restated to conform to the 2003 presentation.

        Net Sales.    Net sales by business segment for the years 2002 and 2003 were:

        Net sales for 2003 were $892.9 million compared with $845.3 million in 2002. The $47.6 million (6%) increase in sales resulted from higher unit volumes in the industrial chemicals and mineral products segments (totaling $24.0 million) and in the pharmaceutical, food, beverage and personal care product lines of the specialty chemicals segment (totaling $19.0 million) and from the favorable impact

F-5

of the weaker U.S. dollar, primarily in Europe ($40.8 million). These sales gains were partially offset by lower pricing in industrial chemicals, mineral products and personal care (totaling $13.9 million) and lower volumes in the fine chemicals and performance chemicals product lines of the specialty chemicals segment (totaling $22.3 million). On a geographic region basis, sales increased by 16% in Europe, 9% in Asia-Pacific and 7% in Latin America and decreased by 1% in North America.

        Gross Margin.    Our gross margin in 2003 was 34.6% compared with 34.8% in 2002. The gross margin for the specialty chemicals segment increased to 43.0% in 2003 compared with 39.3% in 2002 as a result of higher volumes, manufacturing efficiencies and the favorable impact of the weaker U.S. dollar. The overall reduction in gross margin resulted primarily from the unfavorable effect of the lower pricing in the industrial chemicals and mineral products segments, unfavorable manufacturing costs in mineral products and the impact of lower volumes in the fine chemicals product line.

        Selling, General and Administrative.    Selling, general and administrative expenses increased 3% in 2003 to $176.5 million from $171.2 million in 2002, however, as a percent of sales, decreased to 19.8% in 2003 from 20.3% in 2002. The increase in selling, general and administrative expenses in 2003 related primarily to higher selling and distribution costs as a result of the higher sales levels and the impact of the weaker U.S. dollar, and also to higher administrative and general expenses due to increased compensation-related costs.

        Other operating gains and (charges).    Other operating charges in 2003 totaled $3.6 million and included a $1.5 million charge for compensation expense for stock option payments related to ISP's going private transaction (see Note 17 to consolidated financial statements). In addition, in December 2003, we decided to discontinue the manufacturing process at our Texas City, Texas facility for a product within the industrial chemicals segment. Accordingly, we recorded a $2.1 million charge for the write-off of production assets related to that manufacturing process. Sales related to this discontinued product were not material.

        Other operating gains in 2002 included $12.2 million of other operating gains, including a $5.5 million gain on the sale of our FineTech business and $6.8 million of gains from the termination and settlement of contracts. Offsetting these gains was a $7.6 million other operating charge for the write-off of deferred costs related to our Linden, New Jersey property. The write-off related to deferred costs associated with the study and exploration of developing a hazardous waste treatment, storage and disposal facility at the Linden site. This alternative use scenario became less likely with the progress made on other development opportunities at this site. See also Note 6 to consolidated financial statements.

        Operating Income.    Operating income by business segment for the years 2002 and 2003 was:

F-6

        Operating income in 2003 was $128.4 million compared with $127.2 million in 2002. Excluding the other operating gains and (charges), net, discussed above, operating income on a comparable basis was $132.0 million in 2003, a $9.4 million (8%) increase compared with $122.6 million in 2002 (see "Non-GAAP Financial Measures" below).

        Operating income for the specialty chemicals segment was $125.9 million for 2003 compared with $107.9 million in 2002. On a comparable basis, excluding the aforementioned gains and charges pertaining to specialty chemicals, operating income for the segment improved 33% to $127.0 million compared with $95.7 million in 2002. The improved results were primarily attributable to the personal care, pharmaceutical and beverage product lines (up a combined $36.2 million), mainly due to manufacturing efficiencies (totaling $8.9 million), lower operating expenses (totaling $6.6 million) and higher volumes (a $4.7 million favorable impact). The weaker U.S. dollar in Europe also had a substantial positive impact on operating income for the specialty chemicals segment in 2003 ($20.0 million).

        The industrial chemicals segment recorded an operating loss of $11.5 million in 2003. Excluding the aforementioned other operating charges in 2003 pertaining to industrial chemicals, the operating loss in 2003 was $9.2 million compared with operating income of $5.9 million in 2002. The results were mainly attributable to lower pricing, higher operating expenses and to the adverse impact of the stronger Euro and higher energy costs.

        Operating income for the mineral products segment was $13.9 million in 2003. On a comparable basis, excluding other operating charges in 2003 pertaining to mineral products, operating income was $14.1 million for 2003 compared with $20.9 million in 2002. The 33% decline from 2002 was due to unfavorable manufacturing costs and, to a lesser extent, unfavorable pricing, partially offset by higher volumes.

        Interest Expense.    Interest expense for 2003 was $52.1 million, a $7.5 million (13%) decrease from the $59.6 million recorded in 2002. The lower interest expense was primarily attributable to lower average borrowings ($4.5 million impact) and, to a lesser extent, lower average interest rates ($3.0 million impact).

        Other Expense, net.    Other expense, net, comprises foreign exchange gains/losses resulting from the revaluation of foreign currency-denominated accounts receivable and payable as a result of changes in exchange rates, and other nonoperating items of expense. Other expense, net, was $2.0 million in 2003 compared with $6.8 million in 2002. The lower expense in 2003 was due primarily to favorable foreign exchange as a result of the weaker U.S. dollar, mainly in Europe, partially offset by $0.9 million higher environmental liability provisions related to discontinued operations.

        Income Taxes.    In 2003, we recorded a provision for income taxes of $26.4 million. Our effective tax rate for 2003 was 35.6%, relatively consistent with an effective tax rate of 34.3% for 2002.

Business Segment Review

        A discussion of operating results for each of our business segments follows. We operate our business through three reportable business segments: specialty chemicals; industrial chemicals; and mineral products. As discussed above, we changed the composition of our reportable segments, effective January 1, 2003. Sales and operating income by business segment for the year 2002 have been restated to conform to the 2003 presentation. The operating income for each business segment discussed below is adjusted for the non-GAAP financial measures in the table below. See Notes 19 and 20 to consolidated financial statements for additional business segment and geographic information.

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Non-GAAP Financial Measures

        The business segment review below and the discussion of operating income above contain information regarding non-GAAP financial measures contained within the meaning of Item 10 of Regulation S-K promulgated by the Securities and Exchange Commission. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. We use non-GAAP financial measures to eliminate the effect of certain other operating gains and charges on reported operating income. Management believes that these financial measures are useful to bondholders and financial institutions because such measures exclude transactions that are unusual due to their nature or infrequency and therefore allow bondholders and financial institutions to more readily compare our company's performance from period to period. Management uses this information in monitoring and evaluating our company's performance and the performance of individual business segments. The non-GAAP financial measures included herein have been reconciled to the most directly comparable GAAP financial measure as is required under Item 10 of Regulation S-K regarding the use of such financial measures. These non-GAAP financial measures should be considered in addition to, and not as a substitute, or superior to, operating income or other measures of financial performance in accordance with accounting principles generally accepted in the United States of America.

(1)

Non-GAAP adjustments for the year 2003 include a $2.1 million other operating charge for the write-off of fixed assets at our Texas City, Texas facility related to a manufacturing process for a

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discontinued product within the industrial chemicals segment. Non-GAAP adjustments for the year 2003 also include an other operating charge of $1.5 million for stock option payments related to ISP's going private transaction. The non-GAAP adjustments for the year 2002 included a $7.6 million write-off of deferred costs related to our Linden, New Jersey property. This charge was not allocated to the current operating business segments because the Linden property is a non-operating property. In addition, the non-GAAP adjustments for the year 2002 included other operating gains of $12.2 million, consisting of a gain of $2.8 million for a contract termination related to the sale of our company's FineTech business, a $5.5 million gain from the sale of the FineTech business and a $3.9 million gain on a contract settlement.

Specialty Chemicals

        Sales for the specialty chemicals segment in 2003 were $623.4 million compared with $600.8 million in 2002. The $22.6 million (4%) increase in sales was attributable to the favorable effect of the weaker U.S. dollar ($29.0 million) and higher unit volumes in the pharmaceutical, food, beverage and personal care product lines (totaling $19.0 million). Partially offsetting these sales increases were lower unit volumes in the fine chemicals and performance chemicals product lines (totaling $22.3 million), partially as a result of the loss of sales due to the termination of the supply and license agreement in 2002 with Polaroid ($9.1 million), and unfavorable pricing ($3.8 million), primarily in the personal care product line. Favorable pharmaceutical volumes were primarily attributable to strong growth in the oral care market in North America and the excipients markets (Plasdones for tablet binders and Polyplasdones for tablet disintegrants), while higher food volumes resulted primarily from the acquisition of Germinal S.A. in May 2003 (see Note 18 to consolidated financial statements). Increased personal care volumes resulted from strong sales of sunscreens in North America and Europe, while higher beverage volumes were due to growth in Europe and Asia-Pacific.

        Operating income for the specialty chemicals segment increased by 33% for the year 2003 to $127.0 million compared with $95.7 million in 2002. The improved results were primarily attributable to the personal care, pharmaceutical and beverage product lines (up a combined $36.2 million), mainly due to manufacturing efficiencies (totaling $8.9 million), lower operating expenses (totaling $6.6 million) and higher volumes (a $4.7 million favorable impact), partially offset by unfavorable pricing ($3.8 million in total for the specialty chemicals segment). The weaker U.S. dollar in Europe also had a substantial positive impact on operating income for the specialty chemicals segment in 2003 ($20.0 million). The improved results for this segment were adversely impacted by the impact of lower volumes in the fine chemicals product line ($6.2 million), mainly due to the loss of sales to Polaroid.

Industrial Chemicals

        Sales for the industrial chemicals segment in 2003 were $165.5 million compared with $149.4 million in 2002. The 11% increase in sales was attributable to higher unit volumes ($10.8 million) and the favorable effect of the weaker U.S. dollar ($11.8 million), partially offset by the continuing adverse effect of unfavorable pricing ($6.4 million).

        The industrial chemicals segment recorded an operating loss of $9.2 million in 2003 compared with operating income of $5.9 million in 2002. The results for this business have been adversely impacted by the stronger Euro on European-based manufacturing costs ($6.6 million). The unfavorable results also included higher energy costs and operating expenses ($8.0 million) and unfavorable pricing ($6.4 million), partially offset by manufacturing efficiencies ($4.9 million) and the impact of higher volumes ($1.6 million).

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        We anticipate ongoing pressure on our pricing and revenue related to commodity type butanediol and related solvents and intermediates. A key competitor in this market completed construction of additional production capacity in Europe for these products during the third quarter of 2002. Due to the large oversupply in the market, a new plant scheduled to be brought on stream by another competitor at the end of 2003 has been delayed. The oversupply of these products to the merchant market is resulting in increased downward pressure on pricing.

Mineral Products

        Sales for the mineral products segment for 2003 were $104.0 million compared with $95.1 million in 2002. The 9% increase was due to higher unit volumes ($13.3 million) and included $4.4 million (20%) of higher third party sales and $4.5 million (6%) of higher sales to Building Materials Corporation of America, an affiliate, which we refer to as "BMCA." The sales growth was partially offset by lower pricing ($4.4 million) due to unfavorable customer contract pricing.

        Operating income for 2003 was $14.1 million compared with $20.9 million in 2002. The $6.8 million (33%) decrease in operating income was due to unfavorable manufacturing costs ($7.5 million), primarily as a result of higher energy costs and to the unfavorable pricing ($4.4 million).

Results of Operations

2002 Compared With 2001

Overview

        We recorded a net loss of $118.3 million in 2002 compared with net income of $32.8 million in 2001. In accordance with the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," we completed a transitional test for impairment of goodwill and, accordingly, recorded a $155.4 million charge, effective January 1, 2002, for the cumulative effect of a change in accounting principle. The write-off represented the goodwill associated with the reporting units included in our specialty chemicals and industrial chemicals business segments and was based upon our estimate of fair value for these businesses, considering expected future cash flows and profitability. The results for 2001 included an after-tax charge of $0.4 million for the cumulative effect of adopting SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."

        Income before the cumulative effect of changes in accounting principles was $37.1 million in 2002 compared with $33.2 million in 2001. The improved results in 2002 were attributable to $13.9 million higher operating income, $12.1 million lower interest expense, $3.3 million higher other operating gains and (charges), net, and $9.0 million lower other expense, net, offset by the absence of investment income in 2002 as a result of a corporate restructuring in June 2001 compared with investment income of $27.5 million in the six-month period prior to the restructuring (see Note 1 to consolidated financial statements). Year 2002 results also included a pre-tax charge of $4.3 million on the early retirement of debt, while operating income for 2001 included $16.5 million of goodwill amortization, prior to the adoption of SFAS No. 142.

        As previously discussed, effective January 1, 2003, we changed the composition of our reportable segments to be consistent with the current structure of our businesses. Sales and operating income by business segment for the years 2001 and 2002 have been restated to conform to the 2003 presentation.

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        Net Sales.    Net sales by business segment for the years 2001 and 2002 were:

        Net sales for 2002 were $845.3 million compared with $787.2 million in 2001. The $58.1 million (7%) increase in sales resulted primarily from the contribution to sales from the biocides business ($31.4 million), which we acquired on December 31, 2001, and higher unit volumes in the mineral products and industrial chemicals segments (totaling $23.9 million) and the pharmaceutical and personal care product lines (totaling $23.1 million). The weaker U.S. dollar in Europe also had a favorable impact ($9.5 million) on net sales. Partially offsetting these sales gains was lower pricing in the industrial chemicals segment and the fine chemicals and personal care product lines (totaling $26.3 million) and lower volumes in the fine chemicals product line ($4.4 million). On a geographic region basis, sales increased by 10% in North America, 5% in Europe, 7% in Latin America and 3% in Asia-Pacific.

        Gross Margin.    Our gross margin in 2002 decreased to 34.8% from 36.4% in 2001. The reduction in gross margin resulted primarily from the lower pricing in the industrial chemicals segment and the fine chemicals and personal care product lines and from unfavorable results in the fine chemicals product line due to the Polaroid bankruptcy in the fourth quarter of 2001.

        Selling, General and Administrative.    Selling, general and administrative expenses increased 8% in 2002 to $171.2 million from $158.1 million in 2001, however, as a percent of sales, remained almost level at 20.3% in 2002 versus 20.1% in 2001. The increase in selling, general and administrative expenses in 2002 related primarily to the newly acquired biocides business, in addition to higher selling and distribution costs as a result of the higher sales levels.

        Other operating gains and (charges), net.    Other operating gains, net, in 2002 totaled $5.4 million and included $12.2 million of other operating gains, including a $5.5 million gain on the sale of our FineTech business and $6.8 million of gains from the termination and settlement of contracts. Offsetting these gains was a $7.6 million other operating charge for the write-off of deferred costs related to our Linden, New Jersey property. The write-off related to deferred costs associated with the study and exploration of developing a hazardous waste treatment, storage and disposal facility at the Linden site. This alternative use scenario became less likely with the progress made on other development opportunities at this site. See also Note 6 to consolidated financial statements. Other operating gains in 2001 totaled $2.1 million and included a $1.6 million gain on an insurance claim related to an industrial accident at one of our manufacturing facilities and a $0.5 million gain from the reversal of excess restructuring severance reserves from our year 2000 restructuring program.

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        Operating Income.    Operating income by business segment for the years 2001 and 2002 was:

        Operating income in 2002 was $127.2 million compared with $113.3 million in 2001. Excluding $4.6 million of other operating gains in 2002 and the $1.6 million other operating gain in 2001 relating to the insurance claim, and also excluding $16.5 million of goodwill amortization in 2001, operating income on a comparable basis was $122.6 million in 2002, a $5.6 million (4%) decrease versus $128.2 million in 2001 (see "Non-GAAP Financial Measures" below). The lower comparable operating results were primarily attributable to lower pricing in the industrial chemicals segment and the personal care product line (totaling $22.4 million), unfavorable volumes, pricing and mix in the fine chemicals product line ($19.0 million) and higher manufacturing costs in the personal care product line ($5.5 million). Partially offsetting these adverse factors was the contribution to income from the biocides business and the impact of higher volumes in the pharmaceutical and personal care product lines and the mineral products segment (totaling $20.0 million) and favorable manufacturing efficiencies in the fine chemicals and performance chemicals product lines (totaling $9.1 million) and the mineral products and industrial chemicals segments (totaling $4.9 million). The weaker U.S. dollar in Europe also had a positive impact on operating income in 2002 ($8.2 million).

        Interest Expense.    Interest expense for 2002 was $59.6 million, a $12.1 million (17%) decrease from the $71.7 million recorded in 2001. The lower interest expense was attributable to lower average borrowings ($12.6 million impact), as a result of the 2001 financing transactions discussed below in "—Liquidity and Financial Condition," partially offset by higher average interest rates ($0.5 million impact).

        Investment Income.    Investment income in 2001 was $27.5 million prior to a corporate restructuring in June 2001 in which we transferred our investment assets to our parent company, International Specialty Holdings Inc. For additional information regarding the restructuring, see Note 1 to consolidated financial statements.

        Other Expense, Net.    Other expense, net, comprises foreign exchange gains/losses resulting from the revaluation of foreign currency-denominated accounts receivable and payable as a result of changes in exchange rates, and other nonoperating items of expense. Other expense, net, was $6.8 million in 2002 compared with $15.9 million in 2001. The lower expense in 2002 was due primarily to favorable foreign exchange as a result of the weaker U.S. dollar, mainly in Europe.

        Income Taxes.    In 2002, we recorded a provision for income taxes of $19.4 million. Our effective tax rate for 2002 was 34.3% compared with an effective tax rate of 37.7% for 2001.

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Business Segment Review

        A discussion of operating results for each of our business segments follows. We operate our business through three reportable business segments: specialty chemicals; industrial chemicals; and mineral products. As discussed above, we changed the composition of our reportable segments, effective January 1, 2003. Sales and operating income by business segment for the years 2002 and 2001 have been restated to conform to the 2003 presentation. The operating income for each business segment discussed below is adjusted for the non-GAAP financial measures in the table below. See Notes 19 and 20 to consolidated financial statements for additional business segment and geographic information.

Non-GAAP Financial Measures

        The business segment review below and the discussion of operating income above contain information regarding non-GAAP financial measures contained within the meaning of Item 10 of Regulation S-K promulgated by the Securities and Exchange Commission. As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. We use non-GAAP financial measures to eliminate the effect of certain other operating gains and charges on reported operating income. Management believes that these financial measures are useful to bondholders and financial institutions because such measures exclude transactions that are unusual due to their nature or infrequency and therefore allow bondholders and financial institutions to more readily compare our company's performance from period to period. Management uses this information in monitoring and evaluating our company's performance and the performance of individual business segments. The non-GAAP financial measures included herein have been reconciled to the most directly comparable GAAP financial measure as is required under Item 10 of Regulation S-K regarding the use of such financial measures. These non-GAAP financial measures should be considered in addition to, and not

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as a substitute, or superior to, operating income or other measures of financial performance in accordance with accounting principles generally accepted in the United States of America.

(1)

Non-GAAP adjustments for the year 2002 included a $7.6 million write-off of deferred costs related to our Linden, New Jersey property. This charge was not allocated to the current operating business segments because the Linden property is a non-operating property. In addition, the non-GAAP adjustments for the year 2002 included other operating gains of $12.2 million, consisting of a gain of $2.8 million for a contract termination related to the sale of our company's FineTech business, a $5.5 million gain from the sale of the FineTech business and a $3.9 million gain on a contract settlement. Non-GAAP adjustments for the year 2001 represent an other operating gain of $1.6 million on an insurance claim related to an industrial accident in 2001 at one of our manufacturing facilities. In accordance with SFAS No. 142, previously discussed, goodwill is no longer amortized. Therefore, for comparability, operating income and operating income for each segment have been adjusted in the table above for goodwill amortization charges in 2001.

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Specialty Chemicals

        Sales for the specialty chemicals segment in 2002 were $600.8 million compared with $552.8 million in 2001. The $48.0 million (9%) increase in sales was mainly attributable to the contribution to sales from the biocides business ($31.4 million) acquired at the end of 2001. In addition, the higher sales were attributable to higher unit volumes in the pharmaceutical and personal care product lines (totaling $23.1 million). The weaker U.S. dollar in Europe also had a favorable impact ($6.4 million) on sales. Favorable pharmaceutical volumes were primarily attributable to strong growth in the excipients market (Plasdones for tablet binders and Polyplasdones for tablet disintegrants) and the oral care market. Increased personal care volumes resulted from strong growth in the skin care preservative/waterproofing market and in hair care products due to the styling gel/lotion market. Partially offsetting these sales increases was lower pricing in the fine chemicals and personal care product lines (totaling $8.0 million) and lower unit volumes in the fine chemicals product line ($4.4 million) as a result of the loss of sales due to the termination of the supply and license agreement with Polaroid.

        Excluding the goodwill amortization in 2001 and other operating gains and (charges) discussed above, operating income for the specialty chemicals segment decreased by 5% for the year 2002 to $95.7 million compared with $100.8 million in 2002. The lower operating income for the specialty chemicals segment in 2002 was mainly attributable to lower operating results for the fine chemicals product line, which decreased by $11.3 million in 2002 as a result of the impact of lower volumes and unfavorable pricing and mix (totaling $19.0 million), partially offset by favorable manufacturing efficiencies ($5.4 million). In addition, operating income for the segment was adversely impacted by lower pricing, unfavorable manufacturing and inventory costs and higher operating costs (totaling $11.7 million) in the personal care product line and higher operating expenses in the pharmaceutical and performance chemicals product lines (totaling $6.9 million). Offsetting these negative factors in 2002 was the contribution to income from the newly acquired biocides business, the impact of higher volumes in the pharmaceutical and personal care product lines (totaling $11.5 million) and the favorable effect on the segment's income from the weaker U.S. dollar in Europe ($5.6 million).

Industrial Chemicals

        Sales for the industrial chemicals segment decreased by $4.3 million (3%) in 2002 to $149.4 million compared with $153.7 million in 2001 as a result of unfavorable pricing ($18.3 million), partially offset by higher volumes ($10.8 million) and the favorable effect of the weaker U.S. dollar in Europe ($3.1 million). Average market selling prices of butanediol decreased in 2002 compared with 2001 levels due to weakening demand and due to new capacity coming on stream in Europe. Operating income for the industrial chemicals segment declined by $6.6 million (53%) to $5.9 million in 2002 from $12.5 million in 2001 as a result of the lower pricing, partially offset by favorable manufacturing efficiencies ($1.8 million) due to lower raw material and energy costs, the impact of the higher volumes and mix ($4.2 million), the favorable effect of the weaker U.S. dollar ($2.6 million) and lower operating expenses.

Mineral Products

        Sales for the mineral products business segment were $95.1 million in 2002, a $14.4 million (18%) increase compared with sales of $80.7 million in 2001, while operating income increased by $7.1 million in 2002 to $20.9 million compared with $13.8 million in 2001. Sales to BMCA increased by $9.8 million (15%), while third party sales increased by $4.7 million (27%). The sales growth was predominantly due to higher volumes ($13.1 million) as a result of increased demand for roofing granules for laminate

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shingles and an increase in overall market demand. The higher operating income was attributable to the impact of the increased volumes ($3.3 million) and favorable manufacturing efficiencies ($3.1 million) due to favorable fuel pricing.

Liquidity and Financial Condition

Cash Flows and Cash Position

        During 2003, our net cash flow before financing activities was $51.6 million, including $121.6 million of cash generated from operations and the reinvestment of $70.0 million for capital programs and the acquisition of Germinal S.A. (see Note 18 to consolidated financial statements).

        Operating Activities.    Net cash generated from operating activities totaled $121.6 million for the year 2003, compared with $148.5 million in 2002. The cash flow from operations in 2003 principally represented our net income of $46.5 million plus non-cash charges to income totaling $77.9 million, mainly depreciation expense and deferred income taxes. The decrease in cash flows from operating activities in 2003 was primarily attributable to working capital activity. Cash generated from a decrease in working capital totaled $35.9 million in 2002, including a $22.1 million decrease in inventories as a result of an inventory reduction program, a $7.8 million decrease in receivables which was attributable to a settlement of receivables related to the Polaroid bankruptcy, and a $7.3 million net increase in payables and accrued liabilities. In 2003, cash invested in additional working capital totaled $1.2 million, including an $8.1 million increase in inventories and a $9.7 million increase in receivables as a result of higher sales, partially offset by a $10.3 million tax refund received by one of our international subsidiaries.

        Investing Activities.    Net cash used in investing activities in 2003 totaled $70.0 million. Capital expenditures in 2003 were $62.8 million compared with $50.5 million and $53.0 million in 2002 and 2001, respectively.

        In May 2003, we acquired 100% of the stock of Germinal S.A., a supplier of food ingredients to the meat and dairy industry in southern Latin America, for $7.3 million in cash, net of $0.4 million cash acquired. Germinal has a manufacturing facility at its headquarters in Cabreuva, Brazil. Additional payments of up to $2.7 million may be payable if certain revenue targets are achieved over the 24 months following the date of acquisition.

        Financing Activities.    Net cash used in financing activities in 2003 totaled $32.7 million, primarily reflecting a $31.2 million loan to a related party. In July 2003, the ISP parent company acquired the synthetic rubber business of Ameripol Synpol Corporation. Effective July 28, 2003, we entered into a promissory note agreement with ISP Elastomers whereby we may from time to time loan to ISP Elastomers the principal amount of up to $50.0 million. The interest rate on the note is at a rate per annum of 1.65%, and the note is due and payable on July 28, 2006. The balance of the loan outstanding at December 31, 2003 was $31.2 million.

        Financing activities in the year 2003 also included $2.8 million of repayments of long-term debt, a $50.0 million dividend to our parent company and $51.5 million of capital contributions from our parent company, including a $1.5 million capital contribution for the termination and payment of stock option plans related to the ISP going private transaction in the first quarter of 2003 (see Note 17 to consolidated financial statements).

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        As a result of the foregoing factors, cash and cash equivalents increased by $23.1 million during 2003 to $56.4 million.

Current Maturities of Long-Term Debt

        As of December 31 2003, our current maturities of long-term debt, scheduled to be repaid during 2004, totaled $2.7 million, including $2.3 million related to the term loan under the Senior Credit Facilities.

Debt Instruments, Financial Covenants and Restrictions and Available Credit Facilities

        During 2001, we and three of our wholly owned subsidiaries jointly issued, in three separate transactions, a total of $405 million aggregate principal amount of 10¹/4% Senior Subordinated Notes due 2011, which we refer to as the "2011 Notes." The 2011 Notes are guaranteed by substantially all of our domestic subsidiaries. The 2011 Notes were issued under an indenture which, among other things, places limitations on our ability and our subsidiaries, except our accounts receivable subsidiary and certain immaterial subsidiaries, to incur additional debt, issue preferred stock, incur liens, and pay dividends or make certain other restricted payments and restricted investments.

        In June 2001, in a related transaction, we and our three subsidiaries which issued the 2011 Notes also entered into $450.0 million of new senior secured credit facilities, which we refer to as the "Senior Credit Facilities." The Senior Credit Facilities are comprised of a $225.0 million term loan with a maturity of seven years and a $225.0 million revolving credit facility which will terminate in June 2006. The revolving credit facility includes a borrowing capacity not in excess of $50.0 million for letters of credit. As of December 31, 2003, no borrowings and $9.8 million of letters of credit were outstanding under the revolving credit facility. All borrowings under the Senior Credit Facilities are based on either an alternate base rate (based on the banks' base rate or on the federal funds rate) or on the Eurodollar rate plus a margin based on the ratio of our total consolidated debt to EBITDA (as defined in the Senior Credit Facilities). The average interest rate at December 31, 2003 on borrowings under the Senior Credit Facilities was 4.2%. The Senior Credit Facilities require compliance with various financial covenants, including a total debt leverage maintenance ratio, a senior debt leverage maintenance ratio, an interest coverage ratio and a minimum adjusted net worth. In addition, the Senior Credit Facilities places limitations on our ability and our subsidiaries, except our accounts receivable subsidiary and certain immaterial subsidiaries, to incur additional debt, issue preferred stock, incur liens, and pay dividends or make certain other restricted payments and restricted investments. We and substantially all of our domestic subsidiaries are designated as obligors under the Senior Credit Facilities. The obligations of the obligors under the Senior Credit Facilities are secured by a first-priority security interest in 100% of the capital stock of our domestic subsidiaries and 66% of the capital stock of some of our foreign subsidiaries, and substantially all of the real and personal property of the obligors, except for our accounts receivable subsidiary and certain immaterial subsidiaries.

        On December 13, 2001, our parent company, International Specialty Holdings Inc., issued $200.0 million principal amount of 10⁵/8% Senior Secured Notes due 2009, which we refer to as the "2009 Notes." The 2009 Notes are secured by a first priority lien on all of our outstanding capital stock. The 2009 Notes are structurally subordinated to all liabilities of our subsidiaries. The 2009 Notes were issued under an indenture which, among other things, limits the ability of our parent company and its subsidiaries, except unrestricted subsidiaries, to incur additional debt, enter into transactions with affiliates, issue preferred stock, incur liens, and pay dividends or make certain other restricted payments and restricted investments. ISP Investco LLC, a wholly owned subsidiary of our parent

F-17

company, the subsidiaries of ISP Investco, our accounts receivable subsidiary and certain immaterial subsidiaries have been designated as unrestricted subsidiaries under the indenture related to the 2009 Notes.

        Our borrowings are subject to the application of certain financial covenants contained in the Senior Credit Facilities and in the indenture governing the 2011 Notes. As of December 31, 2003, we were in compliance with those covenants, and the application of those covenants would not have restricted available borrowings under the Senior Credit Facilities. The Senior Credit Facilities and the indenture governing the 2011 Notes limit the amount of cash dividends, purchases of treasury stock, and other restricted payments (as defined) by us. As of December 31, 2003, under the most restrictive of the limitations, we could have paid dividends and other restricted payments of up to $77.9 million. See Note 14 to consolidated financial statements.

        The Senior Credit Facilities and the indentures governing the 2009 and 2011 Notes contain additional affirmative and negative covenants affecting us and some of our subsidiaries, including restrictions on transactions with affiliates, sale-leaseback transactions and mergers and transfers of all or substantially all of those subsidiaries' assets. Additionally, in the event the holders of the 2009 Notes were to foreclose on our capital stock following an event of default under those notes, the sale of the capital stock would constitute a change of our control. Under the indenture governing the 2011 Notes, if a change of our control occurs, we are obligated to make an offer to repurchase the 2011 Notes from their respective holders. The terms of the Senior Credit Facilities, however, prohibit the repayment of the 2011 Notes in that event unless and until such time as the indebtedness under the Senior Credit Facilities is repaid in full. Failure to make such repayment upon a change of control would result in a default under the 2011 Notes. A change of our control would also result in a default under the Senior Credit Facilities. In the event of a default under the indenture governing the 2011 Notes or under the Senior Credit Facilities, the holders of the 2011 Notes or the lenders under the Senior Credit Facilities, as the case may be, could elect to accelerate the maturity of the 2011 Notes or the loans under the Senior Credit Facilities. Those events could have a material adverse effect on our financial condition and results of operations.

        Subject to restrictions in our Senior Credit Facilities and the indenture governing the 2011 Notes, we may incur additional debt for working capital, capital expenditures, acquisitions and other purposes.

Commercial Commitments

        Our commercial commitments as of December 31, 2003 are as follows:

        The Senior Credit Facilities are comprised of a $225.0 million term loan maturing in 2008 and a $225.0 million revolving credit facility which will terminate in June 2006. The revolving credit facility includes a borrowing capacity not in excess of $50.0 million for letters of credit.

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Capital Expenditures

        Capital expenditures are expected to be approximately $75.0 million in 2004.

Income Taxes

        For information with respect to income taxes, see Note 8 to consolidated financial statements.

Inflation

        Inflation generally affects our company by increasing the cost of labor, raw materials and energy costs. We do not believe that inflation has had a significant adverse effect on our results of operations during the past three years. However, there can be no assurance that our business will not be affected by inflation in the future.

Operating Lease Obligation

        We entered into an operating lease in 1998 for an equipment sale-leaseback transaction related to equipment at our Freetown, Massachusetts facility. The lease had an initial term of four years and, at our option, up to three one-year renewal periods. The first two annual renewal options were exercised during 2002 and 2003, and the third and final renewal option will be exercised during 2004. The lease provides for a substantial guaranteed payment by us, adjusted 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 equipment, or the equipment can be returned to the lessor and sold to a third party. If we do not exercise the purchase option in 2005, we will then be obligated to pay a maximum guaranteed payment amount upon the return of the equipment, currently $32.6 million, reduced by 50% of any proceeds from the subsequent sale of the equipment in excess of $4.8 million. This amount of $32.6 million is included in the table below of "Contractual Obligations" within the caption "Operating leases." In December 2003, we received $1.1 million in settlement of amounts due from the Polaroid bankruptcy (see below). In accordance with the Freetown lease agreement, we paid this $1.1 million to the lessor as a prepayment against future rental obligations under the lease.

        As part of our acquisition of the Freetown facility 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 assets were acquired by a new owner, and the new owner did not assume our long-term supply contract with Polaroid. These events negatively impacted the sale of our fine chemicals products and reduced the utilization of our Freetown plant. We have since increased the utilization of the Freetown facility, primarily from additional production of personal care products. We also continue to shift specialty chemicals production to our Columbus, Ohio fine chemicals facility, which currently has excess capacity.

Environmental Matters

        We, together with other companies, are a party to a variety of proceedings and lawsuits involving environmental matters. See Note 22 to consolidated financial statements and Item 3, "Legal Proceedings" for further information.

Contractual Obligations

        We have a contract with a multinational supplier to supply a substantial amount of our acetylene needs to our Texas City, Texas facility. As a result of the expiration of this contract in March 2004, we

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have taken the following actions. We have reduced our acetylene requirements at the Texas City plant by 50% through shifting production of acetylene-consuming products to our Calvert City, Kentucky plant. We have also entered into a long-term supply contract for the remaining Texas City plant requirements with a local producer. Under this contract, we are obligated to purchase specified quantities of acetylene through the end of 2013. Pricing under this contract is on a fixed basis with escalators related to changes in the Producer Price Index.

        We also have an acetylene supply contract for our requirements of acetylene delivery via pipeline to our Calvert City facility. The current term of this contract expires December 31, 2009 and allows us, at our sole option, to extend the agreement for two additional terms of five years each. We are required by the contract to pay a monthly non-cancelable facility fee. Pricing under the contract is on a fixed basis with escalators related to changes in the Producer Price Index.

        The annual unconditional purchase obligation related to the long-term acetylene supply contract at the Texas City plant, together with the non-cancelable facility fee associated with the Calvert City plant acetylene contract is $5.1 million and is included in the table of contractual obligations shown below, together with other contractual obligations related to debt and leases.

        In May 2003, we entered into a long-term contract with BMCA to supply BMCA and its subsidiaries substantially all of their colored roofing granules and algae-resistant granules requirements, except for the requirements of certain of their roofing plants that are supplied by third parties. The contract includes pricing discounts based on volume purchase targets, which, if the highest discount levels are reached over the term of the contract, could adversely impact gross margins for the mineral products segment.

Market-Sensitive Instruments and Risk Management

        We enter into financial instruments in the ordinary course of business in order to manage our exposure to market fluctuations in interest rates and foreign currency rates. The financial instruments we employ to reduce market risk include swaps, forwards and other hedging instruments. The financial instruments are subject to strict internal controls and their use is primarily confined to the hedging of our debt and foreign currency exposure. The counterparties to these financial instruments are major financial institutions with high credit standings. The amounts subject to credit risk are generally limited to the amounts, if any, by which the counterparties' obligations exceed our obligations. We control credit risk through credit approvals, limits and monitoring procedures. We do not anticipate nonperformance by counterparties to these instruments.

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        All of the financial instruments in the above table have a maturity of less than one year.

        We enter into forward foreign exchange instruments in order to hedge a portion of both our borrowings denominated in foreign currency and transactions related to the operations of our foreign subsidiaries. Forward contract agreements require us and the counterparty to exchange fixed amounts of U.S. dollars for fixed amounts of foreign currency on specified dates. All forward contracts are in major currencies with highly liquid markets and mature within one year. Hedging strategies are approved by senior management before they are implemented.

        As of December 31, 2002, the U.S. dollar equivalent notional value of outstanding forward foreign exchange contracts was $10.0 million. There were no outstanding forward foreign exchange contracts as of December 31, 2003. All foreign exchange contracts outstanding as of December 31, 2002 were entered into as a hedge of intercompany loans, representing 100% of our foreign currency exposure with respect to such loans.

        In 1998, the Financial Accounting Standards Board, which we refer to as "FASB," issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138. SFAS No. 133 and SFAS No. 138 established accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 and SFAS No. 138 require that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met, which for qualifying hedges, allow a derivative's gains and losses to offset related results on the hedged item in the statement of operations.

        We adopted SFAS No. 133 and SFAS No. 138 as of January 1, 2001. Accounting for interest rate swaps and foreign exchange forward contracts held by us was affected by implementation of these standards. The earnings impact of the transition adjustments related to the initial adoption of the standards was an after-tax loss of $0.4 million, which was recorded in the first quarter of 2001 as the cumulative effect of a change in accounting principle.

        The Senior Credit Facilities include a $225.0 million term loan. In 2001, we designated interest rate swaps, with a total notional amount of $100 million, as a hedge of our exposure to changes in the Eurodollar rate under the term loan. The interest rate swaps were structured to receive interest based on the Eurodollar rate and pay interest on a fixed rate basis. The interest rate swaps were designated to have a cash flow hedging relationship whereby the interest rate swaps hedged the risk of changes in the Eurodollar rate related to borrowings against the term loan through July 2002. The interest rate swaps were deemed to be highly effective throughout the term of their designation as a cash flow hedge. Those swaps matured in June and July of 2002. During 2002, $1.5 million related to the interest rate swaps was reclassified and charged against interest expense.

New Accounting Standards

        In November 2002, the FASB issued FASB Interpretation No. 45, which we refer to as "FIN 45," "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 clarifies the requirements for a guarantor's accounting for and disclosures of certain guarantees issued and outstanding. The provisions of FIN 45 apply to guarantee contracts that contingently require the guarantor to make payments (in cash, financial instruments, other assets, shares of stock or provision of services) to the guaranteed party for guarantees such as a financial standby letter of credit, a market value guarantee on either a financial or nonfinancial asset owned by the guaranteed party and a guarantee of the collection of the scheduled contractual cash flows from financial assets held by a special-purpose entity. FIN 45 also applies to indemnification

F-21

contracts and indirect guarantees of indebtedness of others. The requirements of FIN 45 for the initial recognition and measurement of the liability for a guarantor's obligations are to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002. A subsidiary's guarantee of the debt of its parent (as disclosed in Note 14 to consolidated financial statements) is not subject to the initial recognition and measurement provisions of FIN 45 but are subject to its disclosure requirements. We currently do not have any guarantees, indemnification contracts or indirect guarantees of indebtedness of others that would be subject to the initial recognition and measurement provisions of FIN 45. As discussed in Note 14 to consolidated financial statements, ISP Chemco's 10¹/4% Senior Subordinated Notes due 2011 are guaranteed by all of ISP Chemco's domestic subsidiaries, other than certain immaterial subsidiaries and our accounts receivable financing subsidiary.

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 has not had an immediate impact on our consolidated financial statements.

        In December 2003, the FASB issued a revised FIN 46, "Consolidation of Variable Interest Entities," which had originally been issued in January 2003. In accordance with FIN 46, a variable interest entity will be consolidated if either the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or as a group, the holders of the equity investment at risk lack any one of the following three characteristics of a controlling financial interest: (1) the direct or indirect ability to make decisions about an entity's activities; (2) the obligation to absorb the expected losses of the entity if they occur; (3) the right to receive the expected residual returns of the entity if they occur. All companies with variable interests in variable interest entities subject to FIN 46 shall apply the provisions of FIN 46 no later than the end of the first reporting period that ends after March 15, 2004. Our company does not currently have an interest in a variable interest entity. Therefore, FIN 46 will not have an immediate impact on our consolidated financial statements.

* * *

Forward-looking Statements

        This annual report on Form 10-K 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 annual report on Form 10-K 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.

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ISP CHEMCO INC.

SELECTED FINANCIAL DATA

        The following information sets forth our selected historical consolidated financial data.

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors of ISP Chemco Inc.:

We have audited the accompanying consolidated balance sheets of ISP Chemco Inc. and subsidiaries as of December 31, 2002 and 2003, and the related consolidated statements of operations, shareholder's equity, and cash flows for the years then ended. In connection with our audits of the 2002 and 2003 consolidated financial statements, we also have audited the 2002 and 2003 consolidated financial statement schedule on page S-1. These consolidated financial statements and consolidated financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedule based on our audits. The 2001 consolidated financial statements of ISP Chemco Inc. and subsidiaries were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements and consolidated financial statement schedule, before the revision described in Note 12 and before the restatement described in Note 19 to the consolidated financial statements, in their report dated February 27, 2002.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2002 and 2003 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ISP Chemco Inc. and subsidiaries as of December 31, 2002 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related 2002 and 2003 consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 12 and 15 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002, and Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, as of January 1, 2003, respectively.

As discussed above, the 2001 consolidated financial statements of ISP Chemco Inc. and subsidiaries were audited by other auditors who have ceased operations. As described in Note 12, these consolidated financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. As described in Note 19, the Company changed the composition of its reportable segments in 2003, and the amounts in the 2001 consolidated financial statements relating to reportable segments have been restated to conform to the 2003 composition of reportable segments. We audited the adjustments that were applied to restate the disclosures for reportable segments reflected in the 2001 consolidated financial statements. In our opinion, such transitional disclosures for 2001 in Note 12 are appropriate and such segment adjustments in Note 19 are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 consolidated financial statements of ISP Chemco Inc. and subsidiaries other than with respect to such transitional disclosures and such segment adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statements taken as a whole.

                                                                                        /s/ KPMG LLP

Short Hills, New Jersey
February 17, 2004

F-24

INFORMATION REGARDING PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS' REPORT

        The following report is a copy of a previously issued report by Arthur Andersen LLP ("Andersen"). The report has not been reissued by Andersen nor has Andersen consented to its inclusion in this annual report on Form 10-K. The 2001 financial statements have been revised to include transitional disclosures to reflect the effects of the Company's adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets and have been restated to conform to the 2003 composition of reportable segments. The Andersen report refers to the consolidated balance sheets as of December 31, 2000 and 2001 and the consolidated statements of income, shareholder's equity and cash flows for the years ended December 31, 1999 and 2000, which are no longer included in the accompanying financial statements.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To ISP Chemco Inc.:

        We have audited the accompanying consolidated balance sheets of ISP Chemco Inc. (formerly known as ISP Opco Holdings Inc.) (a Delaware corporation) and subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above, appearing on pages F-13 to F-53 of this Form 10-K, present fairly, in all material respects, the financial position of ISP Chemco Inc. and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

        Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule appearing on page S-1 of this Form 10-K is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

Roseland, New Jersey
February 27, 2002

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ISP CHEMCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

F-26

ISP CHEMCO INC.

CONSOLIDATED BALANCE SHEETS

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

F-27

ISP CHEMCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS