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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 March 31, 2005                                               
|  
|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
    incorporation or organization) |  | (IRS Employer
    Identification No.)               
|                                                                  
|333 Clay Street, Suite 3600
    Houston, Texas 77002-4109          |  | (713) 650-3700                                      
|(Address of principal executive offices)                           |  | (Registrants telephone number, 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


(Title of class)


þ o


o þ


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:


þ o












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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 strategy;                                                                                                                                    
|
| |  | 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;                                                                                                                        

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| |   |                                          
| | - | -----------------------------------------
| |  | compliance with applicable laws; and     
|
| |  | adequacy of insurance or indemnification.





| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing and extent of changes in commodity prices;                                                                                        
|
| |  | petrochemicals industry production capacity and operating rates;                                                                             
|
| |  | market conditions in the petrochemicals industry, including the
    supply-demand balance for our products;                                  
|
| |  | competition, including competitive products and pricing
    pressures;                                                                       
|
| |  | obsolescence of product lines;                                                                                                               
|
| |  | 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;                                                          
|
| |  | our ability to obtain raw materials, energy and ocean-going
    vessels at acceptable 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;                                                                                                                             
|
| |  | 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;                        
|
| |  | 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.                                                                                 



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Subsequent Events




Document Summaries




Access to Filings




iii



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STERLING CHEMICALS, INC.


INDEX


|                                                             |  |                                                                                           |  |      |    | 
|------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                             |  |                                                                                           |  | Page |   
|                                                             |  |                                                                                           |  |      |   
|PART I. FINANCIAL
    INFORMATION                           
|Item 1.                                                      |  | Financial Statements                                                                      |  |      | 2  | 
|Item 2.                                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |      | 14 | 
|Item 3.                                                      |  | Quantitative and Qualitative Disclosures
    about Market Risk                            |  |      | 20 | 
|Item 4.                                                      |  | Controls and Procedures                                                                   |  |      | 21 | 
|PART II. OTHER INFORMATION                                  
|Item 1.                                                      |  | Legal Proceedings                                                                         |  |      | 22 | 
|Item 6.                                                      |  | Exhibits                                                                                  |  |      | 22 | 
|Amended Certificate of Incorporation                        
|Certificate of Amend.of Amended Certificate of Incorporation
|Letter of Deloitte & Touche LLP                             
|Certification of CEO Pursuant to Rule 13a-14(a)             
|Certification of CFO Pursuant to Rule 13a-14(a)             
|Certification of CEO Pursuant to Section 1350               
|Certification of CFO Pursuant to Section 1350               
|Amended Audit Committee Charter                             



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PART I.


FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

STERLING CHEMICALS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                           |  |                        |           |   |      |   |           |  
|---------------------------------------------------------- |  | ---------------------- | --------- | - | ---- | - | --------- | -
|                                                           |  | Three Months Ended     |          
|                                                           |  | March 31,              |          
|                                                           |  |                        |          
|                                                           |  | 2005                   |           |   | 2004 |  
|                                                           |  |                        |           |   |      |  
|                                                           |  | (Unaudited)            |          
|                                                           |  | (Dollars in thousands, |          
|                                                           |  | except share data)     |          
|Revenues                                                   |  | $                      | 215,493   |   |      | $ | 146,102   |  
|Cost of goods sold                                         |  |                        | 209,159   |   |      |   | 157,701   |  
|                                                           |  |                        |           |   |      |  
|Gross profit (loss)                                        |  |                        | 6,334     |   |      |   | (11,599   | )
|Selling, general and administrative expenses               |  |                        | 3,173     |   |      |   | 3,181     |  
|Equity income from joint venture                           |  |                        | (2,664    | ) |      |   | (1,800    | )
|Interest and debt related expenses, net of interest income |  |                        | 2,983     |   |      |   | 2,529     |  
|                                                           |  |                        |           |   |      |  
|Income (loss) before income tax                            |  |                        | 2,842     |   |      |   | (15,509   | )
|Provision (benefit) for income taxes                       |  |                        | 1,036     |   |      |   | (5,649    | )
|                                                           |  |                        |           |   |      |  
|Net income (loss)                                          |  | $                      | 1,806     |   |      | $ | (9,860    | )
|Preferred stock dividends                                  |  |                        | 1,652     |   |      |   | 1,412     |  
|                                                           |  |                        |           |   |      |  
|Net income (loss) attributable to common stockholders      |  | $                      | 154       |   |      | $ | (11,272   | )
|                                                           |  |                        |           |   |      |  
|Income (loss) per share of common stock, basic and diluted |  | $                      | 0.05      |   |      | $ | (3.99     | )
|Weighted average shares outstanding:                       |  |                        |           |   |      |   |           |  
|Basic                                                      |  |                        | 2,825,718 |   |      |   | 2,825,000 |  
|Diluted                                                    |  |                        | 2,915,273 |   |      |   | 2,825,000 |  



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STERLING CHEMICALS, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


|                                       |                                      |                                            |         |         |                   |  |         |         |         | 
|-------------------------------------- | ------------------------------------ | ------------------------------------------ | ------- | ------- | ----------------- |  | ------- | ------- | ------- | 
|                                       |                                      | March 31, 2005                             |         |         | December 31, 2004 | 
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | (Unaudited)                                |        
|                                       |                                      | (Dollars in thousands,                     |        
|                                       |                                      | except share data)                         |        
|ASSETS                                
|Current assets:                        |                                      |                                            |         |         |                   |  |         |        
|                                       | Cash and cash equivalents            |                                            | $       | 676     |                   |  | $       | 1,901   |        
|                                       | Accounts receivable, net             |                                            |         | 97,636  |                   |  |         | 113,074 |        
|                                       | Inventories, net                     |                                            |         | 87,937  |                   |  |         | 87,980  |        
|                                       | Prepaid expenses                     |                                            |         | 2,768   |                   |  |         | 4,198   |        
|                                       | Deferred tax asset                   |                                            |         | 3,719   |                   |  |         | 4,108   |        
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | Total current assets                       |         |         | 192,736           |  |         |         | 211,261 | 
|Property, plant and equipment, net     |                                      |                                            | 243,778 |         |                   |  | 248,598 |        
|Other assets, net                      |                                      |                                            | 13,782  |         |                   |  | 13,694  |        
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | Total assets                               |         | $       | 450,296           |  |         | $       | 473,553 | 
|                                       |                                      |                                            |         |         |                   | 
|                                      
|LIABILITIES AND STOCKHOLDERS EQUITY  
|Current liabilities:                   |                                      |                                            |         |         |                   |  |         |        
|                                       | Accounts payable                     |                                            | $       | 51,260  |                   |  | $       | 67,260  |        
|                                       | Accrued liabilities                  |                                            |         | 19,614  |                   |  |         | 23,787  |        
|Current portion of long-term debt      |                                      |                                            | 15,044  |         |                   |  | 17,684  |        
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | Total current liabilities                  |         |         | 85,918            |  |         |         | 108,731 | 
|Long-term debt                         |                                      |                                            | 100,579 |         |                   |  | 100,579 |        
|Deferred tax liability                 |                                      |                                            | 29,055  |         |                   |  | 28,407  |        
|Deferred credits and other liabilities |                                      |                                            | 71,409  |         |                   |  | 74,464  |        
|Redeemable preferred stock             |                                      |                                            | 42,941  |         |                   |  | 41,289  |        
|Commitments and contingencies (Note 6) |                                      |                                            |         |         |                   |  |         |        
|Stockholders equity:                  |                                      |                                            |         |         |                   |  |         |        
|                                       | Common stock, $.01 par value         |                                            |         | 28      |                   |  |         | 28      |        
|                                       | Additional paid-in capital           |                                            |         | 197,913 |                   |  |         | 199,408 |        
|                                       | Accumulated deficit                  |                                            |         | (76,581 | )                 |  |         | (78,387 | )      
|                                       | Accumulated other comprehensive loss |                                            |         | (966    | )                 |  |         | (966    | )      
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | Total stockholders equity                 |         |         | 120,394           |  |         |         | 120,083 | 
|                                       |                                      |                                            |         |         |                   | 
|                                       |                                      | Total liabilities and stockholders equity |         | $       | 450,296           |  |         | $       | 473,553 | 
|                                       |                                      |                                            |         |         |                   | 



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STERLING CHEMICALS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                         |                                    |                        |        |         |      |   |         |         |  
|---------------------------------------------------------------------------------------- | ---------------------------------- | ---------------------- | ------ | ------- | ---- | - | ------- | ------- | -
|                                                                                         |                                    | Three Months Ended     |       
|                                                                                         |                                    | March 31,              |       
|                                                                                         |                                    |                        |       
|                                                                                         |                                    | 2005                   |        |         | 2004 |  
|                                                                                         |                                    |                        |        |         |      |  
|                                                                                         |                                    | (Unaudited)            |       
|                                                                                         |                                    | (Dollars in thousands) |       
|Cash flows from operating activities:                                                    |                                    |                        |        |         |      |   |         |        
|                                                                                         | Net income (loss)                  |                        | $      | 1,806   |      |   | $       | (9,860  | )
|Adjustments to reconcile net income (loss) to net cash used in
    operating activities: |                                    |                        |        |         |      |   |         |        
|                                                                                         | Depreciation and amortization      |                        |        | 6,607   |      |   |         | 7,094   |  
|                                                                                         | Interest amortization              |                        |        | 100     |      |   |         | 99      |  
|                                                                                         | Lower-of-cost-or-market adjustment |                        |        | 1,990   |      |   |         | 5,464   |  
|                                                                                         | Deferred tax provision (benefit)   |                        |        | 1,037   |      |   |         | (5,712  | )
|                                                                                         | Other                              |                        |        | 157     |      |   |         |        |  
|Change in assets/liabilities:                                                            |                                    |                        |        |         |      |   |         |        
|                                                                                         | Accounts receivable                |                        |        | 15,438  |      |   |         | 23,788  |  
|                                                                                         | Inventories                        |                        |        | (1,947  | )    |   |         | (10,636 | )
|                                                                                         | Prepaid expenses                   |                        |        | 1,430   |      |   |         | 1,015   |  
|                                                                                         | Other assets                       |                        |        | (944    | )    |   |         | (2,632  | )
|                                                                                         | Accounts payable                   |                        |        | (16,000 | )    |   |         | (20,987 | )
|                                                                                         | Accrued liabilities                |                        |        | (3,878  | )    |   |         | 1,841   |  
|                                                                                         | Other liabilities                  |                        |        | (3,055  | )    |   |         | 1,702   |  
|                                                                                         |                                    |                        |        |         |      |  
|Net cash provided by (used in) operating activities                                      |                                    |                        | 2,741  |         |      |   | (8,824  | )      
|                                                                                         |                                    |                        |        |         |      |  
|Cash flows used in investing activities:                                                 |                                    |                        |        |         |      |   |         |        
|                                                                                         | Capital expenditures               |                        |        | (1,031  | )    |   |         | (3,362  | )
|                                                                                         | Cash used for methanol dismantling |                        |        | (295    | )    |   |         |        |  
|                                                                                         |                                    |                        |        |         |      |  
|Net cash used in investing activities                                                    |                                    |                        | (1,326 | )       |      |   | (3,362  | )      
|                                                                                         |                                    |                        |        |         |      |  
|Cash flows from financing activities:                                                    |                                    |                        |        |         |      |   |         |        
|                                                                                         | Net repayments on the Revolver     |                        |        | (2,640  | )    |   |         |        |  
|                                                                                         |                                    |                        |        |         |      |  
|Net decrease in cash and cash equivalents                                                |                                    |                        | (1,225 | )       |      |   | (12,186 | )      
|Cash and cash equivalents  beginning of year                                            |                                    |                        | 1,901  |         |      |   | 42,384  |        
|                                                                                         |                                    |                        |        |         |      |  
|Cash and cash equivalents  end of period                                                |                                    | $                      | 676    |         |      | $ | 30,198  |        
|                                                                                         |                                    |                        |        |         |      |  
|Supplemental disclosures of cash flow information:                                       |                                    |                        |        |         |      |   |         |        
|                                                                                         | Net interest paid                  |                        | $      | 690     |      |   | $       | 112     |  
|                                                                                         | Cash paid for income taxes         |                        |        | 13      |      |   |         | 63      |  



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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|   |                      
|-- | ---------------------
|1. | Basis of Presentation







|   |                         
|-- | ------------------------
|2. | Stock-Based Compensation





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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                    |  |                        |      |  |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ---- |  | ---- | - | ------- | -
|                                                                                                                                                    |  | Three Months Ended     |     
|                                                                                                                                                    |  | March 31,              |     
|                                                                                                                                                    |  |                        |     
|                                                                                                                                                    |  | 2005                   |      |  | 2004 |  
|                                                                                                                                                    |  |                        |      |  |      |  
|                                                                                                                                                    |  | (Dollars in thousands, |     
|                                                                                                                                                    |  | except share data)     |     
|Net income (loss) attributable to common stockholders, as
    reported                                                                              |  | $                      | 154  |  |      | $ | (11,272 | )
|Add: Stock-based employee compensation expense included in
    reported net income (loss), net of related tax effects                               |  |                        | 128  |  |      |   |        |  
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |  |                        | 130  |  |      |   | 432     |  
|                                                                                                                                                    |  |                        |      |  |      |  
|Pro forma net income (loss) attributable to common stockholders                                                                                     |  | $                      | 152  |  |      | $ | (11,704 | )
|                                                                                                                                                    |  |                        |      |  |      |  
|Income (loss) per share attributable to common stockholders,
    basic and diluted:                                                                 |  |                        |      |  |      |   |         |  
|As reported                                                                                                                                         |  | $                      | 0.05 |  |      | $ | (3.99   | )
|Pro forma                                                                                                                                           |  |                        | 0.05 |  |      |   | (4.14   | )



|   |            
|-- | -----------
|3. | Inventories

|                                      |  |                        |        |  |                   |   |        | 
|------------------------------------- |  | ---------------------- | ------ |  | ----------------- | - | ------ | 
|                                      |  | March 31, 2005         |        |  | December 31, 2004 |  
|                                      |  |                        |        |  |                   |  
|                                      |  | (Dollars in thousands) |       
|Finished products                     |  | $                      | 58,810 |  |                   | $ | 63,841 | 
|Raw materials                         |  |                        | 21,595 |  |                   |   | 18,682 | 
|Inventories under exchange agreements |  |                        | 2,343  |  |                   |   | 330    | 
|Stores and supplies, net              |  |                        | 5,189  |  |                   |   | 5,127  | 
|                                      |  |                        |        |  |                   |  
|                                      |  | $                      | 87,937 |  |                   | $ | 87,980 | 
|                                      |  |                        |        |  |                   |  

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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                   
|-- | ------------------
|4. | Earnings Per Share



|                                                             |  |                        |           |  |      |   |           |  
|------------------------------------------------------------ |  | ---------------------- | --------- |  | ---- | - | --------- | -
|                                                             |  | Three Months Ended     |          
|                                                             |  | March 31,              |          
|                                                             |  |                        |          
|                                                             |  | 2005                   |           |  | 2004 |  
|                                                             |  |                        |           |  |      |  
|                                                             |  | (Dollars in thousands, |          
|                                                             |  | except share data)     |          
|Basic income (loss) per share:                               |  |                        |           |  |      |   |           |  
|Net income (loss) attributable to common shareholders        |  | $                      | 154       |  |      | $ | (11,272   | )
|Weighted average shares outstanding                          |  |                        | 2,825,718 |  |      |   | 2,825,000 |  
|Earnings per common share:                                   |  |                        |           |  |      |   |           |  
|Net income (loss) attributable to common shareholders        |  | $                      | 0.05      |  |      | $ | (3.99     | )
|                                                             |  |                        |           |  |      |  
|Diluted income (loss) per share:                             |  |                        |           |  |      |   |           |  
|Net income (loss) attributable to common shareholders        |  | $                      | 154       |  |      | $ | (11,272   | )
|Weighted average common shares outstanding                   |  |                        | 2,825,718 |  |      |   | 2,825,000 |  
|Dilutive impact of stock options                             |  |                        | 89,554    |  |      |   |          |  
|                                                             |  |                        |           |  |      |  
|Weighted average common shares outstanding assuming dilution |  |                        | 2,915,273 |  |      |   | 2,825,000 |  
|                                                             |  |                        |           |  |      |  
|Earnings per common share assuming dilution:                 |  |                        |           |  |      |   |           |  
|Income (loss) attributable to common shareholders            |  | $                      | 0.05      |  |      | $ | (3.99     | )





|   |               
|-- | --------------
|5. | Long-Term Debt



3 8




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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














|   |                              
|-- | -----------------------------
|6. | Commitments and Contingencies



| |                   
| | ------------------
| | Product Contracts:



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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                           
| | --------------------------
| | Environmental Regulations:











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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                   
| | ------------------
| | Legal Proceedings:





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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                                                
|-- | -----------------------------------------------
|7. | Pension Plans and Other Postretirement Benefits



|                               |  |                        |        |   |      |   |        |  
|------------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | -
|                               |  | Three Months Ended     |       
|                               |  | March 31,              |       
|                               |  |                        |       
|                               |  | 2005                   |        |   | 2004 |  
|                               |  |                        |        |   |      |  
|                               |  | (Dollars in thousands) |       
|Service cost                   |  | $                      | 202    |   |      | $ | 828    |  
|Interest cost                  |  |                        | 1,669  |   |      |   | 1,909  |  
|Expected return on plan assets |  |                        | (1,667 | ) |      |   | (1,301 | )
|                               |  |                        |        |   |      |  
|Net pension costs              |  | $                      | 204    |   |      | $ | 1,436  |  
|                               |  |                        |        |   |      |  



|                                   |  |              |    |  |      |   |      |  
|---------------------------------- |  | ------------ | -- |  | ---- | - | ---- | -
|                                   |  | Three Months |   
|                                   |  | Ended        |   
|                                   |  | March 31,    |   
|                                   |  |              |   
|                                   |  | 2005         |    |  | 2004 |  
|                                   |  |              |    |  |      |  
|                                   |  | (Dollars in  |   
|                                   |  | thousands)   |   
|Service cost                       |  | $            | 99 |  |      | $ | 121  |  
|Interest cost                      |  |              |   |  |      |   | 573  |  
|Amortization of unrecognized costs |  |              |   |  |      |   | (114 | )
|                                   |  |              |    |  |      |  
|Net plan costs                     |  | $            | 99 |  |      | $ | 580  |  
|                                   |  |              |    |  |      |  



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STERLING CHEMICALS, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                         
|-- | ------------------------
|8. | New Accounting Standards







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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                          
| | -------------------------
| | Deloitte & Touche
    LLP





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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Business Overview


See


See




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vice versa. vice versa,




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See


Results of Operations




| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2005 Compared to Three
    Months Ended March 31, 2004



| |                                                    
| | ---------------------------------------------------
| | Revenues, Gross Profit (Loss) and Net Income (Loss)



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| |                                     
| | ------------------------------------
| | Provision (Benefit) for Income Taxes



Liquidity and Capital Resources




3 8








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| |                
| | ---------------
| | Working Capital





| |          
| | ---------
| | Cash Flow





| |                     
| | --------------------
| | Capital Expenditures



Contractual Cash Obligations




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Critical Accounting Policies, Use of Estimates and
Assumptions




New Accounting Standards













|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk



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|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures







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PART II.


OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings








|        |         
|------- | --------
|Item 6. | Exhibits



|        |      |       |  |                        |  |                                                                                                                                                                                                                                                                                          
|------- | ---- | ----- |  | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |       |  |                       
|Number  |      |       |  | Description of Exhibit
|        |      |       |  |                       
|        | 2    | .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. (as amended pursuant to the Certificate of
    Amendment contained as Exhibit 3.1(a)).                                                                                                                 
|        | **3  | .1(a) |  |                       |  | Certificate of Amendment of Amended and Restated Certificate of
    Incorporation of Sterling Chemicals, Inc.                                                                                                                                                                            
|        | 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).                                                                                   
|        | **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    |  |                       |  | Amended and Restated Audit Committee Charter of Sterling
    Chemicals, Inc.                                                                                                                                                                                                             






|   |                            
|-- | ---------------------------
|** | Filed or furnished herewith

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SIGNATURES






| |                         
| | ------------------------
| | Sterling Chemicals, Inc.
| | (Registrant)            



| |    |                     
| | -- | --------------------
| | By | /s/ Richard K. Crump

| |                                      
| | -------------------------------------
| |                                      
| | Richard K. Crump                     
| | President and Chief Executive Officer





| |    |                        
| | -- | -----------------------
| | By | /s/ Paul G. Vanderhoven

| |                                    
| | -----------------------------------
| |                                    
| | Paul G. Vanderhoven                
| | Senior Vice President  Finance and
| | Chief Financial Officer            
| | (Principal Financial Officer)      



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EXHIBIT INDEX


|        |      |       |  |                        |  |                                                                                                                                                                                                                                                                                          
|------- | ---- | ----- |  | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |       |  |                       
|Number  |      |       |  | Description of Exhibit
|        |      |       |  |                       
|        | 2    | .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. (as amended pursuant to the Certificate of
    Amendment contained as Exhibit 3.1(a)).                                                                                                                 
|        | **3  | .1(a) |  |                       |  | Certificate of Amendment of Amended and Restated Certificate of
    Incorporation of Sterling Chemicals, Inc.                                                                                                                                                                            
|        | 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).                                                                                   
|        | **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    |  |                       |  | Amended and Restated Audit Committee Charter of Sterling
    Chemicals, Inc.                                                                                                                                                                                                             






|   |                            
|-- | ---------------------------
|** | Filed or furnished herewith