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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 June 30, 2008
 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(State or other jurisdiction of 
incorporation or organization)
    
    76-0502785(IRS Employer Identification No.)333 Clay Street, Suite 3600
Houston, Texas 77002-4109(Address of principal executive offices)
    
    (713) 650-3700(Registrants telephone number,
including area code)
 þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ




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IMPORTANT INFORMATION REGARDING THIS FORM 10-Q
   Forward-Looking Statements
  
    
    current and future industry conditions and their effect on our results of
operations or financial position;
    
    the extent, timing and impact 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
competitiveness, business strategy, results of operations or financial position;
    
    our ability to consummate development projects at our Texas City, Texas site;
    
    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, renewals or terminations of existing contractual
relationships;
    
    business strategies;
    
    growth opportunities;
    
    competitive position;
    
    expected financial position;
    
    future cash flows or dividends;
    
    budgets for capital and other expenditures;
    
    plans and objectives of management;
    
    outcomes of legal proceedings;
    
    compliance with applicable laws;
    
    our reliance on marketing partners;
    
    adequacy of insurance coverage or indemnification rights;
    
    the timing and extent of changes in commodity prices for our products or raw
materials;
    
    petrochemicals industry production capacity or operating rates;
    
    costs associated with the shut down and decommissioning of our styrene facility;
    
    increases in the cost of, or our ability to obtain, raw materials or energy;
    
    regulatory initiatives and compliance with governmental laws or regulations,
including environmental laws or 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 or economic conditions;
    
    risks of war, military operations, other armed hostilities, terrorist acts or
embargoes;
    
    changes in technology, which could require significant capital expenditures in
order to maintain competitiveness or could cause existing manufacturing processes to
become obsolete;
    
    effects of litigation;
    
    cost, availability or adequacy of insurance; and
 i




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
    
    various other matters, many of which are beyond our control.
  Document Summaries
  Access to Filings
  ii




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##### 



STERLING CHEMICALS, INC.
 INDEX
  
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4T. Controls and Procedures
    
    
    25PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 6. Exhibits
    
    
    28Letter of Grant Thornton LLPCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350
  1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     GRANT THORNTON LLP 
 2




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PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Share Data)
 Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    
    
    
    
    2007(As Restated,
    
    
    
    
    
    
    (As Restated,2008
    
    
    See Note 11 )
    
    
    2008
    
    
    See Note 11)Revenues
    
    $
    47,795
    
    
    $
    34,132
    
    
    $
    85,995
    
    
    $
    66,847Cost of goods sold
    
    
    37,969
    
    
    
    31,329
    
    
    
    71,767
    
    
    
    58,417Gross profit
    
    
    9,826
    
    
    
    2,803
    
    
    
    14,228
    
    
    
    8,430Selling, general and administrative expenses
    
    
    3,787
    
    
    
    2,525
    
    
    
    6,205
    
    
    
    4,823Impairment of long-lived assets
    
    
    6,649
    
    
    
    
    
    
    
    6,649
    
    
    
    Interest and debt related expenses
    
    
    4,719
    
    
    
    4,932
    
    
    
    8,931
    
    
    
    8,392Interest income
    
    
    (1,107
    )
    
    
    (572
    )
    
    
    (2,432
    )
    
    
    (647
    )Other expense
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    839Loss from continuing operations before
income tax
    
    
    (4,222
    )
    
    
    (4,921
    )
    
    
    (5,125
    )
    
    
    (4,977
    )Benefit for income taxes
    
    
    
    
    
    
    (973
    )
    
    
    
    
    
    
    (973
    )Loss from continuing operations
    
    $
    (4,222
    )
    
    $
    (3,948
    )
    
    $
    (5,125
    )
    
    $
    (4,004
    )Income (loss) from discontinued operations,
net of tax of zero for all periods
    
    
    (1,588
    )
    
    
    4,474
    
    
    
    (7,813
    )
    
    
    7,200Net income (loss)
    
    $
    (5,810
    )
    
    $
    526
    
    
    $
    (12,938
    )
    
    $
    3,196Preferred stock dividends
    
    
    4,422
    
    
    
    4,976
    
    
    
    8,693
    
    
    
    8,026Net loss attributable to common stockholders
    
    $
    (10,232
    )
    
    $
    (4,450
    )
    
    $
    (21,631
    )
    
    $
    (4,830
    )Income (loss) per share of common stock
attributable to common stockholders, basic
and diluted:Loss from continuing operations
    
    $
    (3.06
    )
    
    $
    (3.15
    )
    
    $
    (4.89
    )
    
    $
    (4.26
    )Income (loss) from discontinued operations,
net of tax
    
    
    (0.56
    )
    
    
    1.58
    
    
    
    (2.76
    )
    
    
    2.55Basic and diluted loss per share
    
    $
    (3.62
    )
    
    $
    (1.57
    )
    
    $
    (7.65
    )
    
    $
    (1.71
    )Weighted average shares outstanding:Basic and diluted
    
    
    2,828,460
    
    
    
    2,828,460
    
    
    
    2,828,460
    
    
    
    2,828,460
  3




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STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands, Except Share Data)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    160,491
    
    
    $
    100,183Accounts receivable, net of allowance of $33 and $39,
respectively
    
    
    24,098
    
    
    
    29,157Inventories, net
    
    
    5,562
    
    
    
    5,044Prepaid expenses
    
    
    510
    
    
    
    3,129Deferred tax asset
    
    
    
    
    
    
    5,029Assets of discontinued operations
    
    
    1,032
    
    
    
    71,754Total current assets
    
    
    191,693
    
    
    
    214,296Property, plant and equipment, net
    
    
    68,329
    
    
    
    77,677Other assets, net
    
    
    13,646
    
    
    
    14,471Total assets
    
    $
    273,668
    
    
    $
    306,444LIABILITIES AND STOCKHOLDERS DEFICIENCY IN ASSETSCurrent liabilities:Accounts payable
    
    $
    14,996
    
    
    $
    13,715Accrued liabilities
    
    
    15,385
    
    
    
    22,789Liabilities of discontinued operations
    
    
    12,401
    
    
    
    11,528Total current liabilities
    
    
    42,782
    
    
    
    48,032Long-term debt
    
    
    150,000
    
    
    
    150,000Deferred tax liability
    
    
    
    
    
    
    5,029Deferred credits and other liabilities
    
    
    26,415
    
    
    
    26,168Long-term liabilities of discontinued operations
    
    
    41,584
    
    
    
    51,436Commitments and contingencies (Note 6)Redeemable preferred stock
    
    
    108,559
    
    
    
    99,866Stockholders equity:Common stock, $.01 par value (shares authorized
20,000,000; shares issued and outstanding
2,828,460)
    
    
    28
    
    
    
    28Additional paid-in capital
    
    
    132,527
    
    
    
    141,174Accumulated deficit
    
    
    (245,480
    )
    
    
    (232,542
    )Accumulated other comprehensive income
    
    
    17,253
    
    
    
    17,253Total stockholders deficiency in assets
    
    
    (95,672
    )
    
    
    (74,087
    )Total liabilities and stockholders deficiency in assets
    
    $
    273,668
    
    
    $
    306,444
  4




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STERLING CHEMICALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
 Six months ended June 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (12,938
    )
    
    $
    3,196Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Bad debt expense
    
    
    10
    
    
    
    Stock compensation expense
    
    
    46
    
    
    
    Depreciation and amortization
    
    
    5,082
    
    
    
    5,490Impairment of long-lived assets
    
    
    6,649
    
    
    
    Interest amortization
    
    
    810
    
    
    
    375Unearned income amortization
    
    
    (5,744
    )
    
    
    (500
    )Lower-of-cost-or-market adjustment
    
    
    
    
    
    
    1,318Loss on investment
    
    
    
    
    
    
    839Gain on disposal of property, plant and equipment
    
    
    
    
    
    
    (182
    )Deferred tax benefit
    
    
    
    
    
    
    (973
    )Other
    
    
    2
    
    
    
    20Change in assets/liabilities:Accounts receivable
    
    
    60,193
    
    
    
    (29,358
    )Inventories
    
    
    15,010
    
    
    
    19,359Prepaid expenses
    
    
    2,620
    
    
    
    2,029Other assets
    
    
    (126
    )
    
    
    1,976Accounts payable
    
    
    1,846
    
    
    
    5,243Accrued liabilities
    
    
    (6,533
    )
    
    
    (1,041
    )Other liabilities
    
    
    (3,862
    )
    
    
    (8,760
    )Net cash provided by (used in) operating activities
    
    
    63,065
    
    
    
    (969
    )Cash flows used in investing activities:Capital expenditures for property, plant and equipment
    
    
    (2,757
    )
    
    
    (4,350
    )Net proceeds from the sale of property, plant and equipment
    
    
    
    
    
    
    182Net cash used in investing activities
    
    
    (2,757
    )
    
    
    (4,168
    )Cash flows from financing activities:Repayment of tendered Old Secured Notes
    
    
    
    
    
    
    (100,579
    )Proceeds from the issuance of Secured Notes
    
    
    
    
    
    
    150,000Debt issuance costs
    
    
    
    
    
    
    (7,832
    )Net cash provided by financing activities
    
    
    
    
    
    
    41,589Net increase in cash
    
    
    60,308
    
    
    
    36,452Cash and cash equivalents  beginning of year
    
    
    100,183
    
    
    
    20,690Cash and cash equivalents  end of period
    
    $
    160,491
    
    
    $
    57,142Supplemental disclosures of cash flow information:Interest paid, net of interest income received
    
    $
    5,607
    
    
    $
    4,001Cash paid for income taxes
    
    
    404
    
    
    
    299
  5




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of Presentation
  Reclassifications
  2. Stock-Based Compensation
   2008Expected life (years)
    
    
    7.5Expected volatility
    
    
    54.3
    %Expected dividend yield
    
    
    Risk-free interest rate
    
    
    3.5
    %Weighted-average fair value of options granted during the period
    
    $
    7.25
  3. Discontinued Operations
  6




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   June 30, 2008
    
    
    December 31, 2007(Dollars in Thousands)Assets of discontinued operations:Accounts receivable, net
    
    $
    851
    
    
    $
    55,995Inventories
    
    
    181
    
    
    
    15,709Other assets
    
    
    
    
    
    
    50Total
    
    $
    1,032
    
    
    $
    71,754Liabilities of discontinued operations:Accounts payable
    
    $
    
    
    
    $
    3,363Accrued liabilities (1)
    
    
    12,401
    
    
    
    8,165Deferred credits and other liabilities (1)
    
    
    41,584
    
    
    
    51,436Total
    
    $
    53,985
    
    
    $
    62,964
 
 (1)
    
    Includes $54 million of deferred income for the NOVA supply agreement that will
be amortized over the contractual non-compete period of five years using the straight-line
method. Accrued liabilities include the current portion of $12.4 million and deferred credits
and other liabilities include the long-term portion of $41.6 million.  Three months ended June 30,
    
    Six months ended June 30,2008
    
    2007
    
    2008
    
    2007(Dollars in thousands)Revenues
    
    $
    611
    
    
    $
    218,339
    
    
    $
    15,208
    
    
    $
    382,011Income (loss)
before income taxes
    
    
    (1,588
    )
    
    
    4,474
    
    
    
    (7,813
    )
    
    
    7,200
 7




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  Accrued as of
    
    
    
    
    
    
    
    
    
    Accrued as ofDecember 31, 2007
    
    Additional accruals
    
    Cash payments
    
    June 30, 2008Severance accrual
    
    $
    325
    
    
    $
    
    
    
    $
    325
    
    
    $
    
 4. Shutdown and Impairment of Phthalic Anhydride Manufacturing Unit
      8




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
  5. Long-Term Debt
  1 4 1 4
    9




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   6. 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)
   th
 12




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
   7. Income Taxes
  8. Pension Plans and Other Postretirement Benefits
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Service cost
    
    $
    
    
    
    $
    153
    
    
    $
    
    
    
    $
    305Interest cost
    
    
    1,788
    
    
    
    1,782
    
    
    
    3,576
    
    
    
    3,565Expected return on plan assets
    
    
    (2,148
    )
    
    
    (2,025
    )
    
    
    (4,296
    )
    
    
    (4,050
    )Curtailment
loss (gain)
    
    
    2
    
    
    
    (100
    )
    
    
    4
    
    
    
    (100
    )Net pension benefit
    
    $
    (358
    )
    
    $
    (190
    )
    
    $
    (716
    )
    
    $
    (280
    )
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Service cost
    
    $
    14
    
    
    $
    19
    
    
    $
    28
    
    
    $
    65Interest cost
    
    
    142
    
    
    
    329
    
    
    
    284
    
    
    
    693Amortization of
unrecognized costs
    
    
    (541
    )
    
    
    (375
    )
    
    
    (1,082
    )
    
    
    (717
    )Net plan costs (benefit)
    
    $
    (385
    )
    
    $
    (27
    )
    
    $
    (770
    )
    
    $
    41
 9. Operating Segment and Sales Information
  13




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Revenues:Acetic acid
    
    $
    39,139
    
    
    $
    27,012
    
    
    $
    68,074
    
    
    $
    51,830Plasticizers
    
    
    8,487
    
    
    
    6,971
    
    
    
    17,481
    
    
    
    14,486Other
    
    
    169
    
    
    
    149
    
    
    
    440
    
    
    
    531Total
    
    $
    47,795
    
    
    $
    34,132
    
    
    $
    85,995
    
    
    $
    66,847Segment gross profit:Acetic acid
    
    $
    9,585
    
    
    $
    6,649
    
    
    $
    13,572
    
    
    $
    12,481Plasticizers
    
    
    1,155
    
    
    
    271
    
    
    
    3,047
    
    
    
    456Other(1)
    
    
    (914
    )
    
    
    (4,117
    )
    
    
    (2,391
    )
    
    
    (4,507
    )Gross profit
    
    
    9,826
    
    
    
    2,803
    
    
    
    14,228
    
    
    
    8,430Selling, general and administrative expenses
    
    
    3,787
    
    
    
    2,525
    
    
    
    6,205
    
    
    
    4,823Impairment of long-lived assets(2)
    
    
    6,649
    
    
    
    
    
    
    
    6,649
    
    
    
    Interest and debt related expenses
    
    
    4,719
    
    
    
    4,932
    
    
    
    8,931
    
    
    
    8,392Interest income
    
    
    (1,107
    )
    
    
    (572
    )
    
    
    (2,432
    )
    
    
    (647
    )Other expense
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    839Loss from continuing operations before
income tax
    
    $
    (4,222
    )
    
    $
    (4,921
    )
    
    $
    (5,125
    )
    
    $
    (4,977
    )Depreciation and amortization expenses:Acetic acid
    
    $
    1,525
    
    
    $
    1,315
    
    
    $
    3,037
    
    
    $
    2,632Plasticizers
    
    
    532
    
    
    
    493
    
    
    
    1,064
    
    
    
    979Other(3)
    
    
    390
    
    
    
    953
    
    
    
    981
    
    
    
    1,879Total
    
    $
    2,447
    
    
    $
    2,761
    
    
    $
    5,082
    
    
    $
    5,490Capital expenditures:Acetic acid
    
    $
    348
    
    
    $
    704
    
    
    $
    1,142
    
    
    $
    908Plasticizers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Otherplant infrastructure
    
    
    372
    
    
    
    1,398
    
    
    
    1,615
    
    
    
    3,442Total
    
    $
    720
    
    
    $
    2,102
    
    
    $
    2,757
    
    
    $
    4,350
 
 (1)
    
    Gross profit (loss) for Other includes various unallocated corporate charges and
credits.(2)
    
    As a result of the shutdown of our PA unit and the subsequent entry into the
Amended Plasticizers Production Agreement in May 2008, with an effective date of April
1, 2008, our PA unit was determined to be impaired in the second quarter of 2008 and was
written down to zero. See Note 4 for more information.(3)
    
    Includes depreciation and amortization expense of $0.1 million and $0.7 million
for discontinued operations for the three months ended June 30, 2008 and 2007,
respectively, and $0.4 million and $1.3 million for the six months ended June 30, 2008
and 2007, respectively. June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in Thousands)Total assets:Acetic acid
    
    $
    45,009
    
    
    $
    53,769Plasticizers
    
    
    6,466
    
    
    
    13,216Other(4)
    
    
    222,193
    
    
    
    239,459Total
    
    $
    273,668
    
    
    $
    306,444
 
 (4)
    
    Components of Other are presented in the table below: 14




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STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 June 30,
    
    December 31,2008
    
    2007(Dollars in Thousands)Total assets:Corporate:Cash
    
    $
    160,491
    
    
    $
    100,183Other
    
    
    20,620
    
    
    
    27,998Plant infrastructure:Property, plant and equipment, net
    
    
    40,050
    
    
    
    39,524Assets of discontinued operations
    
    
    1,032
    
    
    
    71,754Total
    
    $
    222,193
    
    
    $
    239,459
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)Major customers:BP Chemicals
    
    $
    39,139
    
    
    $
    27,012
    
    
    $
    68,074
    
    
    $
    51,830BASF Corporation
    
    
    8,487
    
    
    
    6,971
    
    
    
    17,481
    
    
    
    14,486
 10. New Accounting Standards
      15




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##### Table of Contents



STERLING CHEMICALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
     11. Restatement of Financial Information
  
    
    Paid-in-kind dividends on our Series A Convertible Preferred Stock were incorrectly
recorded as 4% of the Series A Convertible Preferred Stocks liquidation value versus
the fair value of the dividends. As a result of this error, redeemable preferred stock
was understated and additional paid-in capital was overstated by $29.2 million as of
June 30, 2007. Preferred stock dividends and net loss attributable to common
shareholders were understated by $2.6 million and $3.4 million for the three and six
months ended June 30, 2007, respectively.
    
    Disputed revenues were inappropriately recognized resulting in a gross up of the
consolidated statements of operations for the three and six months ended June 30, 2007.
Revenues and selling, general and administrative expenses were overstated by $1.0
million and $2.0 million for the three and six months ended June 30, 2007.
    
    Deferred taxes were not recognized on benefit adjustments to other comprehensive income, or
OCI, for the quarterly period ended June 30, 2007. OCI was overstated and benefit for income taxes
was understated by $1.0 million for the three and six months ended June 30, 2007.
 16




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
     17




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##### Table of Contents



Results of Operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Revenues and income from continuing operations
    Selling, general and administrative expenses
  18




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##### Table of Contents



1 4
 Impairment of long-lived assets
  Interest income
  Other expense
  Benefit for income taxes
  Discontinued operations
  Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Revenues and income from continuing operations
   19




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##### Table of Contents



Selling, general and administrative expenses
 1 4
 Impairment of long-lived assets
  Interest income
  Other expense
  Benefit for income taxes
  Discontinued operations
  20




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##### Table of Contents



Liquidity and Capital Resources
  1 4 1 4
    21




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##### Table of Contents



i.e.
 Working Capital
  Cash Flow
  Capital Expenditures
  Recent Developments
  22




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##### Table of Contents



Contractual Cash Obligations
  Critical Accounting Policies, Use of Estimates and Assumptions
  New Accounting Standards
  23




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##### Table of Contents



24




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 1 1 4
 
 Item 4T. Controls and Procedures
  Evaluation of Disclosure Controls and Procedures
   25




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
    
    seven of our incumbent directors were re-elected;
    
    the appointment of Grant Thornton LLP as our independent registered accounting
firm for the fiscal year ending December 31, 2008 was ratified and approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
remove provisions relating to our emergence from bankruptcy was approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
remove provisions relating to our 10% Senior Secured Notes due 2007 was approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
prohibit our common stockholders from voting on certain amendments to our Amended and
Restated Certificate of Incorporation relating solely to the terms of any of our
outstanding preferred stock was approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
exempt us from the requirement that directors be elected by ballot was approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
modify the director exculpation provisions thereof was approved;
    
    a proposal to amend our Amended and Restated Certificate of Incorporation to
modify the indemnification provisions thereof was approved; and
    
    a proposal to amend and restate our Amended and Restated Certificate of
Incorporation was approved.
   Director
    
    For
    
    WithheldByron J. Haney
    
    
    4,792.635
    
    
    
    0Steven L. Gidumal
    
    
    4,792.635
    
    
    
    0Philip M. Sivin
    
    
    4,792.635
    
    
    
    0Karl W. Schwarzfeld
    
    
    4,792.635
    
    
    
    0
 26




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##### Table of Contents



Director
    
    For
    
    WithheldRichard K. Crump
    
    
    6,842,051
    
    
    
    81,626John W. Gildea
    
    
    6,923,616
    
    
    
    61Dr. Peter Ting Kai Wu
    
    
    6,923,616
    
    
    
    61
  For
    
    Against
    
    Abstain6,923,638
    
    
    39
    
    
    
    0
   For
    
    Against
    
    Abstain6,923,638
    
    
    955
    
    
    
    0
  For
    
    Against
    
    Abstain6,922,722
    
    
    250,904
    
    
    
    0
  For
    
    Against
    
    Abstain6,590,263
    
    
    333,406
    
    
    
    8
  For
    
    Against
    
    Abstain7,259,042
    
    
    82
    
    
    
    8
  27




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##### Table of Contents



For
    
    Against
    
    Abstain6,923,587
    
    
    85
    
    
    
    5
  For
    
    Against
    
    Abstain6,923,604
    
    
    65
    
    
    
    8
  For
    
    Against
    
    Abstain6,923,604
    
    
    63
    
    
    
    10
  
 Item 6. Exhibits
  ExhibitNumber
    
    
    Description of Exhibit3.1
    
    
    
    Second Amended and Restated Certification of Incorporation of Sterling
Chemicals, Inc. (incorporated by reference to Annex A to our definitive proxy
statement on Schedule 14A filed on April 15, 2008)#10.1
    
    
    
    Third Amended and Restated Plasticizers Production Agreement dated effective
as of April 1, 2008 between BASF Corporation and Sterling Chemicals, Inc.
(incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K
filed on July 25, 2008)+10.2
    
    
    
    Employment Agreement between Sterling Chemicals, Inc. and John V. Genova,
dated effective as of May 27, 2008 (incorporated by reference from Exhibit 10.1
to our Current Report on Form 8-K filed on May 27, 2008)**15.1
    
    
    
    Letter of Grant Thornton 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
 
 **
    
    Filed or furnished herewith#
    
    Portions of this Exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment+
    
    Management contract or compensatory plan or arrangement 28




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##### Table of Contents



SIGNATURES
  STERLING CHEMICALS, INC.
(Registrant)Date: August 14, 2008
    By
    /s/ JOHN V. GENOVAJohn V. GenovaPresident and Chief Executive Officer Date: August 14, 2008
    By
    /s/ JOHN R. BEAVERJohn R. BeaverSenior Vice President-Finance and Chief Financial Officer
(Principal Financial Officer) 29




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    
    Description of Exhibit3.1
    
    
    
    Second Amended and Restated Certification of Incorporation of Sterling
Chemicals, Inc. (incorporated by reference to Annex A to the Companys
definitive proxy statement on Schedule 14A filed on April 15, 2008)#10.1
    
    
    
    Third Amended and Restated Plasticizers Production Agreement dated effective
as of April 1, 2008 between BASF Corporation and Sterling Chemicals, Inc.
(incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K
filed on July 25, 2008).+10.2
    
    
    
    Employment Agreement between Sterling Chemicals, Inc. and John V. Genova,
dated effective as of May 27, 2008 (incorporated by reference from Exhibit 10.1
to our Current Report on Form 8-K filed on May 27, 2008).**15.1
    
    
    
    Letter of Grant Thornton 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
 
 **
    
    Filed or furnished herewith#
    
    Portions of this Exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment+
    
    Management contract or compensatory plan or arrangement