##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   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
    
    59-6490478(State or other jurisdiction of incorporation or organization)
    
    (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
 Act).    Yes o    No 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
    
    
    22ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk
    
    
    39ITEM 4.   Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONITEM 1.   Legal Proceedings
    
    
    40ITEM 1A. Risk Factors
    
    
    40ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    54ITEM 3.   Defaults Upon Senior Securities
    
    
    54ITEM 4.   (Removed and Reserved)
    
    
    54ITEM 5.   Other Information
    
    
    54ITEM 6.   Exhibits
    
    
    54EX-31.1EX-31.2EX-32.1EX-32.2
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN PACIFIC CORPORATIONCondensed Consolidated Statements of Operations
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Revenues
    
    $
    41,854
    
    
    $
    59,395
    
    
    $
    77,038
    
    
    $
    93,459Cost of Revenues
    
    
    31,687
    
    
    
    42,516
    
    
    
    60,255
    
    
    
    64,134Gross Profit
    
    
    10,167
    
    
    
    16,879
    
    
    
    16,783
    
    
    
    29,325Operating Expenses
    
    
    11,820
    
    
    
    11,444
    
    
    
    23,243
    
    
    
    23,751Other Operating Gains
    
    
    1,592
    
    
    
    
    
    
    
    2,929
    
    
    
    Operating Income (Loss)
    
    
    (61
    )
    
    
    5,435
    
    
    
    (3,531
    )
    
    
    5,574Interest Income and Other (Expense), Net
    
    
    505
    
    
    
    (260
    )
    
    
    372
    
    
    
    (268
    )Interest Expense
    
    
    2,571
    
    
    
    2,740
    
    
    
    5,285
    
    
    
    5,431Income (Loss) before Income Tax
    
    
    (2,127
    )
    
    
    2,435
    
    
    
    (8,444
    )
    
    
    (125
    )Income Tax Expense (Benefit)
    
    
    (914
    )
    
    
    1,319
    
    
    
    (3,612
    )
    
    
    199Net Income (Loss)
    
    $
    (1,213
    )
    
    $
    1,116
    
    
    $
    (4,832
    )
    
    $
    (324
    )Earnings (Loss) per Share:Basic
    
    $
    (0.16
    )
    
    $
    0.15
    
    
    $
    (0.64
    )
    
    $
    (0.04
    )Diluted
    
    $
    (0.16
    )
    
    $
    0.15
    
    
    $
    (0.64
    )
    
    $
    (0.04
    )Weighted-Average Shares Outstanding:Basic
    
    
    7,512,000
    
    
    
    7,490,000
    
    
    
    7,508,000
    
    
    
    7,489,000Diluted
    
    
    7,512,000
    
    
    
    7,539,000
    
    
    
    7,508,000
    
    
    
    7,489,000
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AMERICAN PACIFIC CORPORATIONCondensed Consolidated Balance Sheets
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 March 31,
    
    
    September 30,2011
    
    
    2010ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    31,697
    
    
    $
    23,985Accounts Receivable, Net
    
    
    35,034
    
    
    
    51,900Inventories
    
    
    45,127
    
    
    
    36,126Prepaid Expenses and Other Assets
    
    
    4,776
    
    
    
    1,542Income Taxes Receivable
    
    
    4,367
    
    
    
    2,802Deferred Income Taxes
    
    
    10,672
    
    
    
    10,672Total Current Assets
    
    
    131,673
    
    
    
    127,027Property, Plant and Equipment, Net
    
    
    115,684
    
    
    
    113,873Intangible Assets, Net
    
    
    864
    
    
    
    1,420Goodwill
    
    
    3,038
    
    
    
    2,933Deferred Income Taxes
    
    
    20,251
    
    
    
    20,254Other Assets
    
    
    10,233
    
    
    
    10,236TOTAL ASSETS
    
    $
    281,743
    
    
    $
    275,743LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    12,784
    
    
    $
    9,197Accrued Liabilities
    
    
    4,587
    
    
    
    8,062Accrued Interest
    
    
    1,575
    
    
    
    1,575Employee Related Liabilities
    
    
    7,797
    
    
    
    6,472Income Taxes Payable
    
    
    267
    
    
    
    193Deferred Revenues and Customer Deposits
    
    
    30,711
    
    
    
    18,769Current Portion of Environmental Remediation Reserves
    
    
    9,014
    
    
    
    8,694Current Portion of Long-Term Debt
    
    
    73
    
    
    
    70Total Current Liabilities
    
    
    66,808
    
    
    
    53,032Long-Term Debt
    
    
    105,067
    
    
    
    105,102Environmental Remediation Reserves
    
    
    13,437
    
    
    
    15,176Pension Obligations
    
    
    35,641
    
    
    
    37,161Other Long-Term Liabilities
    
    
    1,645
    
    
    
    1,615Total Liabilities
    
    
    222,598
    
    
    
    212,086Commitments and ContingenciesShareholders Equity:Preferred 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 issued and outstanding
    
    
    754
    
    
    
    754Capital in Excess of Par Value
    
    
    73,267
    
    
    
    73,091Retained Earnings
    
    
    1,888
    
    
    
    6,720Accumulated Other Comprehensive Loss
    
    
    (16,764
    )
    
    
    (16,908
    )Total Shareholders Equity
    
    
    59,145
    
    
    
    63,657TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    281,743
    
    
    $
    275,743
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AMERICAN PACIFIC CORPORATIONCondensed Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
  Six Months EndedMarch 31,2011
    
    
    2010Cash Flows from Operating Activities:Net Loss
    
    $
    (4,832
    )
    
    $
    (324
    )Adjustments to Reconcile Net Loss
to Net Cash Provided by Operating Activities:Depreciation and amortization
    
    
    7,411
    
    
    
    8,176Non-cash interest expense
    
    
    454
    
    
    
    315Share-based compensation
    
    
    198
    
    
    
    489Deferred income taxes
    
    
    (19
    )
    
    
    (81
    )Loss on sale of assets
    
    
    2
    
    
    
    5Changes in operating assets and liabilities:Accounts receivable, net
    
    
    16,959
    
    
    
    2,375Inventories
    
    
    (8,715
    )
    
    
    (136
    )Prepaid expenses and other current assets
    
    
    (2,357
    )
    
    
    (591
    )Accounts payable
    
    
    2,448
    
    
    
    1,395Income taxes
    
    
    (1,493
    )
    
    
    900Accrued liabilities
    
    
    (3,483
    )
    
    
    1,039Employee related liabilities
    
    
    1,317
    
    
    
    (1,457
    )Deferred revenues and customer deposits
    
    
    11,924
    
    
    
    2,418Environmental remediation reserves
    
    
    (1,419
    )
    
    
    (979
    )Pension obligations, net
    
    
    (1,520
    )
    
    
    1,546Other
    
    
    (588
    )
    
    
    (496
    )Net Cash Provided by Operating Activities
    
    
    16,287
    
    
    
    14,594Cash Flows from Investing Activities:Capital expenditures
    
    
    (7,729
    )
    
    
    (3,588
    )Net Cash Used by Investing Activities
    
    
    (7,729
    )
    
    
    (3,588
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    (35
    )
    
    
    (89
    )Debt issuance costs
    
    
    (869
    )
    
    
    -Net Cash Used by Financing Activities
    
    
    (904
    )
    
    
    (89
    )Effect of Changes in Currency Exchange Rates on Cash
    
    
    58
    
    
    
    (84
    )Net Change in Cash and Cash Equivalents
    
    
    7,712
    
    
    
    10,833Cash and Cash Equivalents, Beginning of Period
    
    
    23,985
    
    
    
    21,681Cash and Cash Equivalents, End of Period
    
    $
    31,697
    
    
    $
    32,514Cash Paid (Received) For:Interest
    
    $
    4,831
    
    
    $
    5,116Income taxes
    
    
    (2,130
    )
    
    
    (629
    )Non-Cash Investing and Financing Transactions:Additions to Property, Plant and Equipment not yet paid
    
    
    1,746
    
    
    
    387Capital 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 POLICIES
 Interim 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, 2010. The operating results for the three-month and six-month periods ended March
31, 2011 and cash flows for the six-month period ended March 31, 2011 are not necessarily
indicative of the results that will be achieved for the full fiscal year or for future periods.Accounting Policies and Principles of Consolidation.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, 2010. Our consolidated
financial statements include the accounts of American Pacific Corporation and our wholly-owned
subsidiaries. All intercompany accounts have been eliminated.Fair Value Disclosure of Financial Instruments.The current authoritative guidance on fair
value clarifies the definition of fair value, prescribes methods for measuring fair value,
establishes a fair value hierarchy based on the inputs used to measure fair value and expands
disclosures about the use of fair value measurements. The valuation techniques utilized are
based upon observable and unobservable inputs. Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect internal market assumptions. These
two types of inputs create the following fair value hierarchy:Level 1  Quoted prices for identical instruments in active markets.Level 2  Quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations whose inputs
are observable or whose significant value drivers are observable.Level 3  Significant inputs to the valuation model are unobservable.We estimate the fair value 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 as of March 31, 2011 to be
approximately $104,738 based on level 2 data which was the trade date closest to March 31, 2011,
which was March 23, 2011. We estimated the fair value of our fixed-rate long-term debt as of
September 30, 2010 to be approximately $103,688 based on the trade date closest to that date,
which was October 13, 2010.Depreciation and Amortization Expense.Depreciation and amortization expense is classified as
follows in our statements of operations:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Classified as cost of revenuesDepreciation
    
    $
    3,287
    
    
    $
    3,472
    
    
    $
    6,546
    
    
    $
    6,833Classified as operating expensesDepreciation
    
    
    146
    
    
    
    145
    
    
    
    291
    
    
    
    293Amortization
    
    
    239
    
    
    
    506
    
    
    
    574
    
    
    
    1,050Total
    
    $
    3,672
    
    
    $
    4,123
    
    
    $
    7,411
    
    
    $
    8,176
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued)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 $16,517 and $19,606 as of March 31, 2011 and September 30, 2010, respectively.Recently Issued or Adopted Accounting Standards.In April 2010, the Financial Accounting
Standards Board (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. This standard became effective
for us beginning on October 1, 2010. The adoption of this standard did not have a material
impact on our results of operations, financial position or cash flows.In December 2010, the FASB issued ASU No. 2010-28 that affects entities that have recognized
goodwill and have one or more reporting units whose carrying amount for purposes of performing
Step 1 of the goodwill impairment test is zero or negative. The amendments in the ASU modify
Step 1 so that for those reporting units, an entity is required to perform Step 2 of the
goodwill impairment test if it is more likely than not that a goodwill impairment exists. In
determining whether it is more likely than not that a goodwill impairment exists, an entity
should consider whether there are any adverse qualitative factors indicating that an impairment
may exist. The qualitative factors are consistent with existing guidance, which requires that
goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit
below its carrying amount. This standard is effective for us beginning on October 1, 2011. The
adoption of this standard is not expected to have a material impact on our results of
operations, financial position or cash flows.
 2.
    
    SHARE-BASED COMPENSATION
 We 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)
permitted 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. Under the
terms of the 2001 Plan, no options may be granted on or after January 16, 2011, but options
previously granted, may extend beyond that date based on the terms of the relevant grant. This
plan was approved by our stockholders.
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2.
    
    SHARE-BASED COMPENSATION (Continued)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 March 31, 2011,
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, as amended and restated (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 800,000 shares of
common stock are authorized for issuance under the 2008 Plan, provided that no more than 400,000
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 March 31, 2011, there were 462,000
shares available for grant under the 2008 Plan. This plan was approved by our stockholders.A summary of our outstanding and non-vested stock option and restricted stock activity for the
six months ended March 31, 2011 is as follows:
 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, 2010
    
    
    658,176
    
    
    $
    8.32
    
    
    
    248,895
    
    
    $
    4.41
    
    
    
    50,664
    
    
    $
    8.34Granted
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Vested
    
    
    -
    
    
    
    -
    
    
    
    (100,770
    )
    
    
    4.51
    
    
    
    (19,336
    )
    
    
    8.70Exercised
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Expired / Cancelled
    
    
    (10,000
    )
    
    
    6.34
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Balance, March 31, 2011
    
    
    648,176
    
    
    
    8.35
    
    
    
    148,125
    
    
    
    4.35
    
    
    
    31,328
    
    
    
    8.11
 A summary of our exercisable stock options as of March 31, 2011 is as follows:
 Number of vested stock options
    
    
    500,051Weighted-average exercise price per share
    
    $
    8.31Aggregate intrinsic value
    
    $
    53Weighted-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.
 - 6 -




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2.
    
    SHARE-BASED COMPENSATION (Continued)
 Six Months EndedMarch 31,2011
    
    
    2010Weighted-average grant date fair value per share of options granted
    
    
    -
    
    
    $
    3.65Significant fair value assumptions:
    
    
    -Expected term in years
    
    
    -
    
    
    
    6.00Expected volatility
    
    
    -
    
    
    
    51.3
    %Expected dividends
    
    
    -
    
    
    
    0.0
    %Risk-free interest rates
    
    
    -
    
    
    
    2.3
    %Total intrinsic value of options exercised
    
    
    -
    
    
    $
    -Aggregate cash received for option exercises
    
    
    -
    
    
    $
    -Compensation cost (included in operating expenses)Stock options
    
    $
    144
    
    
    $
    322Restricted stock
    
    
    54
    
    
    
    167Total
    
    
    198
    
    
    
    489Tax benefit recognized
    
    
    37
    
    
    
    99Net compensation cost
    
    $
    161
    
    
    $
    390As of period end date:Total compensation cost for non-vested awards not yet recognized:Stock options
    
    $
    154
    
    
    $
    524Restricted stock
    
    $
    34
    
    
    $
    155Weighted-average years to be recognizedStock options
    
    
    1.1
    
    
    
    1.6Restricted stock
    
    
    1.1
    
    
    
    1.6
 3.
    
    SELECTED BALANCE SHEET DATA
 Inventories.Inventories consist of the following:
 March 31,
    
    
    September 30,2011
    
    
    2010Finished goods
    
    $
    6,180
    
    
    $
    2,977Work-in-process
    
    
    23,838
    
    
    
    18,318Raw materials and supplies
    
    
    10,957
    
    
    
    9,103Deferred cost of revenues
    
    
    4,551
    
    
    
    5,728Under(over) applied manufacturing overhead costs
    
    
    (399
    )
    
    
    -Total
    
    $
    45,127
    
    
    $
    36,126
 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:
 March 31,
    
    
    September 30,2011
    
    
    2010Customer relationships
    
    
    9,002
    
    
    
    8,976Less accumulated amortization
    
    
    (8,138
    )
    
    
    (7,556
    )864
    
    
    
    1,420Backlog
    
    
    1,584
    
    
    
    1,559Less accumulated amortization
    
    
    (1,584
    )
    
    
    (1,559
    )-
    
    
    
    -Total
    
    $
    864
    
    
    $
    1,420
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3.
    
    SELECTED BALANCE SHEET DATA (Continued)Customer relationships are assets of our Fine Chemicals and Aerospace Equipment segments and are
subject to amortization. Amortization expense was $239 and $344 for the three months ended March
31, 2011 and 2010, respectively, and $574 and $691, for the six months ended March 31, 2011 and
2010, respectively. Backlog is an asset of our Aerospace Equipment segment and is subject to
amortization. Amortization expense was zero and $162 for the three months ended March 31, 2011
and 2010, respectively, and zero and $359 for the six months ended March 31, 2011 and 2010,
respectively.Goodwill.Goodwill is an asset of our Aerospace Equipment segment and is not expected to be
deductible for tax purposes. Changes in the reported value for goodwill are a result of
fluctuations in the underlying foreign currency translation rate.
 4.
    
    COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS
 Comprehensive income (loss) consists of the following:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Net Income (Loss)
    
    $
    (1,213
    )
    
    $
    1,116
    
    
    $
    (4,832
    )
    
    $
    (324
    )Other Comprehensive Income (Loss) -Foreign currency translation adjustment
    
    
    260
    
    
    
    (307
    )
    
    
    144
    
    
    
    (382
    )Comprehensive Income (Loss)
    
    $
    (953
    )
    
    $
    809
    
    
    $
    (4,688
    )
    
    $
    (706
    )
 The components of accumulated other comprehensive loss are as follows:
 March 31,
    
    
    September 30,2011
    
    
    2010Cumulative currency translation adjustment
    
    $
    (317
    )
    
    $
    (461
    )Unamortized benefit plan costs, net of tax of $10,964
    
    
    (16,447
    )
    
    
    (16,447
    )Total
    
    $
    (16,764
    )
    
    $
    (16,908
    )
 5.
    
    EARNINGS (LOSS) PER SHARE
 Shares used to compute earnings (loss) per share are as follows:
 Three Months Ended
    
    
    Six Months EndedMarch 31
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Net Income (Loss)
    
    $
    (1,213
    )
    
    $
    1,116
    
    
    $
    (4,832
    )
    
    $
    (324
    )Basic weighted-average shares
    
    
    7,512,000
    
    
    
    7,490,000
    
    
    
    7,508,000
    
    
    
    7,489,000Diluted:Weighted-average shares, basic
    
    
    7,512,000
    
    
    
    7,490,000
    
    
    
    7,508,000
    
    
    
    7,489,000Dilutive effect of stock options
    
    
    -
    
    
    
    49,000
    
    
    
    -
    
    
    
    -Weighted-average shares, diluted
    
    
    7,512,000
    
    
    
    7,539,000
    
    
    
    7,508,000
    
    
    
    7,489,000Basic income (loss) per share
    
    $
    (0.16
    )
    
    $
    0.15
    
    
    $
    (0.64
    )
    
    $
    (0.04
    )Diluted income (loss) per share
    
    $
    (0.16
    )
    
    $
    0.15
    
    
    $
    (0.64
    )
    
    $
    (0.04
    )
 As of March 31, 2011 and 2010, we had an aggregate of 679,504 and 689,997 antidilutive
options and unvested restricted shares outstanding, respectively.
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6.
    
    DEBT
 Our outstanding debt balances consist of the following:
 March 31,
    
    September 30,2011
    
    2010Senior Notes, 9%, due 2015
    
    $
    105,000
    
    
    $
    105,000Capital Leases, due through 2014
    
    
    140
    
    
    
    172Total Debt
    
    
    105,140
    
    
    
    105,172Less Current Portion
    
    
    (73
    )
    
    
    (70
    )Total Long-term Debt
    
    $
    105,067
    
    
    $
    105,102
 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 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
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6.
    
    DEBT (Continued)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.Revolving Credit Facility.In February 2007, we entered into an Amended and Restated Credit
Agreement, as amended as of July 7, 2009 and September 17, 2010 (the Revolving Credit
Facility), with Wachovia Bank, National Association (predecessor by merger to Wells Fargo Bank,
National Association), and certain other lenders, which provided a secured revolving credit
facility in an aggregate principal amount of up to $20,000. On December 31, 2010, we terminated
the Revolving Credit Facility.ABL Credit Facility.On January 31, 2011, American Pacific Corporation, as borrower, entered
into an asset based lending credit agreement (the ABL Credit Facility) with Wells Fargo Bank,
National Association, as agent and as lender, and certain domestic subsidiaries of the Company,
as guarantors, which provides a secured revolving credit facility in an aggregate principal
amount of up to $20,000 at any time outstanding with an initial maturity to be the earlier of
(i) January 31, 2015 and (ii) 90 days prior to the maturity date of the Senior Notes, which is
February 1, 2015. The ABL Credit Facility also provides for the issuance of new letters of
credit with a letter of credit sublimit of $5,000. The maximum borrowing availability under the
ABL Credit Facility is based upon a percentage of our eligible account receivables and eligible
inventories. We may prepay and terminate the ABL Credit Facility at any time, without premium or
penalty. The ABL Credit Facility contains certain mandatory prepayment provisions. The annual
interest rates applicable to loans under the ABL Credit Facility will be, at our option, either
at a Base Rate or LIBOR Rate (each as defined in the ABL Credit Facility) plus, in each case, an
applicable margin of 2.50 percentage points. In addition, we will pay commitment fees, other
fees related to the issuance and maintenance of the letters of credit, and certain agency fees.The ABL Credit Facility is guaranteed by our current and future domestic subsidiaries and is
secured by substantially all of our assets and the assets of our current and future domestic
subsidiaries, subject to certain exceptions as set forth in the ABL Credit Facility. The ABL
Credit Facility contains certain negative covenants, subject to customary exceptions and
exclusions, restricting and limiting our ability to, among other things:
 
    
    incur debt, incur contingent obligations and issue certain types of preferred stock, or
prepay certain debt;
    
    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.
 The ABL Credit Facility also contains financial covenants which are only triggered by
utilization of the ABL Credit Facility and borrowing availability not exceeding a designated
threshold amount. If the financial covenants are triggered, then we would be subject to the
following financial covenants:
 
    
    Minimum EBITDA. We would be required to achieve a minimum level of EBITDA for the twelve
month period then ended. This covenant may become applicable through September 30, 2011.
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6.
    
    DEBT (Continued)
 
    
    Fixed Charge Coverage Ratio. We would be required to maintain a minimum fixed charge
coverage ratio on a rolling trailing 12 month basis of at least 1.10:1.00. This covenant
may become applicable beginning with the 12 month period ending October 31, 2011 and
through the remaining term of the ABL Credit Facility.
    
    Maximum Capital Expenditures. The ABL Credit Facility limits our capital expenditures
in any fiscal year to amounts set forth in the ABL Credit Facility.
   Letters of Credit.
 7.
    
    COMMITMENTS AND CONTINGENCIES
 Regulatory Review of Perchlorates
 Perchlorate Remediation Project in Henderson, Nevada.
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
     Henderson Site Environmental Remediation Reserve.
   - 12 -




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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
      - 13 -




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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)
  Balance, September 30, 2010
    
    $
    23,870Additions or adjustments
    
    
    -Expenditures
    
    
    (1,419
    )Balance, March 31, 2011
    
    $
    22,451
 AFC Environmental Matters.
   Other Matters.
 8.
    
    SEGMENT INFORMATION
  Fine Chemicals.
 - 14 -




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8.
    
    SEGMENT INFORMATION (Continued)
  Specialty Chemicals. â
 Aerospace Equipment
 Other Businesses.
  Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2011
    
    2010
    
    2011
    
    2010Fine chemicals customer
    
    
    
    
    
    
    40
    %
    
    
    11
    %
    
    
    27
    %Fine chemicals customer
    
    
    
    
    
    
    
    
    
    
    11
    %Fine chemicals customer
    
    
    11
    %Specialty chemicals customer
    
    
    15
    %
    
    
    
    
    
    
    11
    %
    
    
    16
    %
 - 15 -




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8.
    
    SEGMENT INFORMATION (Continued)
  Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2011
    
    2010
    
    2011
    
    2010Revenues:Fine Chemicals
    
    $
    16,065
    
    
    $
    33,673
    
    
    $
    29,954
    
    
    $
    43,177Specialty Chemicals
    
    
    10,828
    
    
    
    14,086
    
    
    
    19,869
    
    
    
    26,889Aerospace Equipment
    
    
    14,372
    
    
    
    10,168
    
    
    
    25,824
    
    
    
    18,493Other Businesses
    
    
    589
    
    
    
    1,468
    
    
    
    1,391
    
    
    
    4,900Total Revenues
    
    $
    41,854
    
    
    $
    59,395
    
    
    $
    77,038
    
    
    $
    93,459Segment Operating Income (Loss):Fine Chemicals
    
    $
    (838
    )
    
    $
    2,500
    
    
    $
    (4,471
    )
    
    $
    1,760Specialty Chemicals
    
    
    3,542
    
    
    
    6,513
    
    
    
    7,099
    
    
    
    12,344Aerospace Equipment
    
    
    1,407
    
    
    
    25
    
    
    
    2,085
    
    
    
    (337
    )Other Businesses
    
    
    (181
    )
    
    
    69
    
    
    
    (502
    )
    
    
    52Total Segment Operating Income
    
    
    3,930
    
    
    
    9,107
    
    
    
    4,211
    
    
    
    13,819Corporate Expenses
    
    
    (3,991
    )
    
    
    (3,672
    )
    
    
    (7,742
    )
    
    
    (8,245
    )Operating Income (Loss)
    
    $
    (61
    )
    
    $
    5,435
    
    
    $
    (3,531
    )
    
    $
    5,574Depreciation and Amortization:Fine Chemicals
    
    $
    3,040
    
    
    $
    3,194
    
    
    $
    6,277
    
    
    $
    6,522Specialty Chemicals
    
    
    231
    
    
    
    406
    
    
    
    349
    
    
    
    577Aerospace Equipment
    
    
    284
    
    
    
    392
    
    
    
    545
    
    
    
    815Other Businesses
    
    
    5
    
    
    
    4
    
    
    
    9
    
    
    
    8Corporate
    
    
    112
    
    
    
    127
    
    
    
    231
    
    
    
    254Total Depreciation and Amortization
    
    $
    3,672
    
    
    $
    4,123
    
    
    $
    7,411
    
    
    $
    8,176
 9.
    
    INCOME TAXES
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10.
    
    DEFINED BENEFIT PLANS
 Defined Benefit Plan Descriptions
  Three Months Ended
    
    Six Months EndedMarch 31,
    
    March 31,2011
    
    2010
    
    2011
    
    2010Pension Plans:Service Cost
    
    $
    616
    
    
    $
    625
    
    
    $
    1,232
    
    
    $
    1,250Interest Cost
    
    
    878
    
    
    
    798
    
    
    
    1,756
    
    
    
    1,596Expected Return on Plan Assets
    
    
    (722
    )
    
    
    (603
    )
    
    
    (1,444
    )
    
    
    (1,206
    )Recognized Actuarial Losses
    
    
    420
    
    
    
    263
    
    
    
    840
    
    
    
    526Amortization of Prior Service Costs
    
    
    16
    
    
    
    19
    
    
    
    31
    
    
    
    38Net Periodic Pension Cost
    
    $
    1,208
    
    
    $
    1,102
    
    
    $
    2,415
    
    
    $
    2,204Supplemental Executive Retirement Plan:Service Cost
    
    $
    81
    
    
    $
    110
    
    
    $
    162
    
    
    $
    220Interest Cost
    
    
    89
    
    
    
    94
    
    
    
    178
    
    
    
    187Expected Return on Plan Assets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Recognized Actuarial Losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Amortization of Prior Service Costs
    
    
    105
    
    
    
    105
    
    
    
    210
    
    
    
    210Net Periodic Pension Cost
    
    $
    275
    
    
    $
    309
    
    
    $
    550
    
    
    $
    617
 Defined Contribution Plan Descriptions .
 Contributions and Benefit Payments
 - 17 -




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11.
    
    GAIN CONTINGENCIES - OTHER OPERATING GAINS
 We recognize gain contingencies in our consolidated statement of operations when all
contingencies have been resolved, which generally coincides with the receipt of cash, if
applicable. During the three months and six months ended March 31, 2011, our Fine Chemicals
segment reported other operating gains of $1,592 and $2,929, respectively, that resulted from
the resolution of gain contingencies. The total reported gain of $2,929 is comprised of the
following two matters.We made a series of filings with the County of Sacramento, California, to appeal the assessed
values in prior years of our real and personal property located at our Fine Chemicals segments
Rancho Cordova, California facility. During the six months ended March 31, 2011, we received
$2,671 for cash property tax refunds resulting from our appeals and the related favorable
reassessment of historical property values.Our Fine Chemicals segment is undertaking several mandatory capital projects. Certain of the
capital activities are complete and others are anticipated to be completed during the calendar
year 2011. In connection with these projects, our Fine Chemicals segment held, and continues to
hold, negotiations with the former owner of the facilities. During the six months ended March
31, 2011, we received from the former owner cash consideration in the amount of $258 for a
limited release of liability of the former owner with respect to one of the completed projects.
 12.
    
    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.
 Condensed Consolidating Statement of Operations - Three Months Ended March 31, 2011Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    39,149
    
    
    $
    2,869
    
    
    $
    (164
    )
    
    $
    41,854Cost of Revenues
    
    
    -
    
    
    
    29,827
    
    
    
    2,024
    
    
    
    (164
    )
    
    
    31,687Gross Profit
    
    
    -
    
    
    
    9,322
    
    
    
    845
    
    
    
    -
    
    
    
    10,167Operating Expenses, Net
    
    
    -
    
    
    
    9,132
    
    
    
    1,096
    
    
    
    -
    
    
    
    10,228Operating Income (Loss)
    
    
    -
    
    
    
    190
    
    
    
    (251
    )
    
    
    -
    
    
    
    (61
    )Interest and Other Income
    
    
    2,543
    
    
    
    296
    
    
    
    209
    
    
    
    (2,543
    )
    
    
    505Interest Expense
    
    
    2,543
    
    
    
    2,569
    
    
    
    2
    
    
    
    (2,543
    )
    
    
    2,571Loss before Income Tax andEquity Account for Subsidiaries
    
    
    -
    
    
    
    (2,083
    )
    
    
    (44
    )
    
    
    -
    
    
    
    (2,127
    )Income Tax Benefit
    
    
    -
    
    
    
    (931
    )
    
    
    17
    
    
    
    -
    
    
    
    (914
    )Loss beforeEquity Account for Subsidiaries
    
    
    -
    
    
    
    (1,152
    )
    
    
    (61
    )
    
    
    -
    
    
    
    (1,213
    )Equity Account for Subsidiaries
    
    
    (1,213
    )
    
    
    (61
    )
    
    
    -
    
    
    
    1,274
    
    
    
    -Net Loss
    
    $
    (1,213
    )
    
    $
    (1,213
    )
    
    $
    (61
    )
    
    $
    1,274
    
    
    $
    (1,213
    )
 - 18 -




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12.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Statement of Operations - Six Months Ended March 31, 2011Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    72,051
    
    
    $
    5,229
    
    
    $
    (242
    )
    
    $
    77,038Cost of Revenues
    
    
    -
    
    
    
    57,036
    
    
    
    3,461
    
    
    
    (242
    )
    
    
    60,255Gross Profit
    
    
    -
    
    
    
    15,015
    
    
    
    1,768
    
    
    
    -
    
    
    
    16,783Operating Expenses, Net
    
    
    -
    
    
    
    18,428
    
    
    
    1,886
    
    
    
    -
    
    
    
    20,314Operating Income (Loss)
    
    
    -
    
    
    
    (3,413
    )
    
    
    (118
    )
    
    
    -
    
    
    
    (3,531
    )Interest and Other Income
    
    
    5,239
    
    
    
    349
    
    
    
    23
    
    
    
    (5,239
    )
    
    
    372Interest Expense
    
    
    5,239
    
    
    
    5,282
    
    
    
    3
    
    
    
    (5,239
    )
    
    
    5,285Loss before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (8,346
    )
    
    
    (98
    )
    
    
    -
    
    
    
    (8,444
    )Income Tax Benefit
    
    
    -
    
    
    
    (3,676
    )
    
    
    64
    
    
    
    -
    
    
    
    (3,612
    )Loss before
Equity Account for Subsidiaries
    
    
    -
    
    
    
    (4,670
    )
    
    
    (162
    )
    
    
    -
    
    
    
    (4,832
    )Equity Account for Subsidiaries
    
    
    (4,832
    )
    
    
    (162
    )
    
    
    -
    
    
    
    4,994
    
    
    
    -Net Loss
    
    $
    (4,832
    )
    
    $
    (4,832
    )
    
    $
    (162
    )
    
    $
    4,994
    
    
    $
    (4,832
    )
 Condensed Consolidating Statement of Operations - Three Months Ended March 31, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    56,648
    
    
    $
    2,597
    
    
    $
    150
    
    
    $
    59,395Cost of Revenues
    
    
    -
    
    
    
    40,360
    
    
    
    2,006
    
    
    
    150
    
    
    
    42,516Gross Profit
    
    
    -
    
    
    
    16,288
    
    
    
    591
    
    
    
    -
    
    
    
    16,879Operating Expenses
    
    
    -
    
    
    
    10,440
    
    
    
    1,004
    
    
    
    -
    
    
    
    11,444Operating Income (Loss)
    
    
    -
    
    
    
    5,848
    
    
    
    (413
    )
    
    
    -
    
    
    
    5,435Interest and Other Income
    
    
    2,664
    
    
    
    36
    
    
    
    (271
    )
    
    
    (2,689
    )
    
    
    (260
    )Interest Expense
    
    
    2,664
    
    
    
    2,738
    
    
    
    27
    
    
    
    (2,689
    )
    
    
    2,740Income (Loss) before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    3,146
    
    
    
    (711
    )
    
    
    -
    
    
    
    2,435Income Tax Benefit
    
    
    -
    
    
    
    1,254
    
    
    
    65
    
    
    
    -
    
    
    
    1,319Income (Loss) before
Equity Account for Subsidiaries
    
    
    -
    
    
    
    1,892
    
    
    
    (776
    )
    
    
    -
    
    
    
    1,116Equity Account for Subsidiaries
    
    
    1,116
    
    
    
    (776
    )
    
    
    -
    
    
    
    (340
    )
    
    
    -Net Income (Loss)
    
    $
    1,116
    
    
    $
    1,116
    
    
    $
    (776
    )
    
    $
    (340
    )
    
    $
    1,116
 Condensed Consolidating Statement of Operations - Six Months Ended March 31, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    88,376
    
    
    $
    5,100
    
    
    $
    (17
    )
    
    $
    93,459Cost of Revenues
    
    
    -
    
    
    
    60,372
    
    
    
    3,779
    
    
    
    (17
    )
    
    
    64,134Gross Profit
    
    
    -
    
    
    
    28,004
    
    
    
    1,321
    
    
    
    -
    
    
    
    29,325Operating Expenses
    
    
    -
    
    
    
    21,697
    
    
    
    2,054
    
    
    
    -
    
    
    
    23,751Operating Income (Loss)
    
    
    -
    
    
    
    6,307
    
    
    
    (733
    )
    
    
    -
    
    
    
    5,574Interest and Other Income
    
    
    5,333
    
    
    
    76
    
    
    
    (296
    )
    
    
    (5,381
    )
    
    
    (268
    )Interest Expense
    
    
    5,333
    
    
    
    5,427
    
    
    
    52
    
    
    
    (5,381
    )
    
    
    5,431Income (Loss) before Income Tax and
Equity Account for Subsidiaries
    
    
    -
    
    
    
    956
    
    
    
    (1,081
    )
    
    
    -
    
    
    
    (125
    )Income Tax Benefit
    
    
    -
    
    
    
    177
    
    
    
    22
    
    
    
    -
    
    
    
    199Income (Loss) before
Equity Account for Subsidiaries
    
    
    -
    
    
    
    779
    
    
    
    (1,103
    )
    
    
    -
    
    
    
    (324
    )Equity Account for Subsidiaries
    
    
    (324
    )
    
    
    (1,103
    )
    
    
    -
    
    
    
    1,427
    
    
    
    -Net Loss
    
    $
    (324
    )
    
    $
    (324
    )
    
    $
    (1,103
    )
    
    $
    1,427
    
    
    $
    (324
    )
 - 19 -




---



##### Table of Contents



12.
    
    GUARANTOR SUBSIDIARIES (continued)
 Condensed Consolidating Balance Sheet - March 31, 2011Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    31,179
    
    
    $
    518
    
    
    $
    -
    
    
    $
    31,697Accounts Receivable, Net
    
    
    -
    
    
    
    31,031
    
    
    
    4,661
    
    
    
    (658
    )
    
    
    35,034Inventories
    
    
    -
    
    
    
    43,987
    
    
    
    1,140
    
    
    
    -
    
    
    
    45,127Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    4,522
    
    
    
    254
    
    
    
    -
    
    
    
    4,776Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    14,989
    
    
    
    50
    
    
    
    -
    
    
    
    15,039Total Current Assets
    
    
    -
    
    
    
    125,708
    
    
    
    6,623
    
    
    
    (658
    )
    
    
    131,673Property, Plant and Equipment, Net
    
    
    -
    
    
    
    113,499
    
    
    
    2,185
    
    
    
    -
    
    
    
    115,684Intangible Assets, Net
    
    
    -
    
    
    
    111
    
    
    
    753
    
    
    
    -
    
    
    
    864Goodwill
    
    
    -
    
    
    
    -
    
    
    
    3,038
    
    
    
    -
    
    
    
    3,038Deferred Income Taxes
    
    
    -
    
    
    
    20,213
    
    
    
    38
    
    
    
    -
    
    
    
    20,251Other Assets
    
    
    -
    
    
    
    9,849
    
    
    
    384
    
    
    
    -
    
    
    
    10,233Intercompany Advances
    
    
    92,414
    
    
    
    5,046
    
    
    
    -
    
    
    
    (97,460
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    71,731
    
    
    
    4,799
    
    
    
    -
    
    
    
    (76,530
    )
    
    
    -Total Assets
    
    $
    164,145
    
    
    $
    279,225
    
    
    $
    13,021
    
    
    $
    (174,648
    )
    
    $
    281,743Liabilitites and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    25,258
    
    
    $
    2,410
    
    
    $
    (658
    )
    
    $
    27,010Environmental Remediation Reserves
    
    
    -
    
    
    
    9,014
    
    
    
    -
    
    
    
    -
    
    
    
    9,014Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    30,017
    
    
    
    694
    
    
    
    -
    
    
    
    30,711Current Portion of Long-Term Debt
    
    
    -
    
    
    
    22
    
    
    
    51
    
    
    
    -
    
    
    
    73Intercompany Advances
    
    
    -
    
    
    
    92,414
    
    
    
    5,046
    
    
    
    (97,460
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    156,725
    
    
    
    8,201
    
    
    
    (98,118
    )
    
    
    66,808Long-Term Debt
    
    
    105,000
    
    
    
    46
    
    
    
    21
    
    
    
    -
    
    
    
    105,067Environmental Remediation Reserves
    
    
    -
    
    
    
    13,437
    
    
    
    -
    
    
    
    -
    
    
    
    13,437Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    37,286
    
    
    
    -
    
    
    
    -
    
    
    
    37,286Total Liabilities
    
    
    105,000
    
    
    
    207,494
    
    
    
    8,222
    
    
    
    (98,118
    )
    
    
    222,598Total Shareholders Equity
    
    
    59,145
    
    
    
    71,731
    
    
    
    4,799
    
    
    
    (76,530
    )
    
    
    59,145Total Liabilities and Shareholders Equity
    
    $
    164,145
    
    
    $
    279,225
    
    
    $
    13,021
    
    
    $
    (174,648
    )
    
    $
    281,743
 Condensed Consolidating Statement of Cash Flows - Six Months Ended March 31, 2011Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided (Used) by Operating Activities
    
    $
    -
    
    
    $
    16,589
    
    
    $
    (302
    )
    
    $
    -
    
    
    $
    16,287Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (7,372
    )
    
    
    (357
    )
    
    
    -
    
    
    
    (7,729
    )Net Cash Used in Investing Activities
    
    
    -
    
    
    
    (7,372
    )
    
    
    (357
    )
    
    
    -
    
    
    
    (7,729
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (10
    )
    
    
    (25
    )
    
    
    -
    
    
    
    (35
    )Debt Issuance costs
    
    
    (869
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (869
    )Intercompany advances, net
    
    
    869
    
    
    
    (1,019
    )
    
    
    150
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (1,029
    )
    
    
    125
    
    
    
    -
    
    
    
    (904
    )Effect of Changes in Currency Exchange Rates
    
    
    -
    
    
    
    -
    
    
    
    58
    
    
    
    
    
    
    
    58Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    8,188
    
    
    
    (476
    )
    
    
    -
    
    
    
    7,712Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    22,991
    
    
    
    994
    
    
    
    -
    
    
    
    23,985Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    31,179
    
    
    $
    518
    
    
    $
    -
    
    
    $
    31,697
 - 20 -




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##### Table of Contents



12.
    
    GUARANTOR SUBSIDIARIES (continued)
 Condensed Consolidating Balance Sheet - September 30, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    22,991
    
    
    $
    994
    
    
    $
    -
    
    
    $
    23,985Accounts Receivable, Net
    
    
    -
    
    
    
    48,194
    
    
    
    6,054
    
    
    
    (2,348
    )
    
    
    51,900Inventories
    
    
    -
    
    
    
    34,968
    
    
    
    1,158
    
    
    
    -
    
    
    
    36,126Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,249
    
    
    
    293
    
    
    
    -
    
    
    
    1,542Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    13,474
    
    
    
    -
    
    
    
    -
    
    
    
    13,474Total Current Assets
    
    
    -
    
    
    
    120,876
    
    
    
    8,499
    
    
    
    (2,348
    )
    
    
    127,027Property, Plant and Equipment, Net
    
    
    -
    
    
    
    111,946
    
    
    
    1,927
    
    
    
    -
    
    
    
    113,873Intangible Assets, Net
    
    
    -
    
    
    
    537
    
    
    
    883
    
    
    
    -
    
    
    
    1,420Goodwill
    
    
    -
    
    
    
    -
    
    
    
    2,933
    
    
    
    -
    
    
    
    2,933Deferred Income Taxes
    
    
    -
    
    
    
    20,222
    
    
    
    32
    
    
    
    -
    
    
    
    20,254Other Assets
    
    
    -
    
    
    
    9,945
    
    
    
    291
    
    
    
    -
    
    
    
    10,236Intercompany Advances
    
    
    91,545
    
    
    
    4,896
    
    
    
    -
    
    
    
    (96,441
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    77,112
    
    
    
    4,817
    
    
    
    -
    
    
    
    (81,929
    )
    
    
    -Total Assets
    
    $
    168,657
    
    
    $
    273,239
    
    
    $
    14,565
    
    
    $
    (180,718
    )
    
    $
    275,743Liabilitites and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    23,931
    
    
    $
    3,916
    
    
    $
    (2,348
    )
    
    $
    25,499Environmental Remediation Reserves
    
    
    -
    
    
    
    8,694
    
    
    
    -
    
    
    
    -
    
    
    
    8,694Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    17,927
    
    
    
    842
    
    
    
    -
    
    
    
    18,769Current Portion of Long-Term Debt
    
    
    -
    
    
    
    21
    
    
    
    49
    
    
    
    -
    
    
    
    70Intercompany Advances
    
    
    -
    
    
    
    91,545
    
    
    
    4,896
    
    
    
    (96,441
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    142,118
    
    
    
    9,703
    
    
    
    (98,789
    )
    
    
    53,032Long-Term Debt
    
    
    105,000
    
    
    
    57
    
    
    
    45
    
    
    
    -
    
    
    
    105,102Environmental Remediation Reserves
    
    
    -
    
    
    
    15,176
    
    
    
    -
    
    
    
    -
    
    
    
    15,176Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    38,776
    
    
    
    -
    
    
    
    -
    
    
    
    38,776Total Liabilities
    
    
    105,000
    
    
    
    196,127
    
    
    
    9,748
    
    
    
    (98,789
    )
    
    
    212,086Total Shareholders Equity
    
    
    63,657
    
    
    
    77,112
    
    
    
    4,817
    
    
    
    (81,929
    )
    
    
    63,657Total Liabilities and Shareholders Equity
    
    $
    168,657
    
    
    $
    273,239
    
    
    $
    14,565
    
    
    $
    (180,718
    )
    
    $
    275,743
 Condensed Consolidating Statement of Cash Flows - Six Months Ended March 31, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided (Used) by Operating Activities
    
    $
    -
    
    
    $
    15,483
    
    
    $
    (889
    )
    
    $
    -
    
    
    $
    14,594Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (3,115
    )
    
    
    (473
    )
    
    
    -
    
    
    
    (3,588
    )Net Cash Used in Investing Activities
    
    
    -
    
    
    
    (3,115
    )
    
    
    (473
    )
    
    
    -
    
    
    
    (3,588
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (65
    )
    
    
    (24
    )
    
    
    -
    
    
    
    (89
    )Intercompany advances, net
    
    
    -
    
    
    
    (1,234
    )
    
    
    1,234
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (1,299
    )
    
    
    1,210
    
    
    
    -
    
    
    
    (89
    )Effect of Changes in Currency Exchange Rates
    
    
    -
    
    
    
    -
    
    
    
    (84
    )
    
    
    -
    
    
    
    (84
    )Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    11,069
    
    
    
    (236
    )
    
    
    -
    
    
    
    10,833Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    20,046
    
    
    
    1,635
    
    
    
    -
    
    
    
    21,681Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    31,115
    
    
    $
    1,399
    
    
    $
    -
    
    
    $
    32,514
 - 21 -




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
   - 22 -




---



##### Table of Contents



OUR COMPANY
   OUR BUSINESS SEGMENTS
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Fine Chemicals
    
    
    39
    %
    
    
    57
    %
    
    
    39
    %
    
    
    46
    %Specialty Chemicals:Perchlorates
    
    
    21
    %
    
    
    22
    %
    
    
    21
    %
    
    
    26
    %Sodium Azide
    
    
    2
    %
    
    
    0
    %*
    
    
    2
    %
    
    
    1
    %Halotron
    
    
    3
    %
    
    
    2
    %
    
    
    3
    %
    
    
    2
    %Total Specialty Chemicals
    
    
    26
    %
    
    
    24
    %
    
    
    26
    %
    
    
    29
    %Aerospace Equipment
    
    
    34
    %
    
    
    17
    %
    
    
    34
    %
    
    
    20
    %Other Businesses:Real Estate
    
    
    0
    %*
    
    
    0
    %*
    
    
    0
    %*
    
    
    0
    %*Water Treatment Equipment
    
    
    1
    %
    
    
    2
    %
    
    
    1
    %
    
    
    5
    %Total Other Businesses
    
    
    1
    %
    
    
    2
    %
    
    
    1
    %
    
    
    5
    %Total Revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  - 23 -




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##### Table of Contents



FINE CHEMICALS.
   
    
    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 . ®
 - 24 -




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##### Table of Contents



AEROSPACE EQUIPMENT.
   OTHER BUSINESSES.
 RESULTS OF OPERATIONS
 REVENUES
 March 31,
    
    
    Increase
    
    
    Percentage2011
    
    
    2010
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    16,065
    
    
    $
    33,673
    
    
    $
    (17,608
    )
    
    
    (52
    %)Specialty Chemicals
    
    
    10,828
    
    
    
    14,086
    
    
    
    (3,258
    )
    
    
    (23
    %)Aerospace Equipment
    
    
    14,372
    
    
    
    10,168
    
    
    
    4,204
    
    
    
    41
    %Other Businesses
    
    
    589
    
    
    
    1,468
    
    
    
    (879
    )
    
    
    (60
    %)Total Revenues
    
    $
    41,854
    
    
    $
    59,395
    
    
    $
    (17,541
    )
    
    
    (30
    %)Six Months Ended:Fine Chemicals
    
    $
    29,954
    
    
    $
    43,177
    
    
    $
    (13,223
    )
    
    
    (31
    %)Specialty Chemicals
    
    
    19,869
    
    
    
    26,889
    
    
    
    (7,020
    )
    
    
    (26
    %)Aerospace Equipment
    
    
    25,824
    
    
    
    18,493
    
    
    
    7,331
    
    
    
    40
    %Other Businesses
    
    
    1,391
    
    
    
    4,900
    
    
    
    (3,509
    )
    
    
    (72
    %)Total Revenues
    
    $
    77,038
    
    
    $
    93,459
    
    
    $
    (16,421
    )
    
    
    (18
    %)
 - 25 -




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##### Table of Contents



Fine Chemicals .
 Specialty Chemicals.
 
    
    A 31% decrease in perchlorate volume and a 1% increase in the related average price per
pound for the Fiscal 2011 second quarter compared to the prior fiscal year second quarter.
    
    A 31% decrease in perchlorate volume and a 1% decrease in the related average price per
pound for the Fiscal 2011 six-month period compared to the prior fiscal year six-month period.
    
    Sodium azide revenues increased by $633 for the Fiscal 2011 second quarter and $208 for the
Fiscal 2011 six-month period.
    
    Halotron revenues increased $89 for the Fiscal 2011 second quarter and $219 for the Fiscal
2011 six-month period.
   
    
    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, under which price and volume move inversely, and comparable catalog pricing.
    
    This was offset 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 2011 periods.
 Aerospace Equipment.
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COST OF REVENUES AND GROSS MARGIN
 March 31
    
    
    Increase
    
    
    Percentage2011
    
    
    2010
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Revenues
    
    $
    41,854
    
    
    $
    59,395
    
    
    $
    (17,541
    )
    
    
    (30
    %)Cost of Revenues
    
    
    31,687
    
    
    
    42,516
    
    
    
    (10,829
    )
    
    
    (25
    %)Gross Margin
    
    
    10,167
    
    
    
    16,879
    
    
    
    (6,712
    )
    
    
    (40
    %)Gross Margin Percentage
    
    
    24
    %
    
    
    28
    %Six Months Ended:Revenues
    
    $
    77,038
    
    
    $
    93,459
    
    
    $
    (16,421
    )
    
    
    (18
    %)Cost of Revenues
    
    
    60,255
    
    
    
    64,134
    
    
    
    (3,879
    )
    
    
    (6
    %)Gross Margin
    
    
    16,783
    
    
    
    29,325
    
    
    
    (12,542
    )
    
    
    (43
    %)Gross Margin Percentage
    
    
    22
    %
    
    
    31
    %
  Fine Chemicals.
 Specialty Chemicals.
 Aerospace Equipment .
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OPERATING EXPENSES
 March 31,
    
    
    Increase
    
    
    Percentage2011
    
    
    2010
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Operating Expenses
    
    $
    11,820
    
    
    $
    11,444
    
    
    $
    376
    
    
    
    3
    %Percentage of Revenues
    
    
    28
    %
    
    
    19
    %Six Months Ended:Operating Expenses
    
    $
    23,243
    
    
    $
    23,751
    
    
    $
    (508
    )
    
    
    (2
    %)Percentage of Revenues
    
    
    30
    %
    
    
    25
    %
   OTHER OPERATING GAINS
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SEGMENT OPERATING INCOME (LOSS)
 March 31,
    
    
    Favorable
    
    
    Percentage2011
    
    
    2010
    
    
    (Unfavorable)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    (838
    )
    
    $
    2,500
    
    
    $
    (3,338
    )
    
    NMSpecialty Chemicals
    
    
    3,542
    
    
    
    6,513
    
    
    
    (2,971
    )
    
    
    (46
    %)Aerospace Equipment
    
    
    1,407
    
    
    
    25
    
    
    
    1,382
    
    
    
    5,528
    %Other Businesses
    
    
    (181
    )
    
    
    69
    
    
    
    (250
    )
    
    NMSegment Operating Income
    
    
    3,930
    
    
    
    9,107
    
    
    
    (5,177
    )
    
    
    (57
    %)Corporate Expenses
    
    
    (3,991
    )
    
    
    (3,672
    )
    
    
    (319
    )
    
    
    (9
    %)Operating Income (Loss)
    
    $
    (61
    )
    
    $
    5,435
    
    
    $
    (5,496
    )
    
    NMSix Months Ended:Fine Chemicals
    
    $
    (4,471
    )
    
    $
    1,760
    
    
    $
    (6,231
    )
    
    NMSpecialty Chemicals
    
    
    7,099
    
    
    
    12,344
    
    
    
    (5,245
    )
    
    
    (42
    %)Aerospace Equipment
    
    
    2,085
    
    
    
    (337
    )
    
    
    2,422
    
    
    NMOther Businesses
    
    
    (502
    )
    
    
    52
    
    
    
    (554
    )
    
    NMSegment Operating Income
    
    
    4,211
    
    
    
    13,819
    
    
    
    (9,608
    )
    
    
    (70
    %)Corporate Expenses
    
    
    (7,742
    )
    
    
    (8,245
    )
    
    
    503
    
    
    
    6
    %Operating Income (Loss)
    
    $
    (3,531
    )
    
    $
    5,574
    
    
    $
    (9,105
    )
    
    NM
   BACKLOG
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LIQUIDITY AND CAPITAL RESOURCES
 CASH FLOWS
 Six Months Ended March 31,
    
    
    
    
    
    
    Percentage2011
    
    
    2010
    
    
    Change
    
    
    ChangeCash Provided (Used) By:Operating activities
    
    $
    16,287
    
    
    $
    14,594
    
    
    $
    1,693
    
    
    
    12
    %Investing activities
    
    
    (7,729
    )
    
    
    (3,588
    )
    
    
    (4,141
    )
    
    
    115
    %Financing activities
    
    
    (904
    )
    
    
    (89
    )
    
    
    (815
    )
    
    
    916
    %Effect of changes in exchange rates on cash
    
    
    58
    
    
    
    (84
    )
    
    
    142
    
    
    NMNet change in cash for period
    
    $
    7,712
    
    
    $
    10,833
    
    
    $
    (3,121
    )
    
    
    (29
    %)
  Operating Cash Flows 
  
    
    A decrease in cash due to a decline in the cash profits provided by our operations.
    
    An increase in cash provided by working capital accounts of $13,050, excluding the effects
of interest and income taxes.
    
    An increase in cash income taxes refunded of $1,501.
    
    A decrease in cash interest payments of $285.
    
    An increase in cash used for environmental remediation of $440.
    
    An increase in cash used to fund pension obligations of $3,066.
    
    Other decreases in cash provided by operating activities of $116.
     Investing Cash Flows
 Financing Cash Flows 
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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 calendar 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 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;
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
    
    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 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.
  ABL Credit Facility.
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
    
    incur debt, incur contingent obligations and issue certain types of preferred stock, or
prepay certain debt;
    
    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.
  
    
    Minimum EBITDA. We would be required to achieve a minimum level of EBITDA for the twelve
month period then ended. This covenant may become applicable through September 30, 2011.
    
    Fixed Charge Coverage Ratio. We would be required to maintain a minimum fixed charge
coverage ratio on a rolling trailing 12 month basis of at least 1.10:1.00. This covenant may
become applicable beginning with the 12 month period ending October 31, 2011 and through the
remaining term of the ABL Credit Facility.
    
    Maximum Capital Expenditures. The ABL Credit Facility limits our capital expenditures in
any fiscal year to amounts set forth in the ABL Credit Facility.
   Letters of Credit.
 PENSION BENEFITS.
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ENVIRONMENTAL REMEDIATION  AMPAC HENDERSON SITE.
  - 34 -




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CRITICAL ACCOUNTING POLICIES
   - 35 -




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SALES AND REVENUE RECOGNITION.
   DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS.
  IMPAIRMENT OF LONG-LIVED ASSETS .
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GOODWILL.
 ENVIRONMENTAL COSTS .
  INCOME TAXES .
 - 37 -




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PENSION BENEFITS .
  - 38 -




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RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 ITEM 4. CONTROLS AND PROCEDURES
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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.
  Review of Perchlorate Toxicity by the EPA.
 - 43 -




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Perchlorate Remediation Project in Henderson, Nevada.
 Henderson Site Environmental Remediation Reserve.
 - 44 -




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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.
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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.
  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.
  - 47 -




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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.
  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.
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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.
  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 through acquisitions, but the acquisitions 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.
 - 51 -




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
    
    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.
 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.
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Our suspended 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.
  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;
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
    
    developments in our industries;
    
    changes in investors acceptable levels of risk;
    
    trading volume of our common stock; and
    
    general economic conditions.
  
 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: May 12, 2011
    /s/ JOSEPH CARLEONEJoseph CarleonePresident and Chief Executive Officer
(Principal Executive Officer)/s/ DANA M. KELLEYDana M. KelleyVice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer) - 55 -




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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
    
    Certificate of Amendment of Restated Certificate of Incorporation of American Pacific
Corporation, as filed with the Secretary of State, State of Delaware, on March 8, 2011
(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 March
11, 2011)3.5
    
    American Pacific Corporation Amended and Restated By-laws (incorporated by reference to
Exhibit 3.2 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 March 11, 2011)3.6
    
    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)3.7
    
    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)3.8
    
    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)3.9
    
    Amendment No. 2 to Rights Agreement, dated as of September 14, 2010, 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 September 20, 2010)10.1
    
    Credit Agreement, dated as of January 31, 2011, by and among American Pacific Corporation,
Wells Fargo Bank, National Association, and certain domestic subsidiaries of American Pacific
Corporation (incorporated by reference to Exhibit 10.1 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 February 4, 2011)10.2+
    
    American Pacific Corporation Amended and Restated 2008 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 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 March 11, 2011)31.1
    
    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
 
 +
    
    Management contract or compensatory 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. - 56 -