##### Table of Contents



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




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##### 



AMERICAN PACIFIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
  PART I. FINANCIAL INFORMATIONITEM 1.   Financial Statements
    
    
    1Condensed Consolidated Statements of Operations (unaudited)
    
    
    1Condensed Consolidated Balance Sheets (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk
    
    
    39ITEM 4.   Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONITEM 1.   Legal Proceedings
    
    
    41ITEM 1A. Risk Factors
    
    
    41ITEM 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 CORPORATION
 
 Condensed Consolidated Statements of Operations
 (Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    59,395
    
    
    $
    56,435
    
    
    $
    93,459
    
    
    $
    102,064Cost of Revenues
    
    
    42,516
    
    
    
    39,138
    
    
    
    64,134
    
    
    
    70,033Gross Profit
    
    
    16,879
    
    
    
    17,297
    
    
    
    29,325
    
    
    
    32,031Operating Expenses
    
    
    11,444
    
    
    
    11,071
    
    
    
    23,751
    
    
    
    22,380Operating Income
    
    
    5,435
    
    
    
    6,226
    
    
    
    5,574
    
    
    
    9,651Interest and Other Income (Expense), Net
    
    
    (260
    )
    
    
    (19
    )
    
    
    (268
    )
    
    
    42Interest Expense
    
    
    2,740
    
    
    
    2,684
    
    
    
    5,431
    
    
    
    5,378Income (Loss) before Income Tax
    
    
    2,435
    
    
    
    3,523
    
    
    
    (125
    )
    
    
    4,315Income Tax Expense
    
    
    1,319
    
    
    
    1,790
    
    
    
    199
    
    
    
    2,125Net Income (Loss)
    
    $
    1,116
    
    
    $
    1,733
    
    
    $
    (324
    )
    
    $
    2,190Earnings (Loss) per Share:Basic
    
    $
    0.15
    
    
    $
    0.23
    
    
    $
    (0.04
    )
    
    $
    0.29Diluted
    
    $
    0.15
    
    
    $
    0.23
    
    
    $
    (0.04
    )
    
    $
    0.29Weighted Average Shares Outstanding:Basic
    
    
    7,490,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,481,000Diluted
    
    
    7,539,000
    
    
    
    7,522,000
    
    
    
    7,489,000
    
    
    
    7,545,000
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Condensed Consolidated Balance Sheets
 (Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 March 31,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    32,514
    
    
    $
    21,681Accounts Receivable, Net
    
    
    41,468
    
    
    
    44,028Inventories
    
    
    36,430
    
    
    
    36,356Prepaid Expenses and Other Assets
    
    
    2,391
    
    
    
    1,811Income Taxes Receivable
    
    
    1,467
    
    
    
    2,148Deferred Income Taxes
    
    
    6,317
    
    
    
    6,317Total Current Assets
    
    
    120,587
    
    
    
    112,341Property, Plant and Equipment, Net
    
    
    111,148
    
    
    
    114,645Intangible Assets, Net
    
    
    2,418
    
    
    
    3,553Goodwill
    
    
    2,899
    
    
    
    3,144Deferred Income Taxes
    
    
    21,124
    
    
    
    21,121Other Assets
    
    
    10,420
    
    
    
    10,037TOTAL ASSETS
    
    $
    268,596
    
    
    $
    264,841LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    8,868
    
    
    $
    7,444Accrued Liabilities
    
    
    6,319
    
    
    
    5,295Accrued Interest
    
    
    1,650
    
    
    
    1,650Employee Related Liabilities
    
    
    5,600
    
    
    
    6,930Income Taxes Payable
    
    
    397
    
    
    
    189Deferred Revenues and Customer Deposits
    
    
    9,208
    
    
    
    6,911Current Portion of Environmental Remediation Reserves
    
    
    2,101
    
    
    
    2,522Current Portion of Long-Term Debt
    
    
    112
    
    
    
    151Total Current Liabilities
    
    
    34,255
    
    
    
    31,092Long-Term Debt
    
    
    110,135
    
    
    
    110,097Environmental Remediation Reserves
    
    
    23,610
    
    
    
    24,168Pension Obligations
    
    
    29,120
    
    
    
    27,720Other Long-Term Liabilities
    
    
    596
    
    
    
    667Total Liabilities
    
    
    197,716
    
    
    
    193,744Commitments and ContingenciesShareholders EquityPreferred
Stock - $1.00 par value; 3,000,000 authorized; none outstanding
    
    
    -
    
    
    
    -Common Stock
- $0.10 par value; 20,000,000 shares authorized, 

7,540,591 and 7,504,591 issued
    
    
    754
    
    
    
    750Capital in Excess of Par Value
    
    
    72,807
    
    
    
    72,322Retained Earnings
    
    
    9,673
    
    
    
    9,997Accumulated Other Comprehensive Loss
    
    
    (12,354
    )
    
    
    (11,972
    )Total Shareholders Equity
    
    
    70,880
    
    
    
    71,097TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    268,596
    
    
    $
    264,841
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AMERICAN PACIFIC CORPORATION
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited, Dollars in Thousands)
 
 Six Months EndedMarch 31,2010
    
    
    2009Cash Flows from Operating Activities:Net Income (Loss)
    
    $
    (324
    )
    
    $
    2,190Adjustments to Reconcile Net Income (Loss)


to Net Cash Provided by Operating Activities:Depreciation and amortization
    
    
    8,176
    
    
    
    7,870Non-cash interest expense
    
    
    315
    
    
    
    315Share-based compensation
    
    
    489
    
    
    
    305Excess tax benefit from stock option exercises
    
    
    -
    
    
    
    (3
    )Deferred income taxes
    
    
    (81
    )
    
    
    (68
    )Loss on sale of assets
    
    
    5
    
    
    
    53Changes in operating assets and liabilities:Accounts receivable, net
    
    
    2,375
    
    
    
    (1,220
    )Inventories
    
    
    (136
    )
    
    
    5,058Prepaid expenses and other current assets
    
    
    (591
    )
    
    
    1,019Accounts payable
    
    
    1,395
    
    
    
    (3,032
    )Income taxes
    
    
    900
    
    
    
    2,502Accrued liabilities
    
    
    1,039
    
    
    
    287Employee related liabilities
    
    
    (1,457
    )
    
    
    (2,125
    )Deferred revenues and customer deposits
    
    
    2,418
    
    
    
    625Environmental remediation reserves
    
    
    (979
    )
    
    
    (717
    )Pension obligations, net
    
    
    1,546
    
    
    
    1,008Other
    
    
    (496
    )
    
    
    85Net Cash Provided by Operating Activities
    
    
    14,594
    
    
    
    14,152Cash Flows from Investing Activities:Capital expenditures
    
    
    (3,588
    )
    
    
    (4,412
    )Acquisition of business, net of cash acquired
    
    
    -
    
    
    
    (6,661
    )Net Cash Used by Investing Activities
    
    
    (3,588
    )
    
    
    (11,073
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    (89
    )
    
    
    (172
    )Issuances of common stock, net
    
    
    -
    
    
    
    32Excess tax benefit from stock option exercises
    
    
    -
    
    
    
    3Net Cash Used by Financing Activities
    
    
    (89
    )
    
    
    (137
    )Effect of
Changes in Currency Exchange Rates on Cash
    
    
    (84
    )
    
    
    -Net Change in Cash and Cash Equivalents
    
    
    10,833
    
    
    
    2,942Cash and Cash Equivalents, Beginning of Period
    
    
    21,681
    
    
    
    26,893Cash and Cash Equivalents, End of Period
    
    $
    32,514
    
    
    $
    29,835Cash Paid (Received) For:Interest
    
    $
    5,116
    
    
    $
    5,063Income taxes
    
    
    (629
    )
    
    
    (380
    )Non-Cash Investing and Financing Transactions:Additions to Property, Plant and Equipment not yet paid
    
    
    387
    
    
    
    660Capital 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, 2009. The operating results for the three-month and six-month periods ended March
31, 2010 and cash flows for the six-month period ended March 31, 2010 are not necessarily
indicative of the results that will be achieved for the full fiscal year or for future periods.Accounting Policies.A description of our significant accounting policies is included in Note 1
to our consolidated financial statements included in our Annual Report on Form 10-K for the year
ended September 30, 2009.Principles of Consolidation.Our consolidated financial statements include the accounts of
American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have
been eliminated.Effective October 1, 2008, we acquired Marotta Holdings Limited (subsequently renamed Ampac ISP
Holdings Limited) and its wholly-owned subsidiaries (collectively AMPAC ISP Holdings) for a
cash purchase price, including direct expenses and net of cash acquired, of $6,661. AMPAC ISP
Holdings was included in our consolidated financial statements beginning on October 1, 2008 and
is a component of our Aerospace Equipment segment.Fair Value Disclosure of Financial Instruments.We estimate the fair values of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities approximate their
carrying values due to their short-term nature. We estimate the fair value of our fixed-rate
long-term debt to be approximately $109,450 based on the trade date closest to March 31, 2010,
which was April 4, 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 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Classified as cost of revenuesDepreciation
    
    $
    3,472
    
    
    $
    3,276
    
    
    $
    6,833
    
    
    $
    6,602Classified as operating expensesDepreciation
    
    
    145
    
    
    
    124
    
    
    
    293
    
    
    
    258Amortization
    
    
    506
    
    
    
    501
    
    
    
    1,050
    
    
    
    1,010Total
    
    $
    4,123
    
    
    $
    3,901
    
    
    $
    8,176
    
    
    $
    7,870
 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 $36,811 and $25,882 as of March 31, 2010 and September 30, 2009, respectively.
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)Recently Issued or Adopted Accounting Standards.In September 2006, the Financial Accounting
Standards Board (the FASB) issued a new standard which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles in the United
States of America, and expands disclosures about fair value measurements. In February 2008, the
FASB deferred this standard for one year as it applied to certain items, including assets and
liabilities initially measured at fair value in a business combination, reporting units and
certain assets and liabilities measured at fair value in connection with goodwill impairment
tests, and long-lived assets measured at fair value for impairment assessments. The standard
applies under other accounting pronouncements that require or permit fair value measurements,
the FASB having previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. This standard was effective for us on October 1, 2008; however,
we did not adopt all the provisions of the standard as the FASB delayed the effective date of
its application to non-financial assets and liabilities. The remaining provisions became
effective for us beginning October 1, 2009. The adoption of this standard did not have a
material impact on our results of operations, financial position or cash flows.In December 2007, the FASB issued a new standard that significantly changed the accounting for
business combinations. Under the standard, an acquiring entity is required to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with
limited exceptions. The standard also includes a substantial number of new disclosure
requirements. The standard applies to us for business combinations with acquisition dates on or
after October 1, 2009. We expect that the new standard will have an impact on our accounting
for future business combinations, but the effect is dependent upon acquisitions at that time.In December 2007, the FASB issued a new standard that establishes revised accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. Specifically, the standard requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements and separate
from the parents equity. The amount of net income attributable to the noncontrolling interest
will be included in consolidated net income on the face of the income statement. It also
clarifies that changes in a parents ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling financial
interest. The standard requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the
noncontrolling equity investment on the deconsolidation date. The standard also includes
expanded disclosure requirements regarding the interests of the parent and its noncontrolling
interest. The standard was effective for us beginning on October 1, 2009. We currently have no
entities or arrangements that were affected by the adoption of this standard.In April 2008, the FASB issued a new standard which amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset. The standard for determining the useful life of a recognized intangible
asset shall be applied prospectively to intangible assets acquired after the effective date.
However, the disclosure requirements must be applied prospectively to all intangible assets
recognized in the Companys financial statements as of the effective date. The standard was
effective for us beginning on October 1, 2009. The adoption of this standard did not have a
material impact on our results of operations, financial position or cash flows.In December 2008, the FASB issued a new standard that provides guidance on an employers
disclosures about plan assets of a defined benefit pension or other postretirement plan. The
objectives of the disclosures include disclosure of investment allocation decisions, major
categories of plan assets, inputs and valuation techniques used to measure the fair value of
plan assets, the effect of certain fair value measurements, and significant concentrations of
risk within plan assets. The
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)expanded disclosure requirements are effective for our fiscal year ending September 30, 2010.
The adoption of this standard is not expected to have a material impact on our results of
operations, financial position or cash flows.
 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)
permits the granting of stock options to employees, officers, directors and consultants. Options
granted under the 2001 Plan generally vested 50% at the grant date and 50% on the one-year
anniversary of the grant date, and expire ten years from the date of grant. As of March 31,
2010, there were no shares available for grant under the 2001 Plan. This plan was approved by
our stockholders.The American Pacific Corporation 2002 Directors Stock Option Plan, as amended and restated (the
2002 Directors Plan) compensates non-employee directors with stock options granted annually or
upon other discretionary events. Options granted under the 2002 Directors Plan prior to
September 30, 2007 generally vested 50% at the grant date and 50% on the one-year anniversary of
the grant date, and expire ten years from the date of grant. Options granted under the 2002
Directors Plan in November 2007 vested 50% one year from the date of grant and 50% two years
from the date of grant, and expire ten years from the date of grant. As of March 31, 2010,
there were no shares available for grant under the 2002 Directors Plan. This plan was approved
by our stockholders.The American Pacific Corporation 2008 Stock Incentive Plan (the 2008 Plan) permits the
granting of stock options, restricted stock, restricted stock units and stock appreciation
rights to employees, directors and consultants. A total of 350,000 shares of common stock are
authorized for issuance under the 2008 Plan, provided that no more than 200,000 shares of common
stock may be granted pursuant to awards of restricted stock and restricted stock units.
Generally, awards granted under the 2008 Plan vest in three equal annual installments beginning
on the first anniversary of the grant date, and in the case of option awards, expire ten years
from the date of grant. As of March 31, 2010, there were 12,000 shares available for grant
under the 2008 Plan. This plan was approved by our stockholders.
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2.
    
    SHARE-BASED COMPENSATION (continued)A summary of our stock option and restricted stock activity for the six months ended March 31,
2010 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, 2009
    
    
    540,997
    
    
    $
    8.64
    
    
    
    161,710
    
    
    $
    5.57
    
    
    
    22,000
    
    
    $
    11.25Granted
    
    
    149,000
    
    
    
    7.21
    
    
    
    149,000
    
    
    
    3.65
    
    
    
    36,000
    
    
    
    7.15Vested
    
    
    -
    
    
    
    -
    
    
    
    (61,065
    )
    
    
    5.62
    
    
    
    (7,336
    )
    
    
    11.25Exercised
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Expired / Cancelled
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Balance, March 31, 2010
    
    
    689,997
    
    
    
    8.33
    
    
    
    249,645
    
    
    
    4.41
    
    
    
    50,664
    
    
    
    8.34
 A summary of our exercisable stock options as of March 31, 2010 is as follows:
 Number of vested stock options
    
    
    440,352Weighted-average exercise price per share
    
    $
    8.11Aggregate intrinsic value
    
    $
    162Weighted-average remaining contractual term in years
    
    
    4.7
 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.
 Six Months EndedMarch 31,2010
    
    
    2009Weighted-average grant date fair value per share of options granted
    
    $
    3.65
    
    
    $
    5.41Significant fair value assumptions:Expected term in years
    
    
    6.00
    
    
    
    6.00Expected volatility
    
    
    51.3%
    
    
    
    48.7%Expected dividends
    
    
    0.0%
    
    
    
    0.0%Risk-free interest rates
    
    
    2.3%
    
    
    
    2.7%Total intrinsic value of options exercised
    
    $
    -
    
    
    $
    21Aggregate cash received for option exercises
    
    $
    -
    
    
    $
    32Compensation cost (included in operating expenses)Stock options
    
    $
    322
    
    
    $
    244Restricted stock
    
    
    167
    
    
    
    61Total
    
    
    489
    
    
    
    305Tax benefit recognized
    
    
    99
    
    
    
    63Net compensation cost
    
    $
    390
    
    
    $
    242As of period end date:Total compensation cost for non-vested awardsnot yet recognized:Stock options
    
    $
    524
    
    
    $
    670Restricted stock
    
    $
    155
    
    
    $
    186Weighted-average years to be recognizedStock options
    
    
    1.6
    
    
    
    1.7Restricted stock
    
    
    1.6
    
    
    
    1.7
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3.
    
    SELECTED BALANCE SHEET DATA
 Inventories.Inventories consist of the following:
 March 31,
    
    
    September 30,2010
    
    
    2009Finished goods
    
    $
    1,509
    
    
    $
    1,951Work-in-process
    
    
    20,540
    
    
    
    22,080Raw materials and supplies
    
    
    9,265
    
    
    
    9,930Deferred cost of revenues
    
    
    4,573
    
    
    
    2,395Under(over) applied manufacturing overhead costs
    
    
    543
    
    
    
    -Total
    
    $
    36,430
    
    
    $
    36,356For 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 30,2010
    
    
    2009Perchlorate customer list
    
    $
    38,697
    
    
    $
    38,697Less accumulated amortization
    
    
    (38,697
    )
    
    
    (38,697
    )-
    
    
    
    -Customer relationships
    
    
    8,947
    
    
    
    9,018Less accumulated amortization
    
    
    (6,868
    )
    
    
    (6,182
    )2,079
    
    
    
    2,836Backlog
    
    
    1,491
    
    
    
    1,579Less accumulated amortization
    
    
    (1,152
    )
    
    
    (862
    )339
    
    
    
    717Total
    
    $
    2,418
    
    
    $
    3,553
 The perchlorate customer list is an asset of our Specialty Chemicals segment and was fully
amortized as of February 2008.
 Customer relationships are assets of our Fine Chemicals and Aerospace Equipment segments and are
subject to amortization. Amortization expense was $344 and $310 for the three months ended
March 31, 2010 and 2009, respectively, and $691 and $619 for the six months ended March 31, 2010
and 2009, respectively.
 Backlog is an asset of our Aerospace Equipment segment and is subject to amortization.
Amortization expense was $162 and $192 for the three months ended March 31, 2010 and 2009,
respectively, and $359 and $391 for the six months ended March 31, 2010 and 2009, respectively.
 Goodwill.Goodwill is an asset of our Aerospace Equipment segment and is not expected to be
deductible for tax purposes.
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4.
    
    COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS
 Comprehensive income (loss) consists of the following:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net Income (Loss)
    
    $
    1,116
    
    
    $
    1,733
    
    
    $
    (324
    )
    
    $
    2,190Other Comprehensive Loss -Foreign currency translation adjustment
    
    
    (307
    )
    
    
    (360
    )
    
    
    (382
    )
    
    
    (897
    )Comprehensive Income (Loss)
    
    $
    809
    
    
    $
    1,373
    
    
    $
    (706
    )
    
    $
    1,293
 The components of accumulated other comprehensive loss are as follows:
 March 31,
    
    
    September 30,2010
    
    
    2009Cumulative currency translation adjustment
    
    $
    (508
    )
    
    $
    (126
    )Unamortized benefit plan costs, net of tax of $7,898
    
    
    (11,846
    )
    
    
    (11,846
    )Total
    
    $
    (12,354
    )
    
    $
    (11,972
    )
 5.
    
    EARNINGS (LOSS) PER SHARE
 Shares used to compute earnings (loss) per share are as follows:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    1,116
    
    
    $
    1,733
    
    
    $
    (324
    )
    
    $
    2,190Basic weighted-average shares
    
    
    7,490,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,481,000Diluted:Weighted-average shares, basic
    
    
    7,490,000
    
    
    
    7,483,000
    
    
    
    7,489,000
    
    
    
    7,481,000Dilutive effect of stock options
    
    
    49,000
    
    
    
    39,000
    
    
    
    -
    
    
    
    64,000Weighted-average shares, diluted
    
    
    7,539,000
    
    
    
    7,522,000
    
    
    
    7,489,000
    
    
    
    7,545,000Basic earnings (loss) per share
    
    $
    0.15
    
    
    $
    0.23
    
    
    $
    (0.04
    )
    
    $
    0.29Diluted earnings (loss) per share
    
    $
    0.15
    
    
    $
    0.23
    
    
    $
    (0.04
    )
    
    $
    0.29
 As of March 31, 2010 and 2009, we had 689,997 and 227,997 antidilutive options outstanding,
respectively.
 6.
    
    DEBT
 Our outstanding debt balances consist of the following:
 March 31,
    
    
    September 30,2010
    
    
    2009Senior Notes, 9%, due 2015
    
    $
    110,000
    
    
    $
    110,000Capital Leases, due through 2014
    
    
    247
    
    
    
    248Total Debt
    
    
    110,247
    
    
    
    110,248Less Current Portion
    
    
    (112
    )
    
    
    (151
    )Total Long-term Debt
    
    $
    110,135
    
    
    $
    110,097
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6.
    
    DEBT (continued)Senior Notes.In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0%
Senior Notes due February 1, 2015 (collectively, with the exchange notes issued in August 2007
as referenced below, the Senior Notes). Proceeds from the issuance of the Senior Notes were
used to repay our former credit facilities. The Senior Notes accrue interest at an annual rate
of 9.0%, payable semi-annually in February and August. The Senior Notes are guaranteed on a
senior unsecured basis by all of our existing and future material U.S. subsidiaries. The Senior
Notes are:
 
    
    ranked equally in right of payment with all of our existing and future senior
indebtedness;
    
    ranked senior in right of payment to all of our existing and future senior subordinated
and subordinated indebtedness;
    
    effectively junior to our existing and future secured debt to the extent of the value of
the assets securing such debt; and
    
    structurally subordinated to all of the existing and future liabilities (including trade
payables) of each of our subsidiaries that do not guarantee the Senior Notes.
 The Senior Notes may be redeemed by the Company, in whole or in part, under the following
circumstances:
 
    
    at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of
the Senior Notes plus an applicable premium as defined in the related indenture;
    
    at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the
principal amount to be redeemed and reducing to 100% by February 1, 2013; and
    
    under certain changes of control, we must offer to purchase the Senior Notes at 101% of
their aggregate principal amount, plus accrued interest.
 The Senior Notes were issued pursuant to an indenture which contains certain customary events of
default, including cross default provisions if we default under our existing and future debt
agreements having, individually or in the aggregate, a principal or similar amount outstanding
of at least $10,000, and certain other covenants limiting, subject to exceptions, carve-outs and
qualifications, our ability to:
 
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
 In connection with the closing of the sale of the Senior Notes, we entered into a registration
rights agreement which required us to file a registration statement to offer to exchange the
Senior Notes for notes that have substantially identical terms as the Senior Notes and are
registered under the Securities Act of 1933, as amended. In July 2007, we filed a registration
statement with the SEC with respect to an offer to exchange the Senior Notes as required by the
registration rights agreement, which registration statement was declared effective by the SEC.
In August 2007, we completed the exchange of 100% of the Senior Notes for substantially
identical notes which are registered under the Securities Act of 1933, as amended.
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6.
    
    DEBT (continued)Revolving Credit Facility.In February 2007, we entered into an Amended and Restated Credit
Agreement, as amended as of July 7, 2009 (the Revolving Credit Facility), with Wachovia Bank,
National Association (predecessor by merger to Wells Fargo Bank, National Association), and
certain other lenders, which provides a secured revolving credit facility in an aggregate
principal amount of up to $20,000 with an initial maturity of 5 years. We may prepay and
terminate the Revolving Credit Facility at any time. The annual interest rates applicable to
loans under the Revolving Credit Facility are, at our option, either the Alternate Base Rate or
LIBOR Rate (each as defined in the Revolving Credit Facility) plus, in each case, an applicable
margin. The applicable margin is tied to our total leverage ratio (as defined in the Revolving
Credit Facility). In addition, we pay commitment fees, other fees related to the issuance and
maintenance of letters of credit, and certain agency fees.The Revolving Credit Facility is guaranteed by and secured by substantially all of the assets of
our current and future domestic subsidiaries, subject to certain exceptions as set forth in the
Revolving Credit Facility. The Revolving Credit Facility contains certain negative covenants
restricting and limiting our ability to, among other things:
 
    
    incur debt, incur contingent obligations and issue certain types of preferred stock;
    
    create liens;
    
    pay dividends, distributions or make other specified restricted payments;
    
    make certain investments and acquisitions;
    
    enter into certain transactions with affiliates;
    
    enter into sale and leaseback transactions; and
    
    merge or consolidate with any other entity or sell, assign, transfer, lease, convey or
otherwise dispose of assets.
 Financial covenants under the Revolving Credit Facility include quarterly requirements for total
leverage ratio of less than or equal to 5.25 to 1.00 (Total Leverage Ratio), and interest
coverage ratio of at least 2.50 to 1.00 (Interest Coverage Ratio). The Revolving Credit
Facility defines Total Leverage Ratio as the ratio of Consolidated Funded Debt to Consolidated
EBITDA and Interest Coverage Ratio as the ratio of Consolidated EBITDA to Consolidated Interest
Expense. With respect to these covenant compliance calculations, Consolidated EBITDA, as defined
in the Revolving Credit Facility (hereinafter, referred to as Credit Facility EBITDA), differs
from typical EBITDA calculations and our calculation of Adjusted EBITDA, which is used in
certain of our public releases and in connection with our incentive compensation plan. The most
significant difference in the Credit Facility EBITDA calculation is the inclusion of cash
payments for environmental remediation as part of the calculation. The following statements
summarize the elements of those definitions that are material to our computations. Consolidated
Funded Debt generally includes principal amounts outstanding under our Senior Notes, Revolving
Credit Facility, capital leases and notional amounts for outstanding letters of credit. Credit
Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense
(benefit), interest expense, depreciation and amortization, and stock-based compensation expense
and less cash payments for environmental remediation and other non-recurring gains in excess of
$50. In accordance with the definitions contained in the Revolving Credit Facility, as of March
31, 2010, our Total Leverage Ratio was 3.96 to 1.00 and our Interest Coverage Ratio was 2.79 to
1.00.The Revolving Credit Facility also contains usual and customary events of default (subject to
certain threshold amounts and grace periods), including cross-default provisions that include
our Senior Notes. If an event of default occurs and is continuing, we may be required to repay
the obligations under the Revolving Credit Facility prior to its stated maturity and the related
commitments may be terminated.
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6.
    
    DEBT (continued)As of March 31, 2010, under our Revolving Credit Facility, we had no borrowings outstanding,
availability of $18,038, and we were in compliance with its various financial covenants.
Availability is computed as the total commitment of $20,000 less outstanding borrowings and
outstanding letters of credit, if any.Letters of Credit.As of March 31, 2010, we had $1,962 in outstanding standby letters of credit
which mature through July 2013. These letters of credit principally secure performance of
certain water treatment equipment sold by us and payment of fees associated with the delivery of
natural gas and power.
 7.
    
    COMMITMENTS AND CONTINGENCIES
 Regulatory Review of Perchlorates.Our Specialty Chemicals segment manufactures and sells
products that contain perchlorates. Federal and state regulators continue to review the effects
of perchlorate, if any, on human health and the related allowable maximum level of contaminant
from perchlorate. While the presence of regulatory review presents general business risk to the
Company, we are currently unaware of any regulatory proposal that would have a material effect
on our results of operations and financial position or that would cause us to significantly
modify or curtail our business practices, including our remediation activities discussed below.Perchlorate Remediation Project in Henderson, Nevada.We commercially manufactured perchlorate
chemicals at a facility in Henderson, Nevada (AMPAC Henderson Site) from 1958 until the
facility was destroyed in May 1988, after which we relocated our production to a new facility in
Iron County, Utah. Kerr-McGee Chemical Corporation (KMCC) also operated a perchlorate
production facility in Henderson, Nevada (the KMCC Site) from 1967 to 1998. In addition,
between 1956 and 1967, American Potash operated a perchlorate production facility and, for many
years prior to 1956, other entities also manufactured perchlorate chemicals at the KMCC Site.
As a result of a longer production history in Henderson, KMCC and its predecessor operations
manufactured significantly greater amounts of perchlorate over time than we did at the AMPAC
Henderson Site.In 1997, the Southern Nevada Water Authority (SNWA) detected trace amounts of the perchlorate
anion in Lake Mead and the Las Vegas Wash. Lake Mead is a source of drinking water for Southern
Nevada and areas of Southern California. The Las Vegas Wash flows into Lake Mead from the Las
Vegas valley.In response to this discovery by SNWA, and at the request of the Nevada Division of
Environmental Protection (NDEP), we engaged in an investigation of groundwater near the AMPAC
Henderson Site and down gradient toward the Las Vegas Wash. The investigation and related
characterization, which lasted more than six years, employed experts in the field of
hydrogeology. This investigation concluded that although there is perchlorate in the groundwater
in the vicinity of the AMPAC Henderson Site up to 700 parts per million, perchlorate from this
site does not materially impact, if at all, water flowing in the Las Vegas Wash toward Lake
Mead. It has been well established, however, by data generated by SNWA and NDEP, that
perchlorate from the KMCC Site did impact the Las Vegas Wash and Lake Mead. KMCCs successor,
Tronox LLC, operates an above ground perchlorate groundwater remediation facility at their
Henderson site. Recent measurements of perchlorate in Lake Mead made by SNWA have been less than
10 parts per billion.Notwithstanding these facts, and at the direction of NDEP and the U.S. Environmental Protection
Agency (the EPA), we conducted an investigation of remediation technologies for perchlorate in
groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. The
technology that was chosen as most efficient and appropriate was in situ bioremediation (ISB).
ISB
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)reduces perchlorate in the groundwater by precise addition of an appropriate carbon source to
the groundwater itself while it is still in the ground (as opposed to an above ground, more
conventional, ex situ process). This induces naturally occurring organisms in the groundwater
to reduce the perchlorate among other oxygen containing compounds.In 2002, we conducted a pilot test in the field of the ISB technology and it was successful. On
the basis of the successful test and other evaluations, in the fiscal year ended September 30,
2005 (Fiscal 2005), we submitted a work plan to NDEP for the construction of a remediation
facility near the AMPAC Henderson Site. The conditional approval of the work plan by NDEP in
our third quarter of Fiscal 2005 allowed us to generate estimated costs for the installation and
operation of the remediation facility to address perchlorate at the AMPAC Henderson Site. We
commenced construction in July 2005. In December 2006, we began operations. The location of
this facility is several miles, in the direction of groundwater flow, from the AMPAC Henderson
Site.At the request of the NDEP, in the summer of 2009, we began renewed discussions to formalize our
remediation efforts in a voluntary agreement that, if negotiated and executed, would provide
more detailed regulatory guidance on environmental characterization and remedies at the AMPAC
Henderson Site and vicinity. The agreement under discussion would be expected to be similar to
others previously executed by the NDEP with other companies under similar circumstances.
Typically, such agreements generally cover such matters as the scope of work plans, schedules,
deliverables, remedies for non compliance, and reimbursement to the State of Nevada for past and
future oversight.Henderson Site Environmental Remediation Reserve.We accrue for anticipated costs associated
with environmental remediation that are probable and estimable. On a quarterly basis, we review
our estimates of future costs that could be incurred for remediation activities. In some cases,
only a range of reasonably possible costs can be estimated. In establishing our reserves, the
most probable estimate is used; otherwise, we accrue the minimum amount of the range.During our Fiscal 2005 third quarter, we recorded a charge for $22,400 representing our estimate
of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the
costs for capital equipment, operating and maintenance (O&M), and consultants. The project
consisted of two primary phases: the initial construction of the remediation equipment phase and
the O&M phase. During the fiscal year ended September 30, 2006, we increased our total cost
estimate of probable costs for the construction phase by $3,600 due primarily to changes in the
engineering designs, delays in receiving permits and the resulting extension of construction
time.ISB is a new technology on the scale being used at the AMPAC Henderson Site. Accordingly, as we
gain ISB operational experience, we have been and are observing certain conditions, operating
results and other data which we consider in updating the assumptions used to determine our cost
estimates. The two most significant assumptions are the estimated speed of groundwater flowing
to our remediation extraction wells and the estimated annual O&M costs.Late in the fiscal year ended September 30, 2009 (Fiscal 2009), we gained additional
information from groundwater modeling that indicates groundwater emanating from the AMPAC
Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is
moving toward our existing remediation facility at a much slower pace than previously estimated.
Utilization of our existing facilities alone, at this lower groundwater pace, could, according
to this recently created groundwater model, extend the life of our remediation project to well
in excess of fifty years. As a result of this additional data, we re-evaluated our remediation
operations. This evaluation indicates
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)that we should be able to significantly reduce the total project time, and ultimately the total
cost of the project, by installing additional groundwater extraction wells in the deeper, more
concentrated areas, thereby providing for a more aggressive remediation treatment. The
additional wells and related remediation equipment will incorporate above ground treatment to
supplement or possibly replace by consolidation our existing ISB process. With the additional
extraction wells and equipment, we estimate that the total remaining project life for the
existing and new, more aggressive deep zone systems could range from 10 to 29 years, beginning
with the fiscal year ending September 30, 2010 (Fiscal 2010). Within that range, we estimate
that a range of 13 to 23 years is more likely. Groundwater speed, perchlorate concentrations,
aquifer characteristics and forecasted groundwater extraction rates continue to be key variables
underlying our estimate of the life of the project. If additional information becomes available
in the future that is different than information currently available to us, our estimate of the
resulting project life could change significantly.In our Fiscal 2009 fourth quarter, we accrued approximately $9,600 representing our estimate of
the cost to engineer, design, and install this additional equipment. We anticipate that these
amounts will be spent through and the new equipment operational in approximately fall 2011.
However, because we are in the early design and engineering steps, this estimate involves a
number of significant assumptions. Due to uncertainties inherent in making early stage
estimates, our estimate may later require significant revision as new facts become available and
circumstances change.In addition to accruing approximately $9,600 for engineering, design, installation and cost of
additional equipment, in our Fiscal 2009 fourth quarter, we increased our estimate of total
remaining O&M costs by $4,100 due primarily to incremental O&M costs to operate and maintain the
additional equipment once installed. Total O&M expenses are currently estimated at approximately
$1,000 per year and estimated to increase to approximately $1,300 per year after the additional
equipment becomes operational. To estimate O&M costs, we consider, among other factors, the
project scope and historical expense rates to develop assumptions regarding labor, utilities,
repairs, maintenance supplies and professional service costs. If additional information becomes
available in the future that is different than information currently available to us and thereby
leads us to different conclusions, our estimate of O&M expenses could change significantly.In addition, certain remediation activities are conducted on public lands under operating
permits. In general, these permits require us to return the land to its original condition at
the end of the permit period. Estimated costs associated with removal of remediation equipment
from the land are not material and are included in our range of estimated costs.As of March 31, 2010, the aggregate range of anticipated environmental remediation costs was
from approximately $22,000 to approximately $46,200 based on a possible total remaining life of
the project ranging from 10 to 29 years. The accrued amount was $25,711, based on 13 years
(beginning with Fiscal 2010), or the low end of the more likely range of 13 to 23 years as no
amount within the range was more likely. These estimates are based on information currently
available to us and may be subject to material adjustment upward or downward in future periods
as new facts or circumstances may indicate. A summary of our environmental reserve activity for
the six months ended March 31, 2010 is shown below:
 Balance, September 30, 2009
    
    $
    26,690Additions or adjustments
    
    
    -Expenditures
    
    
    (979
    )Balance, March 31, 2010
    
    $
    25,711
 AFC Environmental Matters.Our Fine Chemicals segment, Ampac Fine Chemicals LLC (AFC),
is located on land leased from Aerojet-General Corporation (Aerojet). The leased land is part
of a tract of land owned by Aerojet designated as a Superfund site under the Comprehensive
Environmental
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7.
    
    COMMITMENTS AND CONTINGENCIES (Continued)Response, Compensation, and Liability Act of 1980 (CERCLA). The tract of land had been used by
Aerojet and affiliated companies to manufacture and test rockets and related equipment since the
1950s. Although the chemicals identified as contaminants on the leased land were not used by
Aerojet Fine Chemicals LLC (predecessor in interest to AFC) as part of its operations, CERCLA,
among other things, provides for joint and severable liability for environmental liabilities
including, for example, environmental remediation expenses.As part of the agreement by which we acquired the business of AFC from GenCorp Inc. (GenCorp),
an Environmental Indemnity Agreement was entered into whereby GenCorp agreed to indemnify us
against any and all environmental costs and liabilities arising out of or resulting from any
violation of environmental law prior to the effective date of the sale, or any release of
hazardous substances by Aerojet Fine Chemicals LLC, Aerojet or GenCorp on the AFC premises or
Aerojets Sacramento site prior to the effective date of the sale.On November 29, 2005, EPA Region IX provided us with a letter indicating that the EPA does not
intend to pursue any clean up or enforcement actions under CERCLA against future lessees of the
Aerojet property for existing contamination, provided that the lessees do not contribute to or
do not exacerbate existing contamination on or under the Aerojet Superfund site.Other Matters.Although we are not currently party to any material pending legal proceedings,
we are from time to time subject to claims and lawsuits related to our business operations. We
accrue for loss contingencies when a loss is probable and the amount can be reasonably
estimated. Legal fees, which can be material in any given period, are expensed as incurred. We
believe that current claims or lawsuits against us, individually and in the aggregate, will not
result in loss contingencies that will have a material adverse effect on our financial
condition, cash flows or results of operations.
 8.
    
    SEGMENT INFORMATION
 We report our business in four operating segments: Fine Chemicals, Specialty Chemicals,
Aerospace Equipment and Other Businesses. These segments are based upon business units that
offer distinct products and services, are operationally managed separately and produce products
using different production methods. Segment operating income or loss includes all sales and
expenses directly associated with each segment. Environmental remediation charges, corporate
general and administrative costs, which consist primarily of executive, investor relations,
accounting, human resources and information technology expenses, and interest are not allocated
to segment operating results.Fine Chemicals.Our Fine Chemicals segment includes the operating results of our wholly-owned
subsidiary Ampac Fine Chemicals LLC or AFC. AFC is a custom manufacturer of active
pharmaceutical ingredients and registered intermediates for commercial customers in the
pharmaceutical industry. AFC operates in compliance with the U.S. Food and Drug Administrations
current Good Manufacturing Practices and other regulatory agencies such as the European Unions
European Medicines Agency and Japans Pharmaceuticals and Medical Devices Agency. AFC has
distinctive competencies and specialized engineering capabilities in performing chiral
separations, manufacturing chemical compounds that require high containment and performing
energetic chemistries at commercial scale.Specialty Chemicals.Our Specialty Chemicals segment manufactures and sells: (i) perchlorate
chemicals, principally ammonium perchlorate, which is the predominant oxidizing agent for solid
propellant rockets, booster motors and missiles used in space exploration, commercial satellite
transportation and national defense programs, (ii) sodium azide, a chemical used in
pharmaceutical manufacturing, and (iii) Halotronâ, a series of clean fire extinguishing
agents used in fire extinguishing products ranging from portable fire extinguishers to total
flooding systems.
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8.
    
    SEGMENT INFORMATION (Continued)Aerospace Equipment. Our Aerospace Equipment segment includes the operating results of our
wholly-owned subsidiary Ampac-ISP Corp. and its wholly-owned subsidiaries (collectively, AMPAC
ISP). AMPAC ISP manufactures monopropellant and bipropellant liquid propulsion systems and
thrusters for satellites, launch vehicles, and interceptors. In addition, AMPAC ISP designs,
develops and manufactures high performance valves, pressure regulators, cold-gas propulsion
systems, and precision structures for space applications, especially in the European space
market.Other Businesses.Our Other Businesses segment contains our water treatment equipment and real
estate activities. Our water treatment equipment business designs, manufactures and markets
systems for the control of noxious odors, the disinfection of water streams and the treatment of
seawater. Our real estate activities are not material.Our revenues are characterized by individually significant orders and relatively few customers.
As a result, in any given reporting period, certain customers may account for more than ten
percent of our consolidated revenues.The following table provides disclosure of the percentage of our consolidated revenues
attributed to customers that exceed ten percent of the total in each of the given periods.
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Fine chemicals customer
    
    
    40
    %
    
    
    21
    %
    
    
    27
    %
    
    
    22
    %Fine chemicals customer
    
    
    
    
    
    
    21
    %
    
    
    
    
    
    
    13
    %Specialty chemicals customer
    
    
    
    
    
    
    15
    %
    
    
    16
    %
    
    
    21
    %Specialty chemicals customer
    
    
    
    
    
    
    11
    %
 The following provides financial information about our segment operations:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Fine Chemicals
    
    $
    33,673
    
    
    $
    31,738
    
    
    $
    43,177
    
    
    $
    52,122Specialty Chemicals
    
    
    14,086
    
    
    
    17,283
    
    
    
    26,889
    
    
    
    34,641Aerospace Equipment
    
    
    10,168
    
    
    
    7,135
    
    
    
    18,493
    
    
    
    12,892Other Businesses
    
    
    1,468
    
    
    
    279
    
    
    
    4,900
    
    
    
    2,409Total Revenues
    
    $
    59,395
    
    
    $
    56,435
    
    
    $
    93,459
    
    
    $
    102,064Segment Operating Income (Loss):Fine Chemicals
    
    $
    2,500
    
    
    $
    1,406
    
    
    $
    1,760
    
    
    $
    382Specialty Chemicals
    
    
    6,513
    
    
    
    8,325
    
    
    
    12,344
    
    
    
    15,931Aerospace Equipment
    
    
    25
    
    
    
    743
    
    
    
    (337
    )
    
    
    1,153Other Businesses
    
    
    69
    
    
    
    (167
    )
    
    
    52
    
    
    
    378Total
Segment Operating Income
    
    
    9,107
    
    
    
    10,307
    
    
    
    13,819
    
    
    
    17,844Corporate Expenses
    
    
    (3,672
    )
    
    
    (4,081
    )
    
    
    (8,245
    )
    
    
    (8,193
    )Operating Income
    
    $
    5,435
    
    
    $
    6,226
    
    
    $
    5,574
    
    
    $
    9,651Depreciation and Amortization:Fine Chemicals
    
    $
    3,194
    
    
    $
    3,136
    
    
    $
    6,522
    
    
    $
    6,344Specialty Chemicals
    
    
    406
    
    
    
    323
    
    
    
    577
    
    
    
    627Aerospace Equipment
    
    
    392
    
    
    
    323
    
    
    
    815
    
    
    
    654Other Businesses
    
    
    4
    
    
    
    3
    
    
    
    8
    
    
    
    6Corporate
    
    
    127
    
    
    
    116
    
    
    
    254
    
    
    
    239Total
Depreciation and Amortization
    
    $
    4,123
    
    
    $
    3,901
    
    
    $
    8,176
    
    
    $
    7,870
 - 16 -




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##### Table of Contents



9.
    
    INCOME TAXES
 We review our portfolio of uncertain tax positions and recorded liabilities based on the
applicable recognition standards. In this regard, an uncertain tax position represents our
expected treatment of a tax position taken in a filed tax return, or planned to be taken in a
future tax return, that has not been reflected in measuring income tax expense for financial
reporting purposes. We classify uncertain tax positions as non-current income tax liabilities
unless expected to be settled within one year.As of both March 31, 2010 and September 30, 2009, our recorded liability for unrecognized tax
benefits was $652, of which $335 would affect our effective tax rate, if recognized. The
remaining balance is related to deferred tax items which only impact the timing of tax payments.
In Fiscal 2010, it is reasonably possible that the gross liability for unrecognized tax benefits
will decrease by $323 primarily as a result of a change in accounting methods for tax purposes
and the lapsing of statutes of limitations.We recognize accrued interest and penalties related to unrecognized tax benefits in income tax
expense. As of March 31, 2010 and September 30, 2009, we had accrued $172 and $164,
respectively, for the payment of tax-related interest and penalties. For the six months ended
March 31, 2010 and 2009, income tax (benefit) expense includes a benefit of $49 and expense of
$2 for interest and penalties.We file income tax returns in the U.S. federal jurisdiction, various states, and foreign
jurisdictions. With few exceptions, we are no longer subject to federal or state income tax
examinations for years before 2006.
 10.
    
    DEFINED BENEFIT PLANS
 We maintain three defined benefit pension plans which cover substantially all of our U.S.
employees, excluding employees of our Aerospace Equipment segment: the Amended and Restated
American Pacific Corporation Defined Benefit Pension Plan, the Ampac Fine Chemicals LLC Pension
Plan for Salaried Employees, and the Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit
Employees, each as amended and restated (collectively, the Pension Plans). In addition, we
maintain the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and
restated (the SERP), which includes certain of our existing and prior executive officers.We maintain two 401(k) plans in which participating employees may make contributions. One covers
substantially all U.S. employees except AFC bargaining unit employees and the other covers AFC
bargaining unit employees. We make matching contributions for employees of AFC and U.S.
employees of our Aerospace Equipment segment. In addition, we make a profit sharing
contribution for U.S. employees of our Aerospace Equipment segment.We provide healthcare and life insurance benefits to substantially all of our employees.
 - 17 -




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##### Table of Contents



10.
    
    DEFINED BENEFIT PLANS (Continued)Net periodic pension cost consists of the following:
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Pension Plans:Service Cost
    
    $
    625
    
    
    $
    507
    
    
    $
    1,250
    
    
    $
    1,014Interest Cost
    
    
    798
    
    
    
    670
    
    
    
    1,596
    
    
    
    1,340Expected Return on Plan Assets
    
    
    (603
    )
    
    
    (601
    )
    
    
    (1,206
    )
    
    
    (1,202
    )Recognized Actuarial Losses
    
    
    263
    
    
    
    109
    
    
    
    526
    
    
    
    218Amortization of Prior Service Costs
    
    
    19
    
    
    
    19
    
    
    
    38
    
    
    
    38Net Periodic Pension Cost
    
    $
    1,102
    
    
    $
    704
    
    
    $
    2,204
    
    
    $
    1,408Supplemental Executive Retirement Plan:Service Cost
    
    $
    110
    
    
    $
    97
    
    
    $
    220
    
    
    $
    195Interest Cost
    
    
    94
    
    
    
    102
    
    
    
    187
    
    
    
    204Expected Return on Plan Assets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Recognized Actuarial Losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Amortization of Prior Service Costs
    
    
    105
    
    
    
    105
    
    
    
    210
    
    
    
    210Net Periodic Pension Cost
    
    $
    309
    
    
    $
    304
    
    
    $
    617
    
    
    $
    609
 For the six months ended March 31, 2010, we contributed $1,211 to the Pension Plans to fund
benefit payments and anticipate making approximately $1,357 in additional contributions through
September 30, 2010. For the six months ended March 31, 2010, we contributed $63 to the SERP to
fund benefit payments and anticipate making approximately $364 in additional contributions
through September 30, 2010.
 11.
    
    GUARANTOR SUBSIDIARIES
 As discussed in Note 6, in February 2007, American Pacific Corporation, a Delaware corporation
(Parent) issued and sold $110,000 aggregate principal amount of Senior Notes. In connection
with the issuance of the Senior Notes, the Parents material U.S. subsidiaries (Guarantor
Subsidiaries) jointly, fully, severally, and unconditionally guaranteed the Senior Notes. The
Parents foreign subsidiaries (Non-Guarantor Subsidiaries) are not guarantors of the Senior
Notes. Each of the Parents subsidiaries is 100% owned. The Parent has no independent assets or
operations. The following presents condensed consolidating financial information separately for
the Parent, Guarantor Subsidiaries and Non-Guarantor Subsidiaries.
 - 18 -




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##### Table of Contents



11.
    
    GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Balance Sheet - March 31, 2010Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    31,115
    
    
    $
    1,399
    
    
    $
    -
    
    
    $
    32,514Accounts Receivable, Net
    
    
    -
    
    
    
    38,433
    
    
    
    3,319
    
    
    
    (284
    )
    
    
    41,468Inventories
    
    
    -
    
    
    
    35,153
    
    
    
    1,277
    
    
    
    -
    
    
    
    36,430Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,935
    
    
    
    456
    
    
    
    -
    
    
    
    2,391Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    7,784
    
    
    
    -
    
    
    
    -
    
    
    
    7,784Total Current Assets
    
    
    -
    
    
    
    114,420
    
    
    
    6,451
    
    
    
    (284
    )
    
    
    120,587Property, Plant and Equipment, Net
    
    
    -
    
    
    
    109,483
    
    
    
    1,665
    
    
    
    -
    
    
    
    111,148Intangible Assets, Net
    
    
    -
    
    
    
    1,156
    
    
    
    1,262
    
    
    
    -
    
    
    
    2,418Goodwill
    
    
    -
    
    
    
    -
    
    
    
    2,899
    
    
    
    -
    
    
    
    2,899Deferred Income Taxes
    
    
    -
    
    
    
    21,124
    
    
    
    -
    
    
    
    -
    
    
    
    21,124Other Assets
    
    
    -
    
    
    
    10,420
    
    
    
    -
    
    
    
    -
    
    
    
    10,420Intercompany Advances
    
    
    79,918
    
    
    
    3,769
    
    
    
    -
    
    
    
    (83,687
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    100,962
    
    
    
    4,744
    
    
    
    -
    
    
    
    (105,706
    )
    
    
    -Total Assets
    
    $
    180,880
    
    
    $
    265,116
    
    
    $
    12,277
    
    
    $
    (189,677
    )
    
    $
    268,596Liabilities and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    20,864
    
    
    $
    2,254
    
    
    $
    (284
    )
    
    $
    22,834Environmental Remediation Reserves
    
    
    -
    
    
    
    2,101
    
    
    
    -
    
    
    
    -
    
    
    
    2,101Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    7,861
    
    
    
    1,347
    
    
    
    -
    
    
    
    9,208Current Portion of Long-Term Debt
    
    
    -
    
    
    
    64
    
    
    
    48
    
    
    
    -
    
    
    
    112Intercompany Advances
    
    
    -
    
    
    
    79,918
    
    
    
    3,769
    
    
    
    (83,687
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    110,808
    
    
    
    7,418
    
    
    
    (83,971
    )
    
    
    34,255Long-Term Debt
    
    
    110,000
    
    
    
    68
    
    
    
    67
    
    
    
    -
    
    
    
    110,135Environmental Remediation Reserves
    
    
    -
    
    
    
    23,610
    
    
    
    -
    
    
    
    -
    
    
    
    23,610Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    29,668
    
    
    
    48
    
    
    
    -
    
    
    
    29,716Total Liabilities
    
    
    110,000
    
    
    
    164,154
    
    
    
    7,533
    
    
    
    (83,971
    )
    
    
    197,716Total Shareholders Equity
    
    
    70,880
    
    
    
    100,962
    
    
    
    4,744
    
    
    
    (105,706
    )
    
    
    70,880Total Liabilities and Shareholders Equity
    
    $
    180,880
    
    
    $
    265,116
    
    
    $
    12,277
    
    
    $
    (189,677
    )
    
    $
    268,596Condensed 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 andEquity Account for Subsidiaries
    
    
    -
    
    
    
    3,146
    
    
    
    (711
    )
    
    
    -
    
    
    
    2,435Income Tax Benefit
    
    
    -
    
    
    
    1,254
    
    
    
    65
    
    
    
    -
    
    
    
    1,319Income (Loss) beforeEquity 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
 - 19 -




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##### Table of Contents



11. GUARANTOR SUBSIDIARIES (Continued)
 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 andEquity Account for Subsidiaries
    
    
    -
    
    
    
    956
    
    
    
    (1,081
    )
    
    
    -
    
    
    
    (125
    )Income Tax Benefit
    
    
    -
    
    
    
    177
    
    
    
    22
    
    
    
    -
    
    
    
    199Income (Loss) beforeEquity 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
    )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
 - 20 -




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##### Table of Contents



11. GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Balance Sheet - September 30, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    20,046
    
    
    $
    1,635
    
    
    $
    -
    
    
    $
    21,681Accounts Receivable, Net
    
    
    -
    
    
    
    40,399
    
    
    
    3,951
    
    
    
    (322
    )
    
    
    44,028Inventories
    
    
    -
    
    
    
    35,223
    
    
    
    1,133
    
    
    
    -
    
    
    
    36,356Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,645
    
    
    
    166
    
    
    
    -
    
    
    
    1,811Income Taxes Receivable and Deferred Income Taxes
    
    
    -
    
    
    
    8,465
    
    
    
    -
    
    
    
    -
    
    
    
    8,465Total Current Assets
    
    
    -
    
    
    
    105,778
    
    
    
    6,885
    
    
    
    (322
    )
    
    
    112,341Property, Plant and Equipment, Net
    
    
    -
    
    
    
    113,143
    
    
    
    1,502
    
    
    
    -
    
    
    
    114,645Intangible Assets, Net
    
    
    -
    
    
    
    1,775
    
    
    
    1,778
    
    
    
    -
    
    
    
    3,553Goodwill
    
    
    -
    
    
    
    -
    
    
    
    3,144
    
    
    
    -
    
    
    
    3,144Deferred Income Taxes
    
    
    -
    
    
    
    21,121
    
    
    
    -
    
    
    
    -
    
    
    
    21,121Other Assets
    
    
    -
    
    
    
    10,037
    
    
    
    -
    
    
    
    -
    
    
    
    10,037Intercompany Advances
    
    
    79,918
    
    
    
    2,535
    
    
    
    -
    
    
    
    (82,453
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    101,179
    
    
    
    6,229
    
    
    
    -
    
    
    
    (107,408
    )
    
    
    -Total Assets
    
    $
    181,097
    
    
    $
    260,618
    
    
    $
    13,309
    
    
    $
    (190,183
    )
    
    $
    264,841Liabilities and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    19,894
    
    
    $
    1,936
    
    
    $
    (322
    )
    
    $
    21,508Environmental Remediation Reserves
    
    
    -
    
    
    
    2,522
    
    
    
    -
    
    
    
    -
    
    
    
    2,522Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    4,579
    
    
    
    2,332
    
    
    
    -
    
    
    
    6,911Current Portion of Long-Term Debt
    
    
    -
    
    
    
    99
    
    
    
    52
    
    
    
    -
    
    
    
    151Intercompany Advances
    
    
    -
    
    
    
    79,918
    
    
    
    2,535
    
    
    
    (82,453
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    107,012
    
    
    
    6,855
    
    
    
    (82,775
    )
    
    
    31,092Long-Term Debt
    
    
    110,000
    
    
    
    -
    
    
    
    97
    
    
    
    -
    
    
    
    110,097Environmental Remediation Reserves
    
    
    -
    
    
    
    24,168
    
    
    
    -
    
    
    
    -
    
    
    
    24,168Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    28,259
    
    
    
    128
    
    
    
    -
    
    
    
    28,387Total Liabilities
    
    
    110,000
    
    
    
    159,439
    
    
    
    7,080
    
    
    
    (82,775
    )
    
    
    193,744Total Shareholders Equity
    
    
    71,097
    
    
    
    101,179
    
    
    
    6,229
    
    
    
    (107,408
    )
    
    
    71,097Total Liabilities and Shareholders Equity
    
    $
    181,097
    
    
    $
    260,618
    
    
    $
    13,309
    
    
    $
    (190,183
    )
    
    $
    264,841Condensed
Consolidating Statement of Operations - Three Months Ended March 31, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    54,711
    
    
    $
    1,823
    
    
    $
    (99
    )
    
    $
    56,435Cost of Revenues
    
    
    -
    
    
    
    37,936
    
    
    
    1,301
    
    
    
    (99
    )
    
    
    39,138Gross Profit
    
    
    -
    
    
    
    16,775
    
    
    
    522
    
    
    
    -
    
    
    
    17,297Operating Expenses
    
    
    -
    
    
    
    10,483
    
    
    
    588
    
    
    
    -
    
    
    
    11,071Operating Income (Loss)
    
    
    -
    
    
    
    6,292
    
    
    
    (66
    )
    
    
    -
    
    
    
    6,226Interest and Other Income
    
    
    2,664
    
    
    
    35
    
    
    
    (44
    )
    
    
    (2,674
    )
    
    
    (19
    )Interest Expense
    
    
    2,664
    
    
    
    2,686
    
    
    
    8
    
    
    
    (2,674
    )
    
    
    2,684Income (Loss) before Income Tax andEquity Account for Subsidiaries
    
    
    -
    
    
    
    3,641
    
    
    
    (118
    )
    
    
    -
    
    
    
    3,523Income Tax Benefit
    
    
    -
    
    
    
    1,790
    
    
    
    -
    
    
    
    -
    
    
    
    1,790Income (Loss) beforeEquity Account for Subsidiaries
    
    
    -
    
    
    
    1,851
    
    
    
    (118
    )
    
    
    -
    
    
    
    1,733Equity Account for Subsidiaries
    
    
    1,733
    
    
    
    (118
    )
    
    
    -
    
    
    
    (1,615
    )
    
    
    -Net Income (Loss)
    
    $
    1,733
    
    
    $
    1,733
    
    
    $
    (118
    )
    
    $
    (1,615
    )
    
    $
    1,733
 - 21 -




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##### Table of Contents



11. GUARANTOR SUBSIDIARIES (Continued)
 Condensed Consolidating Statement of Operations - Six Months Ended March 31, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    98,613
    
    
    $
    3,568
    
    
    $
    (117
    )
    
    $
    102,064Cost of Revenues
    
    
    -
    
    
    
    67,745
    
    
    
    2,405
    
    
    
    (117
    )
    
    
    70,033Gross Profit
    
    
    -
    
    
    
    30,868
    
    
    
    1,163
    
    
    
    -
    
    
    
    32,031Operating Expenses
    
    
    -
    
    
    
    21,194
    
    
    
    1,186
    
    
    
    -
    
    
    
    22,380Operating Income (Loss)
    
    
    -
    
    
    
    9,674
    
    
    
    (23
    )
    
    
    -
    
    
    
    9,651Interest and Other Income
    
    
    5,333
    
    
    
    122
    
    
    
    (70
    )
    
    
    (5,343
    )
    
    
    42Interest Expense
    
    
    5,333
    
    
    
    5,370
    
    
    
    18
    
    
    
    (5,343
    )
    
    
    5,378Income (Loss) before Income Tax andEquity Account for Subsidiaries
    
    
    -
    
    
    
    4,426
    
    
    
    (111
    )
    
    
    -
    
    
    
    4,315Income Tax Benefit
    
    
    -
    
    
    
    2,125
    
    
    
    -
    
    
    
    -
    
    
    
    2,125Income (Loss) beforeEquity Account for Subsidiaries
    
    
    -
    
    
    
    2,301
    
    
    
    (111
    )
    
    
    -
    
    
    
    2,190Equity Account for Subsidiaries
    
    
    2,190
    
    
    
    (111
    )
    
    
    -
    
    
    
    (2,079
    )
    
    
    -Net Income (Loss)
    
    $
    2,190
    
    
    $
    2,190
    
    
    $
    (111
    )
    
    $
    (2,079
    )
    
    $
    2,190Condensed Consolidating Statement of Cash Flows - Six Months Ended March 31, 2009Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided by Operating Activities
    
    $
    -
    
    
    $
    12,884
    
    
    $
    1,268
    
    
    $
    -
    
    
    $
    14,152Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (4,050
    )
    
    
    (362
    )
    
    
    -
    
    
    
    (4,412
    )Acquisition of business, net of cash acquired
    
    
    -
    
    
    
    (7,132
    )
    
    
    471
    
    
    
    -
    
    
    
    (6,661
    )Net Cash Provided (Used) by Investing Activities
    
    
    -
    
    
    
    (11,182
    )
    
    
    109
    
    
    
    -
    
    
    
    (11,073
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (127
    )
    
    
    (45
    )
    
    
    -
    
    
    
    (172
    )Issuance of common stock
    
    
    32
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    32Excess tax benefit from exercise of stock options
    
    
    3
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3Intercompany advances, net
    
    
    (35
    )
    
    
    (364
    )
    
    
    399
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (491
    )
    
    
    354
    
    
    
    -
    
    
    
    (137
    )Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    1,211
    
    
    
    1,731
    
    
    
    -
    
    
    
    2,942Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    26,664
    
    
    
    229
    
    
    
    -
    
    
    
    26,893Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    27,875
    
    
    $
    1,960
    
    
    $
    -
    
    
    $
    29,835
 - 22 -




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##### Table of Contents



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




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##### Table of Contents



OUR BUSINESS SEGMENTS
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Fine Chemicals
    
    
    57
    %
    
    
    56
    %
    
    
    46
    %
    
    
    51
    %Specialty Chemicals:Perchlorates
    
    
    22
    %
    
    
    28
    %
    
    
    26
    %
    
    
    31
    %Sodium Azide
    
    
    0%
    *
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Halotron
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Total Specialty Chemicals
    
    
    24
    %
    
    
    31
    %
    
    
    29
    %
    
    
    34
    %Aerospace Equipment
    
    
    17
    %
    
    
    13
    %
    
    
    20
    %
    
    
    13
    %Other Businesses:Real Estate
    
    
    0%
    *
    
    
    0%
    *
    
    
    0%
    *
    
    
    0%
    *Water Treatment Equipment
    
    
    2
    %
    
    
    0%
    *
    
    
    5
    %
    
    
    2
    %Total Other Businesses
    
    
    2
    %
    
    
    0
    %
    
    
    5
    %
    
    
    2
    %Total Revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 * less than 1% FINE CHEMICALS.
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
    
    Alternative Supply May Not Be Readily Available.We are currently the sole-source supplier
on several of our fine chemicals products.
 
    
    Regulatory Approval.Applications to and approvals from the FDA and other regulatory
authorities generally require the chemical contractor to be named. Switching contractors may
require additional regulatory approvals and could take as long as two years to complete.
 
    
    Significant Financial Costs.Switching contractors and amending various filings can result
in significant costs associated with technology transfer, process validation and re-filing
with the FDA and other regulatory authorities.
 SPECIALTY CHEMICALS .
   AEROSPACE EQUIPMENT.
   OTHER BUSINESSES.
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RESULTS OF OPERATIONS
 REVENUES
 March 31,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    33,673
    
    
    $
    31,738
    
    
    $
    1,935
    
    
    
    6%Specialty Chemicals
    
    
    14,086
    
    
    
    17,283
    
    
    
    (3,197
    )
    
    
    (18
    %)Aerospace Equipment
    
    
    10,168
    
    
    
    7,135
    
    
    
    3,033
    
    
    
    43%Other Businesses
    
    
    1,468
    
    
    
    279
    
    
    
    1,189
    
    
    
    426%Total Revenues
    
    $
    59,395
    
    
    $
    56,435
    
    
    $
    2,960
    
    
    
    5%Six Months Ended:Fine Chemicals
    
    $
    43,177
    
    
    $
    52,122
    
    
    $
    (8,945
    )
    
    
    (17
    %)Specialty Chemicals
    
    
    26,889
    
    
    
    34,641
    
    
    
    (7,752
    )
    
    
    (22
    %)Aerospace Equipment
    
    
    18,493
    
    
    
    12,892
    
    
    
    5,601
    
    
    
    43%Other Businesses
    
    
    4,900
    
    
    
    2,409
    
    
    
    2,491
    
    
    
    103%Total Revenues
    
    $
    93,459
    
    
    $
    102,064
    
    
    $
    (8,605
    )
    
    
    (8
    %)
 Fine Chemicals .
  Specialty Chemicals.
 
    
    A 29% decrease in perchlorate volume offset by a 13% increase in the related average price
per pound for the Fiscal 2010 second quarter compared to the prior fiscal year second quarter.
 
    
    A 38% decrease in perchlorate volume offset by a 20% increase in the related average price
per pound for the Fiscal 2010 six-month period compared to the prior fiscal year six-month
period.
 
    
    Sodium azide revenues increased $500 for the Fiscal 2010 six-month period compared to the
prior fiscal year six-month period, reflecting increased sales outside the U.S.
 
    
    Halotron revenues were consistent between comparable second quarter and six-month periods.
  
    
    The average price per pound of Grade I AP increased approximately proportionate and inverse
to the decrease in Grade I AP volume consistent with the contractual Grade I AP price-volume
matrix and comparable increases in catalog pricing.
 
    
    This was offset, in part, by our other lower-priced perchlorate products, such as sodium
perchlorate and potassium perchlorate, which accounted for a greater percentage of all
perchlorate product volume in the Fiscal 2010 periods. This change in mix of perchlorate
product sales had the effect of reducing the average price per pound of all perchlorate
products.
 - 26 -




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Aerospace Equipment .
 COST OF REVENUES AND GROSS MARGIN
 March 31,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Revenues
    
    $
    59,395
    
    
    $
    56,435
    
    
    $
    2,960
    
    
    
    5%Cost of Revenues
    
    
    42,516
    
    
    
    39,138
    
    
    
    3,378
    
    
    
    9%Gross Margin
    
    
    16,879
    
    
    
    17,297
    
    
    
    (418
    )
    
    
    (2
    %)Gross Margin Percentage
    
    
    28%
    
    
    
    31%Six Months Ended:Revenues
    
    $
    93,459
    
    
    $
    102,064
    
    
    $
    (8,605
    )
    
    
    (8
    %)Cost of Revenues
    
    
    64,134
    
    
    
    70,033
    
    
    
    (5,899
    )
    
    
    (8
    %)Gross Margin
    
    
    29,325
    
    
    
    32,031
    
    
    
    (2,706
    )
    
    
    (8
    %)Gross Margin Percentage
    
    
    31%
    
    
    
    31%
  Fine Chemicals.
 Specialty Chemicals.
 Aerospace Equipment .
 - 27 -




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OPERATING EXPENSES
 March 31,
    
    
    Increase
    
    
    Percentage2010
    
    
    2009
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Operating Expenses
    
    $
    11,444
    
    
    $
    11,071
    
    
    $
    373
    
    
    
    3
    %Percentage of Revenues
    
    
    19%
    
    
    
    20%Six Months Ended:Operating Expenses
    
    $
    23,751
    
    
    $
    22,380
    
    
    $
    1,371
    
    
    
    6
    %Percentage of Revenues
    
    
    25%
    
    
    
    22%
  
    
    An increase in Aerospace Equipment segment operating expenses of $594 primarily due to
additional management and organization structure which was added to support the segments
European growth strategy.
 
    
    A decrease in corporate expenses primarily related to reduced strategic development costs.
  SEGMENT OPERATING INCOME (LOSS)
 March 31,
    
    
    Favorable
    
    
    Percentage2010
    
    
    2009
    
    
    (Unfavorable)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    2,500
    
    
    $
    1,406
    
    
    $
    1,094
    
    
    
    78%Specialty Chemicals
    
    
    6,513
    
    
    
    8,325
    
    
    
    (1,812
    )
    
    
    (22
    %)Aerospace Equipment
    
    
    25
    
    
    
    743
    
    
    
    (718
    )
    
    
    (97
    %)Other Businesses
    
    
    69
    
    
    
    (167
    )
    
    
    236
    
    
    NMSegment Operating Income
    
    
    9,107
    
    
    
    10,307
    
    
    
    (1,200
    )
    
    
    (12
    %)Corporate Expenses
    
    
    (3,672
    )
    
    
    (4,081
    )
    
    
    409
    
    
    
    10%Operating Income (Loss)
    
    $
    5,435
    
    
    $
    6,226
    
    
    $
    (791
    )
    
    
    (13
    %)Six Months Ended:Fine Chemicals
    
    $
    1,760
    
    
    $
    382
    
    
    $
    1,378
    
    
    
    361%Specialty Chemicals
    
    
    12,344
    
    
    
    15,931
    
    
    
    (3,587
    )
    
    
    (23
    %)Aerospace Equipment
    
    
    (337
    )
    
    
    1,153
    
    
    
    (1,490
    )
    
    NMOther Businesses
    
    
    52
    
    
    
    378
    
    
    
    (326
    )
    
    
    (86
    %)Segment Operating Income
    
    
    13,819
    
    
    
    17,844
    
    
    
    (4,025
    )
    
    
    (23
    %)Corporate Expenses
    
    
    (8,245
    )
    
    
    (8,193
    )
    
    
    (52
    )
    
    
    (1
    %)Operating Income
    
    $
    5,574
    
    
    $
    9,651
    
    
    $
    (4,077
    )
    
    
    (42
    %)
   - 28 -




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BACKLOG
    LIQUIDITY AND CAPITAL RESOURCES
 CASH FLOWS
 Six Months Ended March 31,
    
    
    
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeCash Provided (Used) By:Operating activities
    
    $
    14,594
    
    
    $
    14,152
    
    
    $
    442
    
    
    
    3%Investing activities
    
    
    (3,588
    )
    
    
    (11,073
    )
    
    
    7,485
    
    
    
    (68
    %)Financing activities
    
    
    (89
    )
    
    
    (137
    )
    
    
    48
    
    
    
    (35
    %)Effect of changes in exchange rates on cash
    
    
    (84
    )
    
    
    -
    
    
    
    (84
    )
    
    NMNet change in cash for period
    
    $
    10,833
    
    
    $
    2,942
    
    
    $
    7,891
    
    
    
    268%NM = Not meanginful.
 Operating Activities .
  
    
    A decrease in cash due to less profit from our operations of $3,897.
 
    
    An increase in cash provided by working capital accounts of $4,431, excluding the effects
of interest and income taxes.
 
    
    An increase in cash taxes refunded of $249.
 
    
    An increase in cash paid for interest of $53.
 
    
    An increase in cash used for environmental remediation of $262.
 
    
    Other decreases in cash provided by operating activities of $26.
  - 29 -




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Investing Activities
  LIQUIDITY AND CAPITAL RESOURCES.
    
    
    current results of operations, cash flows and backlog;
 
    
    anticipated changes in operating trends, including anticipated changes in revenues and
margins;
 
    
    cash requirements related to our debt agreements and pension plans; and
 
    
    cash requirements related to our remediation activities, including amounts that we expect
to spend through fall 2011 for the engineering, design, installation and cost of additional
remediation equipment (Remediation Capital). See further discussion under the heading
Environmental Remediation  AMPAC Henderson Site below.
  - 30 -




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LONG-TERM DEBT AND REVOLVING CREDIT FACILITIES
 Senior Notes.
 
    
    ranked equally in right of payment with all of our existing and future senior indebtedness;
    
    ranked senior in right of payment to all of our existing and future senior subordinated and
subordinated indebtedness;
    
    effectively junior to our existing and future secured debt to the extent of the value of
the assets securing such debt; and
    
    structurally subordinated to all of the existing and future liabilities (including trade
payables) of each of our subsidiaries that do not guarantee the Senior Notes.
  
    
    at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of
the Senior Notes plus an applicable premium as defined in the related indenture;
    
    at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the
principal amount to be redeemed and reducing to 100% by February 1, 2013; and
    
    under certain changes of control, we must offer to purchase the Senior Notes at 101% of
their aggregate principal amount, plus accrued interest.
  
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
  Revolving Credit Facility.
 - 31 -




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
    
    incur debt, incur contingent obligations and issue certain types of preferred stock;
    
    create liens;
    
    pay dividends, distributions or make other specified restricted payments;
    
    make certain investments and acquisitions;
    
    enter into certain transactions with affiliates;
    
    enter into sale and leaseback transactions; and
    
    merge or consolidate with any other entity or sell, assign, transfer, lease, convey or
otherwise dispose of assets.
    PENSION BENEFITS.
 - 32 -




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##### Table of Contents



ENVIRONMENTAL REMEDIATION  AMPAC HENDERSON SITE.
    - 33 -




---



##### Table of Contents



CONTRACTUAL OBLIGATIONS.
  
    
    We have recorded an estimated liability for environmental remediation of $25,711 (see Note
7 to the condensed consolidated financial statements included in Item 1 of this report). We
expect to spend approximately $2,522 for environmental remediation during Fiscal 2010.
 - 34 -




---



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
    
    We have recorded aggregate unfunded Pension Plans and SERP obligations of $29,748 (see Note 10
to the condensed consolidated financial statements included in Item 1 of this report). We
expect to contribute $2,995 to our Pension Plans and SERP during Fiscal 2010.
    
    We have uncertain tax positions totaling $652. We are unable to reasonably estimate the
timing of the related payments, if any.
    
    We also maintain the Revolving Credit Facility, which provides revolving credit in an
aggregate principal amount of up to $20,000 with an initial maturity in February 2012. We had
no balance outstanding under the Revolving Credit Facility. We may prepay and terminate the
Revolving Credit Facility at any time.
 OFF-BALANCE SHEET ARRANGEMENTS
 Letters of Credit.
 Employee Agreements.
   CRITICAL ACCOUNTING POLICIES
   SALES AND REVENUE RECOGNITION.
 - 35 -




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##### Table of Contents



DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS.
  IMPAIRMENT OF LONG-LIVED ASSETS .
  - 36 -




---



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GOODWILL.
 ENVIRONMENTAL COSTS .
  INCOME TAXES .
  - 37 -




---



##### Table of Contents



PENSION BENEFITS .
   RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS.
 - 38 -




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 ITEM 4. CONTROLS AND PROCEDURES
  - 39 -




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
    
    Developed and implemented a comprehensive Fine Chemicals segment revenue recognition
testing work program based on a risk assessment that determined the scope of transactions
to be tested.
    
    Reviewed significant manufacturing agreements, customer proposals and purchase orders,
including contractual arrangements documented outside of the customers written contract or
purchase order, related to revenues recorded in our Fiscal 2010 second quarter.
   
    
    Improving the Fine Chemicals segment contract administration process to ensure the
proper approval and circulation of all sales arrangements, including non-standard
commitments;
    
    Providing additional and on-going training to Fine Chemicals segment finance and
accounting staff on the application of technical accounting pronouncements, especially in
the area of revenue recognition. Additionally, we continued to provide training to Fine
Chemicals segment product managers and others involved in negotiating contractual
arrangements with our customers to heighten the awareness of revenue recognition concepts,
with emphasis on non-standard contracts; and
    
    Establishing a process whereby corporate finance personnel provide a second review of
the Fine Chemicals segments accounting treatment for significant sales arrangements.
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS (Dollars in Thousands)
   We depend on a limited number of customers for most of our sales in our Specialty Chemicals,
Aerospace Equipment and Fine Chemicals segments and the loss of one or more of these customers
could have a material adverse effect on our financial position, results of operations and cash
flows.
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The inherent limitations of our fixed-price or similar contracts may impact our profitability.
  The numerous and often complex laws and regulations and regulatory oversight to which our
operations and properties are subject, the cost of compliance, and the effect of any failure to
comply could reduce our profitability and liquidity.
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A significant portion of our business depends on contracts with the government or its prime
contractors or subcontractors and these contracts are impacted by governmental priorities and are
subject to potential fluctuations in funding or early termination, including for convenience, any
of which could have a material adverse effect on our operating results, financial condition or cash
flows.
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We may be subject to potentially material costs and liabilities in connection with environmental or health matters.
  Review of Perchlorate Toxicity by the EPA.
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Perchlorate Remediation Project in Henderson, Nevada.
 Henderson Site Environmental Remediation Reserve.
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Other Environmental Matters.
 Although we have established an environmental reserve for remediation activities in Henderson,
Nevada, given the many uncertainties involved in assessing environmental liabilities, our
environmental-related risks may from time to time exceed any related reserves.
  For each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment segments, most
production is conducted in a single facility and any significant disruption or delay at a
particular facility could have a material adverse effect on our business, financial position and
results of operations.
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The release or explosion of dangerous materials used in our business could disrupt our operations
and cause us to incur additional costs and liabilities.
  Disruptions in the supply of key raw materials and difficulties in the supplier qualification
process, as well as increases in prices of raw materials, could adversely impact our operations.
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Each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment segments may be unable to
comply with customer specifications and manufacturing instructions or may experience delays or
other problems with existing or new products, which could result in increased costs, losses of
sales and potential breach of customer contracts.
    Successful commercialization of pharmaceutical products and product line extensions is very
difficult and subject to many uncertainties. If a customer is not able to successfully
commercialize its products for which AFC produces compounds or if a product is subsequently
recalled, then the operating results of AFC may be negatively impacted.
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A strike or other work stoppage, or the inability to renew collective bargaining agreements on
favorable terms, could have a material adverse effect on the cost structure and operational
capabilities of AFC.
  The pharmaceutical fine chemicals industry is a capital-intensive industry and if AFC does not have
sufficient financial resources to finance the necessary capital expenditures, its business and
results of operations may be harmed.
  We may be subject to potential liability claims for our products or services that could affect our
earnings and financial condition and harm our reputation.
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Technology innovations in the markets that we serve may create alternatives to our products and
result in reduced sales.
  We are subject to strong competition in certain industries in which we participate and therefore
may not be able to compete successfully.
  Due to the nature of our business, our sales levels may fluctuate causing our quarterly operating
results to fluctuate.
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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.
  We may continue to expand our operations in part through acquisitions, which could divert
managements attention and expose us to unanticipated liabilities and costs. We may experience
difficulties integrating the acquired operations, and we may incur costs relating to acquisitions
that are never consummated.
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We have a substantial amount of debt, and the cost of servicing that debt could adversely affect
our ability to take actions, our liquidity or our financial condition.
  
    
    make it more difficult for us to satisfy any other outstanding debt obligations;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments
on our debt, reducing the amount of our cash flow available for working capital, capital
expenditures, acquisitions, developing our real estate assets and other general corporate
purposes;
    
    limit our flexibility in planning for, or reacting to, changes in the industries in which
we compete;
    
    place us at a competitive disadvantage compared to our competitors, some of which have
lower debt service obligations and greater financial resources than we do;
    
    limit our ability to borrow additional funds; or
    
    increase our vulnerability to general adverse economic and industry conditions.
 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;
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
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
  Significant changes in discount rates, rates of return on pension assets, mortality tables and
other factors could affect our estimates of pension obligations, which in turn could affect future
funding requirements and related costs and impact our future earnings.
  Our shareholder rights plan, Restated Certificate of Incorporation, as amended, and Amended and
Restated By-laws discourage unsolicited takeover proposals and could prevent stockholders from
realizing a premium on their common stock.
  
    
    a classified board of directors;
    
    the ability of our board of directors to designate the terms of and issue new series of
preferred stock;
    
    advance notice requirements for nominations for election to our board of directors; and
    
    special voting requirements for the amendment, in certain cases, of our Restated
Certificate of Incorporation, as amended, and our Amended and Restated By-laws.
  Our proprietary and intellectual property rights may be violated, compromised, circumvented or
invalidated, which could damage our operations.
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Our common stock price may fluctuate substantially, and a stockholders investment could decline in
value.
  
    
    actual or anticipated fluctuations in our results of operations;
    
    events or concerns related to our products or operations or those of our competitors,
including public health, environmental and safety concerns related to products and operations;
    
    material public announcements by us or our competitors;
    
    changes in government regulations or policies, such as new legislation, laws or regulatory
decisions that are adverse to us and/or our products;
    
    changes in key members of management;
    
    developments in our industries;
    
    changes in investors acceptable levels of risk;
    
    trading volume of our common stock; and
    
    general economic conditions.
  
 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 11, 2010
    
    /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)
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EXHIBIT INDEX
 EXHIBIT NO.
    
    DOCUMENT DESCRIPTION3.1
    
    Restated Certificate of Incorporation, as amended, of American Pacific Corporation
(incorporated by reference to Exhibit 4.(a) to the registrants Registration Statement on Form
S-3 (File No. 33-15674))3.2
    
    Articles of Amendment to the Restated Certificate of Incorporation of American Pacific
Corporation, as filed with the Secretary of State, State of Delaware, on October 7, 1991
(incorporated by reference to Exhibit 4.3 to the registrants Registration Statement on Form
S-3 (File No. 33-52196))3.3
    
    Articles of Amendment to the Restated Certificate of Incorporation of American Pacific
Corporation, as filed with the Secretary of State, State of Delaware, on April 21, 1992
(incorporated by reference to Exhibit 4.4 to the registrants Registration Statement on Form
S-3 (File No. 33-52196))3.4
    
    American Pacific Corporation Amended and Restated By-laws (incorporated by reference to
Exhibit 3.1 to the registrants Current Report on Form 8-K (File No. 001-08137) filed by the
registrant with the Securities and Exchange Commission on September 15, 2008)3.5
    
    Rights Agreement, dated as of August 3, 1999, between American Pacific Corporation and
American Stock Transfer & Trust Company (incorporated by reference to Exhibit 1 to the
registrants Registration Statement on Form 8-A (File No. 001-08137) filed by the registrant
with the Securities and Exchange Commission on August 6, 1999)3.6
    
    Form of Letter to Stockholders that accompanied copies of the Summary of Rights to Purchase
Preferred Shares (incorporated by reference to Exhibit 2 to the registrants Registration
Statement on Form 8-A (File No. 001-08137) filed by the registrant with the Securities and
Exchange Commission on August 6, 1999)3.7
    
    Amendment, dated as of July 11, 2008, between American Pacific Corporation and American Stock
Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the registrants Current
Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and
Exchange Commission on July 11, 2008)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
 
 *
    
    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 -