Mail Stop 7010
December 22, 2005
Via U.S. mail
Mr. Salvatore J. Guccione
Senior Vice President and Chief Financial Officer
International Specialty Holdings Inc. and ISP Chemco Inc.
300 Delaware Avenue, Suite 303
Wilmington, DE 19801
RE: Forms 10-K for the fiscal year ended December 31, 2004
File Nos. 333-82822 and 333-17827-01
Dear Mr. Guccione:
We have reviewed your response letter dated December 9,
2005 in response to our comment letter dated November 10, 2005 and
have the following comments. If you disagree with a comment, we
will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Statement of Operations, page F-29 and Note 6. Other Expenses,
Net,
page F-44
1. We note your responses to prior comment 2 and 3 of our letter
dated November 10, 2005. We note your belief that the non-
operating
classification of the environmental provisions and related legal
and
development costs associated with the Linden property is
appropriate
since the Linden operations were never part of your business.
However, we note that from the time of the transfer of the Linden
property to the Company, your intent was to convert the real
estate
to a non-chemical operation function and to complete the
remediation
of the environmental contamination. You indicate that since 1991
the
Company has explored several alternative uses for the property
including the use of the site as a waste incinerator facility or
for
warehousing. This intent indicates that, albeit not directly
related
to your four business segments, you intended to use this land in
your
operations. Please revise your financial statements according.
With
regard to your non-Linden related costs included within "other
expense, net" we remind you that the miscellaneous other non-
operating expenses your referred to in your response to prior
comment
5 from our letter dated September 16, 2005 must be reflected with
operating income.
Note 18. Business Segment Information, page F-67
2. We note your response to prior comment 6 of our letter dated
November 10, 2005. Based on the last five years` sales and gross
profit margins information that you have provided for your four
operating segments it does not appear that these operating
segments
are economically similar. We therefore believe you should
reassess
the appropriateness of aggregating these operating segments into
your
Specialty Chemical Segment. We remind you that the objective of
SFAS
131 is to provide information about the different types of
business
activities in which a company engages and the different economic
environments in which it operates to help users of financial
statements better understand the company`s performance, better
assess
its prospects for future net cash flows and make more information
judgments about the company as a whole. With this in mind, we
note
that following differences in your sales and gross margin trends
for
each of the operating segments and the trends they depict.
* Although the sales have increased period over period for
Personal
Care, Pharmaceutical, Food and Beverage, and Performance
Chemicals,
the respective percentage increases period over period have varied
and in some periods such as 2002 to 2003 have varied
significantly.
* Fine Chemicals clearly does not have the same sales trends as
the
other three operating segments.
* We do not believe that the gross profit percentages presented
are
similar.
o Fine Chemicals clearly does not have the same gross profit
percentages as the other three operating segments.
o The range of profit margins in 2003 and 2004 for Personal Care,
Pharmaceutical, Food and Beverage, and Performance Chemicals are
too
wide to be considered economically similar.
o The trend in the gross profit margins has been varied
significantly
period to period. Specifically, from 2001 to 2002, we noted that
while your Personal Care gross profit percentage decreased, your
Pharmaceutical, Food and Beverage gross profit percentage
increased.
Additionally, from 2003 to 2004 we noted that while your Personal
Care gross profit percentage increased while your Pharmaceutical,
Food and Beverage gross profit percentage decreased.
Given these apparent discrepancies in these financial performance
indicators, we believe you must reassess which, if any, of these
operating segments may be appropriately aggregated into your
Specialty Chemicals reportable segment in accordance with
paragraph
17 of SFAS 131. Please provide us with this revised assessment
and
indicate how you will revise your financial statements.
Note 21, Commitments and Contingencies, page F-72
Environmental Litigation
3. We note your response to prior comment 11 of our letter dated
November 10, 2005. In future filings, please include expanded
disclosures in your critical accounting policies to address the
how
the company determines that a recovery is probable.
* * * *
Please respond to these comments within 10 business
days,
or tell us when you will provide us with a response. Please
provide
us with a supplemental response letter that keys your responses to
our comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
If you have any questions regarding these comments, please
direct them to Marie Trimeloni, Staff Accountant, at (202) 551-
3734
or, in her absence, to the Jeanne Baker, Assistant Chief
Accountant,
at (202) 551-3691.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Salvatore J. Guccione
December 22, 2005
Page 3 of 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE