##### Table of Contents



FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission File Number: 001-08137
 AMERICAN PACIFIC CORPORATION
  
 Delaware
(State or other jurisdiction of incorporation or organization)
    
    59-6490478
(I.R.S. Employer Identification No.)
 3883 Howard Hughes Parkway, Suite 700
Las Vegas, Nevada 89169
  (702) 735-2200
  x o
 o o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company x
 o x




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##### 



AMERICAN PACIFIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
  PART I. FINANCIAL INFORMATIONITEM 1.    Financial Statements
    
    
    1Condensed Consolidated Statements of Operations (unaudited)
    
    
    1Condensed Consolidated Balance Sheets (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2.   Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    23ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk
    
    
    40ITEM 4.   Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONITEM 1.   Legal Proceedings
    
    
    42ITEM 1A. Risk Factors
    
    
    42ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56ITEM 3.   Defaults Upon Senior Securities
    
    
    56ITEM 4.   (Removed and Reserved)
    
    
    56ITEM 5.   Other Information
    
    
    56ITEM 6.   Exhibits
    
    
    56EX-10.1EX-10.2EX-10.3EX-10.4EX-31.1EX-31.2EX-32.1EX-32.2
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN PACIFIC CORPORATION
 
 Condensed Consolidated Statements of Operations


(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    37,247
    
    
    $
    31,490
    
    
    $
    130,706
    
    
    $
    133,554Cost of Revenues
    
    
    28,920
    
    
    
    24,227
    
    
    
    93,054
    
    
    
    94,260Gross Profit
    
    
    8,327
    
    
    
    7,263
    
    
    
    37,652
    
    
    
    39,294Operating Expenses
    
    
    11,946
    
    
    
    10,915
    
    
    
    35,697
    
    
    
    33,295Operating Income
    
    
    (3,619
    )
    
    
    (3,652
    )
    
    
    1,955
    
    
    
    5,999Interest and Other Income (Expense), Net
    
    
    (291
    )
    
    
    28
    
    
    
    (559
    )
    
    
    70Interest Expense
    
    
    2,671
    
    
    
    2,683
    
    
    
    8,102
    
    
    
    8,061Loss before Income Tax
    
    
    (6,581
    )
    
    
    (6,307
    )
    
    
    (6,706
    )
    
    
    (1,992
    )Income Tax Benefit
    
    
    (2,008
    )
    
    
    (2,752
    )
    
    
    (1,809
    )
    
    
    (627
    )Net Loss
    
    $
    (4,573
    )
    
    $
    (3,555
    )
    
    $
    (4,897
    )
    
    $
    (1,365
    )Loss per Share:Basic
    
    $
    (0.61
    )
    
    $
    (0.48
    )
    
    $
    (0.65
    )
    
    $
    (0.18
    )Diluted
    
    $
    (0.61
    )
    
    $
    (0.48
    )
    
    $
    (0.65
    )
    
    $
    (0.18
    )Weighted Average Shares Outstanding:Basic
    
    
    7,491,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,482,000Diluted
    
    
    7,491,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,482,000
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AMERICAN PACIFIC CORPORATION
 
 Condensed Consolidated Balance Sheets


(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 June 30,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    32,161
    
    
    $
    21,681Accounts Receivable, Net
    
    
    30,833
    
    
    
    44,028Inventories
    
    
    35,825
    
    
    
    36,356Prepaid Expenses and Other Assets
    
    
    1,917
    
    
    
    1,811Income Taxes Receivable
    
    
    3,149
    
    
    
    2,148Deferred Income Taxes
    
    
    6,139
    
    
    
    6,317Total Current Assets
    
    
    110,024
    
    
    
    112,341Property, Plant and Equipment, Net
    
    
    112,664
    
    
    
    114,645Intangible Assets, Net
    
    
    1,865
    
    
    
    3,553Goodwill
    
    
    2,631
    
    
    
    3,144Deferred Income Taxes
    
    
    21,049
    
    
    
    21,121Other Assets
    
    
    9,753
    
    
    
    10,037TOTAL ASSETS
    
    $
    257,986
    
    
    $
    264,841LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    9,647
    
    
    $
    7,444Accrued Liabilities
    
    
    4,638
    
    
    
    5,295Accrued Interest
    
    
    3,938
    
    
    
    1,650Employee Related Liabilities
    
    
    6,838
    
    
    
    6,930Income Taxes Payable
    
    
    48
    
    
    
    189Deferred Revenues and Customer Deposits
    
    
    7,305
    
    
    
    6,911Current Portion of Environmental Remediation Reserves
    
    
    2,091
    
    
    
    2,522Current Portion of Long-Term Debt
    
    
    65
    
    
    
    151Total Current Liabilities
    
    
    34,570
    
    
    
    31,092Long-Term Debt
    
    
    105,113
    
    
    
    110,097Environmental Remediation Reserves
    
    
    23,071
    
    
    
    24,168Pension Obligations
    
    
    28,925
    
    
    
    27,720Other Long-Term Liabilities
    
    
    233
    
    
    
    667Total Liabilities
    
    
    191,912
    
    
    
    193,744Commitments and ContingenciesShareholders EquityPreferred Stock - $1.00 par value; 3,000,000 authorized; none outstanding
    
    
    -
    
    
    
    -Common Stock - $0.10 par value; 20,000,000 shares authorized, 

7,543,091 and 7,504,591 issued
    
    
    754
    
    
    
    750Capital in Excess of Par Value
    
    
    72,965
    
    
    
    72,322Retained Earnings
    
    
    5,100
    
    
    
    9,997Accumulated Other Comprehensive Loss
    
    
    (12,745
    )
    
    
    (11,972
    )Total Shareholders Equity
    
    
    66,074
    
    
    
    71,097TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    257,986
    
    
    $
    264,841
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AMERICAN PACIFIC CORPORATION
 
 Condensed Consolidated Statements of Cash Flows


(Unaudited, Dollars in Thousands)
 
 Nine Months EndedJune 30,2010
    
    
    2009Cash Flows from Operating Activities:Net Loss
    
    $
    (4,897
    )
    
    $
    (1,365
    )Adjustments to Reconcile Net Loss 

to Net Cash Provided by Operating Activities:Depreciation and amortization
    
    
    11,980
    
    
    
    11,971Non-cash interest expense
    
    
    472
    
    
    
    473Share-based compensation
    
    
    635
    
    
    
    474Deferred income taxes
    
    
    136
    
    
    
    (14
    )Loss on sale of assets
    
    
    12
    
    
    
    52Changes in operating assets and liabilities:Accounts receivable, net
    
    
    12,917
    
    
    
    2,284Inventories
    
    
    711
    
    
    
    (4,847
    )Prepaid expenses and other current assets
    
    
    (127
    )
    
    
    1,792Accounts payable
    
    
    756
    
    
    
    (2,780
    )Income taxes
    
    
    (1,125
    )
    
    
    (262
    )Accrued liabilities
    
    
    (624
    )
    
    
    (1,034
    )Accrued interest
    
    
    2,288
    
    
    
    2,475Employee related liabilities
    
    
    (305
    )
    
    
    (1,298
    )Deferred revenues and customer deposits
    
    
    539
    
    
    
    3,567Environmental remediation reserves
    
    
    (1,528
    )
    
    
    (987
    )Pension obligations, net
    
    
    1,451
    
    
    
    859Other
    
    
    (280
    )
    
    
    (8
    )Net Cash Provided by Operating Activities
    
    
    23,011
    
    
    
    11,352Cash Flows from Investing Activities:Capital expenditures
    
    
    (7,392
    )
    
    
    (6,312
    )Acquisition of business, net of cash acquired
    
    
    -
    
    
    
    (6,725
    )Other investing activities
    
    
    10
    
    
    
    -Net Cash Used by Investing Activities
    
    
    (7,382
    )
    
    
    (13,037
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    (5,048
    )
    
    
    (272
    )Issuances of common stock, net
    
    
    11
    
    
    
    32Net Cash Used by Financing Activities
    
    
    (5,037
    )
    
    
    (240
    )Effect of Changes in Currency Exchange Rates on Cash
    
    
    (112
    )
    
    
    -Net Change in Cash and Cash Equivalents
    
    
    10,480
    
    
    
    (1,925
    )Cash and Cash Equivalents, Beginning of Period
    
    
    21,681
    
    
    
    26,893Cash and Cash Equivalents, End of Period
    
    $
    32,161
    
    
    $
    24,968Cash Paid (Received) For:Interest
    
    $
    5,342
    
    
    $
    5,113Income taxes
    
    
    (501
    )
    
    
    (380
    )Non-Cash Investing and Financing Transactions:Additions to Property,
Plant and Equipment not
yet paid
    
    
    1,525
    
    
    
    408Capital Leases Originated
    
    
    98
    
    
    
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AMERICAN PACIFIC CORPORATION
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIESInterim Basis of Presentation.The accompanying condensed consolidated financial statements of
American Pacific Corporation and its subsidiaries (collectively, the Company, we, us, or
our) are unaudited, but in the opinion of management, include all adjustments, which are of a
normal recurring nature, necessary to a fair statement of the results for the interim periods
presented. These statements should be read in conjunction with our consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the year ended
September 30, 2009. The operating results for the three-month and nine-month periods ended June
30, 2010 and cash flows for the nine-month period ended June 30, 2010 are not necessarily
indicative of the results that will be achieved for the full fiscal year or for future periods.Accounting Policies.A description of our significant accounting policies is included in Note 1
to our consolidated financial statements included in our Annual Report on Form 10-K for the year
ended September 30, 2009.Principles of Consolidation.Our consolidated financial statements include the accounts of
American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have
been eliminated.Effective October 1, 2008, we acquired Marotta Holdings Limited (subsequently renamed Ampac ISP
Holdings Limited) and its wholly-owned subsidiaries (collectively AMPAC ISP Holdings) for a
cash purchase price, including direct expenses and net of cash acquired, of $6,725. AMPAC ISP
Holdings was included in our consolidated financial statements beginning on October 1, 2008 and
is a component of our Aerospace Equipment segment.Fair Value Disclosure of Financial Instruments.We estimate the fair values of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities approximate their
carrying values due to their short-term nature. We estimate the fair value of our fixed-rate
long-term debt to be approximately $103,425 based on the trade date closest to June 30, 2010,
which was June 29, 2010.Depreciation and Amortization Expense.Depreciation and amortization expense is classified as
follows in our statements of operations:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Classified as cost of revenuesDepreciation
    
    $
    3,101
    
    
    $
    3,446
    
    
    $
    9,934
    
    
    $
    10,048Classified as operating expensesDepreciation
    
    
    194
    
    
    
    125
    
    
    
    487
    
    
    
    383Amortization
    
    
    509
    
    
    
    530
    
    
    
    1,559
    
    
    
    1,540Total
    
    $
    3,804
    
    
    $
    4,101
    
    
    $
    11,980
    
    
    $
    11,971
 Bill and Hold Transactions.Some of our perchlorate and fine chemicals products customers
have requested that we store materials purchased from us in our facilities (Bill and Hold
arrangements). The sales value of inventory, subject to Bill and Hold arrangements, at our
facilities was $19,612 and $25,882 as of June 30, 2010 and September 30, 2009, respectively.
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)Recently Issued or Adopted Accounting Standards.In September 2006, the Financial Accounting
Standards Board (the FASB) issued a new standard which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles in the United
States of America, and expands disclosures about fair value measurements. In February 2008, the
FASB deferred this standard for one year as it applied to certain items, including assets and
liabilities initially measured at fair value in a business combination, reporting units and
certain assets and liabilities measured at fair value in connection with goodwill impairment
tests, and long-lived assets measured at fair value for impairment assessments. The standard
applies under other accounting pronouncements that require or permit fair value measurements,
the FASB having previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. This standard was effective for us on October 1, 2008; however,
we did not adopt all the provisions of the standard as the FASB delayed the effective date of
its application to non-financial assets and liabilities. The remaining provisions became
effective for us beginning October 1, 2009. The adoption of this standard did not have a
material impact on our results of operations, financial position or cash flows.In December 2007, the FASB issued a new standard that significantly changed the accounting for
business combinations. Under the standard, an acquiring entity is required to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with
limited exceptions. The standard also includes a substantial number of new disclosure
requirements. The standard applies to us for business combinations with acquisition dates on or
after October 1, 2009. We expect that the new standard will have an impact on our accounting
for future business combinations, but the effect is dependent upon acquisitions at that time.In December 2007, the FASB issued a new standard that establishes revised accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. Specifically, the standard requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements and separate
from the parents equity. The amount of net income attributable to the noncontrolling interest
will be included in consolidated net income on the face of the income statement. It also
clarifies that changes in a parents ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling financial
interest. The standard requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the
noncontrolling equity investment on the deconsolidation date. The standard also includes
expanded disclosure requirements regarding the interests of the parent and its noncontrolling
interest. The standard was effective for us beginning on October 1, 2009. We currently have no
entities or arrangements that were affected by the adoption of this standard.In April 2008, the FASB issued a new standard which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset. The standard for determining the useful life of a recognized intangible asset
shall be applied prospectively to intangible assets acquired after the effective date. However,
the disclosure requirements must be applied prospectively to all intangible assets recognized in
the Companys financial statements as of the effective date. The standard was effective for us
beginning on October 1, 2009. The adoption of this standard did not have a material impact on
our results of operations, financial position or cash flows.In December 2008, the FASB issued a new standard that provides guidance on an employers
disclosures about plan assets of a defined benefit pension or other postretirement plan. The
objectives of the disclosures include disclosure of investment allocation decisions, major
categories of plan assets, inputs and valuation techniques used to measure the fair value of
plan assets, the effect of certain fair value measurements, and significant concentrations of
risk within plan assets. The
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)expanded disclosure requirements are effective for our fiscal year ending September 30, 2010.
The adoption of this standard is not expected to have a material impact on our results of
operations, financial position or cash flows.In April 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-17, which provides
guidance on defining a milestone under Topic 605 and determining when it may be appropriate to
apply the milestone method of revenue recognition for research or development transactions.
Consideration that is contingent on achievement of a milestone in its entirety may be recognized
as revenue in the period in which the milestone is achieved only if the milestone is judged to
meet certain criteria to be considered substantive. Milestones should be considered substantive
in their entirety and may not be bifurcated. An arrangement may contain both substantive and
nonsubstantive milestones that should be evaluated individually. We are currently evaluating the
impact of adopting this ASU, which is effective for us beginning on October 1, 2010.
 2.
    
    SHARE-BASED COMPENSATIONWe account for our share-based compensation arrangements under an accounting standard which
requires us to measure the cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of the award. The fair values of awards are
recognized as additional compensation expense, which is classified as operating expenses,
proportionately over the vesting period of the awards.Our share-based compensation arrangements are designed to advance the long-term interests of the
Company, including by attracting and retaining employees and directors and aligning their
interests with those of our stockholders. The amount, frequency, and terms of share-based awards
may vary based on competitive practices, our operating results, government regulations and
availability under our equity incentive plans. Depending on the form of the share-based award,
new shares of our common stock may be issued upon grant, option exercise or vesting of the
award. We maintain three share based plans, each as discussed below.The American Pacific Corporation Amended and Restated 2001 Stock Option Plan (the 2001 Plan)
permits the granting of stock options to employees, officers, directors and consultants. Options
granted under the 2001 Plan generally vested 50% at the grant date and 50% on the one-year
anniversary of the grant date, and expire ten years from the date of grant. As of June 30, 2010,
there were no shares available for grant under the 2001 Plan. This plan was approved by our
stockholders.The American Pacific Corporation 2002 Directors Stock Option Plan, as amended and restated (the
2002 Directors Plan) compensates non-employee directors with stock options granted annually or
upon other discretionary events. Options granted under the 2002 Directors Plan prior to
September 30, 2007 generally vested 50% at the grant date and 50% on the one-year anniversary of
the grant date, and expire ten years from the date of grant. Options granted under the 2002
Directors Plan in November 2007 vested 50% one year from the date of grant and 50% two years
from the date of grant, and expire ten years from the date of grant. As of June 30, 2010, there
were no shares available for grant under the 2002 Directors Plan. This plan was approved by our
stockholders.The American Pacific Corporation 2008 Stock Incentive Plan (the 2008 Plan) permits the
granting of stock options, restricted stock, restricted stock units and stock appreciation
rights to employees, directors and consultants. A total of 350,000 shares of common stock are
authorized for issuance under the 2008 Plan, provided that no more than 200,000 shares of common
stock may be granted pursuant to awards of restricted stock and restricted stock units.
Generally, awards granted under the 2008 Plan vest in three equal annual installments beginning
on the first anniversary of the grant date, and in the case of option awards, expire ten years
from the date of grant. As of June 30, 2010, there were 12,000 shares available for grant under
the 2008 Plan. This plan was approved by our stockholders.
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2. SHARE-BASED COMPENSATION (continued)
  Stock Options
    
    
    Restricted StockOutstanding
    
    
    Non-Vested
    
    
    Outstanding and Non-VestedWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    FairPrice
    
    
    
    
    
    
    Value
    
    
    
    
    
    
    ValueShares
    
    
    Per Share
    
    
    Shares
    
    
    Per Share
    
    
    Shares
    
    
    Per ShareBalance, September 30, 2009
    
    
    540,997
    
    
    $
    8.64
    
    
    
    161,710
    
    
    $
    5.57
    
    
    
    22,000
    
    
    $
    11.25Granted
    
    
    149,000
    
    
    
    7.21
    
    
    
    149,000
    
    
    
    3.65
    
    
    
    36,000
    
    
    
    7.15Vested
    
    
    -
    
    
    
    -
    
    
    
    (61,065
    )
    
    
    5.62
    
    
    
    (7,336
    )
    
    
    11.25Exercised
    
    
    (2,500
    )
    
    
    4.87
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Expired / Cancelled
    
    
    (28,571
    )
    
    
    8.90
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Balance, June 30, 2010
    
    
    658,926
    
    
    
    8.32
    
    
    
    249,645
    
    
    
    4.41
    
    
    
    50,664
    
    
    
    8.34
 A summary of our exercisable stock options as of June 30, 2010 is as follows:
 Number of vested stock options
    
    
    409,281Weighted-average exercise price per share
    
    $
    8.07Aggregate intrinsic value
    
    $
    15Weighted-average remaining contractual term in years
    
    
    4.8
 We determine the fair value of stock option awards at their grant date, using a
Black-Scholes Option-Pricing model applying the assumptions in the following table. We determine
the fair value of restricted stock awards based on the fair market value of our common stock on
the grant date. Actual compensation, if any, ultimately realized by optionees may differ
significantly from the amount estimated using an option valuation model.
 Nine Months EndedJune 30,2010
    
    
    2009Weighted-average grant date fair value per share of options granted
    
    $
    3.65
    
    
    $
    5.41Significant fair value assumptions:Expected term in years
    
    
    6.00
    
    
    
    6.00Expected volatility
    
    
    51.3%
    
    
    
    48.7%Expected dividends
    
    
    0.0%
    
    
    
    0.0%Risk-free interest rates
    
    
    2.3%
    
    
    
    2.7%Total intrinsic value of options exercised
    
    $
    4
    
    
    $
    21Aggregate cash received for option exercises
    
    $
    12
    
    
    $
    32Compensation cost (included in operating expenses)Stock options
    
    $
    435
    
    
    $
    375Restricted stock
    
    
    200
    
    
    
    99Total
    
    
    635
    
    
    
    474Tax benefit recognized
    
    
    143
    
    
    
    105Net compensation cost
    
    $
    492
    
    
    $
    369As of period end date:Total compensation cost for non-vested awards 

not yet recognized:Stock options
    
    $
    412
    
    
    $
    512Restricted stock
    
    $
    122
    
    
    $
    148Weighted-average years to be recognizedStock options
    
    
    1.4
    
    
    
    1.6Restricted stock
    
    
    1.5
    
    
    
    1.6
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3.
    
    SELECTED BALANCE SHEET DATAInventories.Inventories consist of the following:
 June 30,
    
    
    September 30,2010
    
    
    2009Finished goods
    
    $
    5,323
    
    
    $
    1,951Work-in-process
    
    
    17,654
    
    
    
    22,080Raw materials and supplies
    
    
    9,435
    
    
    
    9,930Deferred cost of revenues
    
    
    3,417
    
    
    
    2,395Under(over) applied manufacturing overhead costs
    
    
    (4
    )
    
    
    -Total
    
    $
    35,825
    
    
    $
    36,356
 For our Specialty Chemicals segment, purchase price variances or volume or capacity cost
variances associated with indirect manufacturing costs and that are planned and expected to be
absorbed by goods produced through the end of our fiscal year are deferred at interim reporting
dates as under(over) applied manufacturing overhead costs. The effect of unplanned or
unanticipated purchase price or volume variances are applied to goods produced in the period.
 Intangible Assets.Intangible assets consist of the following:
 June 30,
    
    
    September 30,2010
    
    
    2009Perchlorate customer list
    
    $
    38,697
    
    
    $
    38,697Less accumulated amortization
    
    
    (38,697
    )
    
    
    (38,697
    )-
    
    
    -Customer relationships
    
    
    8,897
    
    
    
    9,018Less accumulated amortization
    
    
    (7,202
    )
    
    
    (6,182
    )1,695
    
    
    
    2,836Backlog
    
    
    1,479
    
    
    
    1,579Less accumulated amortization
    
    
    (1,309
    )
    
    
    (862
    )170
    
    
    
    717Total
    
    $
    1,865
    
    
    $
    3,553
 The perchlorate customer list is an asset of our Specialty Chemicals segment and was fully
amortized as of February 2008.Customer relationships are assets of our Fine Chemicals and Aerospace Equipment segments and are
subject to amortization. Amortization expense was $341 and $310 for the three months ended June
30, 2010 and 2009, respectively, and $1,032 and $929 for the nine months ended June 30, 2010 and
2009, respectively.Backlog is an asset of our Aerospace Equipment segment and is subject to amortization.
Amortization expense was $168 and $220 for the three months ended June 30, 2010 and 2009,
respectively, and $527 and $611 for the nine months ended June 30, 2010 and 2009, respectively.Goodwill.Goodwill is an asset of our Aerospace Equipment segment and is not expected to be
deductible for tax purposes.
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4.
    
    COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE LOSSComprehensive loss consists of the following:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net Loss
    
    $
    (4,573
    )
    
    $
    (3,555
    )
    
    $
    (4,897
    )
    
    $
    (1,365
    )Other Comprehensive Loss -Foreign currency translation adjustment
    
    
    (391
    )
    
    
    765
    
    
    
    (773
    )
    
    
    (132
    )Comprehensive Loss
    
    $
    (4,964
    )
    
    $
    (2,790
    )
    
    $
    (5,670
    )
    
    $
    (1,497
    )
 The components of accumulated other comprehensive loss are as follows:
 June 30,
    
    
    September 30,2010
    
    
    2009Cumulative currency translation adjustment
    
    $
    (898
    )
    
    $
    (126
    )Unamortized benefit plan costs, net of tax of $7,898
    
    
    (11,847
    )
    
    
    (11,846
    )Total
    
    $
    (12,745
    )
    
    $
    (11,972
    )
 5.
    
    EARNINGS (LOSS) PER SHAREShares used to compute loss per share are as follows:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    (4,573
    )
    
    $
    (3,555
    )
    
    $
    (4,897
    )
    
    $
    (1,365
    )Basic weighted-average shares
    
    
    7,491,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,482,000Diluted:Weighted-average shares, basic
    
    
    7,491,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,482,000Dilutive effect of stock options
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Weighted-average shares, diluted
    
    
    7,491,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,482,000Basic loss per share
    
    $
    (0.61
    )
    
    $
    (0.48
    )
    
    $
    (0.65
    )
    
    $
    (0.18
    )Diluted loss per share
    
    $
    (0.61
    )
    
    $
    (0.48
    )
    
    $
    (0.65
    )
    
    $
    (0.18
    )
 As of June 30, 2010 and 2009, we had 658,926 and 340,161 antidilutive options outstanding,
respectively.
 6.
    
    DEBT
 Our outstanding debt balances consist of the following:
 June 30,
    
    
    September 30,2010
    
    
    2009Senior Notes, 9%, due 2015
    
    $
    105,000
    
    
    $
    110,000Capital Leases, due through 2014
    
    
    178
    
    
    
    248Total Debt
    
    
    105,178
    
    
    
    110,248Less Current Portion
    
    
    (65
    )
    
    
    (151
    )Total Long-term Debt
    
    $
    105,113
    
    
    $
    110,097
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6.
    
    DEBT (continued)
 Senior Notes.In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0%
Senior Notes due February 1, 2015 (collectively, with the exchange notes issued in August 2007
as referenced below, the Senior Notes). Proceeds from the issuance of the Senior Notes were
used to repay our former credit facilities. The Senior Notes accrue interest at an annual rate
of 9.0%, payable semi-annually in February and August. The Senior Notes are guaranteed on a
senior unsecured basis by all of our existing and future material U.S. subsidiaries. The Senior
Notes are:
 
    
    ranked equally in right of payment with all of our existing and future senior
indebtedness;
    
    ranked senior in right of payment to all of our existing and future senior subordinated
and subordinated indebtedness;
    
    effectively junior to our existing and future secured debt to the extent of the value of
the assets securing such debt; and
    
    structurally subordinated to all of the existing and future liabilities (including trade
payables) of each of our subsidiaries that do not guarantee the Senior Notes.
 The Senior Notes may be redeemed by the Company, in whole or in part, under the following
circumstances:
 
    
    at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of
the Senior Notes plus an applicable premium as defined in the related indenture;
    
    at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the
principal amount to be redeemed and reducing to 100% by February 1, 2013; and
    
    under certain changes of control, we must offer to purchase the Senior Notes at 101% of
their aggregate principal amount, plus accrued interest.
 The Senior Notes were issued pursuant to an indenture which contains certain customary events of
default, including cross-default provisions if we default under our existing and future debt
agreements having, individually or in the aggregate, a principal or similar amount outstanding
of at least $10,000, and certain other covenants limiting, subject to exceptions, carve-outs and
qualifications, our ability to:
 
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
 In connection with the closing of the sale of the Senior Notes, we entered into a registration
rights agreement which required us to file a registration statement to offer to exchange the
Senior Notes for notes that have substantially identical terms as the Senior Notes and are
registered under the Securities Act of 1933, as amended. In July 2007, we filed a registration
statement with the SEC with respect to an offer to exchange the Senior Notes as required by the
registration rights agreement, which registration statement was declared effective by the SEC.
In August 2007, we completed the exchange of 100% of the Senior Notes for substantially
identical notes which are registered under the Securities Act of 1933, as amended.
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6.
    
    DEBT (continued)
 Senior Note Repurchase.In June 2010, we repurchased and cancelled $5,000 in principal amount
of our Senior Notes for $4,900. As a result of this repurchase, we recorded an immaterial loss
of $16 in other income (expense), net of deferred financing costs of $116.
 Revolving Credit Facility.In February 2007, we entered into an Amended and Restated Credit
Agreement, as amended as of July 7, 2009 (the Revolving Credit Facility), with Wachovia Bank,
National Association (predecessor by merger to Wells Fargo Bank, National Association), and
certain other lenders, which provides a secured revolving credit facility in an aggregate
principal amount of up to $20,000 with an initial maturity of 5 years. We may prepay and
terminate the Revolving Credit Facility at any time. The annual interest rates applicable to
loans under the Revolving Credit Facility are, at our option, either the Alternate Base Rate or
LIBOR Rate (each as defined in the Revolving Credit Facility) plus, in each case, an applicable
margin. The applicable margin is tied to our total leverage ratio (as defined in the Revolving
Credit Facility). In addition, we pay commitment fees, other fees related to the issuance and
maintenance of letters of credit, and certain agency fees.
 The Revolving Credit Facility is guaranteed by and secured by substantially all of the assets of
our current and future domestic subsidiaries, subject to certain exceptions as set forth in the
Revolving Credit Facility. The Revolving Credit Facility contains certain negative covenants
restricting and limiting our ability to, among other things:
 
    
    incur debt, incur contingent obligations and issue certain types of preferred stock;
    
    create liens;
    
    pay dividends, distributions or make other specified restricted payments;
    
    make certain investments and acquisitions;
    
    enter into certain transactions with affiliates;
    
    enter into sale and leaseback transactions; and
    
    merge or consolidate with any other entity or sell, assign, transfer, lease, convey or
otherwise dispose of assets.
 Financial covenants under the Revolving Credit Facility include quarterly requirements for total
leverage ratio of less than or equal to 5.25 to 1.00 (Total Leverage Ratio), and interest
coverage ratio of at least 2.50 to 1.00 (Interest Coverage Ratio). The Revolving Credit
Facility defines Total Leverage Ratio as the ratio of Consolidated Funded Debt to Consolidated
EBITDA and Interest Coverage Ratio as the ratio of Consolidated EBITDA to Consolidated Interest
Expense. With respect to these covenant compliance calculations, Consolidated EBITDA, as defined
in the Revolving Credit Facility (hereinafter, referred to as Credit Facility EBITDA), differs
from typical EBITDA calculations and our calculation of Adjusted EBITDA, which is used in
certain of our public releases and in connection with our incentive compensation plan. The most
significant difference in the Credit Facility EBITDA calculation is the inclusion of cash
payments for environmental remediation as part of the calculation. The following statements
summarize the elements of those definitions that are material to our computations. Consolidated
Funded Debt generally includes principal amounts outstanding under our Senior Notes, Revolving
Credit Facility, capital leases and notional amounts for outstanding letters of credit. Credit
Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense
(benefit), interest expense, depreciation and amortization, and stock-based compensation expense
and less cash payments for environmental remediation and other non-recurring gains in excess of
$50. In accordance with the definitions contained in the Revolving Credit Facility, as of June
30, 2010, our Total Leverage Ratio was 3.88 to 1.00 and our Interest Coverage Ratio was 2.72 to
1.00.
 The Revolving Credit Facility also contains usual and customary events of default (subject to
certain threshold amounts and grace periods), including cross-default provisions that include
our Senior Notes. If an event of default occurs and is continuing, we may be required to repay
the obligations
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6.
    
    DEBT (continued)
 under the Revolving Credit Facility prior to its stated maturity and the related commitments may
be terminated.
 As of June 30, 2010, under our Revolving Credit Facility, we had no borrowings outstanding,
availability of $18,112, and we were in compliance with its various financial covenants.
Availability is computed as the total commitment of $20,000 less outstanding borrowings and
outstanding letters of credit, if any.
 Letters of Credit.As of June 30, 2010, we had $1,888 in outstanding standby letters of credit
which mature through July 2013. These letters of credit principally secure performance of
certain water treatment equipment sold by us and payment of fees associated with the delivery of
natural gas and power.
 7.
    
    COMMITMENTS AND CONTINGENCIES
 Regulatory Review of Perchlorates.Our Specialty Chemicals segment manufactures and sells
products that contain perchlorates. Federal and state regulators continue to review the effects
of perchlorate, if any, on human health and the related allowable maximum level of contaminant
from perchlorate. While the presence of regulatory review presents general business risk to the
Company, we are currently unaware of any regulatory proposal that would have a material effect
on our results of operations and financial position or that would cause us to significantly
modify or curtail our business practices, including our remediation activities discussed below.
 Perchlorate Remediation Project in Henderson, Nevada.We commercially manufactured perchlorate
chemicals at a facility in Henderson, Nevada (AMPAC Henderson Site) from 1958 until the
facility was destroyed in May 1988, after which we relocated our production to a new facility in
Iron County, Utah. Kerr-McGee Chemical Corporation (KMCC) also operated a perchlorate
production facility in Henderson, Nevada (the KMCC Site) from 1967 to 1998. In addition,
between 1956 and 1967, American Potash operated a perchlorate production facility and, for many
years prior to 1956, other entities also manufactured perchlorate chemicals at the KMCC Site.
As a result of a longer production history in Henderson, KMCC and its predecessor operations
manufactured significantly greater amounts of perchlorate over time than we did at the AMPAC
Henderson Site.
 In 1997, the Southern Nevada Water Authority (SNWA) detected trace amounts of the perchlorate
anion in Lake Mead and the Las Vegas Wash. Lake Mead is a source of drinking water for Southern
Nevada and areas of Southern California. The Las Vegas Wash flows into Lake Mead from the Las
Vegas valley.
 In response to this discovery by SNWA, and at the request of the Nevada Division of
Environmental Protection (NDEP), we engaged in an investigation of groundwater near the AMPAC
Henderson Site and down gradient toward the Las Vegas Wash. The investigation and related
characterization, which lasted more than six years, employed experts in the field of
hydrogeology. This investigation concluded that although there is perchlorate in the groundwater
in the vicinity of the AMPAC Henderson Site up to 700 parts per million, perchlorate from this
site does not materially impact, if at all, water flowing in the Las Vegas Wash toward Lake
Mead. It has been well established, however, by data generated by SNWA and NDEP, that
perchlorate from the KMCC Site did impact the Las Vegas Wash and Lake Mead. KMCCs successor,
Tronox LLC, operates an above ground perchlorate groundwater remediation facility at their
Henderson site.
 Notwithstanding these facts, and at the direction of NDEP and the U.S. Environmental Protection
Agency (the EPA), we conducted an investigation of remediation technologies for perchlorate in
groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. The
technology that was chosen as most efficient and appropriate was in situ bioremediation (ISB).
ISB
reduces perchlorate in the groundwater by precise addition of an appropriate carbon source to
the
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
 groundwater itself while it is still in the ground (as opposed to an above ground, more
conventional, ex situ process). This induces naturally occurring organisms in the groundwater
to reduce the perchlorate among other oxygen containing compounds.In 2002, we conducted a pilot test in the field of the ISB technology and it was successful. On
the basis of the successful test and other evaluations, in the fiscal year ended September 30,
2005 (Fiscal 2005), we submitted a work plan to NDEP for the construction of a remediation
facility near the AMPAC Henderson Site. The conditional approval of the work plan by NDEP in
our third quarter of Fiscal 2005 allowed us to generate estimated costs for the installation and
operation of the remediation facility to address perchlorate at the AMPAC Henderson Site. We
commenced construction in July 2005. In December 2006, we began operations. The location of
this facility is several miles, in the direction of groundwater flow, from the AMPAC Henderson
Site.At the request of the NDEP, in the summer of 2009, we began renewed discussions, which remain
on-going, to formalize our remediation efforts in a voluntary agreement that, if negotiated and
executed, would provide more detailed regulatory guidance on environmental characterization and
remedies at the AMPAC Henderson Site and vicinity. The agreement under discussion would be
expected to be similar to others previously executed by the NDEP with other companies under
similar circumstances. Typically, such agreements generally cover such matters as the scope of
work plans, schedules, deliverables, remedies for non compliance, and reimbursement to the State
of Nevada for past and future oversight.Henderson Site Environmental Remediation Reserve.We accrue for anticipated costs associated
with environmental remediation that are probable and estimable. On a quarterly basis, we review
our estimates of future costs that could be incurred for remediation activities. In some cases,
only a range of reasonably possible costs can be estimated. In establishing our reserves, the
most probable estimate is used; otherwise, we accrue the minimum amount of the range.During our Fiscal 2005 third quarter, we recorded a charge for $22,400 representing our estimate
of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the
costs for capital equipment, operating and maintenance (O&M), and consultants. The project
consisted of two primary phases: the initial construction of the remediation equipment phase and
the O&M phase. During the fiscal year ended September 30, 2006, we increased our total cost
estimate of probable costs for the construction phase by $3,600 due primarily to changes in the
engineering designs, delays in receiving permits and the resulting extension of construction
time.ISB is a new technology on the scale being used at the AMPAC Henderson Site. Accordingly, as we
gain ISB operational experience, we have been and are observing certain conditions, operating
results and other data which we consider in updating the assumptions used to determine our cost
estimates. The two most significant assumptions are the estimated speed of groundwater flowing
to our remediation extraction wells and the estimated annual O&M costs.Late in the fiscal year ended September 30, 2009 (Fiscal 2009), we gained additional
information from groundwater modeling that indicates groundwater emanating from the AMPAC
Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is
moving toward our existing remediation facility at a much slower pace than previously estimated.
Utilization of our existing facilities alone, at this lower groundwater pace, could, according
to this more recently created groundwater model, extend the life of our remediation project to
well in excess of fifty years. As a result of this additional data, we re-evaluated our
remediation operations. This evaluation indicates that we should be able to significantly
reduce the total project time, and ultimately the total cost of the project, by installing
additional groundwater extraction wells in the deeper, more concentrated areas, thereby
providing for a more aggressive remediation treatment. The additional wells and related
remediation equipment will incorporate above ground treatment to supplement or possibly replace
by consolidation our existing ISB process. With the additional extraction wells and equipment,
we
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
 estimate that the total remaining project life for the existing and new, more aggressive deep
zone systems could range from 10 to 29 years, beginning with the fiscal year ending September
30, 2010 (Fiscal 2010). Within that range, we estimate that a range of 13 to 23 years is more
likely. Groundwater speed, perchlorate concentrations, aquifer characteristics and forecasted
groundwater extraction rates continue to be key variables underlying our estimate of the life of
the project. If additional information becomes available in the future that is different than
information currently available to us, our estimate of the resulting project life could change
significantly.In our Fiscal 2009 fourth quarter, we accrued approximately $9,600 representing our estimate of
the cost to engineer, design, and install this additional equipment. We anticipate that these
amounts will be spent through and the new equipment operational in approximately fall 2011.
However, because we are in the early design and engineering steps, this estimate involves a
number of significant assumptions. Due to uncertainties inherent in making early stage
estimates, our estimate may later require significant revision as new facts become available and
circumstances change.In addition to accruing approximately $9,600 for engineering, design, installation and cost of
additional equipment, in our Fiscal 2009 fourth quarter, we increased our estimate of total
remaining O&M costs by $4,100 due primarily to incremental O&M costs to operate and maintain the
additional equipment once installed. Total O&M expenses are currently estimated at approximately
$1,000 per year and estimated to increase to approximately $1,300 per year after the additional
equipment becomes operational. To estimate O&M costs, we consider, among other factors, the
project scope and historical expense rates to develop assumptions regarding labor, utilities,
repairs, maintenance supplies and professional service costs. If additional information becomes
available in the future that is different than information currently available to us and thereby
leads us to different conclusions, our estimate of O&M expenses could change significantly.In addition, certain remediation activities are conducted on public lands under operating
permits. In general, these permits require us to return the land to its original condition at
the end of the permit period. Estimated costs associated with removal of remediation equipment
from the land are not material and are included in our range of estimated costs.As of June 30, 2010, the aggregate range of anticipated environmental remediation costs was from
approximately $21,400 to approximately $45,600 based on a possible total remaining life of the
project ranging from 10 to 29 years. The accrued amount was $25,162, based on 13 years
(beginning with Fiscal 2010), or the low end of the more likely range of 13 to 23 years as no
amount within the range was more likely. These estimates are based on information currently
available to us and may be subject to material adjustment upward or downward in future periods
as new facts or circumstances may indicate. A summary of our environmental reserve activity for
the nine months ended June 30, 2010 is shown below:
 Balance, September 30, 2009
    
    $
    26,690Additions or adjustments
    
    
    -Expenditures
    
    
    (1,528
    )Balance, June 30, 2010
    
    $
    25,162
 AFC Environmental Matters.Our Fine Chemicals segment, Ampac Fine Chemicals LLC (AFC),
is located on land leased from Aerojet-General Corporation (Aerojet). The leased land is part
of a tract of land owned by Aerojet designated as a Superfund site under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). The tract of land
had been used by Aerojet and affiliated companies to manufacture and test rockets and related
equipment since the 1950s. Although the chemicals identified as contaminants on the leased land
were not used by Aerojet Fine Chemicals LLC (predecessor in interest to AFC) as part of its
operations, CERCLA,
among other things, provides for joint and severable liability for environmental liabilities
including, for example, environmental remediation expenses.
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
 As part of the agreement by which we acquired the business of AFC from GenCorp Inc. (GenCorp),
an Environmental Indemnity Agreement was entered into whereby GenCorp agreed to indemnify us
against any and all environmental costs and liabilities arising out of or resulting from any
violation of environmental law prior to the effective date of the sale, or any release of
hazardous substances by Aerojet Fine Chemicals LLC, Aerojet or GenCorp on the AFC premises or
Aerojets Sacramento site prior to the effective date of the sale.On November 29, 2005, EPA Region IX provided us with a letter indicating that the EPA does not
intend to pursue any clean up or enforcement actions under CERCLA against future lessees of the
Aerojet property for existing contamination, provided that the lessees do not contribute to or
do not exacerbate existing contamination on or under the Aerojet Superfund site.Other Matters.Although we are not currently party to any material pending legal proceedings,
we are from time to time subject to claims and lawsuits related to our business operations. We
accrue for loss contingencies when a loss is probable and the amount can be reasonably
estimated. Legal fees, which can be material in any given period, are expensed as incurred. We
believe that current claims or lawsuits against us, individually and in the aggregate, will not
result in loss contingencies that will have a material adverse effect on our financial
condition, cash flows or results of operations.
 8.
    
    SEGMENT INFORMATION
 We report our business in four operating segments: Fine Chemicals, Specialty Chemicals,
Aerospace Equipment and Other Businesses. These segments are based upon business units that
offer distinct products and services, are operationally managed separately and produce products
using different production methods. Segment operating income or loss includes all sales and
expenses directly associated with each segment. Environmental remediation charges, corporate
general and administrative costs, which consist primarily of executive, investor relations,
accounting, human resources and information technology expenses, and interest are not allocated
to segment operating results.Fine Chemicals.Our Fine Chemicals segment includes the operating results of our wholly-owned
subsidiaries Ampac Fine Chemicals LLC and AMPAC Fine Chemicals Texas, LLC (collectively, AMPAC
Fine Chemicals or AFC). AFC is a custom manufacturer of active pharmaceutical ingredients and
registered intermediates for commercial customers in the pharmaceutical industry. AFC operates
in compliance with the U.S. Food and Drug Administrations current Good Manufacturing Practices
and other regulatory agencies such as the European Unions European Medicines Agency and Japans
Pharmaceuticals and Medical Devices Agency. AFC has distinctive competencies and specialized
engineering capabilities in performing chiral separations, manufacturing chemical compounds that
require high containment and performing energetic chemistries at commercial scale.Specialty Chemicals.Our Specialty Chemicals segment manufactures and sells: (i) perchlorate
chemicals, principally ammonium perchlorate, which is the predominant oxidizing agent for solid
propellant rockets, booster motors and missiles used in space exploration, commercial satellite
transportation and national defense programs, (ii) sodium azide, a chemical used in
pharmaceutical manufacturing, and (iii) Halotronâ, a series of clean fire extinguishing
agents used in fire extinguishing products ranging from portable fire extinguishers to total
flooding systems.Aerospace Equipment. Our Aerospace Equipment segment includes the operating results of our
wholly-owned subsidiary Ampac-ISP Corp. and its wholly-owned subsidiaries (collectively, AMPAC
ISP). AMPAC ISP manufactures monopropellant and bipropellant liquid propulsion systems and
thrusters for satellites, launch vehicles, and interceptors. In addition, AMPAC ISP designs,
develops and manufactures high performance valves, pressure regulators, cold-gas propulsion
systems, and precision structures for space applications, especially in the European space
market.
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8. SEGMENT INFORMATION (Continued)
 Other Businesses.Our Other Businesses segment contains our water treatment equipment and real
estate activities. Our water treatment equipment business designs, manufactures and markets
systems for the control of noxious odors, the disinfection of water streams and the treatment of
seawater. Our real estate activities are not material.
 Our revenues are characterized by individually significant orders and relatively few customers.
As a result, in any given reporting period, certain customers may account for more than ten
percent of our consolidated revenues.
 The following table provides disclosure of the percentage of our consolidated revenues
attributed to customers that exceed ten percent of the total in each of the given periods.
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fine chemicals customer
    
    
    17
    %
    
    
    38
    %
    
    
    24
    %
    
    
    26
    %Fine chemicals customer
    
    
    11
    %
    
    
    
    
    
    
    
    
    
    
    10
    %Fine chemicals customer
    
    
    11
    %Fine chemicals customer
    
    
    13
    %Specialty chemicals customer
    
    
    
    
    
    
    
    
    
    
    12
    %
    
    
    17
    %Specialty chemicals customer
    
    
    
    
    
    
    11
    %
 The following provides financial information about our segment operations:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Fine Chemicals
    
    $
    19,951
    
    
    $
    15,644
    
    
    $
    63,128
    
    
    $
    67,766Specialty Chemicals
    
    
    8,168
    
    
    
    6,299
    
    
    
    35,057
    
    
    
    40,940Aerospace Equipment
    
    
    8,647
    
    
    
    9,085
    
    
    
    27,140
    
    
    
    21,977Other Businesses
    
    
    481
    
    
    
    462
    
    
    
    5,381
    
    
    
    2,871Total Revenues
    
    $
    37,247
    
    
    $
    31,490
    
    
    $
    130,706
    
    
    $
    133,554Segment Operating Income (Loss):Fine Chemicals
    
    $
    (2,458
    )
    
    $
    (752
    )
    
    $
    (698
    )
    
    $
    (370
    )Specialty Chemicals
    
    
    2,796
    
    
    
    552
    
    
    
    15,140
    
    
    
    16,481Aerospace Equipment
    
    
    (120
    )
    
    
    417
    
    
    
    (457
    )
    
    
    1,571Other Businesses
    
    
    (286
    )
    
    
    (215
    )
    
    
    (234
    )
    
    
    164Total Segment Operating Income (Loss)
    
    
    (68
    )
    
    
    2
    
    
    
    13,751
    
    
    
    17,846Corporate Expenses
    
    
    (3,551
    )
    
    
    (3,654
    )
    
    
    (11,796
    )
    
    
    (11,847
    )Operating Income (Loss)
    
    $
    (3,619
    )
    
    $
    (3,652
    )
    
    $
    1,955
    
    
    $
    5,999Depreciation and Amortization:Fine Chemicals
    
    $
    3,200
    
    
    $
    3,281
    
    
    $
    9,722
    
    
    $
    9,625Specialty Chemicals
    
    
    14
    
    
    
    324
    
    
    
    591
    
    
    
    951Aerospace Equipment
    
    
    424
    
    
    
    378
    
    
    
    1,239
    
    
    
    1,032Other Businesses
    
    
    4
    
    
    
    3
    
    
    
    12
    
    
    
    9Corporate
    
    
    162
    
    
    
    115
    
    
    
    416
    
    
    
    354Total Depreciation and Amortization
    
    $
    3,804
    
    
    $
    4,101
    
    
    $
    11,980
    
    
    $
    11,971
 - 16 -




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##### Table of Contents



9.
    
    INCOME TAXES
 We review our portfolio of uncertain tax positions and recorded liabilities based on the
applicable recognition standards. In this regard, an uncertain tax position represents our
expected treatment of a tax position taken in a filed tax return, or planned to be taken in a
future tax return, that has not been reflected in measuring income tax expense for financial
reporting purposes. We classify uncertain tax positions as non-current income tax liabilities
unless expected to be settled within one year.As of June 30, 2010 and September 30, 2009, our recorded liability for unrecognized tax benefits
was $329, of which $327 would affect our effective tax rate if recognized, and $652,
respectively. The remaining balance is related to deferred tax items which only impact the
timing of tax payments. It is reasonably possible that the gross liability for unrecognized tax
benefits will decrease by $79 during the next twelve months primarily as a result of the lapsing
of statutes of limitations.We recognize accrued interest and penalties related to unrecognized tax benefits in income tax
expense. As of June 30, 2010 and September 30, 2009, we had accrued $80 and $164, respectively,
for the payment of tax-related interest and penalties. For the nine months ended June 30, 2010
and 2009, income tax benefit includes a benefit of $140 and $1, respectively, for interest and
penalties.We file income tax returns in the U.S. federal jurisdiction, various states, and foreign
jurisdictions. With few exceptions, we are no longer subject to federal or state income tax
examinations for years before 2007.
 10.
    
    DEFINED BENEFIT PLANS
 We maintain three defined benefit pension plans which cover substantially all of our U.S. employees, excluding employees
of our Aerospace Equipment segment: the Amended and Restated American Pacific Corporation Defined Benefit Pension Plan,
the Ampac Fine Chemicals LLC Pension Plan for Salaried Employees, and the Ampac Fine Chemicals LLC Pension Plan for
Bargaining Unit Employees, each as amended and restated (collectively, the Pension Plans). In May 2010, our board
of directors approved amendments to our Pension Plans which effectively closed the Pension Plans to participation by
any new employees. Retirement benefits for existing U.S. employees and retirees through June 30, 2010 are not effected
by this change. Beginning July 1, 2010, new U.S. employees will participate solely in one of the Companys 401(k) plans.In addition, we maintain the American Pacific Corporation Supplemental Executive Retirement
Plan, as amended and restated (the SERP), which includes certain of our existing and prior
executive officers.We maintain two 401(k) plans in which participating employees may make contributions. One covers
substantially all U.S. employees except AFC bargaining unit employees and the other covers AFC
bargaining unit employees. For U.S. employees of the Company prior to July 1, 2010, we make
matching contributions for AFC employees and U.S. employees of our Aerospace Equipment segment.
In addition, we make a profit sharing contribution for U.S. employees of our Aerospace Equipment
segment. Beginning July 1, 2010, for all eligible new U.S. employees we will make matching
contributions.We provide healthcare and life insurance benefits to substantially all of our employees.
 - 17 -




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##### Table of Contents



10.
    
    DEFINED BENEFIT PLANS (Continued)
 Net periodic pension cost consists of the following:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Pension Plans:Service Cost
    
    $
    397
    
    
    $
    524
    
    
    $
    1,647
    
    
    $
    1,538Interest Cost
    
    
    864
    
    
    
    832
    
    
    
    2,460
    
    
    
    2,172Expected Return on Plan Assets
    
    
    (600
    )
    
    
    (448
    )
    
    
    (1,806
    )
    
    
    (1,650
    )Recognized Actuarial Losses
    
    
    357
    
    
    
    169
    
    
    
    883
    
    
    
    387Amortization of Prior Service Costs
    
    
    13
    
    
    
    19
    
    
    
    51
    
    
    
    57Net Periodic Pension Cost
    
    $
    1,031
    
    
    $
    1,096
    
    
    $
    3,235
    
    
    $
    2,504Supplemental Executive Retirement Plan:Service Cost
    
    $
    109
    
    
    $
    67
    
    
    $
    329
    
    
    $
    262Interest Cost
    
    
    94
    
    
    
    73
    
    
    
    281
    
    
    
    277Expected Return on Plan Assets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Recognized Actuarial Losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Amortization of Prior Service Costs
    
    
    105
    
    
    
    116
    
    
    
    315
    
    
    
    326Net Periodic Pension Cost
    
    $
    308
    
    
    $
    256
    
    
    $
    925
    
    
    $
    865
 For the nine months ended June 30, 2010, we contributed $2,615 to the Pension Plans to fund
benefit payments and anticipate making approximately $672 in additional contributions through
September 30, 2010. For the nine months ended June 30, 2010, we contributed $95 to the SERP to
fund benefit payments and anticipate making approximately $332 in additional contributions
through September 30, 2010.
 11.
    
    GUARANTOR SUBSIDIARIES
 As discussed in Note 6, in February 2007, American Pacific Corporation, a Delaware corporation
(Parent) issued and sold $110,000 aggregate principal amount of Senior Notes. In connection
with the issuance of the Senior Notes, the Parents material U.S. subsidiaries (Guarantor
Subsidiaries) jointly, fully, severally, and unconditionally guaranteed the Senior Notes. The
Parents foreign subsidiaries (Non-Guarantor Subsidiaries) are not guarantors of the Senior
Notes. Each of the Parents subsidiaries is 100% owned. The Parent has no independent assets or
operations. The following presents condensed consolidating financial information separately for
the Parent, Guarantor Subsidiaries and Non-Guarantor Subsidiaries.
 - 18 -




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##### Table of Contents



11.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Balance Sheet

- June 30,  2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    31,643
    
    
    $
    518
    
    
    $
    -
    
    
    $
    32,161Accounts Receivable, Net
    
    
    -
    
    
    
    27,088
    
    
    
    4,294
    
    
    
    (549
    )
    
    
    30,833Inventories
    
    
    -
    
    
    
    34,579
    
    
    
    1,246
    
    
    
    -
    
    
    
    35,825Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,531
    
    
    
    386
    
    
    
    -
    
    
    
    1,917Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    9,288
    
    
    
    -
    
    
    
    -
    
    
    
    9,288Total Current Assets
    
    
    -
    
    
    
    104,129
    
    
    
    6,444
    
    
    
    (549
    )
    
    
    110,024Property, Plant and Equipment, Net
    
    
    -
    
    
    
    111,082
    
    
    
    1,582
    
    
    
    -
    
    
    
    112,664Intangible Assets, Net
    
    
    -
    
    
    
    847
    
    
    
    1,018
    
    
    
    -
    
    
    
    1,865Goodwill
    
    
    -
    
    
    
    -
    
    
    
    2,631
    
    
    
    -
    
    
    
    2,631Deferred Income Taxes
    
    
    -
    
    
    
    21,049
    
    
    
    -
    
    
    
    -
    
    
    
    21,049Other Assets
    
    
    -
    
    
    
    9,753
    
    
    
    -
    
    
    
    -
    
    
    
    9,753Intercompany Advances
    
    
    79,929
    
    
    
    4,333
    
    
    
    -
    
    
    
    (84,262
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    91,145
    
    
    
    3,646
    
    
    
    -
    
    
    
    (94,791
    )
    
    
    -Total Assets
    
    $
    171,074
    
    
    $
    254,839
    
    
    $
    11,675
    
    
    $
    (179,602
    )
    
    $
    257,986Liabilitites and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    23,638
    
    
    $
    2,020
    
    
    $
    (549
    )
    
    $
    25,109Environmental Remediation Reserves
    
    
    -
    
    
    
    2,091
    
    
    
    -
    
    
    
    -
    
    
    
    2,091Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    5,735
    
    
    
    1,570
    
    
    
    -
    
    
    
    7,305Current Portion of Long-Term Debt
    
    
    -
    
    
    
    21
    
    
    
    44
    
    
    
    -
    
    
    
    65Intercompany Advances
    
    
    -
    
    
    
    79,929
    
    
    
    4,333
    
    
    
    (84,262
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    111,414
    
    
    
    7,967
    
    
    
    (84,811
    )
    
    
    34,570Long-Term Debt
    
    
    105,000
    
    
    
    62
    
    
    
    51
    
    
    
    -
    
    
    
    105,113Environmental Remediation Reserves
    
    
    -
    
    
    
    23,071
    
    
    
    -
    
    
    
    -
    
    
    
    23,071Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    29,147
    
    
    
    11
    
    
    
    -
    
    
    
    29,158Total Liabilities
    
    
    105,000
    
    
    
    163,694
    
    
    
    8,029
    
    
    
    (84,811
    )
    
    
    191,912Total Shareholders Equity
    
    
    66,074
    
    
    
    91,145
    
    
    
    3,646
    
    
    
    (94,791
    )
    
    
    66,074Total Liabilities and Shareholders Equity
    
    $
    171,074
    
    
    $
    254,839
    
    
    $
    11,675
    
    
    $
    (179,602
    )
    
    $
    257,986Condensed Consolidating Statement of Operations

- Three Months
Ended June 30, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    35,076
    
    
    $
    2,171
    
    
    $
    -
    
    
    $
    37,247Cost of Revenues
    
    
    -
    
    
    
    27,571
    
    
    
    1,349
    
    
    
    -
    
    
    
    28,920Gross Profit
    
    
    -
    
    
    
    7,505
    
    
    
    822
    
    
    
    -
    
    
    
    8,327Operating Expenses
    
    
    -
    
    
    
    10,963
    
    
    
    983
    
    
    
    -
    
    
    
    11,946Operating Loss
    
    
    -
    
    
    
    (3,458
    )
    
    
    (161
    )
    
    
    -
    
    
    
    (3,619
    )Interest and Other Income
    
    
    2,649
    
    
    
    10
    
    
    
    (301
    )
    
    
    (2,649
    )
    
    
    (291
    )Interest Expense
    
    
    2,649
    
    
    
    2,669
    
    
    
    2
    
    
    
    (2,649
    )
    
    
    2,671Loss before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (6,117
    )
    
    
    (464
    )
    
    
    -
    
    
    
    (6,581
    )Income Tax Benefit
    
    
    -
    
    
    
    (1,877
    )
    
    
    (131
    )
    
    
    -
    
    
    
    (2,008
    )Loss before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (4,240
    )
    
    
    (333
    )
    
    
    -
    
    
    
    (4,573
    )Equity Account for Subsidiaries
    
    
    (4,573
    )
    
    
    (333
    )
    
    
    -
    
    
    
    4,906
    
    
    
    -Net Loss
    
    $
    (4,573
    )
    
    $
    (4,573
    )
    
    $
    (333
    )
    
    $
    4,906
    
    
    $
    (4,573
    )
 - 19 -




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##### Table of Contents



11.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Statement of Operations

- Nine Months
Ended June 30, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    123,452
    
    
    $
    7,271
    
    
    $
    (17
    )
    
    $
    130,706Cost of Revenues
    
    
    -
    
    
    
    87,942
    
    
    
    5,129
    
    
    
    (17
    )
    
    
    93,054Gross Profit
    
    
    -
    
    
    
    35,510
    
    
    
    2,142
    
    
    
    -
    
    
    
    37,652Operating Expenses
    
    
    -
    
    
    
    32,659
    
    
    
    3,038
    
    
    
    -
    
    
    
    35,697Operating Income (Loss)
    
    
    -
    
    
    
    2,851
    
    
    
    (896
    )
    
    
    -
    
    
    
    1,955Interest and Other Income
    
    
    7,982
    
    
    
    86
    
    
    
    (582
    )
    
    
    (8,045
    )
    
    
    (559
    )Interest Expense
    
    
    7,982
    
    
    
    8,097
    
    
    
    68
    
    
    
    (8,045
    )
    
    
    8,102Loss before Income Tax and Equity Account for Subsidiaries
    
    
    -
    
    
    
    (5,160
    )
    
    
    (1,546
    )
    
    
    -
    
    
    
    (6,706
    )Income Tax Benefit
    
    
    -
    
    
    
    (1,699
    )
    
    
    (110
    )
    
    
    -
    
    
    
    (1,809
    )Loss before Equity Account for Subsidiaries
    
    
    -
    
    
    
    (3,461
    )
    
    
    (1,436
    )
    
    
    -
    
    
    
    (4,897
    )Equity Account for Subsidiaries
    
    
    (4,897
    )
    
    
    (1,436
    )
    
    
    -
    
    
    
    6,333
    
    
    
    -Net Loss
    
    $
    (4,897
    )
    
    $
    (4,897
    )
    
    $
    (1,436
    )
    
    $
    6,333
    
    
    $
    (4,897
    )Condensed Consolidating Statement of Cash Flows

 - Nine Months
Ended June 30, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided (Used) by Operating Activities
    
    $
    -
    
    
    $
    24,775
    
    
    $
    (1,764
    )
    
    $
    -
    
    
    $
    23,011Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (6,762
    )
    
    
    (630
    )
    
    
    -
    
    
    
    (7,392
    )Other investing activities
    
    
    -
    
    
    
    10
    
    
    
    -
    
    
    
    -
    
    
    
    10Net Cash Used in Investing Activities
    
    
    -
    
    
    
    (6,752
    )
    
    
    (630
    )
    
    
    -
    
    
    
    (7,382
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (5,014
    )
    
    
    (34
    )
    
    
    -
    
    
    
    (5,048
    )Issuances of common stock
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11Intercompany advances, net
    
    
    (11
    )
    
    
    (1,412
    )
    
    
    1,423
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (6,426
    )
    
    
    1,389
    
    
    
    -
    
    
    
    (5,037
    )Effect of Changes in Currency Exchange Rates
    
    
    -
    
    
    
    -
    
    
    
    (112
    )
    
    
    -
    
    
    
    (112
    )Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    11,597
    
    
    
    (1,117
    )
    
    
    -
    
    
    
    10,480Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    20,046
    
    
    
    1,635
    
    
    
    -
    
    
    
    21,681Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    31,643
    
    
    $
    518
    
    
    $
    -
    
    
    $
    32,161
 - 20 -




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##### Table of Contents



11.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Balance Sheet

- September 30,
2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    20,046
    
    
    $
    1,635
    
    
    $
    -
    
    
    $
    21,681Accounts Receivable, Net
    
    
    -
    
    
    
    40,399
    
    
    
    3,951
    
    
    
    (322
    )
    
    
    44,028Inventories
    
    
    -
    
    
    
    35,223
    
    
    
    1,133
    
    
    
    -
    
    
    
    36,356Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,645
    
    
    
    166
    
    
    
    -
    
    
    
    1,811Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    8,465
    
    
    
    -
    
    
    
    -
    
    
    
    8,465Total Current Assets
    
    
    -
    
    
    
    105,778
    
    
    
    6,885
    
    
    
    (322
    )
    
    
    112,341Property, Plant and Equipment, Net
    
    
    -
    
    
    
    113,143
    
    
    
    1,502
    
    
    
    -
    
    
    
    114,645Intangible Assets, Net
    
    
    -
    
    
    
    1,775
    
    
    
    1,778
    
    
    
    -
    
    
    
    3,553Goodwill
    
    
    -
    
    
    
    -
    
    
    
    3,144
    
    
    
    -
    
    
    
    3,144Deferred Income Taxes
    
    
    -
    
    
    
    21,121
    
    
    
    -
    
    
    
    -
    
    
    
    21,121Other Assets
    
    
    -
    
    
    
    10,037
    
    
    
    -
    
    
    
    -
    
    
    
    10,037Intercompany Advances
    
    
    79,918
    
    
    
    2,535
    
    
    
    -
    
    
    
    (82,453
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    101,179
    
    
    
    6,229
    
    
    
    -
    
    
    
    (107,408
    )
    
    
    -Total Assets
    
    $
    181,097
    
    
    $
    260,618
    
    
    $
    13,309
    
    
    $
    (190,183
    )
    
    $
    264,841Liabilitites and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    19,894
    
    
    $
    1,936
    
    
    $
    (322
    )
    
    $
    21,508Environmental Remediation Reserves
    
    
    -
    
    
    
    2,522
    
    
    
    -
    
    
    
    -
    
    
    
    2,522Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    4,579
    
    
    
    2,332
    
    
    
    -
    
    
    
    6,911Current Portion of Long-Term Debt
    
    
    -
    
    
    
    99
    
    
    
    52
    
    
    
    -
    
    
    
    151Intercompany Advances
    
    
    -
    
    
    
    79,918
    
    
    
    2,535
    
    
    
    (82,453
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    107,012
    
    
    
    6,855
    
    
    
    (82,775
    )
    
    
    31,092Long-Term Debt
    
    
    110,000
    
    
    
    -
    
    
    
    97
    
    
    
    -
    
    
    
    110,097Environmental Remediation Reserves
    
    
    -
    
    
    
    24,168
    
    
    
    -
    
    
    
    -
    
    
    
    24,168Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    28,259
    
    
    
    128
    
    
    
    -
    
    
    
    28,387Total Liabilities
    
    
    110,000
    
    
    
    159,439
    
    
    
    7,080
    
    
    
    (82,775
    )
    
    
    193,744Total Shareholders Equity
    
    
    71,097
    
    
    
    101,179
    
    
    
    6,229
    
    
    
    (107,408
    )
    
    
    71,097Total Liabilities and Shareholders Equity
    
    $
    181,097
    
    
    $
    260,618
    
    
    $
    13,309
    
    
    $
    (190,183
    )
    
    $
    264,841Condensed Consolidating Statement of Operations

 - Three Months
Ended June 30, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    29,485
    
    
    $
    2,054
    
    
    $
    (49
    )
    
    $
    31,490Cost of Revenues
    
    
    -
    
    
    
    22,686
    
    
    
    1,590
    
    
    
    (49
    )
    
    
    24,227Gross Profit
    
    
    -
    
    
    
    6,799
    
    
    
    464
    
    
    
    -
    
    
    
    7,263Operating Expenses
    
    
    -
    
    
    
    10,019
    
    
    
    896
    
    
    
    -
    
    
    
    10,915Operating Loss
    
    
    -
    
    
    
    (3,220
    )
    
    
    (432
    )
    
    
    -
    
    
    
    (3,652
    )Interest and Other Income
    
    
    2,666
    
    
    
    30
    
    
    
    5
    
    
    
    (2,673
    )
    
    
    28Interest Expense
    
    
    2,666
    
    
    
    2,682
    
    
    
    8
    
    
    
    (2,673
    )
    
    
    2,683Loss before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (5,872
    )
    
    
    (435
    )
    
    
    -
    
    
    
    (6,307
    )Income Tax Benefit
    
    
    -
    
    
    
    (2,752
    )
    
    
    -
    
    
    
    -
    
    
    
    (2,752
    )Loss before
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (3,120
    )
    
    
    (435
    )
    
    
    -
    
    
    
    (3,555
    )Equity Account for Subsidiaries
    
    
    (3,555
    )
    
    
    (435
    )
    
    
    -
    
    
    
    3,990
    
    
    
    -Net Loss
    
    $
    (3,555
    )
    
    $
    (3,555
    )
    
    $
    (435
    )
    
    $
    3,990
    
    
    $
    (3,555
    )
 - 21 -




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##### Table of Contents



11.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Statement of Operations

 - Nine Months
Ended June 30, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    128,098
    
    
    $
    5,622
    
    
    $
    (166
    )
    
    $
    133,554Cost of Revenues
    
    
    -
    
    
    
    90,431
    
    
    
    3,995
    
    
    
    (166
    )
    
    
    94,260Gross Profit
    
    
    -
    
    
    
    37,667
    
    
    
    1,627
    
    
    
    -
    
    
    
    39,294Operating Expenses
    
    
    -
    
    
    
    31,213
    
    
    
    2,082
    
    
    
    -
    
    
    
    33,295Operating Income (Loss)
    
    
    -
    
    
    
    6,454
    
    
    
    (455
    )
    
    
    -
    
    
    
    5,999Interest and Other Income (Expense)
    
    
    7,999
    
    
    
    152
    
    
    
    (65
    )
    
    
    (8,016
    )
    
    
    70Interest Expense
    
    
    7,999
    
    
    
    8,052
    
    
    
    26
    
    
    
    (8,016
    )
    
    
    8,061Loss before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (1,446
    )
    
    
    (546
    )
    
    
    -
    
    
    
    (1,992
    )Income Tax Benefit
    
    
    -
    
    
    
    (627
    )
    
    
    -
    
    
    
    -
    
    
    
    (627
    )Loss before
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (819
    )
    
    
    (546
    )
    
    
    -
    
    
    
    (1,365
    )Equity Account for Subsidiaries
    
    
    (1,365
    )
    
    
    (546
    )
    
    
    -
    
    
    
    1,911
    
    
    
    -Net Loss
    
    $
    (1,365
    )
    
    $
    (1,365
    )
    
    $
    (546
    )
    
    $
    1,911
    
    
    $
    (1,365
    )Condensed Consolidating Statement of Cash Flows

- Nine Months
Ended June 30, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided by Operating Activities
    
    $
    -
    
    
    $
    10,055
    
    
    $
    1,297
    
    
    $
    -
    
    
    $
    11,352Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (5,810
    )
    
    
    (502
    )
    
    
    -
    
    
    
    (6,312
    )Acquisition on business, net of cash acquired
    
    
    -
    
    
    
    (7,195
    )
    
    
    470
    
    
    
    -
    
    
    
    (6,725
    )Net Cash Used by Investing Activities
    
    
    -
    
    
    
    (13,005
    )
    
    
    (32
    )
    
    
    -
    
    
    
    (13,037
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (211
    )
    
    
    (61
    )
    
    
    -
    
    
    
    (272
    )Issuance of common stock
    
    
    32
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    32Intercompany advances, net
    
    
    (32
    )
    
    
    (509
    )
    
    
    541
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (720
    )
    
    
    480
    
    
    
    -
    
    
    
    (240
    )Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    (3,670
    )
    
    
    1,745
    
    
    
    -
    
    
    
    (1,925
    )Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    26,664
    
    
    
    229
    
    
    
    -
    
    
    
    26,893Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    22,994
    
    
    $
    1,974
    
    
    $
    -
    
    
    $
    24,968
 - 22 -




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
   OUR COMPANY
  - 23 -




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##### Table of Contents



OUR BUSINESS SEGMENTS
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fine Chemicals
    
    
    54
    %
    
    
    50
    %
    
    
    48
    %
    
    
    51
    %Specialty Chemicals:Perchlorates
    
    
    18
    %
    
    
    14
    %
    
    
    23
    %
    
    
    28
    %Sodium Azide
    
    
    1
    %
    
    
    3
    %
    
    
    1
    %
    
    
    1
    %Halotron
    
    
    3
    %
    
    
    3
    %
    
    
    3
    %
    
    
    2
    %Total Specialty Chemicals
    
    
    22
    %
    
    
    20
    %
    
    
    27
    %
    
    
    31
    %Aerospace Equipment
    
    
    23
    %
    
    
    29
    %
    
    
    21
    %
    
    
    16
    %Other Businesses:Real Estate
    
    
    0%
    *
    
    
    0%
    *
    
    
    0%
    *
    
    
    0%
    *Water Treatment Equipment
    
    
    1
    %
    
    
    1
    %
    
    
    4
    %
    
    
    2
    %Total Other Businesses
    
    
    1
    %
    
    
    1
    %
    
    
    4
    %
    
    
    2
    %Total Revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 * less than 1% FINE CHEMICALS.
  - 24 -




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##### Table of Contents




    
    Alternative Supply May Not Be Readily Available.We are currently the sole-source supplier
on several of our fine chemicals products.
 
    
    Regulatory Approval.Applications to and approvals from the FDA and other regulatory
authorities generally require the chemical contractor to be named. Switching contractors may
require additional regulatory approvals and could take as long as two years to complete.
 
    
    Significant Financial Costs.Switching contractors and amending various filings can result
in significant costs associated with technology transfer, process validation and re-filing
with the FDA and other regulatory authorities.
 SPECIALTY CHEMICALS . ®
   AEROSPACE EQUIPMENT.
   OTHER BUSINESSES.
 - 25 -




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##### Table of Contents



RESULTS OF OPERATIONS
 REVENUES
 June 30,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    19,951
    
    
    $
    15,644
    
    
    $
    4,307
    
    
    
    28%Specialty Chemicals
    
    
    8,168
    
    
    
    6,299
    
    
    
    1,869
    
    
    
    30%Aerospace Equipment
    
    
    8,647
    
    
    
    9,085
    
    
    
    (438
    )
    
    
    (5
    %)Other Businesses
    
    
    481
    
    
    
    462
    
    
    
    19
    
    
    
    4%Total Revenues
    
    $
    37,247
    
    
    $
    31,490
    
    
    $
    5,757
    
    
    
    18%Nine Months Ended:Fine Chemicals
    
    $
    63,128
    
    
    $
    67,766
    
    
    $
    (4,638
    )
    
    
    (7
    %)Specialty Chemicals
    
    
    35,057
    
    
    
    40,940
    
    
    
    (5,883
    )
    
    
    (14
    %)Aerospace Equipment
    
    
    27,140
    
    
    
    21,977
    
    
    
    5,163
    
    
    
    23%Other Businesses
    
    
    5,381
    
    
    
    2,871
    
    
    
    2,510
    
    
    
    87%Total Revenues
    
    $
    130,706
    
    
    $
    133,554
    
    
    $
    (2,848
    )
    
    
    (2
    %)
 Fine Chemicals .
  Specialty Chemicals.
 
    
    A 42% increase in perchlorate volume and a 2% increase in the related average price per
pound for the Fiscal 2010 third quarter compared to the prior fiscal year third quarter.
    
    A 29% decrease in perchlorate volume offset by an 18% increase in the related average price
per pound for the Fiscal 2010 nine-month period compared to the prior fiscal year nine-month
period.
    
    Sodium azide revenues for the Fiscal 2010 third quarter decreased $485 compared to the
prior fiscal year third quarter and, for the Fiscal 2010 nine-month period, were consistent
with the prior fiscal year period.
    
    Halotron revenues increased approximately $300 for both the Fiscal 2010 third quarter and
nine-month period, each compared to the comparable Fiscal 2009 periods.
  - 26 -




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##### Table of Contents




    
    The average price per pound of Grade I AP increased approximately proportionate and inverse
to the decrease in Grade I AP volume consistent with the contractual Grade I AP price-volume
matrix and comparable catalog pricing.
    
    This was offset, in part, by our other lower-priced perchlorate products, such as sodium
perchlorate and potassium perchlorate, which accounted for a greater percentage of all
perchlorate product volume in the Fiscal 2010 periods. This change in the mix of perchlorate
product sales had a reducing effect on the overall average price per pound of all perchlorate
products. This factor had a greater effect on the Fiscal 2010 third quarter than on the Fiscal
2010 nine-month period.
   Aerospace Equipment .
 COST OF REVENUES AND GROSS MARGIN
 June 30,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Revenues
    
    $
    37,247
    
    
    $
    31,490
    
    
    $
    5,757
    
    
    
    18%Cost of Revenues
    
    
    28,920
    
    
    
    24,227
    
    
    
    4,693
    
    
    
    19%Gross Margin
    
    
    8,327
    
    
    
    7,263
    
    
    
    1,064
    
    
    
    15%Gross Margin Percentage
    
    
    22%
    
    
    
    23%Nine Months Ended:Revenues
    
    $
    130,706
    
    
    $
    133,554
    
    
    $
    (2,848
    )
    
    
    (2
    %)Cost of Revenues
    
    
    93,054
    
    
    
    94,260
    
    
    
    (1,206
    )
    
    
    (1
    %)Gross Margin
    
    
    37,652
    
    
    
    39,294
    
    
    
    (1,642
    )
    
    
    (4
    %)Gross Margin Percentage
    
    
    29%
    
    
    
    29%
  - 27 -




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##### Table of Contents



Fine Chemicals.
 Specialty Chemicals.
  Aerospace Equipment .
 OPERATING EXPENSES
 June 30,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Operating Expenses
    
    $
    11,946
    
    
    $
    10,915
    
    
    $
    1,031
    
    
    
    9
    %Percentage of Revenues
    
    
    32%
    
    
    
    35%Nine Months Ended:Operating Expenses
    
    $
    35,697
    
    
    $
    33,295
    
    
    $
    2,402
    
    
    
    7
    %Percentage of Revenues
    
    
    27%
    
    
    
    25%
  
    
    Fine Chemicals segment operating expenses increased $504 for the Fiscal 2010 third quarter
as compared to the prior fiscal year third quarter. The increase is largely attributed to
incremental costs associated with the successful three-year renewal of our collective
bargaining agreement, as well as additional costs associated with our recently acquired
facility in Texas. For the Fiscal 2010 nine-month period, as compared to the prior fiscal
year nine-month period, operating expenses increased $793 reflecting the above mentioned third
quarter increases and an increase in business development activities.
    
    Aerospace Equipment segment operating expenses increased $344 for the Fiscal 2010 third
quarter and $1,534 for the Fiscal 2010 nine-month period, each as compared to the
corresponding prior fiscal year periods, primarily as a result of additional management and
organization structure which was added to support the segments European growth strategy, as
well as increases in research and development expenses in both the U.S. and Europe.
 - 28 -




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##### Table of Contents



SEGMENT OPERATING INCOME (LOSS)
 June 30,
    
    
    Favorable
    
    
    Percentage2010
    
    
    2009
    
    
    (Unfavorable)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    (2,458
    )
    
    $
    (752
    )
    
    $
    (1,706
    )
    
    
    (227
    %)Specialty Chemicals
    
    
    2,796
    
    
    
    552
    
    
    
    2,244
    
    
    
    407%Aerospace Equipment
    
    
    (120
    )
    
    
    417
    
    
    
    (537
    )
    
    NMOther Businesses
    
    
    (286
    )
    
    
    (215
    )
    
    
    (71
    )
    
    
    (33
    %)Segment Operating Income
    
    
    (68
    )
    
    
    2
    
    
    
    (70
    )
    
    NMCorporate Expenses
    
    
    (3,551
    )
    
    
    (3,654
    )
    
    
    103
    
    
    
    3%Operating Loss
    
    $
    (3,619
    )
    
    $
    (3,652
    )
    
    $
    33
    
    
    
    1%Nine Months Ended:Fine Chemicals
    
    $
    (698
    )
    
    $
    (370
    )
    
    $
    (328
    )
    
    
    (89
    %)Specialty Chemicals
    
    
    15,140
    
    
    
    16,481
    
    
    
    (1,341
    )
    
    
    (8
    %)Aerospace Equipment
    
    
    (457
    )
    
    
    1,571
    
    
    
    (2,028
    )
    
    NMOther Businesses
    
    
    (234
    )
    
    
    164
    
    
    
    (398
    )
    
    NMSegment Operating Income
    
    
    13,751
    
    
    
    17,846
    
    
    
    (4,095
    )
    
    
    (23
    %)Corporate Expenses
    
    
    (11,796
    )
    
    
    (11,847
    )
    
    
    51
    
    
    
    0%Operating Income
    
    $
    1,955
    
    
    $
    5,999
    
    
    $
    (4,044
    )
    
    
    (67
    %)
   BACKLOG
    - 29 -




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 CASH FLOWS
 Nine Months Ended June 30,
    
    
    
    
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeCash Provided (Used) By:Operating activities
    
    $
    23,011
    
    
    $
    11,352
    
    
    $
    11,659
    
    
    
    103%Investing activities
    
    
    (7,382
    )
    
    
    (13,037
    )
    
    
    5,655
    
    
    
    (43
    %)Financing activities
    
    
    (5,037
    )
    
    
    (240
    )
    
    
    (4,797
    )
    
    
    1,999%Effect of changes in exchange rates on cash
    
    
    (112
    )
    
    
    -
    
    
    
    (112
    )
    
    NMNet change in cash for period
    
    $
    10,480
    
    
    $
    (1,925
    )
    
    $
    12,405
    
    
    
    (644
    %)
  Operating Activities .
  
    
    A decrease in cash due to less profit from our operations of $4,503.
    
    An increase in cash provided by working capital accounts of $16,183, excluding the effects
of interest and income taxes.
    
    An increase in cash taxes refunded of $121.
    
    An increase in cash paid for interest of $229.
    
    An increase in cash used for environmental remediation of $541.
    
    Other increases in cash provided by operating activities of $628.
  Investing Activities
  Financing Activities
 - 30 -




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES.
    
    
    current results of operations, cash flows and backlog;
    
    anticipated changes in operating trends, including anticipated changes in revenues and
margins;
    
    cash requirements related to our debt agreements and pension plans; and
    
    cash requirements related to our remediation activities, including amounts that we expect
to spend through fall 2011 for the engineering, design, installation and cost of additional
remediation equipment (Remediation Capital). See further discussion under the heading
Environmental Remediation  AMPAC Henderson Site below.
  LONG-TERM DEBT AND REVOLVING CREDIT FACILITIES
 Senior Notes.
 
    
    ranked equally in right of payment with all of our existing and future senior indebtedness;
    
    ranked senior in right of payment to all of our existing and future senior subordinated and
subordinated indebtedness;
 - 31 -




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##### Table of Contents




    
    effectively junior to our existing and future secured debt to the extent of the value of
the assets securing such debt; and
    
    structurally subordinated to all of the existing and future liabilities (including trade
payables) of each of our subsidiaries that do not guarantee the Senior Notes.
  
    
    at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of
the Senior Notes plus an applicable premium as defined in the related indenture;
    
    at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the
principal amount to be redeemed and reducing to 100% by February 1, 2013; and
    
    under certain changes of control, we must offer to purchase the Senior Notes at 101% of
their aggregate principal amount, plus accrued interest.
  
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
  Revolving Credit Facility.
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
    
    incur debt, incur contingent obligations and issue certain types of preferred stock;
    
    create liens;
    
    pay dividends, distributions or make other specified restricted payments;
    
    make certain investments and acquisitions;
    
    enter into certain transactions with affiliates;
    
    enter into sale and leaseback transactions; and
    
    merge or consolidate with any other entity or sell, assign, transfer, lease, convey or
otherwise dispose of assets.
    PENSION BENEFITS.
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ENVIRONMENTAL REMEDIATION  AMPAC HENDERSON SITE.
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CONTRACTUAL OBLIGATIONS.
  
    
    We have recorded an estimated liability for environmental remediation of $25,162 (see Note
7 to the condensed consolidated financial statements included in Item 1 of this report). We
expect to spend approximately $2,522 for environmental remediation during Fiscal 2010.
    
    We have recorded aggregate unfunded Pension Plans and SERP obligations of $29,653,
including $728 which is classified as current employee related liabilities (see Note 10 to the
condensed consolidated financial statements included in Item 1 of this report). We expect to
contribute $3,714 to our Pension Plans and SERP during Fiscal 2010.
    
    We have uncertain tax positions totaling $329. We are unable to reasonably estimate the
timing of the related payments, if any.
    
    We also maintain the Revolving Credit Facility, which provides revolving credit in an
aggregate principal amount of up to $20,000 with an initial maturity in February 2012. We had
no balance outstanding under the Revolving Credit Facility. We may prepay and terminate the
Revolving Credit Facility at any time.
 
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OFF-BALANCE SHEET ARRANGEMENTS
 Letters of Credit.
 Employee Agreements.
   CRITICAL ACCOUNTING POLICIES
   SALES AND REVENUE RECOGNITION.
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DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS.
  IMPAIRMENT OF LONG-LIVED ASSETS .
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GOODWILL.
 ENVIRONMENTAL COSTS .
  INCOME TAXES .
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PENSION BENEFITS .
   RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4. CONTROLS AND PROCEDURES
    
    
    Effecting improvements in the Fine Chemicals segment contract administration process to
ensure the proper approval and circulation of all sales arrangements, including
non-standard commitments;
    
    Providing additional and on-going training to Fine Chemicals segment finance and
accounting staff on the application of technical accounting pronouncements, especially in
the area of revenue recognition. Additionally, we continued to provide training to Fine
Chemicals segment product managers and others involved in negotiating contractual
arrangements with our customers to heighten the awareness of revenue recognition concepts,
with emphasis on non-standard contracts; and
    
    Establishing a process whereby corporate finance personnel provide a second review of
the Fine Chemicals segments accounting treatment for significant sales arrangements.
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS (Dollars in Thousands)
   We depend on a limited number of customers for most of our sales in our Specialty Chemicals,
Aerospace Equipment and Fine Chemicals segments and the loss of one or more of these customers
could have a material adverse effect on our financial position, results of operations and cash
flows.
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The inherent limitations of our fixed-price or similar contracts may impact our profitability.
  The numerous and often complex laws and regulations and regulatory oversight to which our
operations and properties are subject, the cost of compliance, and the effect of any failure to
comply could reduce our profitability and liquidity.
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A significant portion of our business depends on contracts with the government or its prime
contractors or subcontractors and these contracts are impacted by governmental priorities and are
subject to potential fluctuations in funding or early termination, including for convenience, any
of which could have a material adverse effect on our operating results, financial condition or cash
flows.
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We may be subject to potentially material costs and liabilities in connection with environmental or
health matters.
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Review of Perchlorate Toxicity by the EPA.
 Perchlorate Remediation Project in Henderson, Nevada.
 Henderson Site Environmental Remediation Reserve.
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Other Environmental Matters.
 Although we have established an environmental reserve for remediation activities in Henderson,
Nevada, given the many uncertainties involved in assessing environmental liabilities, our
environmental-related risks may from time to time exceed any related reserves.
  For each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment segments, most
production is conducted in a single facility and any significant disruption or delay at a
particular facility could have a material adverse effect on our business, financial position and
results of operations.
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The release or explosion of dangerous materials used in our business could disrupt our operations
and cause us to incur additional costs and liabilities.
  Disruptions in the supply of key raw materials and difficulties in the supplier qualification
process, as well as increases in prices of raw materials, could adversely impact our operations.
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Each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment segments may be unable to
comply with customer specifications and manufacturing instructions or may experience delays or
other problems with existing or new products, which could result in increased costs, losses of
sales and potential breach of customer contracts.
    Successful commercialization of pharmaceutical products and product line extensions is very
difficult and subject to many uncertainties. If a customer is not able to successfully
commercialize its products for which AFC produces compounds or if a product is subsequently
recalled, then the operating results of AFC may be negatively impacted.
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A strike or other work stoppage, or the inability to renew collective bargaining agreements on
favorable terms, could have a material adverse effect on the cost structure and operational
capabilities of AFC.
  The pharmaceutical fine chemicals industry is a capital-intensive industry and if AFC does not have
sufficient financial resources to finance the necessary capital expenditures, its business and
results of operations may be harmed.
  We may be subject to potential liability claims for our products or services that could affect our
earnings and financial condition and harm our reputation.
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Technology innovations in the markets that we serve may create alternatives to our products and
result in reduced sales.
  We are subject to strong competition in certain industries in which we participate and therefore
may not be able to compete successfully.
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Due to the nature of our business, our sales levels may fluctuate causing our quarterly operating
results to fluctuate.
  The inherent volatility of the chemical industry affects our capacity utilization and causes
fluctuations in our results of operations.
  A loss of key personnel or highly skilled employees, or the inability to attract and retain such
personnel, could disrupt our operations or impede our growth.
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We may continue to expand our operations in part through acquisitions, which could divert
managements attention and expose us to unanticipated liabilities and costs. We may experience
difficulties integrating the acquired operations, and we may incur costs relating to acquisitions
that are never consummated.
   We have a substantial amount of debt, and the cost of servicing that debt could adversely affect
our ability to take actions, our liquidity or our financial condition.
  
    
    make it more difficult for us to satisfy any other outstanding debt obligations;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments
on our debt, reducing the amount of our cash flow available for working capital, capital
expenditures, acquisitions, developing our real estate assets and other general corporate
purposes;
    
    limit our flexibility in planning for, or reacting to, changes in the industries in which
we compete;
    
    place us at a competitive disadvantage compared to our competitors, some of which have
lower debt service obligations and greater financial resources than we do;
    
    limit our ability to borrow additional funds; or
    
    increase our vulnerability to general adverse economic and industry conditions.
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We are obligated to comply with various ongoing covenants in our debt, which could restrict our
operations, and if we should fail to satisfy any of these covenants, the payment under our debt
could be accelerated, which would negatively impact our liquidity.
  
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
  Significant changes in discount rates, rates of return on pension assets, mortality tables and
other factors could affect our estimates of pension obligations, which in turn could affect future
funding requirements and related costs and impact our future earnings.
  Our shareholder rights plan, Restated Certificate of Incorporation, as amended, and Amended and
Restated By-laws discourage unsolicited takeover proposals and could prevent stockholders from
realizing a premium on their common stock.
  
    
    a classified board of directors;
    
    the ability of our board of directors to designate the terms of and issue new series of
preferred stock;
    
    advance notice requirements for nominations for election to our board of directors; and
    
    special voting requirements for the amendment, in certain cases, of our Restated
Certificate of Incorporation, as amended, and our Amended and Restated By-laws.
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Our proprietary and intellectual property rights may be violated, compromised, circumvented or
invalidated, which could damage our operations.
  Our common stock price may fluctuate substantially, and a stockholders investment could decline in
value.
  
    
    actual or anticipated fluctuations in our results of operations;
    
    events or concerns related to our products or operations or those of our competitors,
including public health, environmental and safety concerns related to products and operations;
    
    material public announcements by us or our competitors;
    
    changes in government regulations or policies, such as new legislation, laws or regulatory
decisions that are adverse to us and/or our products;
    
    changes in key members of management;
    
    developments in our industries;
    
    changes in investors acceptable levels of risk;
    
    trading volume of our common stock; and
    
    general economic conditions.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES  None.
 
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION  None.
 
 ITEM 6. EXHIBITS  See attached exhibit index.
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SIGNATURES
  AMERICAN PACIFIC CORPORATIONDate:  August 6, 2010
    /s/ JOSEPH CARLEONEJoseph CarleonePresident and Chief Executive Officer
(Principal Executive Officer)/s/ DANA M. KELLEYDana M. KelleyVice President, Chief Financial Officer and Treasurer
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EXHIBIT INDEX
 EXHIBIT NO.
    
    DOCUMENT DESCRIPTION3.1
    
    Restated Certificate of Incorporation, as amended, of American Pacific Corporation
(incorporated by reference to Exhibit 4.(a) to the registrants Registration Statement on Form
S-3 (File No. 33-15674))3.2
    
    Articles of Amendment to the Restated Certificate of Incorporation of American Pacific
Corporation, as filed with the Secretary of State, State of Delaware, on October 7, 1991
(incorporated by reference to Exhibit 4.3 to the registrants Registration Statement on Form
S-3 (File No. 33-52196))3.3
    
    Articles of Amendment to the Restated Certificate of Incorporation of American Pacific
Corporation, as filed with the Secretary of State, State of Delaware, on April 21, 1992
(incorporated by reference to Exhibit 4.4 to the registrants Registration Statement on Form
S-3 (File No. 33-52196))3.4
    
    American Pacific Corporation Amended and Restated By-laws (incorporated by reference to
Exhibit 3.1 to the registrants Current Report on Form 8-K (File No. 001-08137) filed by the
registrant with the Securities and Exchange Commission on September 15, 2008)3.5
    
    Rights Agreement, dated as of August 3, 1999, between American Pacific Corporation and
American Stock Transfer & Trust Company (incorporated by reference to Exhibit 1 to the
registrants Registration Statement on Form 8-A (File No. 001-08137) filed by the registrant
with the Securities and Exchange Commission on August 6, 1999)3.6
    
    Form of Letter to Stockholders that accompanied copies of the Summary of Rights to Purchase
Preferred Shares (incorporated by reference to Exhibit 2 to the registrants Registration
Statement on Form 8-A (File No. 001-08137) filed by the registrant with the Securities and
Exchange Commission on August 6, 1999)3.7
    
    Amendment, dated as of July 11, 2008, between American Pacific Corporation and American Stock
Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the registrants Current
Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and
Exchange Commission on July 11, 2008)10.1+
    
    First Amendment to American Pacific Corporation Defined Benefit Pension Plan, executed by
American Pacific Corporation on June 28, 201010.2+
    
    First Amendment to Ampac Fine Chemicals LLC Pension Plan for Salaried Employees, executed by
American Pacific Corporation on June 28, 201010.3+
    
    First Amendment to Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees,
executed by American Pacific Corporation on June 28, 201010.4+
    
    Second Amendment to Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees,
executed by American Pacific Corporation on July 15, 201031.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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+
    
    Management contract or compensatory plan or arrangement.*
    
    Exhibits 32.1 and 32.2 are furnished to accompany this Quarterly Report on Form 10-Q but
shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, or otherwise subject to the liability of that section, and shall not be deemed to
be incorporated by reference into any filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended. - 59 -