##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    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 000-50132
 
 Sterling Chemicals, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    76-0502785(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)333 Clay Street, Suite 3600
    
    (713) 650-3700Houston, Texas 77002-4109
    
    (Registrants telephone number,(Address of principal executive offices)
    
    including area code)
 þ o
  o o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 þ o
 o þ




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##### Table of Contents



IMPORTANT INFORMATION REGARDING THIS FORM 10-Q
   Forward-Looking Statements
  
    
    the cyclicality of the petrochemicals industry;
    
    current and future industry conditions;
    
    the extent and timing of expansions of production capacity of our products, by us or by our competitors;
    
    the potential effects of market and industry conditions and cyclicality on our
business strategy, results of operations or financial position;
    
    the level of expected savings from our cost reduction initiatives;
    
    the adequacy of our liquidity;
    
    our environmental management programs and safety initiatives;
    
    our market sensitive financial instruments;
    
    future uses of and requirements for financial resources;
    
    future contractual obligations;
    
    future amendments or renewals of existing contractual relationships;
    
    business strategies;
    
    growth opportunities;
    
    competitive position;
    
    expected financial position;
    
    future cash flows;
    
    future dividends;
    
    financing plans;
    
    budgets for capital and other expenditures;
    
    plans and objectives of management;
    
    outcomes of legal proceedings;
    
    compliance with applicable laws; and
    
    adequacy of insurance coverage or indemnification rights.
  
    
    the timing and extent of changes in commodity prices for our products and for raw materials;
    
    petrochemicals industry production capacity and operating rates;
    
    market conditions in the petrochemicals industry, including the supply-demand
balance for our products and regional differences in the costs of raw materials and
energy;
    
    competition, including competitive products, pricing pressures and regional variations in manufacturing costs;
    
    our ability to maintain adequate quantities of sales under our contracts;
    
    obsolescence of product lines and manufacturing processes;
    
    the timing and extent of changes in global economic and business conditions;
    
    increases in raw materials and energy costs, including the cost of natural gas;
 i




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
    
    our ability to obtain raw materials, energy and ocean-going vessels at
competitive prices, in a timely manner and on acceptable terms;
    
    regulatory initiatives and compliance with governmental regulations;
    
    compliance with environmental laws and regulations;
    
    customer preferences;
    
    our ability to attract or retain high quality employees;
    
    operating hazards attendant to the petrochemicals industry;
    
    casualty losses, including those resulting from weather related events;
    
    changes in foreign, political, social and economic conditions;
    
    risks of war, military operations, other armed hostilities, terrorist acts and embargoes;
    
    changes in technology, which could require significant capital expenditures in
order to maintain competitiveness or cause existing manufacturing processes to
become obsolete;
    
    effects of litigation;
    
    cost, availability and adequacy of insurance;
    
    adequacy of our sources of liquidity; and
    
    various other matters, many of which are beyond our control.
  Subsequent Events
  Document Summaries
  Access to Filings
  ii




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##### 



STERLING CHEMICALS, INC.
INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    2Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Amended and Restated 2002 Stock PlanFifth Amended and Restated Key Employee Protection PlanAmended and Restated Salaried Employees' Pension PlanLetter of Deloitte & Touche LLPRule 13a-14a Certification of CEORule 13a-14a Certification of CFOSection 1350 Certification of CEOSection 1350 Certification of CFOCompensation Committee Charter
  1




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##### Table of Contents



PART I.
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Unaudited)(Dollars in Thousands, Except Share Data)Revenues
    
    $
    189,916
    
    
    $
    148,733
    
    
    $
    476,972
    
    
    $
    492,455Cost of goods sold
    
    
    176,582
    
    
    
    143,879
    
    
    
    470,008
    
    
    
    490,445Gross profit
    
    
    13,334
    
    
    
    4,854
    
    
    
    6,964
    
    
    
    2,010Selling, general and administrative expenses
    
    
    2,562
    
    
    
    2,338
    
    
    
    6,342
    
    
    
    5,540Other (income) expense
    
    
    (12,000
    )
    
    
    
    
    
    
    (15,724
    )
    
    
    Interest and debt related expenses, net of
interest income
    
    
    2,663
    
    
    
    2,376
    
    
    
    7,566
    
    
    
    7,874Income (loss) from continuing operations
before income tax
    
    
    20,109
    
    
    
    140
    
    
    
    8,780
    
    
    
    (11,404
    )Provision (benefit) for income taxes
    
    
    10,160
    
    
    
    25
    
    
    
    5,827
    
    
    
    (4,198
    )Income (loss) from continuing operations
    
    $
    9,949
    
    
    $
    115
    
    
    $
    2,953
    
    
    $
    (7,206
    )Income (loss) from discontinued operations
(net of tax benefit of $1,139, $5,290,
$2,223 and $8,018, respectively)
    
    
    625
    
    
    
    (9,164
    )
    
    
    (1,127
    )
    
    
    (13,888
    )Net income (loss)
    
    $
    10,574
    
    
    $
    (9,049
    )
    
    $
    1,826
    
    
    $
    (21,094
    )Preferred stock dividends
    
    
    2,090
    
    
    
    1,786
    
    
    
    6,031
    
    
    
    5,156Net income (loss) attributable to common
stockholders
    
    $
    8,484
    
    
    $
    (10,835
    )
    
    $
    (4,205
    )
    
    $
    (26,250
    )Income (loss) per share of common stock:Basic earnings per share:Income (loss) from continuing operations
    
    $
    2.78
    
    
    $
    (0.59
    )
    
    $
    (1.09
    )
    
    $
    (4.37
    )Income (loss) from discontinued operations,
net of tax
    
    
    0.22
    
    
    
    (3.24
    )
    
    
    (0.40
    )
    
    
    (4.91
    )Basic earnings per share
    
    $
    3.00
    
    
    $
    (3.83
    )
    
    $
    (1.49
    )
    
    $
    (9.28
    )Diluted earnings per share:Income (loss) from continuing operations
    
    $
    1.50
    
    
    $
    (0.59
    )
    
    $
    (1.09
    )
    
    $
    (4.37
    )Income (loss) from discontinued operations,
net of tax
    
    
    0.10
    
    
    
    (3.24
    )
    
    
    (0.40
    )
    
    
    (4.91
    )Diluted earnings per share
    
    $
    1.60
    
    
    $
    (3.83
    )
    
    $
    (1.49
    )
    
    $
    (9.28
    )Weighted average shares outstanding:Basic :
    
    
    2,828,460
    
    
    
    2,828,474
    
    
    
    2,828,462
    
    
    
    2,827,566Diluted :
    
    
    6,616,146
    
    
    
    2,828,474
    
    
    
    2,828,462
    
    
    
    2,827,566
  2




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STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)(Dollars in Thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,370
    
    
    $
    42,197Accounts receivable, net of allowance of $1,279 and $953,
respectively
    
    
    42,447
    
    
    
    57,261Accounts receivable, other
    
    
    6,120
    
    
    
    Inventories, net
    
    
    53,501
    
    
    
    39,094Prepaid expenses
    
    
    10,456
    
    
    
    4,888Deferred tax asset
    
    
    2,861
    
    
    
    2,802Assets of discontinued operations
    
    
    684
    
    
    
    1,791Total current assets
    
    
    143,439
    
    
    
    148,033Property, plant and equipment, net
    
    
    216,410
    
    
    
    230,018Other assets, net
    
    
    9,070
    
    
    
    8,543Total assets
    
    $
    368,919
    
    
    $
    386,594LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    34,548
    
    
    $
    43,912Accrued liabilities
    
    
    22,010
    
    
    
    23,690Liabilities of discontinued operations
    
    
    756
    
    
    
    3,826Total current liabilities
    
    
    57,314
    
    
    
    71,428Long-term debt
    
    
    100,579
    
    
    
    100,579Deferred tax liability
    
    
    11,799
    
    
    
    8,196Deferred credits and other liabilities
    
    
    68,674
    
    
    
    77,804Redeemable preferred stock
    
    
    54,334
    
    
    
    48,302Commitments and contingencies (Note 7)Stockholders equity:Common stock, $.01 par value
    
    
    28
    
    
    
    28Additional paid-in capital
    
    
    186,659
    
    
    
    192,551Accumulated deficit
    
    
    (106,129
    )
    
    
    (107,955
    )Accumulated other comprehensive loss
    
    
    (4,339
    )
    
    
    (4,339
    )Total stockholders equity
    
    
    76,219
    
    
    
    80,285Total liabilities and stockholders equity
    
    $
    368,919
    
    
    $
    386,594
  3




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STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months ended September 30,2006
    
    
    2005(Unaudited)(Dollars in Thousands)Cash flows from operating activities:Net income (loss)
    
    $
    1,826
    
    
    $
    (21,094
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    23,517
    
    
    
    25,824Interest amortization
    
    
    300
    
    
    
    300Deferred tax expense (benefit)
    
    
    3,544
    
    
    
    (12,274
    )Gain on disposal of property, plant and equipment
    
    
    (1,960
    )
    
    
    Other
    
    
    140
    
    
    
    157Change in assets/liabilities:Accounts receivable
    
    
    9,651
    
    
    
    58,222Inventories
    
    
    (14,709
    )
    
    
    34,885Prepaid expenses
    
    
    (5,568
    )
    
    
    (1,527
    )Other assets
    
    
    (1,944
    )
    
    
    (1,183
    )Accounts payable
    
    
    (7,668
    )
    
    
    (26,002
    )Accrued liabilities
    
    
    (4,639
    )
    
    
    6,423Other liabilities
    
    
    (9,130
    )
    
    
    (5,887
    )Net cash provided by (used in) operating activities
    
    
    (6,640
    )
    
    
    57,844Cash flows provided by (used in) investing activities:Capital expenditures
    
    
    (10,036
    )
    
    
    (5,155
    )Insurance proceeds relating to property, plant and equipment
    
    
    1,960
    
    
    
    Cash used for methanol dismantling
    
    
    (111
    )
    
    
    (591
    )Net cash used in investing activities
    
    
    (8,187
    )
    
    
    (5,746
    )Cash flows from financing activities:Net repayments on the Revolver
    
    
    
    
    
    
    (17,684
    )Net increase (decrease) in cash
    
    
    (14,827
    )
    
    
    34,414Cash and cash equivalents  beginning of year
    
    
    42,197
    
    
    
    1,901Cash and cash equivalents  end of period
    
    $
    27,370
    
    
    $
    36,315Supplemental disclosures of cash flow information:Interest paid, net of interest income received
    
    $
    5,428
    
    
    $
    5,864Cash paid for income taxes
    
    
    60
    
    
    
    59
  4




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of Presentation
  Reclassification
  2. Stock-Based Compensation
  ,
     5




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005(Dollars in Thousands, Except Share Data)Net loss
attributable to
common stockholders,
as reported
    
    $
    (10,835
    )
    
    $
    (26,250
    )Add: Stock-based
employee
compensation expense
included in reported
net income (loss),
net of related tax
effects
    
    
    
    
    
    
    128Deduct: Total
stock-based employee
compensation expense
determined under
fair value based
method for all
awards, net of
related tax effects
    
    
    (110
    )
    
    
    (350
    )Pro forma net loss
    
    $
    (10,945
    )
    
    $
    (26,472
    )Basic and diluted
loss per share
attributable to
common stockholders:As reported
    
    $
    (3.83
    )
    
    $
    (9.28
    )Pro forma
    
    
    (3.87
    )
    
    
    (9.36
    )
 3. Discontinued Operations
    September 30, 2006
    
    
    December 31, 2005(Dollars in Thousands)Assets of discontinued operations:Accounts receivable, net
    
    $
    6
    
    
    $
    963Inventories
    
    
    678
    
    
    
    376Other assets
    
    
    
    
    
    
    452Total
    
    $
    684
    
    
    $
    1,791Liabilities of discontinued operations:Accrued liabilities
    
    $
    756
    
    
    $
    3,826
 6




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Three months ended September 30,
    
    Nine months ended September 30,2006
    
    2005
    
    2006
    
    2005(Dollars in Thousands)Revenues
    
    $
    103
    
    
    $
    4,582
    
    
    $
    1,108
    
    
    $
    40,545Loss before income taxes
    
    
    514
    
    
    
    14,454
    
    
    
    3,350
    
    
    
    21,906
  Accrued as of
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Accrued as ofDecember 31, 2005
    
    
    accruals
    
    
    Cash payments
    
    
    Other
    
    
    September 30, 2006Severance accrual
    
    $
    477
    
    
    $
    367
    
    
    $
    (646
    )
    
    $
    
    
    
    $
    198DSIDA contractual obligation
    
    
    2,853
    
    
    
    147
    
    
    
    (3,000
    )
    
    
    
    
    
    
    DSIDA dismantling costs
    
    
    496
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    558Product payable
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    228
    
    
    
    Totals
    
    $
    3,826
    
    
    $
    576
    
    
    $
    (3,874
    )
    
    $
    228
    
    
    $
    756
 4. Earnings Per Share
  Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands, Except Share Data)Basic income (loss) per share:Income (loss) from continuing
operations attributable to common
shareholders
    
    $
    7,859
    
    
    $
    (1,671
    )
    
    $
    (3,078
    )
    
    $
    (12,362
    )Income (loss) from discontinued
operations
    
    
    625
    
    
    
    (9,164
    )
    
    
    (1,127
    )
    
    
    (13,888
    )Net income (loss), net of tax
    
    $
    8,484
    
    
    $
    (10,835
    )
    
    $
    (4,205
    )
    
    $
    (26,250
    )Weighted average shares outstanding
    
    
    2,828,460
    
    
    
    2,828,474
    
    
    
    2,828,462
    
    
    
    2,827,566Earnings per common share:Income (loss) from continuing
operations attributable to common
shareholders
    
    $
    2.78
    
    
    $
    (0.59
    )
    
    $
    (1.09
    )
    
    $
    (4.37
    )Income (loss) from discontinued
operations
    
    
    0.22
    
    
    
    (3.24
    )
    
    
    (0.40
    )
    
    
    (4.91
    )Net income (loss)
    
    $
    3.00
    
    
    $
    (3.83
    )
    
    $
    (1.49
    )
    
    $
    (9.28
    )
 7




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Diluted income (loss) per share:Income (loss) from continuing
operations attributable to common
shareholders
    
    $
    7,859
    
    
    $
    (1,671
    )
    
    $
    (3,078
    )
    
    $
    (12,362
    )Add: preferred stock dividends
    
    
    2,090
    
    
    
     ̄
    
    
    
     ̄
    
    
    
     ̄Income available to common
stockholders plus assumed
conversions
    
    $
    9,949
    
    
    $
    (1,671
    )
    
    $
    (3,078
    )
    
    $
    (12,362
    )Income (loss) from discontinued
operations
    
    
    625
    
    
    
    (9,164
    )
    
    
    (1,127
    )
    
    
    (13,888
    )Income (loss) for purposes of
computing diluted earnings per share
    
    $
    10,574
    
    
    $
    (10,835
    )
    
    $
    (4,205
    )
    
    $
    (26,250
    )Weighted average common shares
outstanding
    
    
    2,828,460
    
    
    
    2,828,474
    
    
    
    2,828,462
    
    
    
    2,827,566Dilutive impact of preferred stock,
if converted
    
    
    3,787,686
    
    
    
     ̄
    
    
    
     ̄
    
    
    
     ̄Weighted average common shares
outstanding assuming dilution
    
    
    6,616,146
    
    
    
    2,828,474
    
    
    
    2,828,462
    
    
    
    2,827,566Earnings per common share assuming
dilution:Income (loss) from continuing
operations attributable to common
shareholders
    
    $
    1.50
    
    
    $
    (0.59
    )
    
    $
    (1.09
    )
    
    $
    (4.37
    )Income (loss) from discontinued
operations
    
    
    0.10
    
    
    
    (3.24
    )
    
    
    (0.40
    )
    
    
    (4.91
    )Net income (loss)
    
    $
    1.60
    
    
    $
    (3.83
    )
    
    $
    (1.49
    )
    
    $
    (9.28
    )
  5. Inventories
 September 30, 2006
    
    
    December 31, 2005(Dollars in Thousands)Finished products
    
    $
    34,449
    
    
    $
    30,162Raw materials
    
    
    13,429
    
    
    
    7,974Inventories under exchange agreements
    
    
    1,778
    
    
    
    (2,807
    )Stores and supplies, net
    
    
    3,845
    
    
    
    3,765$
    53,501
    
    
    $
    39,094
 6. Long-Term Debt
  8




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
        9




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 7. Commitments and Contingencies
 Product Contracts:
  Environmental Regulations:
      10




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Legal Proceedings:
     11




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STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Other
  8. Pension Plans and Other Postretirement Benefits
  Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands)Service cost
    
    $
    162
    
    
    $
    202
    
    
    $
    487
    
    
    $
    606Interest cost
    
    
    1,810
    
    
    
    1,669
    
    
    
    5,425
    
    
    
    5,007Expected return on plan assets
    
    
    (1,750
    )
    
    
    (1,667
    )
    
    
    (5,250
    )
    
    
    (5,001
    )Net pension costs
    
    $
    222
    
    
    $
    204
    
    
    $
    662
    
    
    $
    612
  Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in Thousands)Service cost
    
    $
    47
    
    
    $
    89
    
    
    $
    141
    
    
    $
    161Interest cost
    
    
    388
    
    
    
    650
    
    
    
    1,163
    
    
    
    1,171Amortization of unrecognized costs.
    
    
    (288
    )
    
    
    (491
    )
    
    
    (864
    )
    
    
    (886
    )Curtailment gain
    
    
    
    
    
    
    (542
    )
    
    
    
    
    
    
    (542
    )Plan costs of continuing operations
    
    
    147
    
    
    
    (294
    )
    
    
    440
    
    
    
    (96
    )Curtailment gain from discontinued
operations
    
    
    
    
    
    
    (1,185
    )
    
    
    
    
    
    
    (1,185
    )Net plan costs
    
    $
    147
    
    
    $
    (1,479
    )
    
    $
    440
    
    
    $
    (1,281
    )
 9. New Accounting Standards
  12




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##### Table of Contents



STERLING CHEMICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
     13




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
 14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
     15




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##### Table of Contents



Source: Chemical Marketing Associates, Inc. (CMAI)
     16




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Revenues and Income (Loss) from Continuing Operations
   17




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##### Table of Contents



Other Income
  Provision (Benefit) for Income Taxes
  Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Revenues and Income (Loss) from Continuing Operations
    18




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##### Table of Contents



Other Income
  Provision (Benefit) for Income Taxes
  Liquidity and Capital Resources
      19




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##### Table of Contents



Working Capital
  Cash Flow
  Capital Expenditures
  Contractual Cash Obligations
  20




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##### Table of Contents



Less than 1
    
    
    
    
    
    
    
    
    
    More thanyear(1)
    
    1-3 years
    
    4-5 years
    
    5 years
    
    Total(Dollars in Thousands)Long-term debt
    
    $
    
    
    
    $
    100,579
    
    
    $
    
    
    
    $
    
    
    
    $
    100,579Interest payments on long-term debt
    
    
    10,142
    
    
    
    5,029
    
    
    
    
    
    
    
    
    
    
    
    15,171Operating leases
    
    
    293
    
    
    
    879
    
    
    
    586
    
    
    
    293
    
    
    
    2,051Purchase obligations (2)
    
    
    74,000
    
    
    
    100,000
    
    
    
    71,000
    
    
    
    149,000
    
    
    
    394,000Pension and other postretirement
benefits
    
    
    10,340
    
    
    
    17,856
    
    
    
    8,142
    
    
    
    30,491
    
    
    
    66,829Contractual obligations of
discontinued operations
    
    
    756
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    756Total
    
    $
    95,531
    
    
    $
    224,343
    
    
    $
    79,728
    
    
    $
    179,784
    
    
    $
    579,386
 
 (1)
    
    Payment obligations under our Revolver are not presented because there were
no outstanding borrowings at September 30, 2006 and interest payments fluctuate depending on the
interest rate and outstanding balance under our Revolver at any point in time.(2)
    
    For the purposes of this table, we have considered contractual obligations
for the purchase of goods or services as agreements involving more than $1 million that are
enforceable and legally binding and that specify all significant terms, including: fixed or minimum
quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing
of the transaction. Most of the purchase obligations identified include variable pricing
provisions. We have estimated the future prices of these items, utilizing forward curves where
available. The pricing estimated for use in this table is subject to market risk. New Accounting Standards
     21




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##### Table of Contents



Critical Accounting Policies, Use of Estimates and Assumptions
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
    22




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 5. Other Information
   
 Item 6. Exhibits
  ExhibitNumber
    
    
    
    Description of Exhibit2.1
    
    -
    
    Certificate of Ownership and Merger merging Sterling Chemicals Holdings, Inc.
into Sterling Chemicals, Inc. (incorporated by reference from Exhibit 2.1 to our
Annual Report on Form 10-K for the fiscal year ended September 30, 2002).2.2
    
    -
    
    Joint Plan of Reorganization of Sterling Chemicals Holdings, Inc., et al., dated
October 14, 2002 (incorporated by reference from Exhibit 2.1 to our Form 8-K filed
on November 26, 2002).2.3
    
    -
    
    First Modification to Joint Plan of Reorganization of Sterling Chemicals
Holdings, Inc., et al., dated November 18, 2002 (incorporated by reference from
Exhibit 2.2 to our Form 8-K filed on November 26, 2002).3.1
    
    -
    
    Amended and Restated Certificate of Incorporation of Sterling Chemicals, Inc.
(conformed copy) (incorporated by reference from Exhibit 3.1 to our Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2005).3.2
    
    -
    
    Restated Certificate of Designations, Preferences, Rights and Limitations of
Series A Convertible Preferred Stock of Sterling Chemicals, Inc. (incorporated by
reference from Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2003).
 23




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibit3.3
    
    -
    
    Restated Bylaws of Sterling Chemicals, Inc. (conformed copy) (incorporated by
reference from Exhibit 3.3 to our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2003).**10.1+
    
    -
    
    Sterling Chemicals, Inc. Amended and Restated 2002 Stock Plan**10.2+
    
    -
    
    Fifth Amended and Restated Key Employee Protection Plan**10.3+
    
    -
    
    Sterling Chemicals, Inc. Amended and Restated Salaried Employees Pension Plan**15.1
    
    -
    
    Letter of Deloitte & Touche LLP regarding unaudited interim financial
information.**31.1
    
    -
    
    Rule 13a-14(a) Certification of the Chief Executive Officer**31.2
    
    -
    
    Rule 13a-14(a) Certification of the Chief Financial Officer**32.1
    
    -
    
    Section 1350 Certification of the Chief Executive Officer**32.2
    
    -
    
    Section 1350 Certification of the Chief Financial Officer**99.1
    
    -
    
    Compensation Committee Charter of Sterling Chemicals, Inc.
 
 **
    
    Filed or furnished herewith+
    
    Management contracts or compensatory plans or arrangements. 24




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##### Table of Contents



SIGNATURES
  STERLING CHEMICALS, INC.
(Registrant)Date: November 13, 2006
    
    By
    
    /s/ RICHARD K. CRUMPRichard K. CrumpPresident and Chief Executive OfficerDate: November 13, 2006
    
    By
    
    /s/ PAUL G. VANDERHOVENPaul G. VanderhovenSenior Vice President-Finance and Chief Financial Officer(Principal Financial Officer)
 25




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    
    
    Description of Exhibit2.1
    
    -
    
    Certificate of Ownership and Merger merging Sterling Chemicals Holdings, Inc.
into Sterling Chemicals, Inc. (incorporated by reference from Exhibit 2.1 to our
Annual Report on Form 10-K for the fiscal year ended September 30, 2002).2.2
    
    -
    
    Joint Plan of Reorganization of Sterling Chemicals Holdings, Inc., et al., dated
October 14, 2002 (incorporated by reference from Exhibit 2.1 to our Form 8-K filed
on November 26, 2002).2.3
    
    -
    
    First Modification to Joint Plan of Reorganization of Sterling Chemicals
Holdings, Inc., et al., dated November 18, 2002 (incorporated by reference from
Exhibit 2.2 to our Form 8-K filed on November 26, 2002).3.1
    
    -
    
    Amended and Restated Certificate of Incorporation of Sterling Chemicals, Inc.
(conformed copy) (incorporated by reference from Exhibit 3.1 to our Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2005).3.2
    
    -
    
    Restated Certificate of Designations, Preferences, Rights and Limitations of
Series A Convertible Preferred Stock of Sterling Chemicals, Inc. (incorporated by
reference from Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2003).3.3
    
    -
    
    Restated Bylaws of Sterling Chemicals, Inc. (conformed copy) (incorporated by
reference from Exhibit 3.3 to our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2003).**10.1+
    
    -
    
    Sterling Chemicals, Inc. Amended and Restated 2002 Stock Plan**10.2+
    
    -
    
    Fifth Amended and Restated Key Employee Protection Plan**10.3+
    
    -
    
    Sterling Chemicals, Inc. Amended and Restated Salaried Employees Pension Plan**15.1
    
    -
    
    Letter of Deloitte & Touche LLP regarding unaudited interim financial
information.**31.1
    
    -
    
    Rule 13a-14(a) Certification of the Chief Executive Officer**31.2
    
    -
    
    Rule 13a-14(a) Certification of the Chief Financial Officer**32.1
    
    -
    
    Section 1350 Certification of the Chief Executive Officer**32.2
    
    -
    
    Section 1350 Certification of the Chief Financial Officer**99.1
    
    -
    
    Compensation Committee Charter of Sterling Chemicals, Inc.
 
 **
    
    Filed or furnished herewith+
    
    Management contracts or compensatory plans or arrangements.