<PAGE>   1
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                            -----------------------

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1999

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-10059

                        STERLING CHEMICALS HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                     DELAWARE                             76-0185186
      (STATE OR OTHER JURISDICTION OF       (I.R.S. EMPLOYER IDENTIFICATION NO.)
      INCORPORATION OR ORGANIZATION)

     1200 SMITH STREET, SUITE 1900                      (713) 650-3700
       HOUSTON, TEXAS 77002-4312                 (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE

COMMISSION FILE NUMBER 333-04343-01

                            STERLING CHEMICALS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                         76-0502785
  (STATE OR OTHER JURISDICTION OF                            (IRS EMPLOYER
  INCORPORATION OR ORGANIZATION)                           IDENTIFICATION NO.)


    1200 SMITH STREET, SUITE 1900                    (713) 650-3700
       HOUSTON, TEXAS 77002-4312               (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)           INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

     Sterling Chemicals, Inc. meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q, and is therefore filing this form with
the reduced disclosure format provided for by General Instruction H(2) of Form
10-Q.

                            -----------------------

     Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]

     As of July 30, 1999, Sterling Chemicals Holdings, Inc. had 12,752,907
shares of common stock outstanding. As of July 30, 1999, all outstanding equity
securities of Sterling Chemicals, Inc. were owned by Sterling Chemicals
Holdings, Inc.


================================================================================
<PAGE>   2
                 IMPORTANT INFORMATION REGARDING THIS FORM 10-Q

Readers should consider the following information as they review this Form 10-Q.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements
include all statements contained in this Form 10-Q (other than statements of
historical facts) regarding the cyclicality of the industries in which the
Company (as defined herein) is engaged, current and future industry conditions,
the cost of remediating Year 2000 issues and the effect of any unremediated or
undiscovered Year 2000 issues on the Company's operations, and the potential
effects of such matters on the Company's business strategy, results of
operations, and financial position, including without limitation the statements
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations". Although the Company believes that the expectations reflected in
the forward-looking statements contained herein are reasonable, no assurance can
be given that such expectations will prove to have been correct. Certain
important factors that could cause actual results to differ materially from
expectations ("Cautionary Statements") are stated herein in conjunction with the
forward-looking statements or are included elsewhere in this Form 10-Q or
Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year
ended September 30, 1998 (the "Annual Report"). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Certain Known
Events, Trends, Uncertainties, and Risk Factors" contained in the Annual Report.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

SUBSEQUENT EVENTS, ETC.

     All statements contained in this Form 10-Q, including the forward-looking
statements discussed above, are made as of August 12, 1999, except for those
statements that are expressly made as of another date. The Company disclaims any
responsibility for the correctness of any information contained in this Form
10-Q to the extent such information is affected or impacted by events,
circumstances, or developments occurring after August 12, 1999, or by the
passage of time after such date and, except as required by applicable securities
laws, the Company does not intend to update such information.




                                       2
<PAGE>   3

     This combined Form 10-Q is separately filed by Holdings and Chemicals (each
as defined herein). Information contained herein relating to Chemicals is filed
by Holdings and separately by Chemicals on its own behalf. Certain capitalized
terms used in this Form 10-Q are defined in the Notes to Consolidated Financial
Statements included herein.


PART I.--FINANCIAL INFORMATION

ITEM 1.--FINANCIAL STATEMENTS



                                       3
<PAGE>   4
                        STERLING CHEMICALS HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                         JUNE 30,        SEPTEMBER 30,
                                                                                           1999              1998
                                                                                       ------------      ------------
<S>                                                                                    <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents .....................................................     $      6,327      $     11,168
   Accounts receivable ...........................................................          117,678           114,571
   Inventories ...................................................................           78,915            73,225
   Prepaid expenses ..............................................................           11,202            15,571
   Deferred tax asset ............................................................            8,817             5,140
                                                                                       ------------      ------------
     Total current assets ........................................................          222,939           219,675

Property, plant and equipment, net ...............................................          432,827           450,315
Deferred tax asset ...............................................................            7,370              --
Other assets .....................................................................           94,597            95,966
                                                                                       ------------      ------------
     Total assets ................................................................     $    757,733      $    765,956
                                                                                       ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
   Accounts payable ..............................................................     $     64,912      $     46,983
   Accrued liabilities ...........................................................           64,297            71,873
   Current portion of long-term debt .............................................            2,633             8,909
                                                                                       ------------      ------------
     Total current liabilities ...................................................          131,842           127,765

Long-term debt ...................................................................          923,613           873,616
Deferred tax liability ...........................................................             --              11,123
Deferred credits and other liabilities ...........................................           78,095            80,289
Common stock held by ESOP ........................................................            2,946             5,938
Less:  unearned compensation .....................................................             (595)           (2,845)
Redeemable preferred stock .......................................................           20,225            18,249
Commitments and contingencies (Note 4) ...........................................             --                --
Stockholders' equity (deficiency in assets):
   Common stock, $.01 par value, 20,000,000 shares authorized, 12,305,000 shares
     issued and 12,098,000 outstanding at June 30, 1999, and 12,273,000
     shares issued and 12,073,000 outstanding at September 30, 1998 ..............              123               123
   Additional paid-in capital ....................................................         (542,712)         (542,701)
   Retained earnings .............................................................          174,892           229,590
   Pension adjustment ............................................................             (121)             (121)
   Accumulated translation adjustment ............................................          (28,052)          (32,559)
   Deferred compensation .........................................................              (70)             (111)
                                                                                       ------------      ------------
                                                                                           (395,940)         (345,779)
   Treasury stock, at cost, 207,000 and 200,000 shares at June 30, 1999 and
     September 30, 1998, respectively ............................................           (2,453)           (2,400)
                                                                                       ------------      ------------
       Total stockholders' equity (deficiency in assets) .........................         (398,393)         (348,179)
                                                                                       ------------      ------------
         Total liabilities and stockholders' equity (deficiency in assets) .......     $    757,733      $    765,956
                                                                                       ============      ============
</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.




                                       4
<PAGE>   5

                        STERLING CHEMICALS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED JUNE 30,           NINE MONTHS ENDED JUNE 30,
                                                                 ------------------------------      ------------------------------
                                                                    1999              1998              1999              1998
                                                                 ------------      ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>               <C>
Revenues .....................................................   $    181,789      $    205,414      $    506,190      $    640,154
Cost of goods sold ...........................................        169,591           182,886           472,963           586,968
                                                                 ------------      ------------      ------------      ------------
Gross profit .................................................         12,198            22,528            33,227            53,186

Selling, general and administrative expenses .................          9,137            10,641            27,594            28,094
Other expense ................................................          1,733             3,022            10,809             5,962
Interest and debt related expenses, net of interest income ...         24,760            25,748            74,711            76,021
                                                                 ------------      ------------      ------------      ------------
Loss before income taxes .....................................        (23,432)          (16,883)          (79,887)          (56,891)
Benefit for income taxes .....................................         (7,017)           (3,765)          (25,552)          (17,340)
                                                                 ------------      ------------      ------------      ------------

Net loss .....................................................        (16,415)          (13,118)          (54,335)          (39,551)
Preferred stock dividends ....................................            672               607             1,975             1,826
                                                                 ------------      ------------      ------------      ------------

Net loss attributable to common stockholders .................   $    (17,087)     $    (13,725)     $    (56,310)     $    (41,377)
                                                                 ============      ============      ============      ============

Net loss per common share (Note 5) ...........................   $      (1.37)     $      (1.13)     $      (4.43)     $      (3.40)
                                                                 ============      ============      ============      ============

Weighted average shares outstanding ..........................         12,516            12,185            12,469            12,007
                                                                 ============      ============      ============      ============
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.



                                       5
<PAGE>   6

                        STERLING CHEMICALS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                       NINE MONTHS ENDED JUNE 30,
                                                                     ------------------------------
                                                                         1999              1998
                                                                     ------------      ------------
<S>                                                                  <C>               <C>
Cash flows from operating activities:
     Net loss ..................................................     $    (54,335)     $    (39,551)
     Adjustments to reconcile net loss to net cash provided by
       operating activities:
        Depreciation and amortization ..........................           42,375            42,205
        Interest amortization ..................................            1,781             2,830
        Deferred tax benefit ...................................          (19,198)          (14,557)
        Discount notes amortization ............................           13,738            12,898
        Early retirement programs and benefit changes ..........            6,782              --
        Other ..................................................            1,089             1,890
     Change in assets/liabilities:
        Accounts receivable ....................................           (2,604)           36,246
        Inventories ............................................           (5,195)            9,810
        Prepaid expenses .......................................           (4,896)           (1,672)
        Other assets ...........................................          (12,553)            1,055
        Accounts payable .......................................           31,747           (19,247)
        Accrued liabilities ....................................          (16,616)           (2,221)
        Other liabilities ......................................            6,366             7,836
                                                                     ------------      ------------

Net cash provided (used in) by operating activities ............          (11,519)           37,522
                                                                     ------------      ------------

Cash flows from investing activities:
     Capital expenditures ......................................          (17,836)          (18,861)
                                                                     ------------      ------------

Cash flows from financing activities:
     Proceeds from long-term debt ..............................          220,769            48,562
     Repayment of long-term debt ...............................         (196,412)          (62,448)
     Other .....................................................              (58)              104
                                                                     ------------      ------------
Net cash provided (used in) by financing activities ............           24,299           (13,782)
                                                                     ------------      ------------

Effect of United States /Canadian exchange rate on cash ........              215              (390)
                                                                     ------------      ------------

Net increase (decrease) in cash and cash equivalents ...........           (4,841)            4,489
Cash and cash equivalents - beginning of year ..................           11,168             7,958
                                                                     ------------      ------------
Cash and cash equivalents - end of period ......................     $      6,327      $     12,447
                                                                     ============      ============

Supplement disclosures of cash flow information:
     Interest paid, net of interest income received ............     $    (56,534)     $    (58,534)
     Income tax refunds received ...............................            5,042             6,833
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.



                                       6
<PAGE>   7

                            STERLING CHEMICALS, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                             JUNE 30,        SEPTEMBER 30,
                                                                               1999              1998
                                                                           ------------      ------------
<S>                                                                        <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents .........................................     $      6,307      $     11,159
   Accounts receivable ...............................................          117,701           116,398
   Inventories .......................................................           78,915            73,225
   Prepaid expenses ..................................................            9,031            13,632
   Deferred tax asset ................................................            8,817             5,140
                                                                           ------------      ------------
     Total current assets ............................................          220,771           219,554

Property, plant and equipment, net ...................................          432,827           450,315
Other assets .........................................................           91,635            92,634
                                                                           ------------      ------------
     Total assets ....................................................     $    745,233      $    762,503
                                                                           ============      ============

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
   Accounts payable ..................................................     $     63,008      $     46,764
   Accrued liabilities ...............................................           64,051            71,884
   Current portion of long-term debt .................................            2,633             8,909
                                                                           ------------      ------------
   Total current liabilities .........................................          129,692           127,557

Long-term debt .......................................................          781,180           745,709
Deferred tax liability ...............................................            9,431            23,301
Deferred credits and other liabilities ...............................           81,095            83,288
Common stock held by ESOP ............................................            2,946             5,938
Less:  unearned compensation .........................................             (595)           (2,845)
Commitments and contingencies (Note 4) ...............................             --                --
Stockholder's equity (deficiency in assets):
   Common stock, $.01 par value ......................................             --                --
   Additional paid-in capital ........................................         (140,013)         (139,786)
   Accumulated deficit ...............................................          (90,260)          (47,868)
   Pension adjustment ................................................             (121)             (121)
   Accumulated translation adjustment ................................          (28,052)          (32,559)
   Deferred compensation .............................................              (70)             (111)
                                                                           ------------      ------------
   Total stockholder's equity (deficiency in assets) .................         (258,516)         (220,445)
                                                                           ------------      ------------

   Total liabilities and stockholder's equity (deficiency in assets) .     $    745,233      $    762,503
                                                                           ============      ============
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.




                                       7
<PAGE>   8

                            STERLING CHEMICALS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (AMOUNTS IN THOUSANDS)
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED JUNE 30,       NINE MONTHS ENDED JUNE 30,
                                                                  ----------------------------      ----------------------------
                                                                     1999             1998             1999             1998
                                                                  -----------      -----------      -----------      -----------
<S>                                                               <C>              <C>              <C>              <C>
Revenues ....................................................     $   181,789      $   205,414      $   506,190      $   640,154
Cost of goods sold ..........................................         169,591          182,886          472,963          586,968
                                                                  -----------      -----------      -----------      -----------
Gross profit ................................................          12,198           22,528           33,227           53,186

Selling, general and administrative expenses ................           9,034           10,393           27,235           27,066
Other expense ...............................................           1,733            3,022           10,809            5,962
Interest and debt related expenses, net of interest income ..          19,640           21,188           59,881           62,867
                                                                  -----------      -----------      -----------      -----------

Loss before income taxes ....................................         (18,209)         (12,075)         (64,698)         (42,709)
Benefit for income taxes ....................................          (5,814)          (3,027)         (20,694)         (13,219)
                                                                  -----------      -----------      -----------      -----------

Net loss ....................................................     $   (12,395)     $    (9,048)     $   (44,004)     $   (29,490)
                                                                  ===========      ===========      ===========      ===========
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.




                                       8
<PAGE>   9
                            STERLING CHEMICALS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)
                                   (UNAUDITED


<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED JUNE 30,
                                                              ----------------------------
                                                                 1999             1998
                                                              -----------      -----------
<S>                                                           <C>              <C>
Cash flows from operating activities:
     Net loss ...........................................     $   (44,004)     $   (29,490)
     Adjustments to reconcile net loss to net
       cash provided by operating activities:
        Depreciation and amortization ...................          42,375           42,205
        Debt fee amortization ...........................           1,461            2,362
        Deferred tax benefit ............................         (19,198)         (10,451)
        Early retirement programs and benefit changes ...           6,782             --
        Other ...........................................             307            1,890
     Change in assets/liabilities:
        Accounts receivable .............................             188           36,208
        Inventories .....................................          (5,195)           9,810
        Prepaid expenses ................................          (4,662)          (1,658)
        Other assets ....................................          (7,928)           1,017
        Accounts payable ................................          28,612          (20,182)
        Accrued liabilities .............................         (16,616)          (2,221)
        Other liabilities ...............................           6,348            8,030
                                                              -----------      -----------
Net cash provided by operating activities ...............         (11,530)          37,520
                                                              -----------      -----------

Cash flows from investing activities:
   Capital expenditures .................................         (17,836)         (18,861)
                                                              -----------      -----------

Cash flows from financing activities:
   Proceeds from long-term debt .........................         220,769           48,562
   Repayment of long-term debt ..........................        (196,412)         (62,448)
   Other ................................................             (58)             104
                                                              -----------      -----------

Net cash provided by  (used in) financing activities ....          24,299          (13,782)
                                                              -----------      -----------

Effect of United States /Canadian exchange rate on cash .             215             (390)
                                                              -----------      -----------

Net increase (decrease) in cash and cash equivalents ....          (4,852)           4,487
Cash and cash equivalents - beginning of year ...........          11,159            7,958
                                                              -----------      -----------
Cash and cash equivalents - end of period ...............     $     6,307      $    12,445
                                                              ===========      ===========

Supplement disclosures of cash flow information:
   Interest paid, net of interest income received .......     $   (56,545)     $   (58,534)
   Income tax refunds received ..........................           5,042            6,833
</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.



                                       9
<PAGE>   10

                        STERLING CHEMICALS HOLDINGS, INC.
                            STERLING CHEMICALS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   BASIS OF PRESENTATION

     In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all adjustments necessary to present fairly the
consolidated financial position of Sterling Chemicals Holdings, Inc.
("Holdings") and its subsidiaries (Holdings and its subsidiaries collectively,
the "Company") and Sterling Chemicals, Inc. and its subsidiaries (Sterling
Chemicals, Inc. and its subsidiaries collectively, "Chemicals") as of June 30,
1999, and their consolidated results of operations and cash flows for the
applicable three month and nine month periods ended June 30, 1999 and 1998. All
such adjustments are of a normal and recurring nature. The results of operations
for the periods presented are not necessarily indicative of the results to be
expected for the full year. The accompanying unaudited consolidated financial
statements should be, and are assumed to have been, read in conjunction with the
consolidated financial statements and notes included in Holdings' and Chemicals'
combined Annual Report on Form 10-K for the fiscal year ended September 30, 1998
(the "Annual Report"). The accompanying consolidated balance sheets as of
September 30, 1998, have been derived from the audited consolidated balance
sheets as of September 30, 1998, included in the Annual Report. The accompanying
consolidated financial statements as of and for the three month and nine month
periods ended June 30, 1999, have been reviewed by Deloitte & Touche LLP, the
Company's independent public accountants, whose reports are included herein.

     Certain amounts reported in the financial statements for the prior periods
have been reclassified to conform with the current financial statement
presentation with no effect on net loss or stockholders' equity (deficiency in
assets).


2. INVENTORIES

<TABLE>
<CAPTION>
                                                               JUNE 30,      SEPTEMBER 30,
                                                                1999            1998
                                                             -----------     -----------
<S>                                                          <C>             <C>
Inventories consisted of the following (in thousands):

Finished products ......................................     $    46,641     $    42,436

Raw materials ..........................................          14,753           8,089

Inventories under exchange agreements ..................           1,830           3,031

Stores and supplies ....................................          15,691          19,669
                                                             -----------     -----------
                                                             $    78,915     $    73,225
                                                             ===========     ===========
</TABLE>

3. LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                  JUNE 30,       SEPTEMBER 30,
                                                                   1999             1998
                                                                -----------      -----------
<S>                                                             <C>              <C>
Long-term debt consisted of the following (in thousands):

Revolving credit facility .................................     $    36,450      $      --
Term loans ................................................         273,000          274,000
Saskatoon term loans ......................................          44,764           49,552
ESOP term loan ............................................           2,031            3,250
11-1/4% Notes .............................................         152,568          152,816
11-3/4% Notes .............................................         275,000          275,000
                                                                -----------      -----------
     Total Chemicals' debt outstanding ....................         783,813          754,618

13-1/2% Notes .............................................         142,433          127,907
                                                                -----------      -----------
        Total Holdings' debt outstanding ..................         926,246          882,525

Less:
     Current maturities ...................................          (2,633)          (8,909)
                                                                -----------      -----------

Total long-term debt ......................................     $   923,613      $   873,616
                                                                ===========      ===========
</TABLE>




                                       10
<PAGE>   11

     On July 23, 1999, Chemicals completed a private offering (the "12-3/8%
Notes Offering") of $295,000,000 of its 12-3/8% Senior Secured Notes due 2006
(the "12-3/8% Notes"). The 12-3/8% Notes are senior secured obligations of
Chemicals and rank equally in right of payment with all other existing and
future senior indebtedness of Chemicals and senior in right of payment to all
existing and future subordinated indebtedness of Chemicals. The 12-3/8% Notes
are guaranteed by all of Chemicals' existing direct and indirect U.S.
subsidiaries (other than Sterling Chemicals Acquisitions, Inc.) on a joint and
several basis. Each subsidiary's guarantee ranks equally in right of payment
with all of such subsidiary's existing and future senior indebtedness and senior
in right of payment to all existing and future subordinated indebtedness of such
subsidiary. However, the 12-3/8% Notes, and each subsidiary's guarantee, is
subordinated to the extent of the collateral securing Chemicals' new secured
revolving credit facilities described below. The 12-3/8% Notes and the
subsidiary guarantees are secured by (i) a second priority lien on all of
Chemicals' U.S. chemical production facilities and related assets, (ii) a second
priority pledge of all of the capital stock of each subsidiary guarantor, and
(iii) a first priority pledge of 65% of the stock of certain of the Company's
subsidiaries incorporated outside of the United States.

     In addition, on July 23, 1999, Chemicals established two new secured
revolving credit facilities providing for up to $155,000,000 in revolving credit
loans (the "New Revolvers") under a single Revolving Credit Agreement (the "New
Credit Agreement"). Under the New Credit Agreement, Chemicals and each of its
direct and indirect U.S. subsidiaries (other than Sterling Chemicals
Acquisitions, Inc.) are co-borrowers and are jointly and severally liable for
any indebtedness thereunder. The New Revolvers consist of (i) a $70,000,000
revolving credit facility (the "Fixed Assets Revolver") secured by a first
priority lien on all of Chemicals' U.S. chemical production facilities and
related assets, all of the capital stock of Chemicals and all of the capital
stock of each co-borrower and a second priority lien on all accounts receivable,
inventory and other specified assets of Chemicals and each co-borrower, and (ii)
an $85,000,000 revolving credit facility (the "Current Assets Revolver") secured
by a first priority lien on all accounts receivable, inventory and other
specified assets of Chemicals and each co-borrower.

     Funding under the 12-3/8% Notes Offering and the New Revolvers occurred on
July 23, 1999. The proceeds of the 12-3/8% Notes Offering and the initial
borrowings under the New Revolvers were used to completely repay all outstanding
indebtedness under Chemicals existing senior credit facility. Accordingly,
amounts classified as current under the terms of the existing senior credit
facility have been reclassified as long-term under the terms of the 12-3/8%
Notes and the New Revolvers.

     Borrowings under the Fixed Assets Revolver bear interest, at Chemicals'
option, at an annual rate of either the "LIBOR Rate" (as defined in the New
Credit Agreement) plus 3.75% or the Alternate Base Rate plus 2.25%. Borrowings
under the Current Assets Revolver bear interest, at Chemicals' option, at an
annual rate of either the LIBOR Rate plus 3.00% or the Alternate Base Rate plus
1.50%. The "Alternate Base Rate" is equal to the greater of the Base Rate as
announced from time to time by The Chase Manhattan Bank in New York, New York or
the "Federal Funds Effective Rate" plus 1/2% (as such terms are defined in the
New Credit Agreement.). The New Credit Agreement also requires Chemicals and the
co-borrowers to pay an aggregate commitment fee ranging from 0.75% to 1.25% on
the unused portion of the commitment for the Fixed Assets Revolver, depending on
the amount drawn, and an aggregate commitment fee of 0.5% on the unused portion
of the commitment for the Current Assets Revolver. Available credit under the
Current Assets Revolver is subject to a monthly borrowing base consisting of 85%
of eligible accounts receivable and 65% of eligible inventory with an inventory
cap of $42,500,000. In addition, the borrowing base for the Current Assets
Revolver must exceed outstanding borrowings thereunder by $12,000,000 at all
times.

     The Fixed Assets Revolver matures in five years, with quarterly commitment
reductions totalling 30% of the total commitment in year four and 70% in year
five. The Current Assets Revolver matures in five years, with no scheduled
commitment reductions prior to that time. However, the commitments for each of
the Fixed Assets Revolver and the Current Assets Revolvers will be permanently
reduced to the extent required under the New Credit Agreement upon prepayments
made out of specific sources of funds, including asset sales and certain equity
issuances by Holdings.

     The indenture governing the 12-3/8% Notes (the "Indenture") and the New
Credit Agreement contain numerous covenants, including, but not limited to,
restrictions on the ability of Chemicals and certain of its subsidiaries to
incur indebtedness, pay dividends, create liens, sell assets, engage in mergers
and acquisitions and refinance existing indebtedness. In addition, the Indenture
and the New Credit Agreement specify various circumstances that will constitute,
upon occurrence and subject in certain cases to notice and grace periods, an
event of default thereunder. However, neither the Indenture nor the New Credit
Agreement requires the Company to satisfy any financial ratios or maintenance
tests.

     The Indenture, the indenture governing the 11-1/4% Notes, the indenture
governing the 11-3/4% Notes, and the New Credit Agreement contain provisions
which restrict the payment of advances, loans and dividends from Chemicals to
Holdings. The most restrictive of the covenants limits such payments during
fiscal 1999 to approximately $2.0 million, plus any amounts due Holdings from
Chemicals under the intercompany tax sharing agreement.



                                       11
<PAGE>   12
4. COMMITMENTS AND CONTINGENCIES

Product Contracts

     The Company has certain long-term agreements that provide for the
dedication of 100% of the Company's production of acetic acid, plasticizers,
tertiary butylamine, and sodium cyanide, each to one customer. The Company also
dedicates a significant portion of its acrylonitrile, methanol, and styrene
production under long-term arrangements. Some of these agreements provide for
cost recovery plus an agreed profit margin based upon market prices.

Environmental Regulations

     The Company's operations involve the handling, production, transportation,
treatment, and disposal of materials that are classified as hazardous or toxic
waste and that are extensively regulated by environmental and health and safety
laws, regulations, and permit requirements. Environmental permits required for
the Company's operations are subject to periodic renewal and can be revoked or
modified for cause or when new or revised environmental requirements are
implemented. Changing and increasingly strict environmental requirements can
affect the manufacturing, handling, processing, distribution, and use of the
Company's chemical products and the raw materials used to produce such products
and, if so, the Company's business and operations may be materially and
adversely affected. In addition, changes in environmental requirements can cause
the Company to incur substantial costs in upgrading or redesigning its
facilities and processes, including waste treatment, storage, disposal, and
other waste handling practices and equipment.

     While the Company believes that its business operations and facilities
generally are operated in compliance in all material respects with all
applicable environmental and health and safety requirements, there can be no
assurance that past practices or future operations will not result in material
claims or regulatory action, require material environmental expenditures, or
result in exposure or injury claims by employees, contractors and their
employees or the public. Some risk of environmental costs and liabilities is
inherent in the operations and products of the Company, as it is with other
companies engaged in similar businesses. In addition, a catastrophic event at
any of the Company's facilities could result in liabilities to the Company
substantially in excess of its insurance coverages.

Legal Proceedings

     Ammonia Release. A description of the ammonia release lawsuits is found
under "Legal Proceedings" in Note 7 of the "Notes to Consolidated Financial
Statements" of the Annual Report and is incorporated herein by reference. As
discussed therein, the Company continues to vigorously defend against the claims
of the approximately 100 remaining plaintiffs. The Company has settled the
claims of a majority of the original plaintiffs and is engaged in ongoing
settlement discussions with the remaining plaintiffs. The Company believes that
all or substantially all of its future out-of-pocket costs and expenses
(including settlement payments and judgements) relating to these lawsuits will
be covered by the Company's liability insurance policies.

     Nickel Carbonyl Release. A description of the nickel carbonyl lawsuit is
found under "Legal Proceedings" in Note 7 of the "Notes to Consolidated
Financial Statements" of the Annual Report and is incorporated herein by
reference. As discussed therein, a total of eighteen contractor employees
allegedly exposed to nickel carbonyl have filed a lawsuit against Chemicals
seeking unspecified damages for personal injuries. A majority of these claims
have been settled. Additional claims and litigation against Chemicals relating
to this incident may ensue. The Company believes that all or substantially all
of its future out-of-pocket costs and expenses (including settlement payments
and judgements) relating to these lawsuits will be covered by the Company's
liability insurance policies and/or indemnification from third parties.

     Ethylbenzene Release. A description of this release is found under "Legal
Proceedings" in Note 7 of the "Notes to Consolidated Financial Statements" of
the Annual Report and is incorporated herein by reference. There is no lawsuit
pending against the Company based on this release, but the Company has received,
and in some instances resolved, claims from individuals for alleged damage from
this incident. The Company believes that its liability insurance coverage is
sufficient to cover all out-of-pocket costs and expenses stemming from this
incident in excess of its $1 million deductible.

     Other Lawsuits. The Company is subject to various other claims and legal
actions that arise in the ordinary course of its business.



                                       12
<PAGE>   13
Litigation Contingency

     The Company has made estimates of the reasonably possible range of
liability with regard to its outstanding litigation for which it may incur any
liability. These estimates are based on the Company's judgments using currently
available information as well as consultation with the Company's insurance
carriers and outside legal counsel. A number of the claims in these litigation
matters are covered by the Company's insurance policies or by contractual
indemnification obligations of third parties to the benefit of the Company. The
Company, therefore, has also made estimates of its probable recoveries under
insurance policies or from third-party indemnitors based on its understanding of
its insurance policies and indemnification arrangements, discussions with its
insurers and indemnitors, and consultation with outside legal counsel, in
addition to the Company's judgments. Based on the foregoing, as of June 30,
1999, the Company has accrued approximately $9.9 million as its estimate of its
aggregate contingent liability for these matters and has also recorded aggregate
receivables from its insurers and third-party indemnitors of approximately $8.8
million. At June 30, 1999, management estimates that the aggregate reasonably
possible range of loss for all litigation combined, in addition to the amount
accrued, is between zero and $12 million. The Company believes that this
additional reasonably possible loss would be substantially covered by insurance
or indemnification.

     While the Company has based its estimates on its evaluation of available
information and the other matters described above, much of the litigation
remains in the discovery stage and it is impossible to predict with certainty
the ultimate outcome of such litigation. The Company will adjust its estimates
as necessary as additional information is developed and evaluated. However, the
Company believes that the final resolution of these contingencies will not have
a material adverse impact on the financial position, results of operations, or
cash flows of the Company.

     The timing of probable insurance and indemnity recoveries and payment of
liabilities, if any, are not expected to have a material adverse effect on the
financial position, results of operations, or cash flows of the Company.


5. LOSS PER SHARE CALCULATION

     For purposes of computing net loss per common share, net loss has been
reduced by an amount equal to the fair market value of Released Shares (as
hereinafter defined) at the end of the period minus the sum of the amount
previously recognized as compensation expense with respect to Released Shares
and the amount of depreciation/appreciation in value of Released Shares in prior
periods. This reduction results from the Company being required, under certain
circumstances, to purchase for cash common stock distributed to participants by
Chemicals' employee stock ownership plan (the "ESOP"). "Released Shares" are
shares held by the ESOP but allocated to employees. The weighted average number
of outstanding shares and computation of the net loss per common share is as
follows (in thousands, except net loss per common share):

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED JUNE 30,       NINE MONTHS ENDED JUNE 30,
                                                       ---------------------------      ----------------------------
                                                          1999            1998             1999             1998
                                                       -----------     -----------      -----------      -----------
<S>                                                    <C>             <C>              <C>              <C>
Net loss attributable to common stockholders .....     $   (17,087)    $   (13,725)     $   (56,310)     $   (41,377)

Plus depreciation in value of Released Shares ....            --              --              1,048              505
                                                       -----------     -----------      -----------      -----------

Net loss for purpose of computing loss per share .     $   (17,087)    $   (13,725)     $   (55,262)     $   (40,872)
                                                       ===========     ===========      ===========      ===========

Net loss per common share ........................     $     (1.37)    $     (1.13)     $     (4.43)     $     (3.40)
                                                       ===========     ===========      ===========      ===========

Weighted average shares outstanding ..............          12,516          12,185           12,469           12,007
                                                       ===========     ===========      ===========      ===========
</TABLE>

6. CAPITAL STOCK

     In December 1998, the Company entered into separate Standby Purchase
Agreements (collectively, the "Standby Purchase Agreements") with each of Gordon
A. Cain, William A. McMinn, James Crane, Frank P. Diassi, Frank J. Hevrdejs and
Koch Capital Services, Inc. (collectively, the "Standby Purchasers"). Pursuant
to the terms of the Standby Purchase Agreements, the Standby Purchasers
committed to purchase up to 2.5 million shares of the common stock, par value
$0.01 per share, of Holdings ("Common Stock"), at a price of $6.00 per share,
if, as, and when requested by Holdings at any time or from time to time prior to
December 15, 2001. Under each of the Standby Purchase Agreements, Holdings may
only require the Standby Purchasers to purchase such shares if it believes that
the purchase price paid by the Standby Purchasers for such shares is necessary
to maintain, reestablish, or enhance the Company's borrowing ability under its
revolving credit facilities or to satisfy any requirement




                                       13
<PAGE>   14

thereunder to raise additional equity. In order to induce the Standby Purchasers
to enter into the Standby Purchase Agreements, Holdings issued to them warrants
to purchase an aggregate of 300,000 shares of Common Stock at an exercise price
of $6.00 per share. In addition, under the terms of the Standby Purchase
Agreements, Holdings agreed to issue to the Standby Purchasers additional
warrants to purchase up to 300,000 additional shares of Common Stock if, as, and
when they purchase shares of Common Stock under the Standby Purchase Agreements.
Any shares of Common Stock purchased under the Standby Purchase Agreements, any
warrants issued to the Standy Purchasers pursuant to the Standby Purchase
Agreements and any shares of Common Stock purchased pursuant to such warrants
will be subject to the terms of the Third Amended and Restated Voting Agreement
dated as of February 1, 1999, the Sterling Chemicals Holdings, Inc. Stockholders
Agreement dated effective as of August 21, 1996, as amended, the Tag-Along
Agreement dated as of August 21, 1996, and the Registration Rights Agreement
dated as of August 21, 1996.

7. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS

     The Company recorded a net $6.8 million charge, included in Other Expense,
increasing its pension liability and other post-retirement benefits liability in
the second quarter of fiscal 1999, as a result of an early retirement program
for employees at the Texas City, Texas plant and certain benefit changes for all
U.S. employees. The early retirement program resulted in curtailment expense for
the pension plan and special termination benefits expenses for both the pension
and the other post-retirement benefits plans, partially offset by the
curtailment gain from the reduction of post-retirement life insurance benefits
for currently active U.S.
employees.

8. NEW ACCOUNTING STANDARDS

     As of October 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for the reporting and displaying of comprehensive
net income and its components. The components of comprehensive net loss, net of
tax, are as follows:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                           JUNE 30,                           JUNE 30,
                                                   ----------------------------      ----------------------------
                                                      1999             1998             1999             1998
                                                   -----------      -----------      -----------      -----------
<S>                                                <C>              <C>              <C>              <C>
Net loss attributable to common stockholders .     $   (17,087)     $   (13,725)     $   (56,310)     $   (41,377)

Depreciation in value of Released Shares .....            --               --              1,048              505

Change in accumulated translation adjustment .           3,007           (5,143)           4,507           (9,371)
                                                   -----------      -----------      -----------      -----------

Comprehensive net loss .......................     $   (14,080)     $   (18,868)     $   (50,755)     $   (50,243)
                                                   ===========      ===========      ===========      ===========
</TABLE>

     SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information", establishes standards for the way that public business enterprises
report information about operating segments in interim and annual financial
statements. SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", establishes revisions to employers' disclosures about
pension and other post retirement benefit plans. The Company adopted these
statements as of October 1, 1998, and the disclosures required thereby will be
included in Holdings' and Chemicals' combined Annual Report on Form 10-K for the
fiscal year ending September 30, 1999.

     SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. The Company is evaluating the disclosures
that will be required when this statement is adopted in the first quarter of
fiscal 2001.



                                       14
<PAGE>   15

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Sterling Chemicals Holdings, Inc.

We have reviewed the accompanying consolidated balance sheet of Sterling
Chemicals Holdings, Inc. and subsidiaries (the "Company") as of June 30, 1999,
and the related consolidated statements of operations and cash flows for the
three month and nine month periods ended June 30, 1999 and 1998. These financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of September 30,
1998, and the related consolidated statements of operations, stockholders'
equity (deficiency in assets), and cash flows for the year then ended (not
presented herein); and in our report dated December 4, 1998 (December 17, 1998
as to Notes 4, 11, and 12), we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of September 30, 1998 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.


DELOITTE & TOUCHE LLP

Houston, Texas
August 10, 1999



                                       15
<PAGE>   16
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholder of Sterling Chemicals, Inc.

We have reviewed the accompanying consolidated balance sheet of Sterling
Chemicals, Inc. and subsidiaries ("Chemicals") as of June 30, 1999, and the
related consolidated statements of operations and cash flows for the three month
and nine month periods ended June 30, 1999 and 1998. These financial statements
are the responsibility of Chemicals' management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Chemicals as of September 30, 1998,
and the related consolidated statement of operations, stockholder's equity
(deficiency in assets), and cash flows for the year then ended (not presented
herein); and in our report dated December 4, 1998 (December 17, 1998 as to Notes
4, 11, and 12), we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of September 30, 1998 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.

DELOITTE & TOUCHE LLP

Houston, Texas
August 10, 1999




                                       16
<PAGE>   17

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

Certain capitalized terms used but not defined in this Item 2 have the meanings
assigned to them in the Notes To Consolidated Financial Statements included in
this Form 10-Q or in the Notes to Consolidated Financial Statements included in
Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year
ended September 30, 1998.


OVERVIEW

      Holdings is a holding company whose only material asset is its investment
in Chemicals. Holdings' only material liabilities are its obligation to repay
its outstanding 13-1/2% Senior Secured Discount Notes due 2008 (the "13-1/2%
Notes"), its obligation to redeem its outstanding shares of preferred stock, and
certain contingent obligations. Chemicals directly or indirectly owns
substantially all of the consolidated operating assets, and is obligated for
substantially all remaining liabilities, of the Company. Other than the
additional interest expense associated with the 13-1/2% Notes, results of
operations for the Company are essentially the same as those for Chemicals.
Accordingly, the discussion that follows is applicable to both entities, except
as specifically noted. A separate discussion of the results of operations for
Chemicals would not, in the opinion of the Company, provide any additional
meaningful information.


RECENT DEVELOPMENTS

     In April 1999, the Company restarted its methanol facility, which had been
shut down since August 1998 for economic reasons. A significant disparity
between prices for domestic and foreign natural gas, one of the primary raw
materials for methanol, has put domestic methanol producers at a disadvantage
when compared to foreign competitors. One of the primary uses of methanol is in
the production of MTBE used in reformulated gasolines. The State of California
has recently announced that MTBE must be phased out of reformulated gasoline
used in that state by December 31, 2002. In addition, in July 1999, the
Environmental Protection Agency announced that it would ask Congress to develop
legislation aimed at phasing out MTBE from the existing reformulated gasoline
program, and to give states the authority to ban MTBE completely. These
developments are expected to negatively impact the Company's methanol business,
as well as the global methanol market. The Company continues to evaluate the
best use for its methanol facility.

     The Company's styrene monomer unit at its facilities in Texas City, Texas
(the "Texas City Plant") was shutdown for approximately one month during the
second quarter of fiscal 1999 for scheduled maintenance. Although the styrene
unit was restarted on March 22, 1999, the restart of the ethylbenzene unit, an
important component of the styrene unit, was delayed until April 30, 1999 so
that unscheduled maintenance work could be performed on a process vessel. During
this delay, the Company purchased most of its ethylbenzene requirements on the
spot market. The unscheduled work on the process vessel and the resulting delay
in restarting the ethylbenzene unit negatively impacted pretax earnings for the
third quarter of fiscal 1999 by approximately $3 million.

     In May 1999, the Company reduced its pulp chemicals business workforce by
27 employees. The Company recorded a pre-tax charge of $1.7 million, primarily
associated with this reduction, in the third quarter of fiscal 1999. The Company
expects this workforce reduction to generate annual savings of approximately
$1.5 million, although no assurances can be given as to the level of savings
that will actually be achieved.

     On July 23, 1999, Chemicals completed a private offering (the "12-3/8%
Notes Offering") of $295,000,000 of its 12-3/8% Senior Secured Notes due 2006
(the "12-3/8% Notes"). In addition, on July 23, 1999, Chemicals established two
new secured revolving credit facilities providing for up to $155,000,000 in
revolving credit loans (the "New Revolvers") under a single Revolving Credit
Agreement (the "New Credit Agreement"). The proceeds of the 12-3/8% Notes
Offering and initial borrowings under the New Revolvers were used to fully repay
and terminate Chemicals' three outstanding term loans and existing revolving
credit facility.


RESULTS OF OPERATIONS

     Revenues for the third quarter of fiscal 1999 were $182 million compared to
revenues of $205 million for the third quarter of fiscal 1998, a decrease of
11%. Revenues for the first nine months of fiscal 1999 were $506 million
compared to $640 million in the prior year period, a decrease of 20%. The
decrease in revenues for the third quarter of fiscal 1999 as compared to the
same period of fiscal 1998 was primarily due to lower acrylonitrile and acrylic
fibers sales volumes and lower acrylonitrile, methanol, acrylic fibers, and
sodium chlorate sales prices. The decrease in revenues for the first nine months
of fiscal 1999 as compared to




                                       17
<PAGE>   18

the corresponding period of fiscal 1998 was primarily due to lower
acrylonitrile, styrene, methanol, and acrylic fibers sales volumes and prices
and lower sodium chlorate sales prices. A net loss attributable to common
stockholders of $17.1 million, or $1.37 per share, was recorded for the third
quarter of fiscal 1999, compared to a net loss attributable to common
stockholders of $13.7 million, or $1.13 per share, for the third quarter of
fiscal 1998. A net loss attributable to common stockholders of $56.3 million, or
$4.43 per share, was recorded for the first nine months of fiscal 1999, compared
to a net loss attributable to common stockholders of $41.4 million, or $3.40 per
share, for the same period of fiscal 1998. The increase in net loss for the
third quarter of fiscal 1999 as compared to the same period of fiscal 1998 was
primarily due to: (i) reduced acrylonitrile and sodium chlorate margins, (ii)
the negative impact of the aforementioned delay in the restart of the
ethylbenzene unit, (iii) weak markets in acrylic fibers, and (iv) costs
associated with the aforementioned pulp chemicals business workforce reduction.
The increase in the net loss for the first nine months of fiscal 1999 as
compared to the same period of fiscal 1998 was primarily due to: (i) reduced
acrylonitrile, methanol, and sodium chlorate margins, (ii) shutdowns in styrene
for routine maintenance and acetic acid for expansion in the second quarter of
fiscal 1999, (iii) the negative impact of the aforementioned delay in the
restart of the ethylbenzene unit, (iv) weak markets in acrylic fibers, and (v)
costs associated with workforce reduction programs and benefit changes, all
partially offset by a modest improvement in styrene margins.

Revenues, Cost of Goods Sold, and Gross Profit

     Petrochemicals and Acrylic Fibers

     For the third quarter of fiscal 1999, the Company's revenues from its
petrochemicals and acrylic fibers businesses decreased to $134 million, from
$155 million for the same period of fiscal 1998. For the first nine months of
fiscal 1999, the Company's revenues from its petrochemicals and acrylic fibers
businesses decreased to $366 million, from $486 million for the same period of
fiscal 1998. The 14% decrease in revenues for the third quarter of fiscal 1999,
as compared to the same period of fiscal 1998, was primarily due to reduced
acrylonitrile and acrylic fibers sales volumes and reduced acrylonitrile,
methanol, and acrylic fibers sales prices, partially offset by an increase in
styrene sales prices. The 25% decrease in revenues for the first nine months of
fiscal 1999 as compared to the same period of fiscal 1998, was primarily due to
reduced styrene, acrylonitrile, methanol, and acrylic fibers sales prices and
volumes. The economic conditions in Asia continued to negatively impact market
conditions in the fiscal 1999 periods, particularly for the Company's styrene,
acrylonitrile, and acrylic fibers products. The Company's petrochemicals and
acrylic fibers businesses recorded combined operating losses of $5 million and
$26 million for the third quarter and first nine months of fiscal 1999,
respectively, compared to an operating loss of $1 million and $10 million for
the third quarter and first nine months of fiscal 1998, respectively. The
increase in operating loss for the third quarter of fiscal 1999 was primarily
due to weaker operational performance in acrylonitrile, methanol, and acrylic
fibers and the negative impact of the aforementioned delay in the restart of the
ethylbenzene unit. The increase in operating loss for the first nine months of
fiscal 1999 was primarily due to weaker operational performance in
acrylonitrile, methanol, and acrylic fibers, and costs associated with workforce
reduction programs and benefit changes, partially offset by a modest improvement
in styrene margins.

     Styrene revenues increased 2% to $62 million in the third quarter of fiscal
1999 and decreased 12% to $163 million for the first nine months of fiscal 1999,
compared to the same periods in fiscal 1998. Styrene sales prices increased 6%
and decreased 5% for the third quarter and first nine months of fiscal 1999,
respectively, compared to the prior fiscal year periods. Styrene sales volumes
decreased 5% and 8% for the third quarter and first nine months of fiscal 1999,
respectively, compared to the prior fiscal year periods. The decrease in sales
volumes for the first nine months of fiscal 1999 was primarily due to the
month-long scheduled maintenance shutdown of the styrene unit during the second
quarter of fiscal 1999. The major raw materials for styrene are benzene and
ethylene. The price of benzene increased 12% in the third quarter of fiscal 1999
and decreased 12% in the first nine months of fiscal 1999, compared to the same
periods of fiscal 1998. The price of ethylene increased 35% in the third quarter
of fiscal 1999 and decreased 14% in the first nine months of fiscal 1999,
compared to the same periods of fiscal 1998. Styrene margins decreased in the
third quarter of fiscal 1999, compared to the same period of fiscal 1998, as
higher sales prices and lower fixed manufacturing costs were insufficient to
cover the increased raw materials and energy costs. Styrene margins increased in
the first nine months of fiscal 1999, compared to the same period of fiscal
1998, as lower raw materials costs and lower fixed manufacturing costs more than
offset the lower sales prices.

     Acrylonitrile revenues decreased 35% to $17 million in the third quarter of
fiscal 1999 and 40% to $53 million for the first nine months of fiscal 1999,
compared to the same periods in fiscal 1998. Acrylonitrile sales prices
decreased 24% and 29% for the third quarter and first nine months of fiscal
1999, respectively, compared to the prior fiscal year periods. In addition,
acrylonitrile sales volumes decreased 14% for both the third quarter and first
nine months of fiscal 1999, compared to the prior fiscal year periods. The lower
sales prices and volumes were primarily due to weaker market conditions,
primarily in Asia. The major raw materials for acrylonitrile are propylene and
ammonia. The price of propylene decreased 14% and 29% in the third quarter of
fiscal 1999 and the first nine months of fiscal 1999, respectively, compared to
the same periods of fiscal 1998. The price of ammonia remained constant in the
third quarter of fiscal 1999 and decreased 13% in the first nine months of
fiscal 1999, compared to the same periods of fiscal 1998. Acrylonitrile margins
decreased in the third quarter and first nine months of fiscal 1999, compared to
the same periods of fiscal 1998, as significantly lower sales prices more than
offset the lower raw materials costs and fixed manufacturing costs.



                                       18
<PAGE>   19

     Acrylic fibers revenues decreased 32% to $17 million in the third quarter
of fiscal 1999 and 37% to $48 million for the first nine months of fiscal 1999,
compared to the same periods in fiscal 1998. Acrylic fibers sales volumes
decreased 18% and 31% for the third quarter and first nine months of fiscal
1999, respectively, compared to the prior fiscal year periods. The performance
of the Company's acrylic fibers business in the third quarter and first nine
months of fiscal 1999 continued to be negatively impacted by weak market
conditions and imports from foreign suppliers.

     Revenues from the Company's business unit that produces acetic acid,
methanol, plasticizers, and certain other petrochemicals ("AMP") decreased 11%
to $37 million in the third quarter of fiscal 1999 and 25% to $103 million for
the first nine months of fiscal 1999, compared to the same periods in fiscal
1998. The decreases in revenues for the third quarter and first nine months of
fiscal 1999 were primarily due to a 26% and 44% decrease in methanol sales
prices, respectively, and a 1% and 19% decrease in methanol sales volumes,
respectively, compared to the prior fiscal year periods. The decrease in
methanol revenues and sales volumes was primarily a result of continued
overcapacity in the global methanol market. The Company's AMP products reported
an increase in operating earnings in the third quarter of fiscal 1999 compared
to the prior period of fiscal 1998 as lower methanol margins were more than
offset by cost reductions. The Company's AMP products reported a decrease in
operating earnings in the first nine months of fiscal 1999 compared to the prior
periods of fiscal 1998 primarily due to the aforementioned weak methanol market
conditions and acetic acid shutdown for expansion in the second quarter of
fiscal 1999.

     Pulp Chemicals

     Revenues from the Company's pulp chemicals business decreased 5% to $48
million in the third quarter of fiscal 1999 and decreased 9% to $140 million in
the first nine months of fiscal 1999, compared to the same periods in fiscal
1998. The decrease in revenues in the third quarter and first nine months of
fiscal 1999 was primarily due to a decrease in average sodium chlorate sales
prices compared to the prior periods of fiscal 1998. The decline in sodium
chlorate sales prices was primarily due to an increase in North American sodium
chlorate capacity. The Company's pulp chemicals business recorded operating
earnings of $6 million and $21 million for the third quarter and first nine
months of fiscal 1999, respectively, compared to operating earnings of $9
million and $29 million for the same periods of fiscal 1998. This reduction in
operating earnings was primarily due to reduced sodium chlorate sales prices.

Selling, General, and Administrative ("SG&A") Expenses

     SG&A expenses were $9 million and $28 million for the third quarter and
first nine months of fiscal 1999, respectively, compared to $11 million and $28
million for the same periods of fiscal 1998. SG&A expenses were impacted
favorably by cost reduction programs which were mostly offset by costs
associated with upgrades of certain of the Company's information technology
systems, including Year 2000 compliance activities.

Other Expense

     Other expense was $2 million and $11 million for the third quarter and
first nine months of fiscal 1999, respectively, compared to $3 million and $6
million for the same periods of fiscal 1998. The fiscal 1999 amounts relate to
the aforementioned one-time non-cash charge related to early retirement programs
and benefit changes and workforce reductions in the petrochemicals business and
pulp chemical business. The fiscal 1998 amounts relate to voluntary severance
programs in the petrochemicals business.

Interest and Debt Related Expenses

     Interest and debt related expense was $25 million and $75 million for the
third quarter and nine months of fiscal 1999, respectively, compared to $26
million and $76 million for the same periods of fiscal 1998.

Benefit for Income Taxes

     Benefit for income taxes for the third quarter and first nine months of
fiscal 1999 were $7 million (effective tax rate of 30%) and $26 million
(effective tax rate of 32%), respectively, compared to $4 million (effective tax
rate of 22%) and $17 million (effective tax rate of 30%) for the comparable
periods of fiscal 1998. The increase in the benefit was primarily the result of
the increase in the Company's pre-tax losses in the fiscal 1999 periods.




                                       19
<PAGE>   20
LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 1999, the Company's old long-term debt (including current
maturities) totaled approximately $926 million and consisted of: (i) three term
loans under the Old Credit Agreement (defined below); (ii) loans under the Old
Revolver (defined below); (iii) two term loans under the Sask Credit Agreement
(defined below); (iv) Chemicals' 11-1/4% Senior Subordinated Notes due 2007 (the
"11-1/4% Notes"); (v) Chemicals' 11-3/4% Senior Subordinated Notes due 2006 (the
"11-3/4 Notes"); and (vi) the 13-1/2% Notes.

     In July 1997, Chemicals entered into an Amended and Restated Credit
Agreement (as amended, the "Old Credit Agreement") with Chase Bank of Texas,
National Association, individually and as administrative agent, Credit Suisse
First Boston, individually and as documentation agent, and certain other
financial institutions. The Old Credit Agreement established a revolving credit
facility (the "Old Revolver") under which Chemicals could borrow, repay and
reborrow funds for general corporate purposes. As of June 30, 1999, Chemicals
had drawn approximately $36 million and had approximately $4 million in letters
of credit outstanding under the Old Revolver.

     In December 1998, Chemicals obtained certain amendments to the financial
covenants contained in the Old Credit Agreement which made the financial
covenants less restrictive through December 31, 1999. Chemicals was in
compliance with the covenants at all times, but requested the amendments based
on its revised financial projections. Chemicals was in compliance with all
covenants in the Old Credit Agreement at June 30, 1999.

     On July 23, 1999, Chemicals completed a refinancing of its senior debt
outstanding under the Old Credit Agreement by issuing the 12-3/8% Notes and
establishing the New Revolvers with aggregate borrowing capacity of $155
million, approximately $47 million of which was drawn under the Fixed Assets
Revolver (defined below) at closing. The Old Credit Agreement was terminated
upon consummation of the refinancing. The refinancing increased Chemicals'
liquidity by eliminating near-term debt amortization and financial covenants
associated with the Old Credit Agreement that limited availability under the Old
Revolver, as well as by increasing revolving credit availability. Although no
assurances can be given, the Company believes the additional liquidity provided
by the refinancing, when combined with cash flows from operations and other
sources of available capital, will be sufficient to enable Chemicals to operate
through the current cyclical downturn in the markets for its primary
petrochemicals products. Such belief is largely based upon published predictions
of industry experts as to the timing of improvements in those markets. If
conditions in those markets do not improve as predicted, the Company may be
unable to fund its operations and meet its debt service requirements over an
extended period.

     The 12-3/8% Notes are senior secured obligations of Chemicals and rank
equally in right of payment with all other existing and future senior
indebtedness of Chemicals and senior in right of payment to all existing and
future subordinated indebtedness of Chemicals. The 12-3/8% Notes are guaranteed
by all of Chemicals' existing direct and indirect U.S. subsidiaries (other than
Sterling Chemicals Acquisitions, Inc.) on a joint and several basis. Each
subsidiary's guarantee ranks equally in right of payment with all of such
subsidiary's existing and future senior indebtedness and senior in right of
payment to all existing and future subordinated indebtedness of such subsidiary.
However, the 12-3/8% Notes, and each subsidiary's guarantee, is subordinated to
the extent of the collateral securing the New Revolvers. The 12-3/8% Notes and
the subsidiary guarantees are secured by (i) a second priority lien on all of
Chemicals' U.S. chemical production facilities and related assets, (ii) a second
priority pledge of all of the capital stock of each subsidiary guarantor, and
(iii) a first priority pledge of 65% of the stock of certain of the Company's
subsidiaries incorporated outside of the United States.

     Under the New Credit Agreement, Chemicals and each of its direct and
indirect U.S. subsidiaries (other than Sterling Chemicals Acquisitions, Inc.)
are co-borrowers and are jointly and severally liable for any indebtedness
thereunder. The New Revolvers consist of (i) a $70,000,000 revolving credit
facility (the "Fixed Assets Revolver") secured by a first priority lien on all
of Chemicals' U.S. chemical production facilities and related assets, all of the
capital stock of Chemicals and all of the capital stock of each co-borrower and
a second priority lien on all accounts receivable, inventory and other specified
assets of Chemicals and each co-borrower, and (ii) an $85,000,000 revolving
credit facility (the "Current Assets Revolver") secured by a first priority lien
on all accounts receivable, inventory and other specified assets of Chemicals
and each co-borrower.

     The commitments for each of the Fixed Assets Revolver and the Current
Assets Revolver will be permanently reduced to the extent required under the New
Credit Agreement upon prepayments made out of specific sources of funds,
including assets sales and certain equity issuances by Holdings.

     The indenture governing the 12-3/8% Notes (the "Indenture") and the New
Credit Agreement contain numerous covenants, including, but not limited to,
restrictions on the ability of Chemicals and certain of its subsidiaries to
incur indebtedness, pay dividends, create liens, sell assets, engage in mergers
and acquisitions and refinance existing indebtedness. In addition, the Indenture
and the New Credit Agreement specify various circumstances that will constitute,
upon occurrence and subject in certain cases to notice and grace periods, an
event of default thereunder. However, neither the Indenture nor the New Credit
Agreement requires the Company to satisfy any financial ratios or maintenance
tests.



                                       20
<PAGE>   21
     The Indenture, the indenture governing the 11-1/4% Notes, the indenture
governing the 11-3/4% Notes, and the New Credit Agreement contain provisions
which restrict the payment of advances, loans and dividends from Chemicals to
Holdings. The most restrictive of these covenants limits such payments during
fiscal 1999 to approximately $2.0 million, plus any amounts due Holdings from
Chemicals under the intercompany tax sharing agreement.

     Available credit under the Current Assets Revolver is subject to a monthly
borrowing base consisting of 85% of eligible accounts receivable and 65% of
eligible inventory with an inventory cap of $42,500,000. In addition, the
borrowing base for the Current Assets Revolver must exceed outstanding
borrowings thereunder by $12,000,000 at all times.

     As Sterling Sask is designated as an "Unrestricted Subsidiary" under the
New Credit Agreement and the indentures governing the 13-1/2% Notes, the 11-3/4%
Notes, the 11-1/4% Notes, and the 12-3/8% Notes, Sterling Sask is generally not
subject to, nor are its results considered in determining Chemicals' compliance
with, the restrictive covenants contained therein. In July 1997, Sterling Sask
entered into a Credit Agreement (the "Sask Credit Agreement") with The Chase
Manhattan Bank of Canada, individually and as administrative agent, and certain
other financial institutions. The Sask Credit Agreement requires that certain
amounts of Excess Cash Flow (as defined therein) be used to prepay amounts
outstanding under the Sask Term Loans. A mandatory prepayment in the amount of
approximately Cdn. $5 million was made in the first quarter of fiscal 1999
pursuant to such obligation. The Sask Credit Agreement provides for a revolving
credit facility of Cdn. $8 million to be used by Sterling Sask solely for its
general corporate purposes (the "Saskatoon Revolver"). No borrowings were
outstanding under the Sask Revolver as of June 30, 1999. Because of restrictions
in the Sask Credit Agreement, the Company will generally not have access to the
cash flows of Sterling Sask. The Saskatoon Credit Agreement contains provisions
which restrict the payment of advances, loans, and dividends from Sterling Sask
to Chemicals or Holdings. The most restrictive of the covenants limits such
payments during fiscal 1999 to less than $1 million, plus any amounts due to
Chemicals or Holdings from Sterling Sask under the intercompany tax sharing
agreement. The indebtedness under the Sask Credit Agreement is secured by
substantially all the assets of Sterling Sask.

     In December 1998, Holdings entered into the Standby Purchase Agreements
with the Standby Purchasers. Pursuant to the terms of the Standby Purchase
Agreements, the Standby Purchasers committed to purchase up to 2.5 million
shares of Common Stock, at a price of $6.00 per share, if, as and when requested
by Holdings at any time or from time to time prior to December 15, 2001. Under
each of the Standby Purchase Agreements, Holdings may only require the Standby
Purchasers to purchase such shares if it believes that the purchase price paid
by the Standby Purchasers for such shares is necessary to maintain, reestablish,
or enhance the Company's borrowing ability under its revolving credit facilities
or to satisfy any requirement thereunder to raise additional equity. In order to
induce the Standby Purchasers to enter into the Standby Purchase Agreements,
Holdings issued to them warrants to purchase an aggregate of 300,000 shares of
Common Stock at an exercise price of $6.00 per share. In addition, under the
terms of the Standby Purchase Agreements, Holdings agreed to issue to the
Standby Purchasers additional warrants to purchase 300,000 additional shares of
Common Stock if, as, and when they purchase shares of Common Stock under the
Standby Purchase Agreements.

Working Capital

     Working capital of the Company was $91 million at June 30, 1999, down from
$92 million at September 30, 1998. This $1 million decrease in working capital
was primarily due to the timing of working capital items and improved working
capital management.

Cash Flow

     Net cash used in operations was $12 million for the nine months ended June
30, 1999, compared to net cash provided by operations of $38 million for the
nine months ended June 30, 1998. This $50 million decrease in net cash provided
by operations was primarily due to the increase in operating losses.

Capital Expenditures

     The Company's capital expenditures for the first nine months of fiscal 1999
were $18 million compared to $19 million in the same period in fiscal 1998. The
capital expenditures in the first nine months of fiscal 1999 were primarily
related to the acetic acid expansion, the Company's phenylacetylene reduction
("PAR") project, the Company's disodium iminodiacetic acid project ("DSIDA")
with Monsanto Company, and routine safety, environmental, and replacement
capital. During the remainder of fiscal 1999, the Company expects to spend
approximately $8 million to $10 million on the PAR project, the DSIDA project,
and routine safety, environmental, and replacement capital. The Company expects
to fund its remaining fiscal 1999 capital expenditures from operating cash flow,
plus borrowings under the New Revolvers, if needed.



                                       21
<PAGE>   22

Year 2000 Issue

     Some computer systems and other equipment with computer chips store dates
as two digits rather than four to define the applicable year. For example, these
computer systems would store the year "1999" as "99". Any clock or date
recording mechanism (including date sensitive software) which uses only two
digits to represent the year may interpret the digits "00" as the Year 1900
rather than the Year 2000. This could result in a system failure or
miscalculations causing serious disruption of operations. The Company is in the
process, using both internal and external resources, of addressing the Year 2000
issue. The Company is currently engaged in a comprehensive project intended to
upgrade its information technology systems (such as computer systems and
software) and non-information technology systems (such as process control
systems and other equipment that utilize embedded chips to control various
functions) to systems that will consistently and properly recognize the Year
2000 and subsequent years.

     The Company has conducted an inventory of its hardware and software and
made a preliminary assessment of the Year 2000 compliance of its business and
process control systems. This preliminary assessment determined which of the
Company's business and process control systems are critical to its business.
Those systems deemed to be critical were assigned a higher priority in the Year
2000 remediation effort. In this phase of the project, the Company discovered
some Year 2000 deficiencies in its business systems and initiated plans to
rectify these issues in the remediation and replacement phase of the project.
The preliminary assessment of the Company's process control systems did not
detect any material Year 2000 difficulties. The Company then engaged a
nationally recognized independent consultant to perform a more detailed survey
of all of its business and process control systems (both critical and
non-critical) to confirm the absence of any additional material Year 2000
deficiencies. This survey has been completed and did not reveal any additional
material Year 2000 deficiencies.

     In the second phase of the Company's Year 2000 project, the Company
believes it is taking the necessary steps to rectify all material Year 2000
deficiencies. A major component of this effort involves the replacement of all
critical business systems which may not be Year 2000 compliant with new business
systems intended to be Year 2000 compliant. All of such projects are scheduled
to be completed by October 1999. If the Company determines that any additional
systems under review have material Year 2000 deficiencies, the Company plans to
take appropriate remedial action. At this time, the instrumentation in the
laboratory at the Company's Texas City, Texas facilities requires significant
remediation or replacement. However, that instrumentation can be successfully
operated in its current state with minimal manual intervention. Even without
remediation or replacement, this instrumentation would not jeopardize the
successful operation of the Company's Texas City, Texas facility.

     The final phase of the Company's Year 2000 project involves testing all
critical systems to confirm that such systems will react properly to the advent
of the Year 2000. The Company is in the process of conducting tests on all of
its current information technology and non-information technology systems that
were not identified as having Year 2000 deficiencies and anticipates that all
such testing will be completed by October 1999. Once the remediation and
replacement phase is completed, the Company will conduct tests on all newly
installed and updated systems to determine if they are Year 2000 compliant. Such
testing is scheduled to be completed by September 30, 1999.

     The total estimated expense for the Company's Year 2000 compliance projects
is approximately $13 to $15 million, of which the Company has incurred
approximately $6 million through June 30, 1999. Such expense has been and will
continue to be funded by the Company out of its operating cash flow and/or
borrowings under its credit facilities.

     Irrespective of the efforts of the Company, certain Year 2000 problems,
such as processing failures, error messages, or incorrect data may still occur
in some of its computer systems if the Company receives programs and/or data
from third parties who are not Year 2000 compliant. Moreover, the Company's
business may be disrupted in other ways by Year 2000 problems of third parties,
which may affect, for example, the Company's ability to obtain needed materials
or deliver its products. The Company is in the process of determining whether
its significant vendors, customers, and others with whom it deals are Year 2000
compliant and has requested that such persons (other than those that the Company
believes do not have a material impact on the business of the Company or its
operations) complete and return surveys with respect to their Year 2000 issues.
The Company has not received any survey response which indicates that any of
such persons has any specific Year 2000 problems. However, no assurances can be
given that a Year 2000 problem will not occur for the Company as a result of a
Year 2000 problem of a vendor or customer of the Company or some other person
with whom the Company deals.

     While the Company's Year 2000 projects are scheduled to be completed by
September 30, 1999, it is possible that one or more of such projects may not be
completed or that compliance efforts may be ineffective. A failure to properly
and timely correct any Year 2000 deficiencies would affect the Company on
several levels. If the Company's Year 2000 remediation efforts were to prove
unsuccessful, the Company might be unable to take orders, sell products, operate
one or more of its manufacturing facilities, or otherwise generally conduct its
business. Since the Company's business is characterized by large volume sales to
a relatively limited number of customers, the Company believes that, with the
engagement of additional personnel, orders could be processed and deliveries
completed through manual means. In preparation for such a scenario, the Company
has outlined a contingency plan to guide the hiring and training of additional
personnel and the processing of paperwork manually.



                                       22
<PAGE>   23
     Although the Company believes that it is taking the appropriate courses of
action to ensure that it is Year 2000 compliant, there can be no assurance that
the actions discussed herein will have the anticipated results or that Year 2000
problems will not have a material adverse effect on the Company's financial
condition or results of operations. Specific factors that might affect the
success of the Company's Year 2000 efforts and the occurrence of Year 2000
disruption or expense include (i) failure of the Company or its consultant to
properly identify deficient systems, (ii) the failure of the selected remedial
action to adequately address any deficiencies, (iii) the failure of the
Company's consultant to complete the remediation in a timely manner (due to
shortages of qualified labor or other factors), (iv) unforeseen expenses related
to the remediation of existing systems or the transition to replacement systems,
and (v) the failure of third parties to become compliant or to adequately notify
the Company of potential noncompliance.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's market risk disclosures set forth in the Annual Report
had not changed significantly through the period ended June 30, 1999.






                                       23
<PAGE>   24
PART II--OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         The information under "Legal Proceedings" in Note 4 of the Notes to
Consolidated Financial Statements herein is hereby incorporated by reference.
See also "Item 3. Legal Proceedings" in the Annual Report.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: The following exhibits are filed as part of this Form 10-Q.


 EXHIBIT
 NUMBER                                          DESCRIPTION OF EXHIBIT


   4.1  - Revolving Credit Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp Chemicals US,
          Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers, Inc., Sterling
          Chemicals Energy, Inc. and Sterling Chemicals International. Inc., as
          the Borrowers, The CIT Group/Business Credit, Inc., as the
          Administrative Agent, Credit Suisse First Boston, as the Documentation
          Agent, DLJ Capital Funding, Inc., as the Syndication Agent, and
          various financial institutions, as the Lenders.

   4.2  - Deed of Trust, Assignment of Leases and Rents, Security Agreement
          and Fixture Filing dated as of July 23, 1999 by Sterling Chemicals,
          Inc., Trustor, to Linda H. Earle, Trustee for the benefit of The CIT
          Group/Business Credit, Inc., as Administrative and Collateral Agent,
          Beneficiary.

   4.3  - Mortgage, Assignment of Leases and Rents, Security Agreement and
          Fixture Filing dated as of July 23, 1999 by Sterling Fibers, Inc.,
          Mortgagor, to The CIT Group/Business Credit, Inc., Mortgagee

   4.4  - Leasehold Deed to Secure Debt, Assignment and Security Agreement
          dated as of July 23, 1999 by Sterling Pulp Chemicals, Inc. to The CIT
          Group/Business Credit, Inc., as Administrative Agent, and U.S. Bank
          Trust National Association, as Georgia co-agent.

   4.5  - Fixed Assets Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp
          Chemicals US, Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers,
          Inc., Sterling Chemicals Energy, Inc. and Sterling Chemicals
          International. Inc., as the Grantors, and The CIT Group/Business
          Credit, Inc., as Administrative Agent for each of the Fixed Assets
          Secured Parties.

   4.6  - Current Assets Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp
          Chemicals US, Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers,
          Inc., Sterling Chemicals Energy, Inc. and Sterling Chemicals
          International. Inc., as the Grantors, and The CIT Group/Business
          Credit, Inc., as Administrative Agent for each of the Current Assets
          Secured Parties.

   4.7  - Parent Pledge Agreement dated as of July 23, 1999 between Sterling
          Chemicals Holdings, Inc. and The CITGroup/ Business Credit, Inc., as
          Administrative Agent for each of the Fixed Assets Secured Parties.

   4.8  - Obligor Pledge Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc. and Sterling Pulp Chemicals US,
          Inc., as the Pledgors, and The CIT Group/Business Credit, Inc., as
          Administrative Agent for each of the Fixed Assets Secured Parties.

   4.9  - Indenture dated as of July 23, 1999 among Sterling Chemicals, Inc.,
          as Issuer, Sterling Canada, Inc., Sterling Chemicals Energy, Inc.,
          Sterling Chemicals International, Inc., Sterling Fibers, Inc.,
          Sterling Pulp Chemicals US, Inc. and Sterling Pulp Chemicals, Inc., as
          Guarantors, and Harris Trust Company of New York, as Trustee.

   4.10 - Second Deed of Trust, Assignment of Leases and Rents, Security
          Agreement and Fixture Filing dated as of July 23, 1999 by Sterling
          Chemicals, Inc., Trustor, to John Dorris, Trustee for the benefit of
          Harris Trust Company of New York, Beneficiary.



                                       24
<PAGE>   25

   4.11 - Second Mortgage, Assignment of Leases and Rents, Security Agreement
          and Fixture Filing dated as of July 23, 1999 between Sterling Fibers,
          Inc., Mortgagor, and The CIT Group/Business Credit, Inc., Mortgagee

   4.12 - Second Leasehold Deed to Secure Debt, Assignment and Security
          Agreement dated as of July 23, 1999 by Sterling Pulp Chemicals, Inc.,
          Grantor, to Harris Trust Company of New York, as Collateral Agent, and
          U.S. Bank Trust National Association, as Georgia co-agent.

   4.13 - Security Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp Chemicals, Inc.,
          Sterling Pulp Chemicals US, Inc., Sterling Fibers, Inc., Sterling
          Chemicals Energy, Inc. and Sterling Chemicals International. Inc., as
          Assignors, and Harris Trust Company of New York, as Collateral Agent.

   4.14 - Stock Pledge and Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc. and Sterling Pulp
          Chemicals US, Inc., as Pledgors, and Harris Trust Company of New York,
          as Collateral Agent.

   4.15 - Stock Pledge and Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc. and Sterling Canada, Inc., as Pledgors, and
          Harris Trust Company of New York, as Collateral Agent.

   4.16 - A/B Exchange Registration Rights Agreement dated as of July 23, 1999
          among Sterling Chemicals, Inc., as the Company, Sterling Canada, Inc.,
          Sterling Pulp Chemicals US, Inc., Sterling Pulp Chemicals, Inc.,
          Sterling Fibers, Inc., Sterling Chemicals Energy, Inc. and Sterling
          Chemicals International. Inc., as Guarantors, and Donaldson, Lufkin &
          Jenrette Securities Corporation and Credit Suisse First Boston
          Corporation, as Initial Purchasers.

   4.17 - Senior Debt Intercreditor Agreement dated as of July 23, 199 among
          Harris Trust Company of New York, as Trustee, The CIT Group/Business
          Credit, Inc., as Administrative Agent, and Sterling Chemicals, Inc.

   4.18 - Amendment Of Intercreditor Agreement dated as of July 23, 1999,
          among Sterling Chemicals Holdings, Inc., Chase Bank of Texas, N.A.
          (formerly known as Texas Commerce Bank National Association), as
          Administrative Agent, and State Street Bank And Trust Company, as
          Trustee.

   11.1 - Earnings Per Share Calculation.

   15.1 - Letter of Deloitte & Touche LLP regarding unaudited interim
          financial information.

   27.1 - Financial Data Schedule of Sterling Chemicals Holdings, Inc.

   27.2 - Financial Data Schedule of Sterling Chemicals, Inc.


     (b) Reports on Form 8-K.

         On July 15, 1999, the Company filed a Current Report on Form 8-K,
reporting under Items 5 and 7.



                                       25
<PAGE>   26
                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrants have duly caused this report to be signed on their
behalf by the undersigned thereunto duly authorized.


                                         STERLING CHEMICALS HOLDINGS, INC.
                                         STERLING CHEMICALS, INC.
                                         (Registrants)



Date: August 13, 1999                    /s/ PETER W. DE LEEUW
                                         ---------------------------------------
                                         Peter W. De Leeuw
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)



Date: August 13, 1999                    /s/ GARY M. SPITZ
                                         ---------------------------------------
                                         Gary M. Spitz
                                         Vice President-Finance and Chief
                                          Financial Officer
                                         (Principal Financial Officer)



                                       26
<PAGE>   27

                               INDEX TO EXHIBITS

   4.1  - Revolving Credit Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp Chemicals US,
          Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers, Inc., Sterling
          Chemicals Energy, Inc. and Sterling Chemicals International. Inc., as
          the Borrowers, The CIT Group/Business Credit, Inc., as the
          Administrative Agent, Credit Suisse First Boston, as the Documentation
          Agent, DLJ Capital Funding, Inc., as the Syndication Agent, and
          various financial institutions, as the Lenders.

   4.2  - Deed of Trust, Assignment of Leases and Rents, Security Agreement
          and Fixture Filing dated as of July 23, 1999 by Sterling Chemicals,
          Inc., Trustor, to Linda H. Earle, Trustee for the benefit of The CIT
          Group/Business Credit, Inc., as Administrative and Collateral Agent,
          Beneficiary.

   4.3  - Mortgage, Assignment of Leases and Rents, Security Agreement and
          Fixture Filing dated as of July 23, 1999 by Sterling Fibers, Inc.,
          Mortgagor, to The CIT Group/Business Credit, Inc., Mortgagee

   4.4  - Leasehold Deed to Secure Debt, Assignment and Security Agreement
          dated as of July 23, 1999 by Sterling Pulp Chemicals, Inc. to The CIT
          Group/Business Credit, Inc., as Administrative Agent, and U.S. Bank
          Trust National Association, as Georgia co-agent.

   4.5  - Fixed Assets Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp
          Chemicals US, Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers,
          Inc., Sterling Chemicals Energy, Inc. and Sterling Chemicals
          International. Inc., as the Grantors, and The CIT Group/Business
          Credit, Inc., as Administrative Agent for each of the Fixed Assets
          Secured Parties.

   4.6  - Current Assets Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp
          Chemicals US, Inc., Sterling Pulp Chemicals, Inc., Sterling Fibers,
          Inc., Sterling Chemicals Energy, Inc. and Sterling Chemicals
          International. Inc., as the Grantors, and The CIT Group/Business
          Credit, Inc., as Administrative Agent for each of the Current Assets
          Secured Parties.

   4.7  - Parent Pledge Agreement dated as of July 23, 1999 between Sterling
          Chemicals Holdings, Inc. and The CITGroup/ Business Credit, Inc., as
          Administrative Agent for each of the Fixed Assets Secured Parties.

   4.8  - Obligor Pledge Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc. and Sterling Pulp Chemicals US,
          Inc., as the Pledgors, and The CIT Group/Business Credit, Inc., as
          Administrative Agent for each of the Fixed Assets Secured Parties.

   4.9  - Indenture dated as of July 23, 1999 among Sterling Chemicals, Inc.,
          as Issuer, Sterling Canada, Inc., Sterling Chemicals Energy, Inc.,
          Sterling Chemicals International, Inc., Sterling Fibers, Inc.,
          Sterling Pulp Chemicals US, Inc. and Sterling Pulp Chemicals, Inc., as
          Guarantors, and Harris Trust Company of New York, as Trustee.

   4.10 - Second Deed of Trust, Assignment of Leases and Rents, Security
          Agreement and Fixture Filing dated as of July 23, 1999 by Sterling
          Chemicals, Inc., Trustor, to John Dorris, Trustee for the benefit of
          Harris Trust Company of New York, Beneficiary.

   4.11 - Second Mortgage, Assignment of Leases and Rents, Security Agreement
          and Fixture Filing dated as of July 23, 1999 between Sterling Fibers,
          Inc., Mortgagor, and The CIT Group/Business Credit, Inc., Mortgagee

   4.12 - Second Leasehold Deed to Secure Debt, Assignment and Security
          Agreement dated as of July 23, 1999 by Sterling Pulp Chemicals, Inc.,
          Grantor, to Harris Trust Company of New York, as Collateral Agent, and
          U.S. Bank Trust National Association, as Georgia co-agent.

   4.13 - Security Agreement dated as of July 23, 1999 among Sterling
          Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp Chemicals, Inc.,
          Sterling Pulp Chemicals US, Inc., Sterling Fibers, Inc., Sterling
          Chemicals Energy, Inc. and Sterling Chemicals International. Inc., as
          Assignors, and Harris Trust Company of New York, as Collateral Agent.

   4.14 - Stock Pledge and Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc., Sterling Canada, Inc. and Sterling Pulp
          Chemicals US, Inc., as Pledgors, and Harris Trust Company of New York,
          as Collateral Agent.

   4.15 - Stock Pledge and Security Agreement dated as of July 23, 1999 among
          Sterling Chemicals, Inc. and Sterling Canada, Inc., as Pledgors, and
          Harris Trust Company of New York, as Collateral Agent.

   4.16 - A/B Exchange Registration Rights Agreement dated as of July 23, 1999
          among Sterling Chemicals, Inc., as the Company, Sterling Canada, Inc.,
          Sterling Pulp Chemicals US, Inc., Sterling Pulp Chemicals, Inc.,
          Sterling Fibers, Inc., Sterling Chemicals Energy, Inc. and Sterling
          Chemicals International. Inc., as Guarantors, and Donaldson, Lufkin &
          Jenrette Securities Corporation and Credit Suisse First Boston
          Corporation, as Initial Purchasers.

   4.17 - Senior Debt Intercreditor Agreement dated as of July 23, 199 among
          Harris Trust Company of New York, as Trustee, The CIT Group/Business
          Credit, Inc., as Administrative Agent, and Sterling Chemicals, Inc.

   4.18 - Amendment Of Intercreditor Agreement dated as of July 23, 1999,
          among Sterling Chemicals Holdings, Inc., Chase Bank of Texas, N.A.
          (formerly known as Texas Commerce Bank National Association), as
          Administrative Agent, and State Street Bank And Trust Company, as
          Trustee.

   11.1 - Earnings Per Share Calculation.

   15.1 - Letter of Deloitte & Touche LLP regarding unaudited interim
          financial information.

   27.1 - Financial Data Schedule of Sterling Chemicals Holdings, Inc.

   27.2 - Financial Data Schedule of Sterling Chemicals, Inc.