-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IC/6s1e4nj4ZUjZ6bTGS5X8biyQIaFhbAyRtGc1Y/eke9GXFK449E922h7MJ/Ew2 pskqEVlBWAp09mjAj9F4MQ== 0000950129-99-002153.txt : 19990514 0000950129-99-002153.hdr.sgml : 19990514 ACCESSION NUMBER: 0000950129-99-002153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING CHEMICALS HOLDINGS INC /TX/ CENTRAL INDEX KEY: 0000795662 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 760185186 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10059 FILM NUMBER: 99619273 BUSINESS ADDRESS: STREET 1: 1200 SMITH ST, SUITE 1900 CITY: HOUSTON STATE: TX ZIP: 77002-4312 BUSINESS PHONE: 7136503700 MAIL ADDRESS: STREET 1: 1200 SMITH ST SUITE 1900 CITY: HOUSTON STATE: TX ZIP: 77002-4312 FORMER COMPANY: FORMER CONFORMED NAME: STERLING CHEMICALS INC /TX/ DATE OF NAME CHANGE: 19961218 FORMER COMPANY: FORMER CONFORMED NAME: STERLING CHEMICALS HOLDINGS INC DATE OF NAME CHANGE: 19960828 FORMER COMPANY: FORMER CONFORMED NAME: STERLING CHEMICALS INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING CHEMICAL INC CENTRAL INDEX KEY: 0001014669 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 760502785 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-04343-01 FILM NUMBER: 99619274 BUSINESS ADDRESS: STREET 1: 1200 SMITH STREET STREET 2: SUITE 1900 CITY: HOUSTON STATE: TX ZIP: 77002-4312 BUSINESS PHONE: 7136503700 MAIL ADDRESS: STREET 1: C/O STERLING GROUP INC STREET 2: EIGHT GREENWAY PLAZA, SUITE 702 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: STX CHEMICALS CORP DATE OF NAME CHANGE: 19960516 10-Q 1 STERLING CHEMICALS, INC. AND S.C. HOLDINGS, INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ----------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ COMMISSION FILE NUMBER 1-10059 STERLING CHEMICALS HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 76-0185186 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1200 SMITH STREET, SUITE 1900 (713) 650-3700 HOUSTON, TEXAS 77002-4312 (REGISTRANT'S TELEPHONE NUMBER, (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE COMMISSION FILE NUMBER 333-04343-01 STERLING CHEMICALS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 76-0502785 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1200 SMITH STREET, SUITE 1900 (713) 650-3700 HOUSTON, TEXAS 77002-4312 (REGISTRANT'S TELEPHONE NUMBER, (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Sterling Chemicals, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the reduced disclosure format provided for by General Instruction H(2) of Form 10-Q. ----------------- Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of April 30, 1999, Sterling Chemicals Holdings, Inc. had 12,722,196 shares of common stock outstanding. As of April 30, 1999, all outstanding equity securities of Sterling Chemicals, Inc. were owned by Sterling Chemicals Holdings, Inc. ================================================================================ 2 IMPORTANT INFORMATION REGARDING THIS FORM 10-Q Readers should consider the following information as they review this Form 10-Q. FORWARD-LOOKING STATEMENTS This Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements include all statements contained in this Form 10-Q (other than statements of historical facts) regarding the cyclicality of the industries in which the Company (as defined herein) is engaged, current and future industry conditions, the cost of remediating Year 2000 issues and the effect of any unremediated or undiscovered Year 2000 issues on the Company's operations, and the potential effects of such matters on the Company's business strategy, results of operations, and financial position, including without limitation the statements under "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". Although the Company believes that the expectations reflected in the forward-looking statements contained herein are reasonable, no assurance can be given that such expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from expectations ("Cautionary Statements") are stated herein in conjunction with the forward-looking statements or are included elsewhere in this Form 10-Q or Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year ended September 30, 1998 (the "Annual Report"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Known Events, Trends, Uncertainties, and Risk Factors" contained in the Annual Report. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. SUBSEQUENT EVENTS, ETC. All statements contained in this Form 10-Q, including the forward-looking statements discussed above, are made as of May 13, 1999, except for those statements that are expressly made as of another date. The Company disclaims any responsibility for the correctness of any information contained in this Form 10-Q to the extent such information is affected or impacted by events, circumstances, or developments occurring after May 13, 1999, or by the passage of time after such date and, except as required by applicable securities laws, the Company does not intend to update such information. 2 3 This combined Form 10-Q is separately filed by Holdings and Chemicals (each as defined herein). Information contained herein relating to Chemicals is filed by Holdings and separately by Chemicals on its own behalf. Certain capitalized terms used in this Form 10-Q are defined in the Notes to Consolidated Financial Statements included herein. PART I.--FINANCIAL INFORMATION ITEM 1.--FINANCIAL STATEMENTS 3 4 STERLING CHEMICALS HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED)
MARCH 31, SEPTEMBER 30, 1999 1998 ---------- ------------- ASSETS Current assets: Cash and cash equivalents .................................... $ 4,608 $ 11,168 Accounts receivable .......................................... 95,683 114,571 Inventories .................................................. 71,635 73,225 Prepaid expenses ............................................. 9,665 15,571 Deferred income tax benefit .................................. 7,960 5,140 ---------- ---------- Total current assets ....................................... 189,551 219,675 Property, plant and equipment, net .............................. 437,486 450,315 Deferred income tax benefit ..................................... 3,352 -- Other assets .................................................... 98,068 95,966 ---------- ---------- Total assets ............................................... $ 728,457 $ 765,956 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS) Current liabilities: Accounts payable ............................................. $ 46,759 $ 46,983 Accrued liabilities .......................................... 65,364 71,873 Current portion of long-term debt ............................ 6,734 8,909 ---------- ---------- Total current liabilities .................................. 118,857 127,765 Long-term debt .................................................. 893,219 873,616 Deferred income tax liability ................................... -- 11,123 Deferred credits and other liabilities .......................... 79,301 80,289 Common stock held by ESOP ....................................... 2,946 5,938 Less: unearned compensation .................................... (1,105) (2,845) Redeemable preferred stock ...................................... 19,553 18,249 Commitments and contingencies (Note 4) .......................... -- -- Stockholders' equity (deficiency in assets): Common stock, $.01 par value, 20,000,000 shares authorized, 12,273,000 shares issued and 12,068,000 outstanding at March 31, 1999, and 12,273,000 shares issued and 12,073,000 outstanding at September 30, 1998 ............... 123 123 Additional paid-in capital ................................... (542,712) (542,701) Retained earnings ............................................ 191,975 229,590 Pension adjustment ........................................... (121) (121) Accumulated translation adjustment ........................... (31,059) (32,559) Deferred compensation ........................................ (79) (111) ---------- ---------- (381,873) (345,779) Treasury stock, at cost, 205,000 and 200,000 shares at March 31, 1999 and September 30, 1998, respectively ........ (2,441) (2,400) ---------- ---------- Total stockholders' equity (deficiency in assets) ........ (384,314) (348,179) ---------- ---------- Total liabilities and stockholders' equity (deficiency in assets) ........................................... $ 728,457 $ 765,956 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 4 5 STERLING CHEMICALS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- -------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Revenues .................................................. $ 152,472 $ 204,504 $ 324,401 $ 434,740 Cost of goods sold ........................................ 148,160 193,145 303,372 404,082 ---------- ---------- ---------- ---------- Gross profit .............................................. 4,312 11,359 21,029 30,658 Selling, general and administrative expenses .............. 8,801 8,935 18,457 17,453 Other expense ............................................. 6,782 2,940 9,076 2,940 Interest and debt related expenses, net of interest income ................................................... 24,492 24,970 49,951 50,273 ---------- ---------- ---------- ---------- Loss before income taxes .................................. (35,763) (25,486) (56,455) (40,008) Benefit for income taxes .................................. (10,943) (9,198) (18,535) (13,575) ---------- ---------- ---------- ---------- Net loss .................................................. (24,820) (16,288) (37,920) (26,433) Preferred stock dividends ................................. 658 591 1,303 1,219 ---------- ---------- ---------- ---------- Net loss attributable to common stockholders .............. $ (25,478) $ (16,879) $ (39,223) $ (27,652) ========== ========== ========== ========== Net loss per common share (Note 5) ........................ $ (1.96) $ (1.37) $ (3.07) $ (2.28) ========== ========== ========== ========== Weighted average shares outstanding ....................... 12,466 11,984 12,446 11,918 ========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 5 6 STERLING CHEMICALS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED MARCH 31, ----------------------------- 1999 1998 ---------- ---------- Cash flows from operating activities: Net loss ................................................... $ (37,920) $ (26,433) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ........................... 28,028 28,014 Interest amortization ................................... 1,688 2,198 Loss on disposal/write off of assets .................... 52 256 Deferred tax benefit .................................... (14,645) (10,496) Discount notes amortization ............................. 9,197 8,118 Early retirement programs and benefit changes ........... 6,782 -- Other ................................................... 669 923 Change in assets/liabilities: Accounts receivable ..................................... 23,608 26,968 Inventories ............................................. 1,755 (12,658) Prepaid expenses ........................................ (2,460) 4,210 Other assets ............................................ (12,521) 598 Accounts payable ........................................ 6,696 (8,740) Accrued liabilities ..................................... (11,082) 1,067 Other liabilities ....................................... 1,383 223 ---------- ---------- Net cash provided by operating activities ....................... 1,230 14,248 ---------- ---------- Cash flows from investing activities: Capital expenditures ....................................... (12,186) (13,303) ---------- ---------- Cash flows from financing activities: Proceeds from long-term debt ............................... 139,982 48,562 Repayment of long-term debt ................................ (135,616) (48,508) Other ...................................................... (45) (25) ---------- ---------- Net cash provided by financing activities ....................... 4,321 29 ---------- ---------- Effect of United States /Canadian exchange rate on cash ......... 75 (91) ---------- ---------- Net increase (decrease) in cash and cash equivalents ............ (6,560) 883 Cash and cash equivalents - beginning of year ................... 11,168 7,958 ---------- ---------- Cash and cash equivalents - end of period ....................... $ 4,608 $ 8,841 ========== ========== Supplement disclosures of cash flow information: Interest paid, net of interest income received ............. $ (39,406) $ (39,746) Income tax refunds received ................................ 5,441 6,864
The accompanying notes are an integral part of the consolidated financial statements. 6 7 STERLING CHEMICALS, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED)
MARCH 31, SEPTEMBER 30, 1999 1998 ---------- ------------- ASSETS Current assets: Cash and cash equivalents ......................................... $ 4,591 $ 11,159 Accounts receivable ............................................... 97,767 116,398 Inventories ....................................................... 71,635 73,225 Prepaid expenses .................................................. 7,099 13,632 Deferred income tax benefit ....................................... 7,959 5,140 ---------- ---------- Total current assets ............................................ 189,051 219,554 Property, plant and equipment, net ................................... 437,486 450,315 Other assets ......................................................... 98,337 92,634 ---------- ---------- Total assets .................................................... $ 724,874 $ 762,503 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS) Current liabilities: Accounts payable .................................................. $ 46,759 $ 46,764 Accrued liabilities ............................................... 65,371 71,884 Current portion of long-term debt ................................. 6,734 8,909 ---------- ---------- Total current liabilities ......................................... 118,864 127,557 Long-term debt ....................................................... 755,805 745,709 Deferred income tax liability ........................................ 15,204 23,301 Deferred credits and other liabilities ............................... 82,301 83,288 Common stock held by ESOP ............................................ 2,946 5,938 Less: unearned compensation ......................................... (1,105) (2,845) Commitments and contingencies (Note 4) ............................... -- -- Stockholder's equity (deficiency in assets): Common stock, $.01 par value ...................................... -- -- Additional paid-in capital ........................................ (140,013) (139,786) Accumulated deficit ............................................... (77,869) (47,868) Pension adjustment ................................................ (121) (121) Accumulated translation adjustment ................................ (31,059) (32,559) Deferred compensation ............................................. (79) (111) ---------- ---------- Total stockholder's equity (deficiency in assets) ................. (249,141) (220,445) ---------- ---------- Total liabilities and stockholder's equity (deficiency in assets) ......................................................... $ 724,874 $ 762,503 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 7 8 STERLING CHEMICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- -------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Revenues ....................................................... $ 152,472 $ 204,504 $ 324,401 $ 434,740 Cost of goods sold ............................................. 148,160 193,145 303,372 404,082 ---------- ---------- ---------- ---------- Gross profit ................................................... 4,312 11,359 21,029 30,658 Selling, general and administrative expenses ................... 8,663 8,437 18,201 16,673 Other expense .................................................. 6,782 2,940 9,076 2,940 Interest and debt related expenses, net of interest income ..... 19,601 20,782 40,241 41,679 ---------- ---------- ---------- ---------- Loss before income taxes ....................................... (30,734) (20,800) (46,489) (30,634) Benefit for income taxes ....................................... (9,099) (7,228) (14,880) (10,192) ---------- ---------- ---------- ---------- Net loss ....................................................... $ (21,635) $ (13,572) $ (31,609) $ (20,442) ========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 8 9 STERLING CHEMICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED
SIX MONTHS ENDED MARCH 31, ----------------------------- 1999 1998 ---------- ---------- Cash flows from operating activities: Net loss ................................................... $ (31,609) $ (20,442) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ........................... 28,028 28,014 Debt fee amortization ................................... 1,415 1,706 Deferred tax benefit .................................... (14,645) (7,813) Early retirement programs and benefit changes ........... 6,782 -- Other ................................................... 474 1,179 Change in assets/liabilities: Accounts receivable ..................................... 23,507 26,930 Inventories ............................................. 1,755 (12,658) Prepaid expenses ........................................ (1,438) 4,910 Other assets ............................................ (9,920) 562 Accounts payable ........................................ 6,556 (9,479) Accrued liabilities ..................................... (11,074) 1,067 Other liabilities ....................................... 1,391 224 ---------- ---------- Net cash provided by operating activities ....................... 1,222 14,200 ---------- ---------- Cash flows from investing activities: Capital expenditures ......................................... (12,186) (13,303) ---------- ---------- Cash flows from financing activities: Proceeds from long-term debt ................................. 139,982 48,361 Repayment of long-term debt .................................. (135,616) (47,202) Repayments of amounts due parent ............................. -- (1,105) Other ........................................................ (45) (25) ---------- ---------- Net cash provided by financing activities ....................... 4,321 29 ---------- ---------- Effect of United States /Canadian exchange rate on cash ......... 75 (91) ---------- ---------- Net increase (decrease) in cash and cash equivalents ............ (6,568) 835 Cash and cash equivalents - beginning of year ................... 11,159 7,958 ---------- ---------- Cash and cash equivalents - end of period ....................... $ 4,591 $ 8,793 ========== ========== Supplement disclosures of cash flow information: Interest paid, net of interest income received ............... $ (39,415) $ (39,761) Income tax refunds received .................................. 5,441 6,864
The accompanying notes are an integral part of the consolidated financial statements. 9 10 STERLING CHEMICALS HOLDINGS, INC. STERLING CHEMICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly the consolidated financial position of Sterling Chemicals Holdings, Inc. ("Holdings") and its subsidiaries (Holdings and its subsidiaries collectively, the "Company") and Sterling Chemicals, Inc. and its subsidiaries (Chemicals and its subsidiaries collectively, "Chemicals") as of March 31, 1999 and their consolidated results of operations and cash flows for the applicable three month and six month periods ended March 31, 1999 and 1998. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements should be, and are assumed to have been, read in conjunction with the consolidated financial statements and notes included in Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year ended September 30, 1998 (the "Annual Report"). The accompanying consolidated balance sheets as of September 30, 1998, have been derived from the audited consolidated balance sheets as of September 30, 1998, included in the Annual Report. The accompanying consolidated financial statements as of and for the three month and six month periods ended March 31, 1999, have been reviewed by Deloitte & Touche LLP, the Company's independent public accountants, whose reports are included herein. Certain amounts reported in the financial statements for the prior periods have been reclassified to conform with the current financial statement presentation with no effect on net loss or stockholders' equity (deficiency in assets). 2. INVENTORIES
MARCH 31, SEPTEMBER 30, 1999 1998 ---------- ------------- Inventories consisted of the following (in thousands): Finished products ............................................... $ 41,627 $ 42,436 Raw materials ................................................... 10,305 8,089 Inventories under exchange agreements ........................... 1,896 3,031 Stores and supplies ............................................. 17,807 19,669 ---------- ---------- $ 71,635 $ 73,225 ========== ==========
3. LONG-TERM DEBT
MARCH 31, SEPTEMBER 30, 1999 1998 ---------- ------------ Long-term debt consisted of the following (in thousands): Revolving credit facility ....................................... $ 14,100 $ -- Term loans ...................................................... 273,333 274,000 Saskatoon term loans ............................................ 45,017 49,552 ESOP term loan .................................................. 2,438 3,250 11 1/4% Notes ................................................... 152,651 152,816 11 3/4% Notes ................................................... 275,000 275,000 ---------- ---------- Total Chemicals' debt outstanding .......................... 762,539 754,618 13 1/2% Notes ................................................... 137,414 127,907 ---------- ---------- Total Holdings' debt outstanding ........................ 899,953 882,525 Less: Current maturities ......................................... (6,734) (8,909) ---------- ---------- Total long-term debt ............................................ $ 893,219 $ 873,616 ========== ==========
10 11 4. COMMITMENTS AND CONTINGENCIES Product Contracts The Company has certain long-term agreements, which provide for the dedication of 100% of the Company's production of acetic acid, plasticizers, tertiary butylamine, sodium cyanide, and calcium hypochlorite, each to one customer. The Company also has various sales and conversion agreements which dedicate significant portions of the Company's production of styrene, acrylonitrile, and methanol to various customers. Some of these agreements generally provide for cost recovery plus an agreed margin or element of profit based upon market price. Environmental Regulations The Company's operations involve the handling, production, transportation, treatment, and disposal of materials that are classified as hazardous or toxic waste and that are extensively regulated by environmental and health and safety laws and regulations. Environmental permits required for the Company's operations are subject to periodic renewal and can be revoked or modified for cause or when new or revised environmental laws or permit requirements are implemented. Changing and increasingly strict environmental laws, regulations, and permit requirements can affect the manufacturing, handling, processing, distribution, and use of the Company's chemical products and the raw materials used to produce such products and, if so, the Company's business and operations may be materially and adversely affected. In addition, changes in applicable laws, regulations, and permit requirements can cause the Company to incur substantial costs in upgrading or redesigning its facilities and processes, including waste treatment, storage, disposal, and other waste handling practices and equipment. While the Company believes that its business operations and facilities generally are operated in compliance with all material aspects of applicable environmental and health and safety laws, regulations, and disclosure requirements, there can be no assurance that past practices and future operations will not result in material claims or regulatory action, require material environmental expenditures, or result in exposure or injury claims by employees, contract employees or the public. Some risk of environmental costs and liabilities is inherent in the operations and products of the Company, as it is with other companies engaged in similar businesses. In addition, a catastrophic event at any of the Company's facilities could result in liabilities to the Company substantially in excess of its insurance coverages. Legal Proceedings Ammonia Release. A description of the ammonia release lawsuits is found under "Legal Proceedings" in Note 7 of the "Notes to Consolidated Financial Statements" of the Annual Report and is incorporated herein by reference. As discussed therein, the Company continues to vigorously defend against the claims of the approximately 200 remaining plaintiffs. The Company has settled the claims of a majority of the original plaintiffs and is engaged in on-going settlement discussions with the remaining plaintiffs. The Company believes all or substantially all of its future out-of-pocket costs and expenses (including settlement payments and judgements) relating to these lawsuits will be covered by the Company's liability insurance policies. Nickel Carbonyl Release. A description of the nickel carbonyl lawsuit is found under "Legal Proceedings" in Note 7 of the "Notes to Consolidated Financial Statements" of the Annual Report and is incorporated herein by reference. As discussed therein, a total of eighteen contractor employees allegedly exposed to nickel carbonyl have filed a lawsuit against Chemicals seeking unspecified damages for personal injuries. Additional litigation against Chemicals asserting similar claims may ensue. The Company believes all or substantially all of its future out-of-pocket costs and expenses relating to such lawsuits will be covered by the Company's liability insurance policies and/or indemnification from third parties. Ethylbenzene Release. A description of this release is found under "Legal Proceedings" in Note 7 of the "Notes to Consolidated Financial Statements" of the Annual Report and is incorporated herein by reference. There is no lawsuit pending against the Company based on this release, but the Company has received, and in some instances resolved, claims from individuals for personal injuries alledgedly suffered as a result of this incident. The Company believes that its liability insurance coverage is sufficient to cover all out-of-pocket costs and expenses stemming from this incident in excess of its $1 million deductible. Other Lawsuits. The Company is subject to various other claims and legal actions that arise in the ordinary course of its business. Litigation Contingency The Company has made estimates of the reasonably possible range of liability with regard to its outstanding litigation for 11 12 which it may incur any liability. These estimates are based on the Company's judgments using currently available information as well as consultation with the Company's insurance carriers and outside legal counsel. A number of the claims in these litigation matters are covered by the Company's insurance policies or by contractual indemnification obligations of third parties to the benefit of the Company. The Company, therefore, has also made estimates of its probable recoveries under insurance policies or from third-party indemnitors based on its understanding of its insurance policies and indemnification arrangements, discussions with its insurers and indemnitors, and consultation with outside legal counsel, in addition to the Company's judgments. Based on the foregoing, as of March 31, 1999, the Company has accrued approximately $9.9 million as its estimate of its aggregate contingent liability for these matters and has also recorded aggregate receivables from its insurers and third-party indemnitors of approximately $8.8 million. At March 31, 1999, management estimates that the aggregate reasonably possible range of loss for all litigation combined, in addition to the amount accrued, is between zero and $12 million. The Company believes that this additional reasonably possible loss would be substantially covered by insurance or indemnification. While the Company has based its estimates on its evaluation of available information and the other matters described above, much of the litigation remains in the discovery stage and it is impossible to predict with certainty the ultimate outcome of such litigation. The Company will adjust its estimates as necessary as additional information is developed and evaluated. However, the Company believes that the final resolution of these contingencies will not have a material adverse impact on the financial position, results of operations, or cash flows of the Company. The timing of probable insurance and indemnity recoveries and payment of liabilities, if any, are not expected to have a material adverse effect on the financial position, results of operations, or cash flows of the Company. 5. LOSS PER SHARE CALCULATION For purposes of computing net loss per common share, net loss has been reduced by an amount equal to the fair market value of Released Shares (as hereinafter defined) at the end of the period minus the sum of the amount previously recognized as compensation expense with respect to Released Shares and the amount of depreciation/appreciation in value of Released Shares in prior periods. This reduction results from the Company being required, under certain circumstances, to purchase for cash common stock distributed to participants by Chemicals' employee stock ownership plan (the "ESOP"). "Released Shares" are shares held by the ESOP but allocated to employees. The weighted average number of outstanding shares and computation of the net loss per common share is as follows (in thousands, except net loss per common share):
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- -------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net loss attributable to common stockholders .............. $ (25,478) $ (16,879) $ (39,223) $ (27,652) Plus depreciation in value of Released Shares ............. 1,048 505 1,048 505 ---------- ---------- ---------- ---------- Net loss for purpose of computing loss per share .......... $ (24,430) $ (16,374) $ (38,175) $ (27,147) ========== ========== ========== ========== Net loss per common share ................................. $ (1.96) $ (1.37) $ (3.07) $ (2.28) ========== ========== ========== ========== Weighted average shares outstanding ....................... 12,466 11,984 12,446 11,918 ========== ========== ========== ==========
12 13 6. CAPITAL STOCK In December 1998, the Company entered into separate Standby Purchase Agreements (collectively, the "Standby Purchase Agreements") with each of Gordon A. Cain, William A. McMinn, James Crane, Frank P. Diassi, Frank J. Hevrdejs and Koch Capital Services, Inc. (collectively, the "Standby Purchasers"). Pursuant to the terms of the Standby Purchase Agreements, the Standby Purchasers are obligated to purchase up to an aggregate of 2.5 million shares of the common stock, par value $0.01 per share, of Holdings ("Common Stock"), at a price of $6.00 per share, if, as, and when requested by Holdings at any time or from time to time prior to December 15, 2001. Under each of the Standby Purchase Agreements, Holdings may only require the Standby Purchasers to purchase such shares if it believes that the purchase price paid by the Standby Purchasers for such shares is necessary to maintain, reestablish, or enhance the Company's borrowing ability under its revolving credit facilities or to satisfy any requirement thereunder to raise additional equity. To induce the Standby Purchasers to enter into the Standby Purchase Agreements, Holdings issued warrants to the Standby Purchasers that entitle them to purchase an aggregate of 300,000 shares of Common Stock at an exercise price of $6.00 per share. Pursuant to the Standby Purchase Agreements, Holdings is obligated to issue additional warrants to the Standby Purchasers that would entitle them to purchase 300,000 additional shares of Common Stock if, as, and when they purchase shares of Common Stock under the Standby Purchase Agreements. Any shares of Common Stock purchased under the Standby Purchase Agreements, any warrants issued pursuant to the Standby Purchase Agreements and any shares of Common Stock issued pursuant to such warrants will be subject to the terms of the Third Amended and Restated Voting Agreement dated as of February 1, 1999, the Sterling Chemicals Holdings, Inc. Stockholders Agreement dated effective as of August 21, 1996, as amended, the Tag-Along Agreement dated as of August 21, 1996, and the Registration Rights Agreement dated as of August 21, 1996. 7. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS The Company recorded a net $6.8 million charge, included in Other Expense, increasing its pension liability and other post-retirement benefits liability in the second quarter of fiscal 1999, as a result of an early retirement program for employees at the Texas City, Texas plant and certain benefit changes for all U.S. employees. The early retirement program resulted in curtailment expense for the pension plan and special termination benefits expenses for both the pension and the other post-retirement benefits plans, partially offset by the curtailment gain from the reduction of post-retirement life insurance benefits for currently active U.S. employees. 8. NEW ACCOUNTING STANDARDS As of October 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and displaying of comprehensive net income and its components. The components of comprehensive net loss, net of tax, are as follows:
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, ------------------------- ------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net loss attributable to common stockholders .............. $ (25,478) $ (16,879) $ (39,223) $ (27,652) Depreciation in value of Released Shares .................. 1,048 505 1,048 505 Change in accumulated translation adjustment .............. 1,421 1,063 1,500 (4,228) ---------- ---------- ---------- ---------- Comprehensive net loss .................................... $ (23,009) $ (15,311) $ (36,675) $ (31,375) ========== ========== ========== ==========
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial statements. SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits", establishes revisions to employers' disclosures about pension and other post retirement benefit plans. The Company adopted these statements as of October 1, 1998, and the disclosures required thereby will be included in Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year ending September 30, 1999. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Management is currently evaluating the accounting and disclosures required when this statement is adopted in the first quarter of fiscal 2000. 13 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Sterling Chemicals Holdings, Inc. We have reviewed the accompanying consolidated balance sheet of Sterling Chemicals Holdings, Inc. and subsidiaries (the "Company") as of March 31, 1999, and the related consolidated statements of operations and cash flows for the three month and six month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Company as of September 30, 1998, and the related consolidated statements of operations, stockholders' equity (deficiency in assets), and cash flows for the year then ended (not presented herein); and in our report dated December 4, 1998 (December 17, 1998 as to Notes 4, 11, and 12), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of September 30, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Houston, Texas May 11, 1999 14 15 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholder of Sterling Chemicals, Inc. We have reviewed the accompanying consolidated balance sheet of Sterling Chemicals, Inc. and subsidiaries ("Chemicals") as of March 31, 1999, and the related consolidated statements of operations and cash flows for the three month and six month periods ended March 31, 1999 and 1998. These financial statements are the responsibility of Chemicals' management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Chemicals as of September 30, 1998, and the related consolidated statement of operations, stockholder's equity (deficiency in assets), and cash flows for the year then ended (not presented herein); and in our report dated December 4, 1998 (December 17, 1998 as to Notes 4, 11, and 12), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of September 30, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Houston, Texas May 11, 1999 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain capitalized terms used but not defined in this Item 2 have the meanings assigned to them in the Notes To Consolidated Financial Statements included in this Form 10-Q or in the Notes to the Consolidated Financial Statements included in Holdings' and Chemicals' combined Annual Report on Form 10-K for the fiscal year ended September 30, 1998. OVERVIEW Holdings is a holding company whose only material asset is its investment in Chemicals. Holdings' only material liabilities are its obligation to repay its outstanding 13 1/2% Senior Secured Discount Notes due 2008 (the "13 1/2% Notes"), it's obligation to redeem its outstanding shares of preferred stock, and certain contingent obligations. Chemicals directly or indirectly owns substantially all of the consolidated operating assets, and is obligated for substantially all remaining liabilities, of the Company. Other than the additional interest expense associated with the 13 1/2% Notes, results of operations for the Company are essentially the same as those for Chemicals. Accordingly, the discussion that follows is applicable to both entities, except as specifically noted. A separate discussion of the results of operations for Chemicals would not, in the opinion of the Company, provide any additional meaningful information. RECENT DEVELOPMENTS During the second quarter of fiscal 1999, the Company's acetic acid unit at its Texas City, Texas plant (the "Texas City Plant") was shutdown for approximately one month for scheduled maintenance. During the shutdown, the Company and BP Chemicals also completed a 25% capacity expansion of the acetic acid unit, thereby increasing its annual capacity to approximately 1 billion pounds. On February 25, 1999, the Company and Monsanto Company ("Monsanto") announced plans to construct a new disodium iminodiacetate ("DSIDA") plant at the Texas City Plant. The new plant will use hydrogen cyanide ("HCN"), a by-product from the acrylonitrile manufacturing process, as its primary feedstock. The plans call for the construction of a DSIDA plant, with production expected to begin near the end of the second calendar quarter of 2000. The project will require a multi-million dollar investment with Monsanto providing capital for the construction of the DSIDA plant and the Company providing capital currently budgeted for projects associated with its acrylonitrile plant and the utilities which will support the DSIDA plant. The Company also uses HCN for the production of sodium cyanide and tertiary butylamine, or TBA.. Following the start-up of the new DSIDA plant, the acrylonitrile facility is expected to use all of its HCN by-product for chemical value. The DSIDA project is subject to the preparation and execution of mutually acceptable definitive documentation as well as approval by the board of directors of Monsanto. The Company believes the DSIDA project, if and when completed, could generate additional annual cash flows to the Company of up to $8 million depending on operating rates and market conditions. However, there can be no assurances that the DSIDA project will be completed or, if so, that it will generate additional cash flows of any amount. On March 3, 1999, the Company announced a capital project to upgrade its styrene monomer facility at the Texas City Plant. The phenylacetylene removal project ("PAR project") will reduce phenylacetylene ("PA") in styrene monomer produced by the Company through the employment of Raytheon/Fina technology and a Criterion catalyst. The Company expects to invest approximately $7 to $8 million in the PAR project, with the allocation of funds coming from its current capital expenditure budget. During the scheduled maintenance shutdown of the styrene unit that occurred during the second quarter of fiscal 1999, tie-ins for the PAR project were made. If completed as planned, the PAR project would enable the Company to produce lower PA styrene product by December 31, 1999. In April 1999, the Company restarted its methanol facility, which had been shut down since August 1998 for economic reasons. A significant disparity between domestic and foreign natural gas prices has put domestic methanol producers such as the Company at a disadvantage to foreign competitors. The Company continues to evaluate the best use for its methanol facility. One of the primary uses of methanol is in the production of MTBE used in reformulated gasolines. The State of California has recently announced that MTBE must be phased out of reformulated gasoline used in the state by December 31, 2002. Other states could implement similar initiatives, which could lead to a further reduction of demand in the domestic methanol market. As previously announced, the Company negotiated a new three year labor agreement for the Texas City Plant which is expected to save approximately $5 to $6 million annually. In connection with this new agreement, the Company took a one-time non-cash pretax charge of approximately $7 million relating to early retirement programs and benefit changes during the second quarter of fiscal 1999. 16 17 Effective as of February 1, 1999, William A. McMinn was elected to the joint board of directors of Holdings and Chemicals, thereby increasing the size of the board from nine to ten directors. The Company's styrene monomer unit at the Texas City Plant was shutdown for approximately one month during the second quarter of fiscal 1999 for scheduled maintenance. While the styrene unit was restarted on March 22, 1999, the restart of the ethylbenzene unit, an important component, was delayed until April 30, 1999 so that unscheduled maintenance work could be performed on a process vessel. During this delay, the Company purchased most of its ethylbenzene requirements on the spot market. The unscheduled work on the process vessel and the resulting delay in restarting the ethylbenzene unit is expected to negatively impact pretax earnings for the third quarter of fiscal 1999 by approximately $2 to $3 million. During the second quarter of fiscal 1999, the Company entered into three new contracts to build its patented chlorine dioxide generators. In addition, bid activity for the construction of more generators has increased with the approaching implementation deadline for the Environmental Protection Agency's enacted regulations that support substitution of chlorine dioxide for elemental chlorine (commonly referred to as the "Cluster Rules"). RESULTS OF OPERATIONS Revenues for the second quarter of fiscal 1999 were $152 million compared to revenues of $205 million for the second quarter of fiscal 1998, a decrease of 26%. Revenues for the six month period ended March 31, 1999, were $324 million compared to $435 million in the prior year period, a decrease of 26%. The decreases in revenues for the three and six month periods of fiscal 1999 as compared to the corresponding periods for fiscal 1998 were primarily due to lower styrene, acrylonitrile, methanol, and acrylic fibers sales volumes and prices and lower sodium chlorate sales prices. A net loss attributable to common stockholders of $25.5 million, or $1.96 per share, was recorded for the second quarter of fiscal 1999 compared to a net loss attributable to common stockholders of $16.9 million, or $1.37 per share, for the second quarter of fiscal 1998. A net loss attributable to common stockholders of $39.2 million, or $3.07 per share, was recorded for the six month period ended March 31, 1999 compared to a net loss attributable to common stockholders of $27.7 million, or $2.28 per share, for the same period of fiscal 1998. The increases in net loss for the three and six month periods of fiscal 1999 as compared to the corresponding periods for fiscal 1998 were primarily due to: (i) shutdowns in styrene for routine maintenance and acetic acid for expansion in the second quarter of fiscal 1999, (ii) reduced acrylonitrile, methanol, and sodium chlorate margins, (iii) weak markets in acrylic fibers, and (iv) costs associated with the aforementioned one-time non-cash charge related to an early retirement program and benefit changes, all partially offset by a modest improvement in styrene margins. Revenues, Cost of Goods Sold, and Gross Profit Petrochemicals and Fibers For the second quarter of fiscal 1999, the Company's revenues from its petrochemical and fibers businesses decreased to $107 million, from $155 million for the same period of fiscal 1998. For the first six months of fiscal 1999, the Company's revenues from its petrochemical and fibers businesses decreased to $233 million, from $332 million for the same period of fiscal 1998. The 31% and 30% decreases in revenues for the three and six month periods of fiscal 1999, respectively, as compared to the corresponding periods for fiscal 1998, were primarily due to reduced styrene, acrylonitrile, methanol, and acrylic fibers sales prices and volumes. The styrene and acetic acid units were both shutdown for approximately one month in the second quarter of fiscal 1999 for scheduled maintenance, thereby reducing revenues and profitability for such quarter. The economic conditions in Asia continued to negatively impact market conditions in the fiscal 1999 periods, particularly for the Company's styrene, acrylonitrile, and acrylic fibers products. The Company's petrochemicals and fibers businesses recorded combined operating losses of $19 million and $21 million for the three and six month periods of fiscal 1999, respectively, compared to an operating loss of $9 million for each of the two comparable periods of fiscal 1998. The increase in operating loss for both periods was primarily due to weaker operational performance in acrylonitrile, methanol, and acrylic fibers and the aforementioned one-time non-cash charge related to an early retirement program and benefit changes, partially offset by a modest improvement in styrene margins. Styrene revenues decreased 18% to $46 million in the second quarter of fiscal 1999 and 19% to $101 million for the first six months of fiscal 1999, compared to the same periods in fiscal 1998. Styrene sales prices decreased 5% and 10% for the second quarter and first six months of fiscal 1999, respectively, compared to the prior fiscal year periods. The decrease in sales prices was primarily due to continued weak market conditions, particularly in Asia. Styrene sales volumes decreased 15% and 9% for the second quarter and first six months of fiscal 1999, respectively, compared to the prior fiscal year periods. The decrease in sales volumes was primarily due to the month-long maintenance shutdown of the styrene unit during the second quarter of fiscal 1999. The major raw materials for styrene are benzene and ethylene. The price of benzene remained constant in the second quarter of fiscal 1999 and decreased 22% in the first six months of fiscal 1999, compared to the same periods of fiscal 1998. The price of ethylene decreased 7% and 31% in the second quarter of fiscal 1999 and the first six months of fiscal 1999, respectively, compared 17 18 to the same periods of fiscal 1998. Styrene margins increased in the second quarter and first six months of fiscal 1999, compared to the same periods of fiscal 1998, as significantly lower raw materials costs and lower fixed manufacturing costs more than offset the lower sales prices. Acrylonitrile revenues decreased 41% to $17 million in the second quarter of fiscal 1999 and 42% to $36 million for the first six months of fiscal 1999, compared to the same periods in fiscal 1998. Acrylonitrile sales prices decreased 33% and 32% for the second quarter and first six months of fiscal 1999, respectively, compared to the prior fiscal year periods. In addition, acrylonitrile sales volumes decreased 13% and 15% for the second quarter and first six months of fiscal 1999, respectively, compared to the prior fiscal year periods. The lower sales prices and volumes were primarily due to weaker market conditions, primarily in Asia. The major raw materials for acrylonitrile are propylene and ammonia. The price of propylene decreased 33% and 35% in the second quarter of fiscal 1999 and the first six months of fiscal 1999, respectively, compared to the same periods of fiscal 1998. The price of ammonia decreased 10% and 16% in the second quarter of fiscal 1999 and the first six months of fiscal 1999, respectively, compared to the same periods of fiscal 1998. Acrylonitrile margins decreased in the second quarter and first six months of fiscal 1999, compared to the same periods of fiscal 1998, as significantly lower sales prices more than offset lower raw materials costs and lower fixed manufacturing COSTS. The acrylic fibers business revenues decreased 37% to $16 million in the second quarter of fiscal 1999 and 40% to $31 million for the first six months of fiscal 1999, compared to the same periods in fiscal 1998. Acrylic fibers sales volumes decreased 27% and 36% for the second quarter and first six months of fiscal 1999, respectively, compared to the prior fiscal year periods. The performance of the Company's acrylic fibers business in the second quarter and first six months of fiscal 1999 continued to be negatively impacted by weak market conditions and imports from foreign suppliers. Revenues from the Company's acetic acid, methanol and plasticizers ("AMP") products and other petrochemicals decreased 36% to $29 million in the second quarter of fiscal 1999 and 32% to $66 million for the first six months of fiscal 1999, compared to the same periods in fiscal 1998. The decreases in revenues for the second quarter and first six months of fiscal 1999 were primarily due to a 44% and 46% decrease in methanol sales prices, respectively, and a 33% and 27% decrease in methanol sales volumes, respectively, compared to the prior fiscal year periods. The decrease in methanol revenues and sales volumes was primarily a result of continued overcapacity in the global methanol market. The Company's AMP products reported a decrease in operating earnings in the second quarter and first six months of fiscal 1999 compared to the prior periods of fiscal 1998. These decreases in operating earnings were primarily due to the aforementioned weak methanol market conditions and acetic acid shutdown for expansion. Pulp Chemicals Revenues from the Company's pulp chemicals business decreased 9% to $45 million in the second quarter of fiscal 1999 and 11% to $92 million in the first six months of fiscal 1999, compared to the same periods in fiscal 1998. This decrease in revenues was primarily due to a decrease in average sodium chlorate sales prices compared to the prior periods of fiscal 1998. The decline in sodium chlorate sales prices was primarily due to decreased demand as a result of lower pulp mill operating rates. The Company's pulp chemicals business recorded operating earnings of $8 million and $15 million for the three and six month periods of fiscal 1999, respectively, compared to operating earnings of $8 million and $20 million for the same periods of fiscal 1998. This reduction in operating earnings was primarily due to reduced sodium chlorate sales prices. Selling, General, and Administrative ("SG&A") Expenses SG&A expenses were $9 million and $18 million for the second quarter and first six months of fiscal 1999, respectively, compared to $9 million and $17 million for the same periods of fiscal 1998. An increase due to costs associated with upgrades of certain of the Company's information technology systems, which include Year 2000 compliance activities, was mostly offset by the favorable impact of cost reduction programs. Other Expense Other expense was $7 million and $9 million for the second quarter and six months of fiscal 1999, respectively, compared to $3 million for the same periods of fiscal 1998. The fiscal 1999 amounts relate to the aforementioned one-time non-cash charge related to early retirement programs and benefit changes and workforce reductions in the petrochemical business and Saskatoon, Saskatchewan, Canada plant. The fiscal 1998 amounts relate to voluntary severance programs in the petrochemical business. Interest and Debt Related Expenses Interest and debt related expense was $25 million for the second quarters of 1999 and 1998 and $50 million for the first six months of fiscal 1999 and 1998. 18 19 Benefit for Income Taxes Benefit for income taxes for the second quarter and first six months of fiscal 1999 were $11 million (effective tax rate of 31%) and $19 million (effective tax rate of 33%), respectively, compared to $9 million (effective tax rate of 36%) and $14 million (effective tax rate of 34%) for the comparable periods of fiscal 1998. The increase in the benefit was primarily the result of the increase in the Company's pre-tax losses in the fiscal 1999 periods. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1999, the Company's long-term debt (including current maturities) totaled approximately $900 million and consisted of: (i) three term loans under the Credit Agreement (defined below); (ii) loans under the Revolver (defined below); (iii) two term loans under the Sask Credit Agreement (defined below); (iv) Chemicals' 11 1/4% Senior Subordinated Notes due 2007 (the "11 1/4% Notes"); (v) Chemicals' 11 3/4% Senior Subordinated Notes due 2006 (the "11 3/4% Notes"); and (vi) the 13 1/2% Notes. In July 1997, Chemicals entered into an Amended and Restated Credit Agreement (as amended, the "Credit Agreement") with Chase Bank of Texas, National Association, individually and as administrative agent, Credit Suisse First Boston, individually and as documentation agent, and certain other financial institutions. The Credit Agreement establishes a revolving credit facility (the "Revolver") under which Chemicals may borrow, repay and reborrow funds for general corporate purposes. The Revolver automatically terminates on March 31, 2003, at which time all amounts owing thereunder will be due and payable. As of March 31, 1999, Chemicals had drawn approximately $14 million and had approximately $4 million in letters of credit outstanding under the Revolver. Availability of credit under the Revolver (not to exceed $125 million) is subject to a monthly borrowing base consisting of 85% of eligible accounts receivable and 65% of eligible inventory with an inventory cap of 50% of the borrowing base. At March 31, 1999, and after deducting approximately $4 million on account of outstanding letters of credit, the borrowing base limited the total credit available under the Revolver to a maximum of $87 million, down from $118 million at September 30, 1998 and $108 million at December 31, 1998. A review of the borrowing base is currently being performed on behalf of the lenders and it is possible that this review could lead to a reduction in the borrowing base, although the Company does not believe that such a reduction would be warranted. As discussed below, availability of credit under the Revolver is also subject to Chemicals being in compliance with numerous operational and financial covenants, including covenants that obligate Chemicals to maintain certain financial ratios. Even if the Company remains compliant with all covenants, the amount of debt that the Company may incur in the future (including extensions of credit under the Revolver) is limited by the covenants contained in the Credit Agreement as well as those contained in various other debt agreements of the Company. In December 1998, Chemicals obtained certain amendments to the financial covenants contained in the Credit Agreement which made the financial covenants less restrictive through December 31, 1999. Chemicals was in compliance with the covenants at all times, but requested the amendments based on its revised financial projections. Beginning March 31, 2000, certain of these financial covenants become more restrictive. For example, the interest coverage ratio increases from 0.80 at March 31, 1999, to 2.50 beginning with the rolling four quarters ending March 31, 2000. Consequently, Chemicals will be required to have significantly increased cash flows and operating results (or obtain further amendments or waivers) in order to maintain compliance. While Chemicals is currently compliant with all covenants contained in the Credit Agreement, no assurances can be given that its cash flows and operating results will be sufficient to maintain compliance in the future, particularly at and after March 31, 2000. Chemicals' ability to comply with these covenants, as well as the Company's overall ability to meet its debt service obligations and repay principal when due, will depend on the future performance of the Company, which is subject to a number of risks and uncertainties. If weak market conditions continue to negatively impact the sales prices, margins and/or volumes of the Company's primary products (including styrene, acrylonitrile, methanol, sodium chlorate, and acrylic fibers), Chemicals may have difficulty prior to March 31, 2000 and will have difficulty at and after March 31, 2000 remaining in compliance with the existing financial covenants in the Credit Agreement. Should Chemicals fail to maintain covenant compliance and be unable to obtain appropriate amendments or waivers, it would not be entitled to obtain additional credit under the Revolver and the Revolver could be terminated by the lenders with all amounts outstanding being immediately due and payable, although the lenders could elect, at their discretion, to leave amounts drawn under the Revolver outstanding and/or extend additional credit to Chemicals under the Revolver. If Chemicals is unable to borrow additional funds under the Revolver, the Company may not have sufficient funds to make future scheduled interest payments or to pay other obligations as they become due. In that event or in the event the Company fails, without obtaining appropriate amendments or waivers, to remain in compliance with any financial covenants contained in any of its debt agreements, debt holders could pursue remedies available to them under the relevant debt agreements, including, under certain conditions, accelerating the maturity of outstanding indebtedness. The indebtedness under the Credit Agreement is secured by substantially all of the assets of Chemicals. In addition, the indebtedness under the Credit Agreement, along with the 13 1/2% Notes, are secured by a pledge of the outstanding 19 20 common stock of Chemicals. In connection with the Credit Agreement amendments described above, Holdings entered into the Standby Purchase Agreements with the Standby Purchasers. Pursuant to the terms of the Standby Purchase Agreements, the Standby Purchasers are obligated to purchase up to an aggregate of 2.5 million shares of Common Stock, at a price of $6.00 per share, if, as and when requested by Holdings at any time or from time to time prior to December 15, 2001. Under each of the Standby Purchase Agreements, Holdings may only require the Standby Purchasers to purchase such shares if it believes that the purchase price paid by the Standby Purchasers for such shares is necessary to maintain, reestablish, or enhance the Company's borrowing ability under its revolving credit facilities or to satisfy any requirement thereunder to raise additional equity. To induce the Standby Purchasers to enter into the Standby Purchase Agreements, Holdings issued to them warrants to purchase an aggregate of 300,000 shares of Common Stock at an exercise price of $6.00 per share. Pursuant to the Standby Purchase Agreements, Holdings is obligated to issue to the Standby Purchasers additional warrants to purchase 300,000 additional shares of Common Stock if, as, and when they purchase shares of Common Stock under the Standby Purchase Agreements. The Company is exploring various external actions designed to increase its liquidity and capital resources. Actions currently under consideration include pursuing further amendments to the Credit Agreement and/or one or more new external financing arrangements. No assurances can be given that any of these alternatives will be available to the Company or, if so, on terms that are acceptable to the Company. The Company's debt agreements contain provisions which restrict the payment of advances, loans, and dividends from its subsidiaries (including Chemicals) to Holdings. The most restrictive of those covenants limits such payments during fiscal 1999 to approximately $2 million plus any amounts due to Holdings from Chemicals under the intercompany tax sharing agreement. These restrictions are not expected to limit Holdings' ability to meet its obligations in fiscal 1999. Because Sterling Sask is designated as an "Unrestricted Subsidiary" under the Credit Agreement and the indentures governing the 13 1/2% Notes, the 11 3/4% Notes and the 11 1/4% Notes, Sterling Sask is generally not subject to, nor are its results considered in determining Chemicals' compliance with, the restrictive covenants contained therein. In July 1997, Sterling Sask entered into a Credit Agreement (the "Sask Credit Agreement") with The Chase Manhattan Bank of Canada, individually and as administrative agent, and certain other financial institutions. The Sask Credit Agreement requires that certain amounts of Excess Cash Flow (as defined therein) be used to prepay amounts outstanding under the Sask Term Loans. A mandatory prepayment in the amount of approximately Cdn. $5 million was made in the first quarter of fiscal 1999 pursuant to such obligation. The Sask Credit Agreement provides for a revolving credit facility of Cdn. $8 million to be used by Sterling Sask solely for its general corporate purposes (the "Saskatoon Revolver"). No borrowings were outstanding under the Sask Revolver as of March 31, 1999. Because of restrictions in the Sask Credit Agreement, the Company will generally not have access to the cash flows of Sterling Sask. The Saskatoon Credit Agreement contains provisions which restrict the payment of advances, loans, and dividends from Sterling Sask to Chemicals or Holdings. The most restrictive of the covenants limits such payments during fiscal 1999 to less than $1 million, plus any amounts due to Chemicals or Holdings from Sterling Sask under the intercompany tax sharing agreement. The indebtedness under the Sask Credit Agreement is secured by substantially all the assets of Sterling Sask. Working Capital Working capital of the Company was $71 million at March 31, 1999, down from $92 million at September 30, 1998. This $21 million decrease in working capital was primarily due to a decrease in accounts receivable as a result of lower sales prices and volumes, partly attributable to the scheduled styrene and acetic acid maintenance shutdowns during the second quarter of fiscal 1999. Cash Flow Net cash provided by operations was $1 million for the six months ended March 31, 1999 and $14 million for the six months ended March 31, 1998. This $13 million decrease in net cash provided by operations was primarily due to the increase in net loss resulting from the factors discussed previously. Capital Expenditures The Company's capital expenditures for the first six months of fiscal 1999 were $12 million compared to $13 million in the same period in fiscal 1998. The capital expenditures in the first six months of fiscal 1999 were primarily related to the acetic acid expansion, the PAR project, the DSIDA project, and routine safety, environmental, and replacement capital. During the remainder of fiscal 1999, the Company expects to spend approximately $15 million to $20 million on the PAR project and routine safety, environmental, and replacement capital. The Company expects to fund its remaining fiscal 1999 capital expenditures from operating cash flow, plus borrowings under the Revolver, if needed. 20 21 Year 2000 Issue Certain computer systems and other equipment with computer chips store dates as two digits rather than four to define the applicable year (e.g. 97 for 1997). Any clock or date recording mechanism (including date sensitive software) which uses only two digits to represent the year may interpret the digits "00" as the Year 1900 rather than the Year 2000. This could result in a system failure or miscalculations causing serious disruption of operations. As is the case with most companies, the Company is in the process, using both internal and external resources, of addressing the Year 2000 issue. The Company is currently engaged in a comprehensive project intended to upgrade its information technology (IT) systems (such as computer systems and software) and non-IT systems (such as process control systems and other equipment that utilize embedded chips to control various functions) to systems that will consistently and properly recognize the Year 2000 and subsequent years. The Company has conducted an inventory of its hardware and software and made a preliminary assessment of the Year 2000 compliance of its business and process control systems. This preliminary assessment determined which of the Company's business and process control systems are critical to its business. Those systems deemed to be critical were assigned a higher priority in the Year 2000 remediation effort as compared to other non-critical systems. In this phase of the project, the Company discovered certain Year 2000 deficiencies in its business systems and initiated plans to rectify such issues in the remediation and replacement phase of the project. The preliminary assessment of the Company's process control systems did not detect any material Year 2000 difficulties. The Company then engaged a nationally recognized independent consultant to perform a more detailed survey of all of its business and process control systems (both critical and non-critical) to confirm the absence of any additional material Year 2000 deficiencies. This survey has been completed and did not reveal any additional material Year 2000 deficiencies. In the second phase of the Company's Year 2000 project, the Company believes it is taking the necessary steps to rectify all material Year 2000 deficiencies. A major component of this effort involves the replacement of all critical business systems which may not be Year 2000 compliant with new business systems intended to be Year 2000 compliant. All of such projects are scheduled to be completed by mid-year 1999. If the Company determines that any additional systems under review have material Year 2000 deficiencies, the Company plans to take appropriate remedial action. At this time, the instrumentation in the laboratory requires significant remediation or replacement. However, that instrumentation can be successfully operated in its current state with minimal manual intervention. Even without remediation or replacement, this instrumentation does not jeopardize the successful operation of the facility or the business. The final phase of the Company's Year 2000 project involves testing all critical systems to confirm that such systems will react properly to the advent of the Year 2000. The Company is in the process of conducting tests on all of its current IT and non-IT systems that were not identified as having Year 2000 deficiencies and anticipates that all such testing will be completed by June 30, 1999. Once the remediation and replacement phase is completed, the Company will conduct tests on all newly installed and updated systems to determine if they are Year 2000 compliant. Such testing is scheduled to be completed by mid-year 1999. The total estimated expense for the Company's Year 2000 compliance projects is approximately $11 to $13 million, of which the Company has incurred approximately $5 million through March 31, 1999. Such expense has been and will continue to be funded by the Company out of its operating cash flow and/or borrowings under its credit facilities. Irrespective of the efforts of the Company, certain Year 2000 problems, such as processing failures, error messages, or incorrect data may still occur in some of its computer systems if the Company receives programs and/or data from third parties who are not Year 2000 compliant. Moreover, the Company's business may be disrupted in other ways by Year 2000 problems of third parties, which may affect, for example, the Company's ability to obtain needed materials or deliver its products. The Company is in the process of determining whether vendors, customers, and others with whom it deals are Year 2000 compliant and has requested that such persons (other than those that the Company believes do not have a material impact on the business of the Company or its operations) complete and return surveys with respect to their Year 2000 issues. The Company has not received any survey response which indicates that any of such persons has any specific Year 2000 problems. However, no assurances can be given that a Year 2000 problem will not occur for the Company as a result of a Year 2000 problem of a vendor or customer of the Company or some other person with whom the Company deals. While the Company's Year 2000 projects are scheduled to be completed around mid-year 1999, it is possible that one or more of such projects may not be completed or that compliance efforts may be ineffective. A failure to properly and timely correct any Year 2000 deficiencies would affect the Company on several levels. If the Company's Year 2000 remediation efforts were to prove unsuccessful, the Company might be unable to take orders, sell products, operate one or more of its manufacturing facilities, or otherwise generally conduct its business. Since the Company's business is characterized by large volume sales to a relatively limited number of customers, the Company believes that, with the engagement of additional personnel, orders could be processed and deliveries completed through manual means. In preparation for such a scenario, the Company has outlined a contingency plan to guide the hiring and training of additional personnel and the processing of paperwork by manual means. 21 22 Although the Company believes that it is taking the appropriate courses of action to ensure that it is Year 2000 compliant, there can be no assurance that the actions discussed herein will have the anticipated results or that Year 2000 problems will not have a material adverse effect on the Company's financial condition or results of operations. Specific factors which might affect the success of the Company's Year 2000 efforts and the occurrence of Year 2000 disruption or expense include failure of the Company or its consultant to properly identify deficient systems, the failure of the selected remedial action to adequately address the deficiencies, the failure of the Company's consultant to complete the remediation in a timely manner (due to shortages of qualified labor or other factors), unforeseen expenses related to the remediation of existing systems or the transition to replacement systems, and the failure of third parties to become compliant or to adequately notify the Company of potential noncompliance. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk disclosures set forth in the Annual Report have not changed significantly through the period ended March 31, 1999. 22 23 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The information under "Legal Proceedings" in Note 4 of the Notes to Consolidated Financial Statements herein is hereby incorporated by reference. See also "Item 3. Legal Proceedings" in the Annual Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Holdings' Annual Meeting of Stockholders was held on January 27, 1999, at which time Holding's nine incumbent directors were re-elected and the appointment of Deloitte & Touche LLP as the Company's independent accountants for the fiscal year ending September 30, 1999 was ratified. The voting results for the re-election of the nine incumbent directors are as set forth below:
FOR WITHHELD --------- -------- Frank P. Diassi........................................... 9,807,863 33,843 Peter W. De Leeuw......................................... 9,807,887 33,819 Robert W. Roten........................................... 9,828,969 12,737 Allan R. Dragone.......................................... 9,828,460 13,246 John L. Garcia............................................ 9,829,099 12,607 Frank J. Hevrdejs......................................... 9,827,683 14,023 Hunter Nelson............................................. 9,827,514 14,192 George J. Damiris......................................... 9,829,099 12,607 Rolf H. Towe.............................................. 9,829,099 12,607
The voting results for the appointment of Deloitte & Touche LLP as the independent accountants of the Company for the fiscal year ending September 30, 1999 are as follows:
FOR AGAINST ABSTAIN --------- ------- ------- 9,809,908 14,010 17,788
There were no broker non-votes for the election of directors or for the ratification and approval of the appointment of Deloitte & Touche LLP as the independent accountants for the Company for the fiscal year ending September 30, 1999. 23 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: The following exhibits are filed as part of this Form 10-Q. EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 4.1 --Third Amended and Restated Voting Agreement dated as of February 1, 1999. 11.1 --Earnings Per Share Calculation. 15.1 --Letter of Deloitte & Touche LLP regarding unaudited interim financial information. 27.1 --Financial Data Schedule of Sterling Chemicals Holdings, Inc. 27.2 --Financial Data Schedule of Sterling Chemicals, Inc. (b) Reports on Form 8-K. On March 4, 1999, the Company filed a Current Report on Form 8-K, reporting under Items 5 and 7. 24 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. STERLING CHEMICALS HOLDINGS, INC. STERLING CHEMICALS, INC. (Registrants) Date: May 13, 1999 /s/ PETER W. DE LEEUW --------------------------------------------- Peter W. De Leeuw President and Chief Executive Officer (Principal Executive Officer) Date: May 13, 1999 /s/ GARY M. SPITZ --------------------------------------------- Gary M. Spitz Vice President-Finance and Chief Financial Officer (Principal Financial Officer) 25 26 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 4.1 --Third Amended and Restated Voting Agreement dated as of February 1, 1999. 11.1 --Earnings Per Share Calculation. 15.1 --Letter of Deloitte & Touche LLP regarding unaudited interim financial information. 27.1 --Financial Data Schedule of Sterling Chemicals Holdings, Inc. 27.2 --Financial Data Schedule of Sterling Chemicals, Inc.
EX-4.1 2 THIRD AMENDED & RESTATED VOTING AGMT. - 2/1/1999 1 THIRD AMENDED AND RESTATED VOTING AGREEMENT THIS THIRD AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement") is entered into as of February 1, 1999, by and among the stockholders named on the signature pages hereto (collectively, the "Stockholders") and Sterling Chemicals Holdings, Inc., a Delaware corporation (the "Company"). PRELIMINARY STATEMENTS A. The Stockholders are beneficial owners of Common Stock (as defined below). B. On August 21, 1996, Frank P. Diassi and Marianne R. Diassi, Joint Tenants With Right of Survivorship, William C. And Margaret W. Oehmig, Tenants in Common, The Rheney Living Trust U/A 8/23/93, Frank J. Hevrdejs, Hunter Nelson, Clipper Capital Associates, L.P., Clipper Equity Partners I, L.P., Clipper/Merchant Partners, L.P., Clipper/Merban, L.P., Clipper/European Re, L.P., CS First Boston Merchant Investments 1995/96, L.P., FSI No. 2 Corporation, Koch Capital Services, Inc., Olympus Growth Fund II, L.P. and Olympus Executive Fund, L.P. (collectively, the "Original Parties") entered into that certain Voting Agreement with the Company (the "Original Voting Agreement"). C. On January 22, 1997, the Original Parties and the Company entered into that certain Amended and Restated Voting Agreement (the "First Amended and Restated Voting Agreement") pursuant to which the Original Voting Agreement was amended in certain respects and restated in its entirety. D. Certain of the Original Parties have heretofore transferred an aggregate of 100,133 shares of Common Stock to the transferees named in Schedule 1 (the "Donees") and, in connection with such transfers, the Donees became parties to the First Amended and Restated Voting Agreement. E. On December 15, 1998, the Original Parties, the Donees and the Standby Investors (as defined below) entered into that certain Amended and Restated Voting Agreement (the "Second Amended and Restated Voting Agreement") pursuant to which the First Amended and Restated Voting Agreement was amended in certain respects and restated in its entirety. F. The parties hereto desire to amend the Second Amended and Restated Voting Agreement in certain respects and to restate the Second Amended and Restated Voting Agreement, as so amended, in its entirety. 2 NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, hereby agree as follows: ARTICLE I Definitions and Interpretation 1.1. Definitions. Capitalized terms used in this Agreement shall have the following respective meanings, except as otherwise provided herein or as the context shall otherwise require: "Agreement" has the meaning specified in the introductory paragraph. "Annual Cain Designation" has the meaning specified in Section 5.2. "Annual Clipper Designation" has the meaning specified in Section 3.2. "Annual Koch Designation" has the meaning specified in Section 4.2. "Annual Meeting" means an annual meeting of the stockholders of the Company. "Board" means the board of directors of the Company. "Cain" means Gordon A. Cain. "Cain Designee" means a person designated as a nominee for election to the Board pursuant to Article V. "Cain Director" means a director of the Company designated by Cain pursuant to Article V. "Clipper Designee" means a person designated as a nominee for election to the Board pursuant to Article III. "Clipper Director" means a director of the Company designated by the Clipper Representative pursuant to Article III. "Clipper Investors" means (i) Clipper Capital Associates, L.P., (ii) Clipper Equity Partners I, L.P., (iii) Clipper/Merchant Partners, L.P., (iv) Clipper/European Re, L.P., Clipper/Merban, L.P., (v) CS First Boston Merchant Investments 1995/96, L.P., (vi) certain accredited investors who enter into agreements with Clipper Capital Associates, L.P. under which such partnership acts as a nominee with respect to Common Stock purchased on behalf of such investors and who are identified as Clipper Investors by written notice given -2- 3 by Clipper Capital Associates, L.P. to the Company and (vii) those employees of CS First Boston Corporation who enter into subscription agreements with the Company and who are identified as Clipper Investors by written notice given by Clipper Capital Associates, L.P. to the Company. "Clipper Observer" has the meaning specified in Section 3.6. "Clipper Representative" means Clipper Equity Partners I, L.P. so long as it holds Voting Stock and thereafter means all the remaining Clipper Investors. "Common Stock" means the common stock, par value $0.01 per share, of the Company and any other class of capital stock of the Company entitled to vote generally in an election of directors. "Company" has the meaning specified in the introductory paragraph. "Donees" has the meaning specified in the Preliminary Statements. "First Amended and Restated Voting Agreement" has the meaning specified in the Preliminary Statements. "Holders" means the Original Parties, the Standby Investors, Von D. Oehmig and any other person or entity that becomes a party to this Agreement after the date hereof in accordance with the terms of this Agreement. "Koch" means Koch Capital Services, Inc. "Koch Designee" means a person designated for election to the Board pursuant to Article IV. "Koch Director" means a director of the Company designated by Koch pursuant to Article IV. "Original Parties" has the meaning specified in the Preliminary Statements. "Original Voting Agreement" has the meaning specified in the Preliminary Statements. "Purchase Agreement" has the meaning specified in Section 5.1. "Second Amended and Restated Voting Agreement" has the meaning specified in the Preliminary Statements. "Standby Investors" means Cain, William A. McMinn and James Crane. -3- 4 "Stockholders" has the meaning specified in the introductory paragraph. "Voting Agreement" means (i) with respect to any day during the period from August 21, 1996 through January 21, 1997, the Original Voting Agreement, (ii) with respect to any day during the period from January 22, 1997 through December 14, 1998, the First Amended and Restated Voting Agreement, (iii) with respect to any day during the period from December 15, 1998 through January 31, 1999, the Second Amended and Restated Voting Agreement, and (iv) with respect to any day thereafter, this Agreement. "Voting Stock" means, with respect to any Holder, (i) all shares of Common Stock owned by such Holder on the date such Holder became or becomes a party to the Voting Agreement, (ii) all shares of Common Stock issued by the Company to or acquired by such Holder after the date such Holder became or becomes a party to the Voting Agreement, whether in connection with a purchase, issuance, grant, stock split, stock dividend, reorganization, warrant, option, convertible security, right to acquire or otherwise, and (iii) all securities of the Company or any other corporation or entity which such Holder acquires after the date hereof in respect of his, her or its shares of Common Stock referred to in clauses (i) and (ii) above in connection with any exchange, merger, consolidation, recapitalization, reorganization or other transaction to which the Company is a party. 1.2. Interpretation. (a) In this Agreement, unless a contrary intention appears: (i) all terms defined in the singular shall have the same meanings in the plural and vice versa; (ii) reference to any gender includes each other gender and the neuter; (iii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (iv) reference to any person or entity includes such person's or entity's heirs, executors, personal representatives, administrators, successors and assigns but, if applicable, only if such heirs, executors, personal representatives, administrators, successors and assigns are permitted by this Agreement, and reference to a person or entity in a particular capacity excludes such person or entity in any other capacity or individually; (v) reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof; and (vi) reference to any Article or Section means such Article or Section hereof. -4- 5 (b) The captions and headings contained herein are for convenience only and shall not be considered or given any effect in construing the provisions hereof if any question of intent should arise. (c) All references to Articles, Sections and Schedules shall be deemed to be references to the Articles and Sections of this Agreement and the Schedules attached hereto which are made a part hereof and incorporated herein by reference, respectively. (d) The word "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term. (e) Where any provision of this Agreement refers to action to be taken by any person or entity, or which such person or entity is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such person or entity. (f) This Agreement shall be deemed drafted jointly by all the parties hereto and shall not be interpreted or construed against any party hereto solely because such party or its legal counsel drafted such provision. ARTICLE II Size of Board The parties hereto acknowledge and agree that, so long as this Agreement remains in effect, at no time shall the total number of directors of the Company be less than the sum of (i) four plus (ii) the total number of director nominees that the Clipper Representative, Koch and Cain shall then be entitled to designate in accordance with Articles III, IV and V, respectively. ARTICLE III The Clipper Director and Observer 3.1. General. The Clipper Representative shall be entitled to designate one individual as a director nominee to serve on the Board. Such designation shall be made annually as provided in Section 3.2 or at other times as provided in Section 3.3. The parties hereto acknowledge that Robert B. Calhoun has heretofore been designated and elected as the initial Clipper Director. The Clipper Director shall serve on the Board until a successor director shall be duly elected and qualified or until his earlier death, removal or resignation. 3.2. Annual Clipper Designations. The Company shall, no later than 45 days prior to the mailing of any proxy statement with respect to an Annual Meeting, notify the Clipper Representative of the date of such mailing. As soon as practicable after receipt of such notice but in any event no later than 20 days prior to the mailing date specified therein, the Clipper Representative shall provide the Company a written instrument ("Annual Clipper Designation") designating either the incumbent Clipper Director or a person other than the incumbent Clipper -5- 6 Director, in which event the Annual Clipper Designation shall include such other person's name, age, principal occupation, business address and telephone number and residence address and telephone number. The Annual Clipper Designation shall also include or be accompanied by (i) all information relating to the person designated therein that is required to be disclosed in the proxy statement pursuant to applicable regulations of the Securities and Exchange Commission, (ii) such person's social security number, (iii) such person's consent to being named in the proxy statement as a nominee and (iv) a statement of such person's intention to serve as a director if elected to the Board. The Company shall nominate for election at such Annual Meeting the person designated in the Annual Clipper Designation. Subject to applicable laws, the Company shall take all other actions reasonably necessary to cause the Clipper Designee to be elected to the Board. Each Holder agrees to vote (or caused to be voted) the Voting Stock owned by him, her or it in favor of the Clipper Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to cause the Clipper Designee to be elected to the Board. 3.3. Interim Clipper Designations. In case a vacancy shall occur on the Board because of the death, resignation or removal of the Clipper Director, the Clipper Representative may elect either (i) to have such vacancy filled at the next Annual Meeting pursuant to a designation made in accordance with Section 3.2 or (ii) to have such vacancy filled prior to such Annual Meeting by a majority of the directors remaining in office. If the Clipper Representative wishes to make the election provided for in clause (ii) above, it shall designate a successor director nominee by written notice given to the Company and each of the other Holders (the "Interim Clipper Designation"). Subject to applicable laws, the Company shall recommend that the remaining directors elect the Clipper Designee named in any Clipper Interim Designation and shall take all other actions reasonably necessary to cause such Clipper Designee to be elected to the Board. Each Holder agrees to vote (or cause to be voted) the Voting Stock owned by him, her or it in favor of any such Clipper Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to cause any such Clipper Designee to be elected to the Board. Without limitation of the foregoing, each of Cain and Koch agrees to cause the Cain Director and the Koch Director, respectively, to vote in favor of any such Clipper Designee and each Holder who is a member of the Board agrees, subject to his fiduciary duties, to vote in favor of any such Clipper Designee. (b) In the event Clipper shall make an Interim Clipper Designation in accordance with paragraph (a) above in order to fill the vacancy created by the death, resignation or removal of the Clipper Director and in the event a majority of the directors remaining in office shall fail or refuse to appoint the Clipper Designee named in such Interim Clipper Designation to fill such vacancy within 30 days after receipt by the Company of such Interim Clipper Designation, then the Company agrees, if requested by Clipper to do so, to call a special meeting of the stockholders of the Company for the purpose of voting upon a proposal to elect such Clipper Designee to the Board; provided, however, that in no event shall the Company be required to call a special meeting of the stockholders if the Company has given a formal notice of the next Annual Meeting. -6- 7 3.4. Failure of Clipper to Designate. If the Clipper Representative shall fail or refuse to designate a nominee for director pursuant to Section 3.2 or 3.3, such directorship shall remain vacant unless and until such designation shall be made as provided in this Article III; provided, however, that if such vacancy results in less than the minimum number of directors required by law or by the charter or bylaws of the Company as then in effect, such vacancy shall be filled by an individual elected by a majority of the directors then serving. 3.5. Removal of Clipper Director. The Clipper Representative shall have the exclusive right (except as otherwise provided by applicable law or the Company's charter) to remove or replace the Clipper Director. If the Clipper Representative desires to remove the Clipper Director, it shall give written notice of such desire to the Company and the other Holders who shall thereupon become obligated to vote all Voting Stock owned by them in favor of the removal of the Clipper Director. No Holder (other than the Clipper Investors) shall vote any Voting Stock owned by him, her or it or take any other action in his, her or its capacity as a holder of Voting Stock for the removal of the Clipper Director without the prior written approval of the Clipper Representative. 3.6. The Clipper Observer. The Clipper Representative shall have the right, exercisable by written notice to the Company, to designate from time to time an observer (the "Clipper Observer") who shall have the right to attend meetings of the Board and to receive information delivered to the Board, at the expense of the Clipper Investors. The initial Clipper Observer shall be Kevin A. Macdonald. 3.7. Termination/Suspension of Clipper Rights. Notwithstanding anything in this Agreement to the contrary, the rights of the Clipper Investors and the Clipper Representative under this Article III and the obligations of the other parties hereto under this Article III shall terminate immediately and without notice upon the earliest of (i) August 21, 2006, (ii) the termination of this Agreement under Section 8.4 and (iii) any event or occurrence resulting in the holding by the Clipper Investors of less than 5% of the outstanding shares of Common Stock. Promptly upon the termination of its rights under this Article III, the Clipper Investors agree to (i) cause the resignation of, or provide notice to the Company and the other Holders as provided in Section 3.5 requesting the removal of, the incumbent Clipper Director and (ii) inform the Clipper Observer that his rights under Section 3.6 have terminated. 3.8. Irrevocable Proxy. Each of the Holders hereby grants to the Clipper Representative, on behalf of the Clipper Investors, an irrevocable proxy to vote all shares of Voting Stock presently or at any future time owned beneficially or of record by such Holder which such Holder is entitled to vote, and to represent and otherwise act as such Holder could act, in the same manner and with the same effect as if such Holder were personally present, at any annual, special or other meeting of the stockholders of the Company, and at any adjournment thereof, or pursuant to any written consent in lieu of meeting or otherwise; provided, however, that any such vote or consent in lieu thereof or any other action so taken shall be solely for the purposes of electing a Clipper Designee to the Board as provided in Section 3.2 or 3.3 or removing the Clipper Director from the Board as provided in Section 3.5. -7- 8 ARTICLE IV The Koch Director 4.1. General. Koch shall be entitled to designate one individual as a director nominee to serve on the Board. Such designation shall be made annually as provided in Section 4.2 or at other times as provided in Section 4.3. The parties hereto acknowledge that George J. Damiris has heretofore been designated and elected as the current Koch Director. The Koch Director shall serve on the Board until a successor director shall be duly elected and qualified or until his earlier death, removal or resignation. 4.2. Annual Koch Designations. The Company shall, no later than 45 days prior to the mailing of any proxy statement with respect to an Annual Meeting, notify Koch of the date of such mailing. As soon as practicable after receipt of such notice but in any event no later than 20 days prior to the mailing date specified therein, Koch shall provide the Company a written statement ("Annual Koch Designation") designating either the incumbent Koch Director or a person other than the incumbent Koch Director, in which event the Annual Koch Designation shall include such other person's name, age, principal occupation, business address and telephone number and residence address and telephone number. The Annual Koch Designation shall also include or be accompanied by (i) all information relating to the person designated therein that is required to be disclosed in the proxy statement pursuant to applicable regulations of the Securities and Exchange Commission, (ii) such person's social security number, (iii) such person's consent to being named in the proxy statement as a nominee and (iv) a statement of such person's intention to serve as a director if elected to the Board. The Company shall nominate for election at such Annual Meeting the person designated in the Annual Koch Designation. Subject to applicable laws, the Company agrees to take all other actions reasonably necessary to cause the Koch Designee to be elected to the Board. Each Holder agrees to vote (or cause to be voted) the Voting Stock owned by him, her or it in favor of the Koch Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to elect the Koch Designee to the Board. 4.3. Interim Koch Designations. (a) In case a vacancy shall occur on the Board because of the death, resignation or removal of the Koch Director, Koch may elect either (i) to have such vacancy filled at the next Annual Meeting pursuant to a designation made in accordance with Section 4.2 or (ii) to have such vacancy filled prior to such Annual Meeting by a majority of the directors remaining in office. If Koch wishes to make the election provided for in clause (ii) above, it shall designate a successor director nominee by written notice given to the Company and each of the other Holders (the "Interim Koch Designation"). Subject to applicable laws, the Company shall recommend that the remaining directors elect the Koch Designee named in the Interim Koch Designation and shall take all other actions reasonably necessary to cause such Koch Designee to be elected to the Board. Each Holder agrees to vote the Voting Stock owned by him, her or it in favor of any such Koch Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to cause any such Koch Designee to be elected to the Board. Without limitation of the foregoing, each of Cain and the Clipper Investors agrees to cause the Cain Director and the Clipper Director, respectively, to vote -8- 9 in favor of any such Koch Designee and each Holder who is a member of the Board agrees, subject to his fiduciary duties, to vote in favor of any such Koch Designee. (b) In the event Koch shall make an Interim Koch Designation in accordance with paragraph (a) above in order to fill the vacancy created by the death, resignation or removal of the Koch Director and in the event a majority of the directors remaining in office shall fail or refuse to appoint the Koch Designee named in such Interim Koch Designation to fill such vacancy within 30 days after receipt by the Company of such Interim Koch Designation, then the Company agrees, if requested by Koch to do so, to call a special meeting of the stockholders of the Company for the purpose of voting upon a proposal to elect such Koch Designee to the Board; provided, however, that in no event shall the Company be required to call a special meeting of the stockholders if the Company has given a formal notice of the next Annual Meeting. 4.4. Failure of Koch to Designate. If Koch shall fail or refuse to designate a nominee for director pursuant to Section 4.2 or 4.3, such directorship shall remain vacant unless and until such designation shall be made as provided in this Article IV; provided, however, that if such vacancy results in less than the minimum number of directors required by law or by the charter or bylaws of the Company as then in effect, such vacancy shall be filled by an individual elected by a majority of the directors then serving. 4.5. Removal of Koch Director. Koch shall have the exclusive right (except as otherwise provided by applicable law) to remove or replace the Koch Director. If Koch desires to remove the Koch Director, it shall give written notice of such desire to the Company and the other Holders who shall thereupon become obligated to vote all Voting Stock owned by them in favor of the removal of the Koch Director. No Holder (other than Koch) shall vote any Voting Stock owned by him, her or it or take any other action in his, her or its capacity as a holder of Voting Stock for the removal of the Koch Director without the prior written approval of Koch. 4.6. Termination/Suspension of Koch Rights. Notwithstanding anything in this Agreement to the contrary, the rights of Koch under this Article IV and the obligations of the other parties hereto under this Article IV shall terminate immediately and without notice upon the earliest of (i) August 21, 2006, (ii) the termination of this Agreement under Section 8.4 and (iii) any event or occurrence resulting in the holding by Koch of less than 5% of the outstanding shares of Common Stock. Promptly upon the termination of its rights under this Article IV, Koch agrees to cause the resignation of, or provide notice to the Company and the other Holders as provided in Section 4.5 requesting the removal of, the incumbent Koch Director. 4.7. Irrevocable Proxy. Each of the Holders hereby grants to Koch an irrevocable proxy to vote all shares of Voting Stock presently or at any future time owned beneficially or of record by such Holder which such Holder is entitled to vote, and to represent and otherwise act as such Holder could act, in the same manner and with the same effect as if such Holder were personally present, at any annual, special or other meeting of the stockholders of the Company, and at any adjournment thereof, or pursuant to any written consent in lieu of meeting or otherwise; provided, however, that any such vote or consent in lieu thereof or any other action so -9- 10 taken shall be solely for the purposes of electing a Koch Designee to the Board as provided in Section 4.2 or 4.3 or removing the Koch Director from the Board as provided in Section 4.5. ARTICLE V The Cain Director 5.1. General. Cain shall be entitled to designate one individual as a director nominee to serve on the Board. The initial Cain Director may be designated by Cain at any time on or after the earlier of (i) February 1, 1999 and (ii) the consummation of the first Closing (as defined in that certain Standby Purchase Agreement dated as of December 15, 1998 between the Company and Cain, which is referred to herein as the "Purchase Agreement"). Thereafter, such designation shall be made annually as provided in Section 5.2 or at other times as provided in Section 5.3. In order to designate the initial Cain Director, Cain shall provide the Company a written statement designating a person as the Cain Director, which statement shall include such person's name, age, principal occupation, business address and telephone number and residence address and telephone number and shall also include or be accompanied by (A) all information relating to the person designated therein that is required to be disclosed in the proxy statement pursuant to applicable regulations of the Securities and Exchange Commission, (B) such person's social security number, (C) such person's consent to being named in the proxy statement as a nominee and (D) a statement of such person's intention to serve as a director if elected to the Board. Upon receipt of such statement, the Company shall, as soon as practicable, call a special meeting of the Board of Directors for the purpose of increasing the size of the Board of Directors by one and electing the initial Cain Designee to fill the vacancy caused by such increase. 5.2. Annual Cain Designations. The Company shall, no later than 45 days prior to the mailing of any proxy statement with respect to an Annual Meeting, notify Cain of the date of such mailing. As soon as practicable after receipt of such notice but in any event no later than 20 days prior to the mailing date specified therein, Cain shall provide the Company a written statement ("Annual Cain Designation") designating either the incumbent Cain Director or a person other than the incumbent Cain Director, in which event the Annual Cain Designation shall include such other person's name, age, principal occupation, business address and telephone number and residence address and telephone number. The Annual Cain Designation shall also include or be accompanied by (i) all information relating to the person designated therein that is required to be disclosed in the proxy statement pursuant to applicable regulations of the Securities and Exchange Commission, (ii) such person's social security number, (iii) such person's consent to being named in the proxy statement as a nominee and (iv) a statement of such person's intention to serve as a director if elected to the Board. The Company shall nominate for election at such Annual Meeting the person designated in the Annual Cain Designation. Subject to applicable laws, the Company agrees to take all other actions reasonably necessary to cause the Cain Designee to be elected to the Board. Each Holder agrees to vote (or cause to be voted) the Voting Stock owned by him, her or it in favor of the Cain Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to elect the Cain Designee to the Board. -10- 11 5.3. Interim Cain Designations. (a) In case a vacancy shall occur on the Board because of the death, resignation or removal of the Cain Director, Cain may elect either (i) to have such vacancy filled at the next Annual Meeting pursuant to a designation made in accordance with Section 5.2 or (ii) to have such vacancy filled prior to such Annual Meeting by a majority of the directors remaining in office. If Cain wishes to make the election provided for in clause (ii) above, he shall designate a successor director nominee by written notice given to the Company and each of the other Holders (the "Interim Cain Designation"). Subject to applicable laws, the Company shall recommend that the remaining directors elect the Cain Designee named in the Interim Cain Designation and shall take all other actions reasonably necessary to cause such Cain Designee to be elected to the Board. Each Holder agrees to vote the Voting Stock owned by him, her or it in favor of any such Cain Designee and to take any other necessary or desirable action in his, her or its capacity as a holder of Voting Stock to cause any such Cain Designee to be elected to the Board. Without limitation of the foregoing, each of the Clipper Investors and Koch agrees to cause the Clipper Director and the Koch Director, respectively, to vote in favor of any such Cain Designee and each Holder who is a member of the Board agrees, subject to his fiduciary duties, to vote in favor of any such Cain Designee. (b) In the event Cain shall make an Interim Cain Designation in accordance with paragraph (a) above in order to fill the vacancy created by the death, resignation or removal of the Cain Director and in the event a majority of the directors remaining in office shall fail or refuse to appoint the Cain Designee named in such Interim Cain Designation to fill such vacancy within 30 days after receipt by the Company of such Interim Cain Designation, then the Company agrees, if requested by Cain to do so, to call a special meeting of the stockholders of the Company for the purpose of voting upon a proposal to elect such Cain Designee to the Board; provided, however, that in no event shall the Company be required to call a special meeting of the stockholders if the Company has given a formal notice of the next Annual Meeting. 5.4. Failure of Cain to Designate. If Cain shall fail or refuse to designate a nominee for director pursuant to Section 5.2 or 5.3, such directorship shall remain vacant unless and until such designation shall be made as provided in this Article V; provided, however, that if such vacancy results in less than the minimum number of directors required by law or by the charter or bylaws of the Company as then in effect, such vacancy shall be filled by an individual elected by a majority of the directors then serving. 5.5. Removal of Cain Director. Cain shall have the exclusive right (except as otherwise provided by applicable law) to remove or replace the Cain Director. If Cain desires to remove the Cain Director, he shall give written notice of such desire to the Company and the other Holders who shall thereupon become obligated to vote all Voting Stock owned by them in favor of the removal of the Cain Director. No Holder (other than Cain) shall vote any Voting Stock owned by him, her or it or take any other action in his, her or its capacity as a holder of Voting Stock for the removal of the Cain Director without the prior written approval of Cain. 5.6. Termination/Suspension of Cain Rights. Notwithstanding anything in this Agreement to the contrary, the rights of Cain under this Article V and the obligations of the other parties hereto under this Article V shall terminate immediately and without notice upon the -11- 12 earlier of (i) the termination of this Agreement under Section 8.4 and (ii) any event or occurrence resulting in the holding by Cain of less than 5% of the outstanding shares of Common Stock; provided, however, that such rights and obligations shall remain in full force and effect so long as Cain is obligated to purchase Common Stock pursuant to the Purchase Agreement. Promptly upon the termination of his rights under this Article V, Cain agrees to cause the resignation of, or provide notice to the Company and the other Holders as provided in Section 5.5 requesting the removal of, the incumbent Cain Director. 5.7. Irrevocable Proxy. Each of the Holders hereby grants to Cain an irrevocable proxy to vote all shares of Voting Stock presently or at any future time owned beneficially or of record by such Holder which such Holder is entitled to vote, and to represent and otherwise act as such Holder could act, in the same manner and with the same effect as if such Holder were personally present, at any annual, special or other meeting of the stockholders of the Company, and at any adjournment thereof, or pursuant to any written consent in lieu of meeting or otherwise; provided, however, that any such vote or consent in lieu thereof or any other action so taken shall be solely for the purposes of electing a Cain Designee to the Board as provided in Section 5.2 or 5.3 or removing the Cain Director from the Board as provided in Section 5.5. ARTICLE VI Certain Restrictions on Sale of Voting Stock, etc. 6.1. Stock Legend. (a) Each certificate for shares of Voting Stock owned by any Holder shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A VOTING AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF STERLING CHEMICALS HOLDINGS, INC., AND ARE HELD AND MAY BE SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH SUCH AGREEMENT. (b) Upon the termination of this Agreement under Section 8.4, the Company shall, without charge and upon surrender of certificates by the holders thereof and written request of such holders, cancel all certificates evidencing shares of Common Stock bearing the legend described above and issue to the holders thereof replacement certificates that do not bear such legend for an equal number of shares held by such holders. Upon the transfer of any Common Stock bearing the legend described above to a party believed by the Company to be not bound by and subject to this Agreement by virtue of Section 8.3, the Company shall, without charge and upon surrender of certificates by the holders thereof and written request of either the transferor or transferee, cancel all certificates evidencing such shares of Common Stock and issue to the transferee thereof replacement certificates that do not bear such legend. 6.2. Voting Trusts, etc. No Holder shall deposit any shares of Voting Stock in a voting trust or subject any shares of Voting Stock to any arrangement or agreement (other than this Agreement) with respect to the voting of such shares unless such trust or arrangement or -12- 13 agreement is made expressly subject to the provisions of this Agreement. Except as provided in this Agreement, no Holder shall give any proxy or power of attorney with respect to any shares of Voting Stock that permits the holder thereof to vote such shares in its discretion in an election of directors or for the removal of the Clipper Director, the Koch Director or the Cain Director unless such proxy or power of attorney is made expressly subject to the provisions of this Agreement. ARTICLE VII Representations and Warranties Each party hereto hereby represents and warrants, severally and not jointly, to each other party hereto as follows: (a) Such party has all necessary power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (b) Assuming this Agreement has been duly and validly authorized, executed and delivered by the other parties hereto, this Agreement constitutes a valid and binding agreement of such party, enforceable in accordance with its terms. (c) Neither the execution and delivery of this Agreement by such party nor the consummation by such party of the transactions contemplated hereby will conflict with or constitute a violation of or default under any contract, commitment, agreement, arrangement or restriction of any kind to which such party is a party or by which such party is bound. ARTICLE VIII Miscellaneous Provisions 8.1. Release of Donees. Upon this Agreement becoming effective, each of the Donees and any and all shares of Common Stock heretofore transferred to each of the Donees (as set forth on Schedule 1) shall be released from, and cease to be bound by, the terms of this Agreement. From and after the effectiveness of this Agreement, the Company shall, without charge and upon surrender of certificates by the holders thereof and written request of such holders, cancel all certificates evidencing such shares of Common Stock bearing the legend described in Section 6.1 and issue to the holders thereof replacement certificates that do not bear such legend for an equal number of shares held by such holders. 8.2. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the -13- 14 United States or any state thereof having jurisdiction (this being in addition to any other remedy to which they are entitled at law or in equity), and each party hereto agrees to waive in any action for such enforcement the defense that a remedy at law would be adequate. 8.3. Agreement Binding on Certain Transferees. (a) Except as otherwise provided in paragraphs (b) and (c) below, prior to any transfer of shares of Voting Stock by any Holder, the transferee of such shares must agree in writing to become bound by the terms of this Agreement. For purposes of this Agreement, all references to Holders shall be deemed to refer to the Holders and all direct and indirect transferees thereof so required to become bound. (b) Notwithstanding any provision of this Agreement to the contrary, no person or entity shall be required to become a party to or agree to be bound by the terms of this Agreement solely on account of the acquisition by such person or entity of shares of Voting Stock (i) pursuant to a bona fide public offering of such shares or (ii) pursuant to a sale of such shares pursuant to Rule 144 under the Securities Act of 1933, as amended. (c) Each Holder may request to transfer shares of Voting Stock by gift to any person or entity free of the restrictions contained in this Agreement by providing written notice to the Company of such request on or before December 1 of any calendar year (a "Gift Transfer Request"). As soon as practicable after December 1 of each year, the Company shall calculate the number of shares of Common Stock by which (i) the aggregate number of shares of Common Stock then subject to the Voting Agreement exceeds (ii) 51% of the then issued and outstanding shares of Common Stock (such excess shares being the "Shares Available for Transfer"). If the Shares Available for Transfer exceeds the aggregate number of shares of Common Stock requested to be transferred pursuant to all timely Gift Transfer Requests, each Holder that has timely delivered a Gift Transfer Request shall be entitled, on or before December 31 of such year, to make the transfers described in such Gift Transfer Requests free of the restrictions contained in this Agreement, in which event the transferees shall not be required to become a party to or agree to be bound by the terms of this Agreement solely on account of such transfers. If the aggregate number of shares of Common Stock requested to be transferred pursuant to all timely Gift Transfer Requests exceeds the Shares Available for Transfer, each Holder shall be entitled, on or before December 31 of such year, to transfer its pro rata portion of the Shares Available for Transfer (based upon the respective number of shares of Common Stock requested to be transferred under all timely Gift Transfer Requests) free of the restrictions contained in this Agreement, in which event the transferees shall not be required to become a party to or agree to be bound by the terms of this Agreement solely on account of such transfers. The Company shall, as soon as practicable after December 1 of each year, notify each Holder that has timely delivered a Gift Transfer Request of the aggregate number of shares of Common Stock which such Holder may transfer free of the restrictions contained in this Agreement. (d) Nothing contained in this Section 8.3 shall prohibit or restrict any Holder from transferring any shares of Voting Stock to any person or entity, by gift or otherwise, if the transferee is a party to this Agreement or, at the time of such transfer, becomes a party to this Agreement. -14- 15 8.4. Term of Agreement. (a) This Agreement shall not become effective for any purpose until such time as one or more counterparts hereof shall have been executed and delivered by the Company and those persons and entities that are Holders as of the date hereof and the Second Amended and Restated Voting Agreement shall remain in full force and effect until such time. (b) This Agreement shall terminate on December 15, 2008 or such earlier date as all of the persons and entities that then have the right hereunder to designate individuals as director nominees to serve on the Board shall agree upon in writing. Upon the termination of this Agreement, the rights and obligations hereunder of the Company and the Holders shall terminate and the provisions of this Agreement shall be of no force and effect. 8.5. Reliance on Opinions of Counsel. (a) The Company shall not be obligated to take any action hereunder which is contrary to applicable law. The Company may rely and shall be fully protected in acting upon any notice, request, consent, approval or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper person or persons. The Company may consult with, and obtain advice from, legal counsel in the event any question as to any of its duties hereunder and it shall incur no liability and shall be fully protected in acting or refusing to act in good faith in accordance with the written opinion or advice of such counsel. (b) Any notice, request, designation, consent or approval given or made by any Holder hereunder shall be conclusive and binding on the heirs, executors, personal representatives, administrators, successors, assigns and transferees of such Holder. (c) For the purpose of determining the number of shares of Voting Stock owned or held by any Holder, the Company may rely and shall be fully protected in acting upon the records maintained by or on behalf of the Company. 8.6. No Inconsistent Actions. Neither the Company nor any Holder shall, directly or indirectly, undertake any course of action inconsistent with the provisions or intent of this Agreement. Without limitation of the foregoing, the Company and each Holder agrees that it will not amend or cause to be amended the provisions of the Company's charter or bylaws if such amendment would create a conflict or inconsistency between this Agreement and the Company's charter or bylaws. 8.7. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, personal representatives, administrators, successors and permitted assigns. 8.8. Amendments. Except as otherwise specifically provided herein, this Agreement shall not be amended other than by an instrument in writing signed by the Company and all of the Holders; provided, however, that any shares of Voting Stock subject to the terms of this Agreement, and any person or entity, may be released from the terms of this Agreement with the -15- 16 written consent of all of the persons and entities that then have the right hereunder to designate individuals as director nominees to serve on the Board. 8.9. Notices. Any notice, request or communication shall be sufficiently given if given in writing addressed as indicated on the signature pages hereof. Notice shall be deemed given when transmitted by telex or telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, three business days after the date deposited in the United States mails. Each party hereto, by written notice to the other parties, may designate additional or different addresses for subsequent notices or communications. 8.10. Counterparts. This Agreement may be executed in counterparts, each of which when executed shall be deemed an original, but all of which together shall constitute one and the same agreement. 8.11. Entire Agreement. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior arrangements or understandings with respect to the subject matter hereof. 8.12. Conflict with Governing Documents. In the event of a conflict between this Agreement and the certificate of incorporation or the bylaws of the Company, the provisions of this Agreement shall govern. 8.13. Governing Law. THE LAWS OF THE JURISDICTION IN WHICH HOLDINGS IS INCORPORATED, THE STATE OF DELAWARE, SHALL GOVERN THIS AGREEMENT WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first written above. THE COMPANY: STERLING CHEMICALS HOLDINGS, INC. 1200 Smith Street, Suite 1900 Houston, Texas 77002 Attention: General Counsel and Secretary Fax: 713-654-9577 By: ------------------------------------- Peter W. De Leeuw, President and Chief Executive Officer -16- 17 STOCKHOLDERS: ---------------------------------------- Frank P. Diassi 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 ---------------------------------------- Marianne R. Diassi 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 WILLIAM C. AND MARGARET W. OEHMIG TENANTS IN COMMON 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 ---------------------------------------- William C. Oehmig ---------------------------------------- Margaret W. Oehmig THE RHENEY LIVING TRUST U/A 8/23/93 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 By: ------------------------------------- Susan O. Rheney, As Trustee -17- 18 ---------------------------------------- Frank J. Hevrdejs 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 ---------------------------------------- Hunter Nelson 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 CLIPPER CAPITAL ASSOCIATES, L.P., in its individual capacity and as nominee By: Clipper Capital Associates, Inc. its general partner By: --------------------------------- Printed Name: ----------------------- Title: ------------------------------ Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 -18- 19 CLIPPER EQUITY PARTNERS I, L.P. By: Clipper Capital Associates, L.P. its general partner By: Clipper Capital Associates, Inc. its general partner By: --------------------------------- Printed Name: ----------------------- Title: ------------------------------ Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 CLIPPER/MERCHANT PARTNERS, L.P. By: Clipper Capital Associates, L.P. its general partner By: Clipper Capital Associates, Inc. its general partner By: --------------------------------- Printed Name: ----------------------- Title: ------------------------------ Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 -19- 20 CLIPPER/MERBAN, L.P. By: Clipper Capital Associates, L.P. its general partner By: Clipper Capital Associates, Inc. its general partner By: --------------------------------- Printed Name: ----------------------- Title: ------------------------------ Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 CLIPPER/EUROPEAN RE, L.P. By: Clipper Capital Associates, L.P. its general partner By: Clipper Capital Associates, Inc. its general partner By: --------------------------------- Printed Name: ----------------------- Title: ------------------------------ Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 -20- 21 CS FIRST BOSTON MERCHANT INVESTMENTS 1995/96, L.P. By: Merchant Capital, Inc. its general partner By: Clipper Capital Associates, L.P. Attorney-in-Fact By: Clipper Capital Corporation, its general partner By: -------------------------------- Printed Name: ----------------------- Title: ----------------------------- Attn: Eugene Lynch 650 Madison Avenue, 9th Floor New York, New York 10022 Fax: (212) 940-6055 FSI NO. 2 CORPORATION By: ------------------------------------------- Printed Name: --------------------------------- Title: ---------------------------------------- Two Houston Center, Suite 2907 Houston, Texas 77010 Fax: (713) 654-8184 KOCH CAPITAL SERVICES, INC. By: ------------------------------------------- Printed Name: --------------------------------- Title: ---------------------------------------- Attn: C. J. Nelson 4111 East 37th Street North Wichita, Kansas 67220 Fax: (316) 828-3133 -21- 22 OLYMPUS GROWTH FUND II, L.P. By: OGP II, L.P., its general partner By: LJM Corporation, a general partner By: ------------------------------- Printed Name: --------------------- Title: ---------------------------- Metro Center, One Station Place Stamford, Connecticut 06902 Fax: (203) 353-5910 OLYMPUS EXECUTIVE FUND, L.P. By: OEF, L.P. By: LJM L.L.C., a general partner By: ------------------------------------- Printed Name: --------------------------- Title: ---------------------------------- Metro Center, One Station Place Stamford, Connecticut 06902 Fax: (203) 353-5910 ---------------------------------------- Gordon A. Cain Address: 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-8107 -22- 23 ---------------------------------------- William A. McMinn Address: 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-8107 ---------------------------------------- James Crane Address: 15350 Vickery Drive Houston, Texas 77032 Fax: (281) 618-3204 BAYLOR SCHOOL By: ------------------------------------- Printed Name: --------------------------- Title: ---------------------------------- Attn: N. Stewart Saltonstall Box 1337 Chattanooga, Texas 37401 Fax: (423) 265-4276 VANDERBILT UNIVERSITY By: ------------------------------------- Printed Name: --------------------------- Title: ---------------------------------- Attn: George B. Stadler, Asst. Treasurer Treasurer's Office 102 Alumni Hall Nashville, Tennessee 37240 Fax: (615) 343-3930 -23- 24 KINKAID INVESTMENTS FOUNDATION By: ------------------------------------- Printed Name: --------------------------- Title: ---------------------------------- Attn: William M. Wheless III 201 Kinkaid School Dr. Houston, Texas 77024 Fax: (713) 782-3543 ---------------------------------------- Von D. Oehmig 1230 Scenic Highway Lookout Mountain, Tennessee 30750 Fax: (706) 820-0323 (Phone (706) 820-0268) ---------------------------------------- Marian Oehmig Latimer 8 Bartram Road Lookout Mountain, Tennessee 37350 Fax: (423) 825-0950 WILLIAM C. AND MATILDA PATTON ---------------------------------------- William C. Patton ---------------------------------------- Matilda Patton 217 N. Hermitage Avenue Lookout Mountain, Tennessee 37350 Fax: (423) 265-3217 -24- 25 RAY W. GRIFFIN III By: ------------------------------------- Marian Oehmig Latimer (Power of Attorney) c/o Marian Oehmig Latimer 8 Bartram Road Lookout Mountain, Tennessee 37350 Fax: (423) 265-3217 ------------------------------------------ Margaret Jones 912 Euclid Avenue Birmingham, Alabama 35213 Fax: None ------------------------------------------ Alexander Jones 912 Euclid Avenue Birmingham, Alabama 35214 Fax: None ------------------------------------------ Margaret Jones as Custodian for Andrews Jones Under the Texas UGMA 912 Euclid Avenue Birmingham, Alabama 35213 Fax: None ------------------------------------------ Margaret Jones as Custodian for Michael Jones Under the Texas UGMA 912 Euclid Avenue Birmingham, Alabama 35213 Fax: None -25- 26 ---------------------------------------- P. Michael Gilbert P.O. Box 22522 Houston, Texas 77227 Fax: (713) 961-0441 1988 OEHMIG DECENDANTS TRUST By: --------------------------------------- Randolph D. Oehmig, Trustee P.O. Box 3088 Crystal River, Florida 34423-3088 Fax: (352) 795-8755 (Phone (352) 795-2402) ------------------------------------------ Randolph D. Oehmig P.O. Box 3088 Crystal River, Florida 34423-3088 Fax: (352) 795-8755 (Phone (352) 795-2402) ------------------------------------------ William Brittain Oehmig P.O. Box 2587 Chattanooga, Tennessee 37409 Fax: (423) 756-4111 -26- 27 ------------------------------------------ William C. Oehmig, Custodian for Gordon D. Oehmig 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 NICHOLAS DIASSI TRUST AGREEMENT By: --------------------------------------- Frank P. Diassi, Trustee 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 BRIANNA DIASSI TRUST AGREEMENT By: --------------------------------------- Frank P. Diassi, Trustee 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 ------------------------------------------ John K. O'Connor One Rolling Ridge Road Northfield, Illinois 60093-1013 Fax: (312) 443-0336 -27- 28 THE DIASSI CHILDREN'S TRUST U/A 12/21/89 By: ------------------------------------------ Frank P. Diassi, Trustee c/o Frank P. Diassi, Trustee 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 GABRIELLE DIASSI TRUST U/A 9/24/90 By: ------------------------------------------ Frank P. Diassi, Trustee 6 Commerce Drive Cranford, New Jersey 07016 Fax: (908) 276-5635 -------------------------------------------- Bryan Clifford Campbell Custodian for Caroline Frances Campbell UGMA 2904 Greenlee Drive Austin, Texas 78703 Fax: (512) 388-9244 -------------------------------------------- Bryan Clifford Campbell, Custodian for Stephen Clifford Campbell UGMA 2904 Greenlee Drive Austin, Texas 78703 Fax: (512) 388-9244 -28- 29 ----------------------------------------- Bryan Clifford Campbell 2904 Greenlee Drive Austin, Texas 78703 Fax: (512) 251-1485 ----------------------------------------- William J. Campbell, Custodian for Andrew Dyer Campbell UGMA 6134 Sugar Hill Houston, Texas 77057 Fax: (713) 464-0970 ----------------------------------------- William Jefferson Campbell 6134 Sugar Hill Houston, Texas 77057 Fax: (713) 464-0970 ----------------------------------------- Ross Eastman, Custodian for Ross Eastman Jr. UGMA 6255 Chevy Chase Houston, Texas 77057 Fax: (713) 785-0956 ----------------------------------------- Ross Eastman, Custodian for Alexandra Eastman UGMA 6255 Chevy Chase Houston, Texas 77057 Fax: (713) 785-0956 -29- 30 ----------------------------------------- Merrie H. Clarke, Custodian for Julian Patrick Clarke UGMA 3728 Northhampton St. NW Washington, D.C. 20015 Fax: None ----------------------------------------- Merrie H. Clarke, Custodian for Sean McLean Clarke UGMA 3728 Northhampton St. NW Washington, D.C. 20015 Fax: None ----------------------------------------- Merrie H. Clarke 3728 Northhampton St. NW Washington, D.C. 20015 Fax: None ----------------------------------------- Patricia Meyer Hevrdejs %Graphic Arts Corp. 2000 N.W. Wilson Portland, Oregon 97209 Fax: (503) 222-0779 ----------------------------------------- Dale E. Barnes The Sterling Group 8 Greenway Plaza, Suite 702 Houston, Texas 77046 Fax: (713) 877-1824 -30- 31 ----------------------------------------- Stephen A. Adger %R.R. Donnelly & Sons 1015 S. Shepherd Houston, Texas 77019 Fax: (713) 521-9707 ----------------------------------------- William J. Campbell, Custodian for William J. Campbell, Jr. UGMA 6134 Sugar Hill Houston, Texas 77057 Fax: (713) 464-0970 -31- 32 SCHEDULE 1 Transfers to Donees
DATE OF NUMBER TRANSFEROR DONEE TRANSFER OF SHARES ---------- ----- -------- --------- Frank P. Diassi Nicholas Diassi Trust Agreement 08/03/98 10,000 Frank P. Diassi Brianna Diassi Trust Agreement 08/03/98 10,000 Frank P. Diassi The Diassi Children's Trust U/A 12/21/89 04/03/97 40,000 Frank P. Diassi Gabrielle Diassi Trust U/A 9/24/90 04/03/97 20,000 William C. Oehmig Baylor School 12/20/96 833 William C. Oehmig Vanderbilt University 12/20/96 2,083 William C. Oehmig Kinkaid Investments Foundation 12/20/96 833 William C. Oehmig Marian Oehmig Latimer 12/20/96 833 William C. Oehmig William C. and Matilda Patton 12/20/96 833 William C. Oehmig Ray W. Griffin III 12/20/96 417 William C. Oehmig Margaret Jones 12/20/96 833 William C. Oehmig Margaret Jones, as Custodian for Andrews 12/20/96 417 Jones under the Texas UGMA William C. Oehmig Margaret Jones, as Custodian for Michael 12/20/96 417 Jones under the Texas UGMA William C. Oehmig Alexander Jones 12/20/96 417 William C. Oehmig P. Michael Gilbert 12/20/96 417 William C. Oehmig 1988 Oehmig Decendants Trust 12/20/96 1,667 William C. Oehmig Randolph D. Oehmig 12/20/96 833 William C. Oehmig William Brittain Oehmig 12/20/96 833 William C. Oehmig William C. Oehmig, as Custodian for 12/20/96 1,667 Gordon D. Oehmig Frank P. Diassi John K. O'Connor 04/03/97 2,000
-32- 33
DATE OF NUMBER TRANSFEROR DONEE TRANSFER OF SHARES ---------- ----- -------- --------- Frank J. Hevrdejs Bryan Clifford Campbell 12/16/97 200 Frank J. Hevrdejs Bryan Clifford Campbell 12/16/98 1,000 Frank J. Hevrdejs Bryan Clifford Campbell, as Custodian for 12/16/97 200 Caroline Frances Campbell UGMA Frank J. Hevrdejs Bryan Clifford Campbell, as Custodian for 12/16/98 400 Caroline Frances Campbell UGMA Frank J. Hevrdejs Bryan Clifford Campbell, as Custodian for 12/16/97 200 Stephen Clifford Campbell UGMA Frank J. Hevrdejs Bryan Clifford Campbell, as Custodian for 12/16/98 400 Stephen Clifford Campbell UGMA Frank J. Hevrdejs William J. Campbell 12/16/97 200 Frank J. Hevrdejs William J. Campbell 12/16/98 1,000 Frank J. Hevrdejs William J. Campbell, as Custodian for 12/16/97 200 Andrew Dyer Campbell UGMA Frank J. Hevrdejs William J. Campbell, as Custodian for 12/16/98 400 Andrew Dyer Campbell UGMA Frank J. Hevrdejs William J. Campbell, as Custodian for 12/16/97 200 William J. Campbell, Jr. UGMA Frank J. Hevrdejs William J. Campbell, as Custodian for 12/16/98 400 William J. Campbell, Jr. UGMA Frank J. Hevrdejs Ross Eastman, as Custodian for Ross 12/16/97 200 Eastman Jr. UGMA Frank J. Hevrdejs Ross Eastman, as Custodian for Ross 12/16/98 400 Eastman Jr. UGMA Frank J. Hevrdejs Ross Eastman, as Custodian for Alexandra 12/16/97 200 Eastman UGMA
-33- 34
DATE OF NUMBER TRANSFEROR DONEE TRANSFER OF SHARES ---------- ----- -------- --------- Frank J. Hevrdejs Ross Eastman, as Custodian for Alexandra 12/16/98 400 Eastman UGMA Frank J. Hevrdejs Merrie H. Clarke 12/16/97 400 Frank J. Hevrdejs Merrie H. Clarke 12/16/98 1,000 Frank J. Hevrdejs Merrie H. Clarke, as Custodian for Julian 12/16/97 200 Patrick Clarke UGMA Frank J. Hevrdejs Merrie H. Clarke, as Custodian for Julian 12/16/98 400 Patrick Clarke UGMA Frank J. Hevrdejs Merrie H. Clarke, as Custodian for Sean 12/16/97 600 McLean Clarke UGMA Frank J. Hevrdejs Merrie H. Clarke, as Custodian for Sean 12/16/98 400 McLean Clarke UGMA Frank J. Hevrdejs Patricia Meyer Hevrdejs 12/16/97 400 Frank J. Hevrdejs Patricia Meyer Hevrdejs 12/16/98 1,000 Frank J. Hevrdejs Dale E. Barnes 12/16/97 800 Frank J. Hevrdejs Dale E. Barnes 12/16/98 1,000 Frank J. Hevrdejs Stephen A. Adger 12/16/97 800 Frank J. Hevrdejs Stephen A. Adger 12/16/98 1,000
-34- EX-11.1 3 EARNINGS PER SHARE CALCULATION 1 STERLING CHEMICALS HOLDINGS, INC. EXHIBIT 11.1 EARNINGS PER SHARE COMPUTATION (Amounts in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ---------------------------- -------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- BASIC EARNINGS PER SHARE Weighted average of common stock outstanding .............. 12,466 11,984 12,446 11,918 Net Loss .................................................. $ (24,820) $ (16,288) $ (37,920) $ (26,433) Less: Preferred dividend requirements and accretion ....... (658) (591) (1,303) (1,219) Plus: Depreciation of value of Released Shares ............ 1,048 505 1,048 505 ---------- ---------- ---------- ---------- Net loss used in basic loss per share ..................... $ (24,430) $ (16,374) $ (38,175) $ (27,147) ========== ========== ========== ========== BASIC LOSS PER SHARE ................................. $ (1.96) $ (1.37) $ (3.07) $ (2.28) ========== ========== ========== ========== DILUTED EARNINGS PER SHARE Weighted average of common stock outstanding .............. 12,466 11,984 12,446 11,918 Total weighted average shares outstanding used in diluted loss per share computation (1) ............... 12,466 11,984 12,446 11,918 Net loss .................................................. $ (24,820) $ (16,288) $ (37,920) $ (26,433) Less: Preferred dividend requirements and accretion ....... (658) (591) (1,303) (1,219) Plus: Depreciation of value of Released Shares ............ 1,048 505 1,048 505 ---------- ---------- ---------- ---------- Net loss used in diluted earning per share ................ $ (24,430) $ (16,374) $ (38,175) $ (27,147) ========== ========== ========== ========== DILUTED LOSS PER SHARE (1) ....................... $ (1.96) $ (1.37) $ (3.07) $ (2.28) ========== ========== ========== ==========
(1) Due to losses resulting in anti-dilution, same as amount used in basic computation. 26 EX-15.1 4 LETTER OF DELOITTE & TOUCHE LLP 1 EXHIBIT 15.1 Deloitte & Touche LLP 333 Clay Street Suite 2300 Houston, Texas 77002 May 11, 1999 Sterling Chemicals Holdings, Inc. 1200 Smith Street, Suite 1900 Houston, Texas 77094 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Sterling Chemicals Holdings, Inc. and subsidiaries for the three and six month periods ended March 31, 1999 and 1998, as indicated in our report dated May 11, 1999; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, is incorporated by reference in Registration Statement No. 333-30917 for Sterling Chemicals Holdings, Inc. on Form S-3 and in Registration Statement No. 333-52795 for Sterling Chemicals Holdings, Inc. on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP EX-27.1 5 FINANCIAL DATA SCHEDULE OF S.C. HOLDINGS, INC.
5 0000795662 STERLING CHEMICALS HOLDINGS, INC. 1,000 6-MOS SEP-30-1999 OCT-01-1998 MAR-31-1999 4,608 0 96,900 (1,217) 71,635 189,551 761,958 (324,472) 728,457 118,857 893,219 19,553 0 123 (384,437) 728,457 324,401 324,401 303,372 303,372 27,533 0 49,951 (56,455) (18,535) (37,920) 0 0 0 (37,920) (3.07) (3.07)
EX-27.2 6 FINANCIAL DATA SCHEDULE OF STERLING CHEMICALS,INC.
5 0001014669 STERLING CHEMICALS, INC. 1,000 6-MOS SEP-30-1999 OCT-01-1998 MAR-31-1999 4,591 0 98,984 (1,217) 71,635 189,051 761,958 (324,472) 724,874 118,864 755,805 0 0 0 (249,141) 724,874 324,401 324,401 303,372 303,372 27,277 0 40,241 (46,489) (14,880) (31,609) 0 0 0 (31,609) 0 0
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