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FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission File Number: 001-08137
 AMERICAN PACIFIC CORPORATION
  
 Delaware
    
    59-6490478(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3883 Howard Hughes Parkway, Suite 700
Las Vegas, Nevada 89169
  702) 735-2200
  x o
 o o
  Large accelerated filer o
Non-accelerated filer o
    
    (Do not check if a smaller reporting company)
    
    Accelerated filer x
Smaller reporting company o
 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
    
    
    25ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    44ITEM 4.
    
    Controls and Procedures
    
    
    44PART II.  OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    45ITEM 1A.
    
    Risk Factors
    
    
    45ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    57ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    57ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    57ITEM 5.
    
    Other Information
    
    
    57ITEM 6.
    
    Exhibits
    
    
    57EX-10.1EX-10.2EX-10.3EX-10.4EX-31.1EX-31.2EX-32.1EX-32.2
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PART I.  FINANCIAL INFORMATION
 
 ITEM 1.  FINANCIAL STATEMENTS
 AMERICAN PACIFIC CORPORATION

Condensed Consolidated Statements of Operations
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Revenues
    
    $
    31,490
    
    
    $
    36,740
    
    
    $
    133,554
    
    
    $
    131,977Cost of Revenues
    
    
    24,227
    
    
    
    23,990
    
    
    
    94,260
    
    
    
    85,188Gross Profit
    
    
    7,263
    
    
    
    12,750
    
    
    
    39,294
    
    
    
    46,789Operating Expenses
    
    
    10,915
    
    
    
    10,377
    
    
    
    33,295
    
    
    
    31,824Operating Income (Loss)
    
    
    (3,652
    )
    
    
    2,373
    
    
    
    5,999
    
    
    
    14,965Interest and Other Income, Net
    
    
    28
    
    
    
    575
    
    
    
    70
    
    
    
    1,221Interest Expense
    
    
    2,683
    
    
    
    2,682
    
    
    
    8,061
    
    
    
    8,073Income (Loss) before Income Tax
    
    
    (6,307
    )
    
    
    266
    
    
    
    (1,992
    )
    
    
    8,113Income Tax Expense (Benefit)
    
    
    (2,752
    )
    
    
    138
    
    
    
    (627
    )
    
    
    3,489Net Income (Loss)
    
    $
    (3,555
    )
    
    $
    128
    
    
    $
    (1,365
    )
    
    $
    4,624Earnings (Loss) per Share:Basic
    
    $
    (0.48
    )
    
    $
    0.02
    
    
    $
    (0.18
    )
    
    $
    0.62Diluted
    
    $
    (0.48
    )
    
    $
    0.02
    
    
    $
    (0.18
    )
    
    $
    0.61Weighted Average Shares Outstanding:Basic
    
    
    7,483,000
    
    
    
    7,452,000
    
    
    
    7,482,000
    
    
    
    7,442,000Diluted
    
    
    7,483,000
    
    
    
    7,607,000
    
    
    
    7,482,000
    
    
    
    7,594,000
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AMERICAN PACIFIC CORPORATION


Condensed Consolidated Balance Sheets
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 June 30,
    
    
    September 30,2009
    
    
    2008ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    24,968
    
    
    $
    26,893Accounts Receivable, Net
    
    
    27,495
    
    
    
    27,445Inventories
    
    
    44,242
    
    
    
    40,357Prepaid Expenses and Other Assets
    
    
    1,639
    
    
    
    3,392Income Taxes Receivable
    
    
    1,967
    
    
    
    1,804Deferred Income Taxes
    
    
    6,697
    
    
    
    6,859Total Current Assets
    
    
    107,008
    
    
    
    106,750Property, Plant and Equipment, Net
    
    
    115,242
    
    
    
    118,608Intangible Assets, Net
    
    
    4,106
    
    
    
    3,013Goodwill
    
    
    3,152
    
    
    
    -Deferred Income Taxes
    
    
    14,026
    
    
    
    13,849Other Assets
    
    
    10,292
    
    
    
    9,193TOTAL ASSETS
    
    $
    253,826
    
    
    $
    251,413LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    8,246
    
    
    $
    10,554Accrued Liabilities
    
    
    4,703
    
    
    
    5,526Accrued Interest
    
    
    4,125
    
    
    
    1,650Employee Related Liabilities
    
    
    5,737
    
    
    
    6,917Income Taxes Payable
    
    
    12
    
    
    
    111Deferred Revenues and Customer Deposits
    
    
    8,283
    
    
    
    3,091Current Portion of Environmental Remediation Reserves
    
    
    1,412
    
    
    
    996Current Portion of Long-Term Debt
    
    
    213
    
    
    
    254Total Current Liabilities
    
    
    32,731
    
    
    
    29,099Long-Term Debt
    
    
    110,105
    
    
    
    110,120Environmental Remediation Reserves
    
    
    11,879
    
    
    
    13,282Pension Obligations
    
    
    16,551
    
    
    
    15,692Other Long-Term Liabilities
    
    
    589
    
    
    
    258Total Liabilities
    
    
    171,855
    
    
    
    168,451Commitments 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,9,550,541 and 9,523,541 issued
    
    
    955
    
    
    
    952Capital in Excess of Par Value
    
    
    88,999
    
    
    
    88,496Retained Earnings
    
    
    14,591
    
    
    
    15,956Treasury Stock - 2,045,950 and 2,045,950 shares
    
    
    (17,175
    )
    
    
    (17,175
    )Accumulated Other Comprehensive Loss
    
    
    (5,399
    )
    
    
    (5,267
    )Total Shareholders Equity
    
    
    81,971
    
    
    
    82,962TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    253,826
    
    
    $
    251,413
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AMERICAN PACIFIC CORPORATION


Condensed Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
 
 Nine Months EndedJune 30,2009
    
    
    2008Cash Flows from Operating Activities:Net Income (Loss)
    
    $
    (1,365
    )
    
    $
    4,624Adjustments to Reconcile Net Income (Loss)to Net Cash Provided by Operating Activities:Depreciation and amortization
    
    
    11,971
    
    
    
    12,472Non-cash interest expense
    
    
    473
    
    
    
    478Share-based compensation
    
    
    474
    
    
    
    90Excess tax benefit from stock option exercises
    
    
    -
    
    
    
    (244
    )Deferred income taxes
    
    
    (14
    )
    
    
    (447
    )Loss (gain) on sale of assets
    
    
    52
    
    
    
    (418
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    2,284
    
    
    
    3,800Inventories
    
    
    (4,847
    )
    
    
    (10,924
    )Prepaid expenses and other current assets
    
    
    1,792
    
    
    
    (1,766
    )Accounts payable
    
    
    (2,780
    )
    
    
    (1,312
    )Income taxes
    
    
    (262
    )
    
    
    1,158Accrued liabilities
    
    
    (1,034
    )
    
    
    (1,011
    )Accrued interest
    
    
    2,475
    
    
    
    2,438Employee related liabilities
    
    
    (1,298
    )
    
    
    (384
    )Deferred revenues and customer deposits
    
    
    3,567
    
    
    
    15,488Environmental remediation reserves
    
    
    (987
    )
    
    
    (757
    )Pension obligations, net
    
    
    859
    
    
    
    (199
    )Other
    
    
    (8
    )
    
    
    (1,945
    )Net Cash Provided by Operating Activities
    
    
    11,352
    
    
    
    21,141Cash Flows from Investing Activities:Capital expenditures
    
    
    (6,312
    )
    
    
    (10,027
    )Acquisition of business, net of cash acquired
    
    
    (6,725
    )
    
    
    -Net Cash Used by Investing Activities
    
    
    (13,037
    )
    
    
    (10,027
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    (272
    )
    
    
    (208
    )Issuances of common stock, net
    
    
    32
    
    
    
    387Excess tax benefit from stock option exercises
    
    
    -
    
    
    
    244Purchases of treasury stock
    
    
    -
    
    
    
    (193
    )Net Cash Provided (Used) by Financing Activities
    
    
    (240
    )
    
    
    230Net Change in Cash and Cash Equivalents
    
    
    (1,925
    )
    
    
    11,344Cash and Cash Equivalents, Beginning of Period
    
    
    26,893
    
    
    
    21,426Cash and Cash Equivalents, End of Period
    
    $
    24,968
    
    
    $
    32,770Cash Paid (Received) For:Interest
    
    $
    5,113
    
    
    $
    5,156Income taxes
    
    
    (380
    )
    
    
    3,901Non-Cash Investing and Financing Transactions:Additions to Property, Plant and Equipment not yet paid
    
    
    408
    
    
    
    1,361
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AMERICAN PACIFIC CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited, Dollars in Thousands, Except per Share Amounts)
 
 1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIESInterim Basis of Presentation.The accompanying condensed consolidated financial statements of
American Pacific Corporation and its subsidiaries (collectively, the Company, we, us, or
our) are unaudited, but in our opinion, include all adjustments, which are of a normal
recurring nature, necessary for the fair presentation of financial results for interim periods.
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, 2008.
We have evaluated subsequent events through August 5, 2009, the date these condensed
consolidated financial statements were issued. The operating results for the three-month and
nine-month periods ended June 30, 2009 and cash flows for the nine-month period ended June 30,
2009, 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, 2008.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 completed the acquisition of Marotta Holdings Limited
(subsequently renamed Ampac ISP Holdings Limited) and its wholly-owned subsidiaries
(collectively AMPAC ISP Holdings). AMPAC ISP Holdings is included in our consolidated
financial statements beginning on October 1, 2008 and is a component of our Aerospace Equipment
segment. See Note 2.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 $96,800 based on the trade date closest to June 30, 2009,
which was June 15, 2009.Depreciation and Amortization Expense.Depreciation expense of $3,446, $10,048, $3,168 and
$9,608 was classified as cost of revenues in our consolidated statements of operations for the
three-month and nine-month periods ended June 30, 2009 and 2008, respectively. Depreciation
expense of $125, $383, $158 and $419 was classified as operating expenses in our consolidated
statements of operations for the three-month and nine-month periods ended June 30, 2009 and
2008, respectively.Amortization expense of $1,517 was classified as cost of revenues in our consolidated statements
of operations for the nine-month period ended June 30, 2008. Amortization expense of $530,
$1,540, $309 and $928 was classified as operating expenses in our consolidated statements of
operations for the three-month and nine-month periods ended June 30, 2009 and 2008,
respectively.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 $25,712 and $29,022 as of June 30, 2009 and September 30, 2008, 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 (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements (SFAS No. 157), 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 the adoption of SFAS No. 157 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 in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and
long-lived assets measured at fair value for impairment assessments under SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived Assets. SFAS No. 157 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. SFAS No. 157 was effective for us on October 1, 2008. We have not
adopted all the provisions of SFAS No. 157 as the FASB delayed the effective date of the
application of SFAS No. 157 to non-financial assets and liabilities. The remaining provisions
of SFAS No. 157 become effective for us beginning October 1, 2009. The partial adoption of SFAS
No. 157 did not have a material impact on our consolidated financial statements. The adoption
of the remaining provisions of SFAS No. 157 is not expected to have a material impact on our
results of operations, financial position or cash flows.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). SFAS No. 159 permits companies to choose to measure
many financial instruments and certain other items at fair value. The objective is to improve
financial reporting by providing companies with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having
to apply complex hedge accounting provisions. The fair value option established by SFAS No. 159
permits all companies to choose to measure eligible items at fair value at specified election
dates. At each subsequent reporting date, a company must report in earnings any unrealized gains
and losses on items for which the fair value option has been elected. SFAS No. 159 was effective
for us on October 1, 2008. We chose not to elect the fair value option for any of our financial
instruments.In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS
No. 141R). SFAS No. 141R will significantly change the accounting for business combinations.
Under SFAS No. 141R, 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.
SFAS No. 141R also includes a substantial number of new disclosure requirements. SFAS No. 141R
applies to us prospectively for business combinations with acquisition dates on or after October
1, 2009. We expect that SFAS No. 141R, once adopted, will have an impact on accounting for
business combinations, but the effect is dependent upon acquisitions at that time.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 establishes
new accounting and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. Specifically, SFAS No. 160 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. SFAS No. 160 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. In addition, SFAS No. 160 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. SFAS No.160 also includes expanded disclosure requirements regarding the interests of the
parent and its noncontrolling interest. SFAS
 
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)No. 160 is effective for us beginning on October 1, 2009. We currently have no entities or
arrangements that will be affected by the adoption of SFAS No. 160. However, determination of
the ultimate effect of this pronouncement will depend on our structure at the date of adoption.In April 2008, the FASB issued FASB Staff Position (FSP) No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP No. 142-3), 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 under SFAS No. 142, Goodwill and Other Intangible Assets. The
guidance contained in this FSP 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 of FSP No. 142-3 must be applied prospectively to all intangible
assets recognized in the Companys financial statements as of the effective date. FSP No. 142-3
is effective for us beginning October 1, 2009.In December 2008, the FASB issued FSP No. FAS 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets, to provide 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 expanded disclosure requirements are effective for our fiscal year ending September
30, 2010.In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 provides additional guidance
for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity
for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on
how to identify circumstances that indicate that a transaction is not orderly and emphasizes
that even if there has been a significant decrease in the volume and level of activity for the
asset or liability and regardless of the valuation techniques used, the objective of a fair
value measurement remains the same. FSP FAS 157-4 was effective for us beginning with our
interim period ended June 30, 2009. The adoption of this standard did not have a material impact
on our results of operations, financial position or cash flows.In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amend
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures
about fair value of financial instruments in interim reporting periods. Such disclosures were
previously required only in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend
Accounting Principles Board Opinion No. 28, Interim Financial Reporting(APB 28), to require
the disclosures required by APB 28 in summarized financial information at interim reporting
periods. FSP FAS 107-1 and APB 28-1 were effective for us beginning with our interim period
ended June 30, 2009. The adoption of these standards did not have a material impact on our
results of operations, financial position or cash flows.In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No. 165). SFAS No. 165
provides authoritative accounting literature related to evaluating subsequent events that was
previously addressed only in the auditing literature under Auditing Standard Section 560,
Subsequent Events. SFAS No. 165 is similar to the current guidance with some exceptions that
are not intended to result in significant change to current practice. SFAS No. 165 defines
subsequent events and also requires the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date. The Company adopted the disclosure
provisions of SFAS No. 165 as of June 30, 2009. The adoption did not have an impact on our
results of operations, financial position, or cash flows.
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1.
    
    INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
(SFAS No. 168). SFAS No. 168 establishes the FASB Standards Accounting Codification
(Codification) as the source of authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied to nongovernmental entities, and rules and
interpretive releases of the Securities and Exchange Commission (the SEC) as authoritative
GAAP for SEC registrants. The Codification will supersede all the existing non-SEC accounting
and reporting standards upon its effective date and subsequently, the FASB will not issue new
standards in the form of Statements of Financial Accounting Standards, FASB Staff Positions or
Emerging Issues Task Force Abstracts. SFAS No. 168 also replaces FASB Statement No. 162, The
Hierarchy of Generally Accepted Accounting Principles but is not intended to change or alter
existing US GAAP. The Codification will change the references of financial standards in effect
for the Company. Beginning with financial statements issued after September 15, 2009, all
references made to U.S. GAAP will use the new Codification numbering system prescribed by the
FASB. SFAS No. 168 will not have any impact on our results of operations, financial position,
and cash flows.
 2.
    
    ACQUISITIONEffective October 1, 2008, we completed the acquisition of AMPAC ISP Holdings for a cash
purchase price, including direct expenses and net of cash acquired, of $6,725. AMPAC ISP
Holdings 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. These products are used on various satellites and spacecraft, as well as
on the Ariane 5 launch vehicle. The business has two locations, Dublin, Ireland and Cheltenham,
U.K.The acquisition of AMPAC ISP Holdings enhances our opportunities to penetrate the European space
market and provides us with the opportunity to further expand our Aerospace Equipment segment
product offerings through the development and manufacture of additional space valves and space
structures. These factors result in the recognition of intangible assets for customer
relationships and goodwill.We are accounting for this acquisition using the purchase method of accounting, under which the
total purchase price is allocated to the fair values of the assets acquired and liabilities
assumed. We engaged outside consultants to assist in the valuation of property, plant and
equipment and intangible assets. As of June 30, 2009, the allocation of the purchase price and
the related determination of the useful lives of property, plant and equipment were preliminary
and subject to change pending receipt and evaluation of the final valuation report. In
addition, amounts allocated to deferred tax assets and liabilities are preliminary pending
completion of AMPAC ISP Holdings tax filings for calendar 2008.The following table indicates the preliminary amounts assigned to each major asset and liability
caption of AMPAC ISP Holdings as of the acquisition date:
 Accounts Receivable
    
    $
    2,291Inventory
    
    
    552Prepaid Expenses
    
    
    39Property, Plant and Equipment
    
    
    912Intangible Assets
    
    
    2,840Goodwill
    
    
    3,158Total Assets Acquired
    
    
    9,792Accounts Payable, Accrued Expenses and Other Current Liabilities
    
    
    978Customer Deposits
    
    
    1,625Long-Term Liabilities
    
    
    464Total Liabilities Assumed
    
    
    3,067Purchase Price
    
    $
    6,725
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2.
    
    ACQUISITION (continued)Intangible assets, consisting of customer relationships (average life of 5 years) and existing
customer backlog (average life of 1.5 years), have definite lives and are being amortized over
their estimated useful lives using the straight-line method.
 3.
    
    SHARE-BASED COMPENSATIONWe account for our share-based compensation arrangements under the provisions of SFAS No. 123
(Revised 2004), Share-Based Payment, which requires us to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant date fair
value of the award. The fair values of awards are recognized as additional compensation
expense, which is classified as operating expenses, proportionately over the vesting period of
the awards.Our share-based compensation arrangements are designed to advance the long-term interests of the
Company, including by attracting and retaining employees and directors and aligning their
interests with those of our stockholders. The amount, frequency, and terms of share-based awards
may vary based on competitive practices, our operating results, government regulations and
availability under our equity incentive plans. Depending on the form of the share-based award,
new shares of our common stock may be issued upon grant, option exercise or vesting of the
award. We maintain three share-based plans, each as discussed below.The American Pacific Corporation Amended and Restated 2001 Stock Option Plan (the 2001 Plan)
permits the granting of stock options to employees, officers, directors and consultants. Options
granted under the 2001 Plan generally vested 50% at the grant date and 50% on the one-year
anniversary of the grant date, and expire ten years from the date of grant. As of June 30, 2009,
there were 20,000 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 vest 50% one year from the date of grant and 50% two years from
the date of grant, and expire ten years from the date of grant. As of June 30, 2009, there were
3 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. As of
June 30, 2009, there were 177,000 shares available for grant under the 2008 plan. This plan was
approved by our stockholders.
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3.
    
    SHARE-BASED COMPENSATION (continued)A summary of our stock option and restricted stock activity for the nine months ended June 30,
2009 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, 2008
    
    
    394,997
    
    
    $
    7.72
    
    
    
    24,997
    
    
    $
    7.86
    
    
    
    -
    
    
    $
    -Granted
    
    
    156,000
    
    
    
    10.98
    
    
    
    156,000
    
    
    
    5.41
    
    
    
    22,000
    
    
    
    11.25Vested
    
    
    -
    
    
    
    -
    
    
    
    (14,287
    )
    
    
    7.88
    
    
    
    -
    
    
    
    -Exercised
    
    
    (5,000
    )
    
    
    6.34
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Expired / Cancelled
    
    
    (5,000
    )
    
    
    11.25
    
    
    
    (5,000
    )
    
    
    5.55
    
    
    
    -
    
    
    
    -Balance, June 30, 2009
    
    
    540,997
    
    
    
    8.64
    
    
    
    161,710
    
    
    
    5.57
    
    
    
    22,000
    
    
    
    11.25
 A summary of our exercisable stock options as of June 30, 2009 is as follows:
 Number of vested stock options
    
    
    379,287Weighted-average exercise price per share
    
    $
    7.48Aggregate intrinsic value
    
    $
    73Weighted-average remaining contractual term in years
    
    
    4.8
 We determine the fair value of stock option awards at their grant date, using a Black-Scholes
Option-Pricing model applying the assumptions in the following table. We determine the fair
value of restricted stock awards based on the fair market value of our common stock on the grant
date. Actual compensation, if any, ultimately realized by optionees may differ significantly
from the amount estimated using an option valuation model.
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3.     SHARE-BASED COMPENSATION (continued)
 Nine Months Ended,June 30,2009
    
    
    2008Weighted-average grant date fair value per share of options granted
    
    $
    5.41
    
    
    $
    7.86Significant fair value assumptions:Expected term in years
    
    
    6.00
    
    
    
    5.75Expected volatility
    
    
    48.7%
    
    
    
    44.5%Expected dividends
    
    
    0.0%
    
    
    
    0.0%Risk-free interest rates
    
    
    2.7%
    
    
    
    3.4%Total intrinsic value of options exercised
    
    $
    21
    
    
    $
    629Aggregate cash received for option exercises
    
    $
    32
    
    
    $
    406Compensation cost (included in operating expenses)Stock options
    
    $
    375
    
    
    $
    90Restricted stock
    
    
    99
    
    
    
    -Total
    
    
    474
    
    
    
    90Tax benefit recognized
    
    
    105
    
    
    
    37Net compensation cost
    
    $
    369
    
    
    $
    53As of period end date:Total compensation cost for non-vested awards 
not yet recognized:Stock options
    
    $
    512
    
    
    $
    107Restricted stock
    
    $
    148
    
    
    
    -Weighted-average years to be recognizedStock options
    
    
    1.6
    
    
    
    0.9Restricted stock
    
    
    1.6
    
    
    
    -
 4.     SELECTED BALANCE SHEET DATA
 Inventories.Inventories consist of the following:
 June 30,
    
    
    September 30,2009
    
    
    2008Finished goods
    
    $
    2,285
    
    
    $
    2,475Work-in-process
    
    
    27,171
    
    
    
    22,698Raw materials and supplies
    
    
    12,345
    
    
    
    14,469Deferred cost of revenues
    
    
    3,278
    
    
    
    715Under(over) applied manufacturing overhead costs
    
    
    (837
    )
    
    
    -Total
    
    $
    44,242
    
    
    $
    40,357
 Our Specialty Chemicals segment accounts for its interim period inventory balances in accordance
with APB 28 (As Amended). 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.
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4.
    
    SELECTED BALANCE SHEET DATA (continued)Intangible Assets.We account for our intangible assets in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets. Intangible assets consist of the following:
 June 30,
    
    
    September 30,2009
    
    
    2008Perchlorate customer list
    
    $
    38,697
    
    
    $
    38,697Less accumulated amortization
    
    
    (38,697
    )
    
    
    (38,697
    )-
    
    
    
    -Customer relationships
    
    
    9,015
    
    
    
    7,957Less accumulated amortization
    
    
    (5,873
    )
    
    
    (4,944
    )3,142
    
    
    
    3,013Backlog
    
    
    1,627
    
    
    
    -Less accumulated amortization
    
    
    (663
    )
    
    
    -964
    
    
    
    -Total
    
    $
    4,106
    
    
    $
    3,013
 The perchlorate customer list is an asset of our Specialty Chemicals segment and was fully
amortized as of February 2008. Amortization expense was zero and $1,517 for the nine-month
periods ended June 30, 2009 and 2008, respectively.Customer relationships are assets of our Fine Chemicals and Aerospace Equipment segments and are
subject to amortization. Amortization expense was $310 and $309 for the three-month periods
ended June 30, 2009 and 2008, respectively, and $929 and $928 for the nine-month periods ended
June 30, 2009 and 2008, respectively.Backlog is an asset of our Aerospace Equipment segment and is subject to amortization.
Amortization expense was $220 and zero for the three-month periods ended June 30, 2009 and 2008,
respectively, and $611 and zero for the nine-month periods ended June 30, 2009 and 2008,
respectively.In connection with our acquisition of AMPAC ISP Holdings (See Note 2), as of October 1, 2008, we
recorded customer relationships in the amount of $1,097 and backlog in the amount of $1,743,
based on our preliminary allocation of the purchase price to the fair values of assets acquired
and liabilities assumed.Goodwill.In connection with our acquisition of AMPAC ISP Holdings (See Note 2), we recorded
goodwill in the amount of $3,158, based on our preliminary allocation of the purchase price to
the fair values of assets acquired and liabilities assumed. Goodwill is an asset of our
Aerospace Equipment segment and is not expected to be deductible for tax purposes. As of June
30, 2009, the balance was $3,152, reflecting the changes in the foreign currency rates used to
consolidate our foreign subsidiaries.
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5.
    
    COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSSComprehensive income (loss) consists of the following:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Income (Loss)
    
    $
    (3,555
    )
    
    $
    128
    
    
    $
    (1,365
    )
    
    $
    4,624Other Comprehensive Income (Loss) -Foreign currency translation adjustment
    
    
    765
    
    
    
    3
    
    
    
    (132
    )
    
    
    (44
    )SERP Amendment, net of tax
    
    
    -
    
    
    
    -
    
    
    
    
    
    
    
    (2,110
    )Comprehensive Income (Loss)
    
    $
    (2,790
    )
    
    $
    131
    
    
    $
    (1,497
    )
    
    $
    2,470The components of accumulated other comprehensive loss are as follows:June 30,
    
    
    September 30,2009
    
    
    2008Cumulative currency translation adjustment
    
    
    
    
    
    
    
    
    
    $
    (175
    )
    
    $
    (43
    )Unamortized benefit plan costs, net of tax of $3,482 and $3,482
    
    
    
    
    
    
    
    
    
    
    (5,224
    )
    
    
    (5,224
    )Total
    
    
    
    
    
    
    
    
    
    $
    (5,399
    )
    
    $
    (5,267
    )6.    EARNINGS PER SHAREShares used to compute earnings per share are as follows:Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (3,555
    )
    
    $
    128
    
    
    $
    (1,365
    )
    
    $
    4,624Basic weighted-average shares
    
    
    7,483,000
    
    
    
    7,452,000
    
    
    
    7,482,000
    
    
    
    7,442,000Diluted:Weighted-average shares, basic
    
    
    7,483,000
    
    
    
    7,452,000
    
    
    
    7,482,000
    
    
    
    7,442,000Dilutive effect of stock options
    
    
    -
    
    
    
    155,000
    
    
    
    -
    
    
    
    152,000Weighted-average shares, diluted
    
    
    7,483,000
    
    
    
    7,607,000
    
    
    
    7,482,000
    
    
    
    7,594,000Basic earnings (loss) per share
    
    $
    (0.48
    )
    
    $
    0.02
    
    
    $
    (0.18
    )
    
    $
    0.62Diluted earnings (loss) per share
    
    $
    (0.48
    )
    
    $
    0.02
    
    
    $
    (0.18
    )
    
    $
    0.61As of June 30, 2009, we had 340,161 antidilutive options outstanding. As of June 30, 2008, we
had no antidilutive options outstanding.7.    DEBTOur outstanding debt balances consist of the following:June 30,
    
    
    September 30,2009
    
    
    2008Senior Notes, 9%, due 2015
    
    
    
    
    
    
    
    
    
    $
    110,000
    
    
    $
    110,000Capital Leases, due through 2012
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    374Total Debt
    
    
    
    
    
    
    
    
    
    
    110,318
    
    
    
    110,374Less Current Portion
    
    
    
    
    
    
    
    
    
    
    (213
    )
    
    
    (254
    )Total Long-term Debt
    
   
   
   
   
   
   
   
   
    $
    110,105
    
    
    $
    110,120
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7.
    
    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;
    
    until February 1, 2010, up to 35% of the principal amount of the Senior Notes at a
redemption price of 109% of the principal amount thereof, plus accrued and unpaid interest
thereon, with the proceeds of certain sales of our equity securities; 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 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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7.
    
    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, 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 plus income tax expense,
interest expense, depreciation and amortization, and stock-based compensation expense and less
cash payments for environmental remediation and other non-recurring gains in excess of $50. In
accordance with the definitions contained in the Revolving Credit Facility, as of June 30, 2009,
our Total Leverage Ratio was 3.66 to 1.00 and our Interest Coverage Ratio was 3.04 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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7.
    
    DEBT (continued)As of June 30, 2009, under our Revolving Credit Facility, we had no borrowings outstanding,
availability of $17,968, and we were in compliance with its various financial covenants.
Availability is computed as the total commitment of $20,000 less outstanding borrowings and
outstanding letters of credit, if any.Letters of Credit.As of June 30, 2009, we had $2,032 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.
 8.
    
    COMMITMENTS AND CONTINGENCIESEnvironmental Matters.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 ex situ 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 is in situ bioremediation (ISB).
ISB reduces perchlorate in the groundwater by precise addition of an appropriate carbon source
to the
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8.
    
    COMMITMENTS AND CONTINGENCIES (continued)groundwater itself while it is still in the ground (as opposed to an above ground, more
conventional, ex situ process). This induces naturally occurring organisms in the groundwater
to reduce the perchlorate among other oxygen containing compounds.In 2002, we conducted a pilot test in the field of the ISB technology and it was successful. On
the basis of the successful test and other evaluations, in 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.At the request of the NDEP, we recently 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
consists of two primary phases: the initial construction of the remediation equipment phase and
the O&M phase.During fiscal 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. 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.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 costs
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.Groundwater speed is one key variable along with the required pore volumes of groundwater used
to estimate the number of years that may be required to operate the facility. Groundwater speed
is estimated by utilizing periodic data that measures, among other things, perchlorate
concentrations upgradient from the treatment area, in addition to hydraulic conductivity and
porosity. As time passes, and as we continue to add reference data and analysis, including
computer modeling, our estimates of the total years of operation may change. Initially, data
suggested that the total project life would extend for a period of 45 years. More recent data
indicates that the total project life may be 23 years. We are unable to predict over the longer
term the most probable life and accordingly have used an assumed range of 23 to 45 years of
operation.
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8.
    
    COMMITMENTS AND CONTINGENCIES (continued)O&M costs include primarily labor, utilities, repairs, maintenance supplies and professional
service costs. Since the inception of operations of the new ISB technology operations in fiscal
2007, we have not consistently achieved the targeted levels of groundwater remediation. We have
experienced annualized O&M cost levels of approximately $1,000, which is higher than our initial
estimates. This higher level of cost reflects costs to evaluate methods to optimize operating
performance and maintenance of reinjection wells. In addition, we anticipate incurring O&M cost
levels in fiscal 2009 of approximately $1,800 as we continue our evaluation of methods to
achieve targeted remediation results. Those evaluations include assessment of competing non-ISB
technologies that might be more efficient. Our range of estimated costs assumes that we will be
successful in optimizing the remediation plant performance and that average annual O&M costs
beyond 2012 and for the duration of the project will be approximately $380.As of June 30, 2009, the aggregate range of anticipated environmental remediation costs was from
approximately $12,700 to approximately $26,300, and the accrued amount was $13,291. These
estimates are based on information currently available to us and may be subject to material
adjustment upward or downward in future periods as new facts or circumstances may indicate. A
summary of our environmental reserve activity for the nine months ended June 30, 2009 is shown
below:
 Balance, September 30, 2008
    
    $
    14,278Additions or adjustments
    
    
    -Expenditures
    
    
    (987
    )Balance, June 30, 2009
    
    $
    13,291
 AFC Environmental Matters.Our Fine Chemicals segment, Ampac Fine Chemicals LLC (AFC), is
located on land leased from Aerojet-General Corporation (Aerojet), a wholly-owned subsidiary
of GenCorp Inc. (GenCorp). The leased land is part of a tract of land owned by Aerojet
designated as a Superfund site under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (CERCLA). The tract of land had been used by Aerojet and affiliated
companies to manufacture and test rockets and related equipment since the 1950s. Although the
chemicals identified as contaminants on the leased land were not used by Aerojet Fine Chemicals
LLC 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, 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.
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9.
    
    SEGMENT INFORMATIONWe 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 under current Good Manufacturing
Practices (cGMP) guidelines for commercial customers in the pharmaceutical industry. AFC has
distinctive competencies and specialized engineering capabilities in performing chiral
separations, manufacturing highly potent (including cytotoxic) products, and performing
energetic and nucleoside/nucleotide chemistries at a commercial scale.Specialty Chemicals.Our Specialty Chemicals segment manufactures and sells: (i) perchlorate
chemicals, used principally in solid rocket propellants for the Space Shuttle and defense
programs, (ii) sodium azide, a chemical used in pharmaceutical manufacturing, and (iii)
Halotronâ, a series of clean fire extinguishing agents used in fire extinguishing products
ranging from portable fire extinguishers to total flooding systems.Aerospace Equipment. Our Aerospace Equipment segment includes the operating results of our
wholly-owned subsidiary Ampac-ISP Corp. (ISP). ISP manufactures monopropellant and
bipropellant liquid propulsion systems and thrusters for satellites, launch vehicles, and
interceptors.Effective October 1, 2008, we completed the acquisition of AMPAC ISP Holdings. AMPAC ISP
Holdings is included in our consolidated financial statements beginning on October 1, 2008 and
is a component of our Aerospace Equipment segment. AMPAC ISP Holdings 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. These
products are used on various satellites and spacecraft, as well as on the Ariane 5 launch
vehicle. See Note 2.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 a relatively few
customers. As a result, in any given reporting period, certain customers may account for more
than ten percent of our consolidated revenues.
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9.
    
    SEGMENT INFORMATION (continued)The following table provides disclosure of the percentage of our consolidated revenues
attributed to customers that exceed ten percent of the total in each of the given periods.
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Fine chemicals customer
    
    
    38
    %
    
    
    
    
    
    
    26
    %
    
    
    14
    %Fine chemicals customer
    
    
    
    
    
    
    33
    %
    
    
    10
    %
    
    
    25
    %Fine chemicals customer
    
    
    
    
    
    
    13
    %
    
    
    
    
    
    
    12
    %Specialty chemicals customer
    
    
    
    
    
    
    23
    %
    
    
    17
    %
    
    
    20
    %Specialty chemicals customer
    
    
    11
    %The following provides financial information about our segment operations:Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Fine Chemicals
    
    $
    15,644
    
    
    $
    19,654
    
    
    $
    67,766
    
    
    $
    76,920Specialty Chemicals
    
    
    6,299
    
    
    
    11,942
    
    
    
    40,940
    
    
    
    40,278Aerospace Equipment
    
    
    9,085
    
    
    
    3,380
    
    
    
    21,977
    
    
    
    11,350Other Businesses
    
    
    462
    
    
    
    1,764
    
    
    
    2,871
    
    
    
    3,429Total Revenues
    
    $
    31,490
    
    
    $
    36,740
    
    
    $
    133,554
    
    
    $
    131,977Segment Operating Income (Loss):Fine Chemicals
    
    $
    (752
    )
    
    $
    621
    
    
    $
    (370
    )
    
    $
    9,426Specialty Chemicals
    
    
    552
    
    
    
    5,998
    
    
    
    16,481
    
    
    
    16,768Aerospace Equipment
    
    
    417
    
    
    
    (330
    )
    
    
    1,571
    
    
    
    248Other Businesses
    
    
    (215
    )
    
    
    341
    
    
    
    164
    
    
    
    340Total Segment Operating Income
    
    
    2
    
    
    
    6,630
    
    
    
    17,846
    
    
    
    26,782Corporate Expenses
    
    
    (3,654
    )
    
    
    (4,257
    )
    
    
    (11,847
    )
    
    
    (11,817
    )Operating Income (Loss)
    
    $
    (3,652
    )
    
    $
    2,373
    
    
    $
    5,999
    
    
    $
    14,965Depreciation and Amortization:Fine Chemicals
    
    $
    3,281
    
    
    $
    3,115
    
    
    $
    9,625
    
    
    $
    9,505Specialty Chemicals
    
    
    324
    
    
    
    302
    
    
    
    951
    
    
    
    2,392Aerospace Equipment
    
    
    378
    
    
    
    60
    
    
    
    1,032
    
    
    
    156Other Businesses
    
    
    3
    
    
    
    3
    
    
    
    9
    
    
    
    9Corporate
    
    
    115
    
    
    
    155
    
    
    
    354
    
    
    
    410Total Depreciation and Amortization
    
    $
    4,101
    
    
    $
    3,635
    
    
    $
    11,971
    
    
    $
    12,472
 10.
    
    INCOME TAXESFIN 48.We account for uncertain tax positions in accordance with FASB Interpretation No. FIN
48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
(FIN 48). Accordingly, we review our portfolio of uncertain tax positions and recorded
liabilities based on the recognition standards established by FIN 48. 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.
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10.
    
    INCOME TAXES (continued)As of June 30, 2009 and September 30, 2008, our recorded liability for unrecognized tax benefits
was $347, of which $294 would impact our effective tax rate if we were to sustain the positions
as filed, and $313, respectively. We expect that it is reasonably possible that our liability
for unrecognized tax benefits will be reduced by $62 during the next twelve months due to the
expiration of certain statutes of limitations.We recognize accrued interest and penalties related to unrecognized tax benefits in income tax
expense. As of June 30, 2009 and September 30, 2008, we had accrued $111 and $225, respectively,
for the payment of tax-related interest and penalties. For the nine months ended June 30, 2009
and 2008, income tax expense includes a benefit of $1 and expense of $8 for interest and
penalties.We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions,
Ireland and the U.K. With few exceptions, we are no longer subject to federal or state income
tax examinations for years before 2006.
 11.
    
    DEFINED BENEFIT PLANSWe 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 AFC and Aerospace Equipment U.S.
employees. In addition, we make a profit sharing contribution for Aerospace Equipment U.S.
employees.We provide healthcare and life insurance benefits to substantially all of our employees.Net periodic pension cost related to the Pension Plans consists of the following:
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Pension Plans:Service Cost
    
    $
    524
    
    
    $
    520
    
    
    $
    1,538
    
    
    $
    1,534Interest Cost
    
    
    832
    
    
    
    758
    
    
    
    2,172
    
    
    
    1,884Expected Return on Plan Assets
    
    
    (448
    )
    
    
    (808
    )
    
    
    (1,650
    )
    
    
    (1,850
    )Recognized Actuarial Losses
    
    
    169
    
    
    
    (6
    )
    
    
    387
    
    
    
    208Amortization of Prior Service Costs
    
    
    19
    
    
    
    28
    
    
    
    57
    
    
    
    56Net Periodic Pension Cost
    
    $
    1,096
    
    
    $
    492
    
    
    $
    2,504
    
    
    $
    1,832Supplemental Executive Retirement Plan:Service Cost
    
    $
    67
    
    
    $
    88
    
    
    $
    262
    
    
    $
    264Interest Cost
    
    
    73
    
    
    
    87
    
    
    
    277
    
    
    
    264Expected Return on Plan Assets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Recognized Actuarial Losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Amortization of Prior Service Costs
    
    
    116
    
    
    
    108
    
    
    
    326
    
    
    
    323Net Periodic Pension Cost
    
    $
    256
    
    
    $
    283
    
    
    $
    865
    
    
    $
    851
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11.
    
    DEFINED BENEFIT PLANS (continued)For the nine months ended June 30, 2009, we contributed $2,415 to the Pension Plans to fund
benefit payments and anticipate making approximately $527 in additional contributions through
September 30, 2009. For the nine months ended June 30, 2009, we contributed $95 to the SERP to
fund benefit payments and anticipate making approximately $32 in additional contributions
through September 30, 2009.
 12.
    
    GUARANTOR SUBSIDIARIESAs discussed in Note 7, 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 U.S. subsidiaries (Guarantor Subsidiaries)
jointly, fully, severally, and unconditionally guaranteed the Senior Notes. The Parents foreign
subsidiaries (Non-Guarantor Subsidiaries) are not guarantors of the Senior Notes. Each of the
Parents subsidiaries is 100% owned. The Parent has no independent assets or operations. The
following presents condensed consolidating financial information separately for the Parent,
Guarantor Subsidiaries and Non-Guarantor Subsidiaries.
 Condensed Consolidating Balance Sheet - June 30, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    22,994
    
    
    $
    1,974
    
    
    $
    -
    
    
    $
    24,968Accounts Receivable, Net
    
    
    -
    
    
    
    25,530
    
    
    
    2,111
    
    
    
    (146
    )
    
    
    27,495Inventories
    
    
    -
    
    
    
    42,326
    
    
    
    1,916
    
    
    
    -
    
    
    
    44,242Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    1,468
    
    
    
    171
    
    
    
    -
    
    
    
    1,639Deferred Income Taxes
    
    
    -
    
    
    
    8,664
    
    
    
    -
    
    
    
    -
    
    
    
    8,664Total Current Assets
    
    
    -
    
    
    
    100,982
    
    
    
    6,172
    
    
    
    (146
    )
    
    
    107,008Property, Plant and Equipment, Net
    
    
    -
    
    
    
    113,862
    
    
    
    1,380
    
    
    
    -
    
    
    
    115,242Intangible Assets, Net
    
    
    -
    
    
    
    2,084
    
    
    
    2,022
    
    
    
    -
    
    
    
    4,106Goodwill
    
    
    -
    
    
    
    -
    
    
    
    3,152
    
    
    
    -
    
    
    
    3,152Deferred Income Taxes
    
    
    -
    
    
    
    14,026
    
    
    
    -
    
    
    
    -
    
    
    
    14,026Other Assets
    
    
    -
    
    
    
    10,292
    
    
    
    -
    
    
    
    -
    
    
    
    10,292Intercompany Advances
    
    
    79,918
    
    
    
    3,316
    
    
    
    -
    
    
    
    (83,234
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    112,053
    
    
    
    5,262
    
    
    
    -
    
    
    
    (117,315
    )
    
    
    -Total Assets
    
    $
    191,971
    
    
    $
    249,824
    
    
    $
    12,726
    
    
    $
    (200,695
    )
    
    $
    253,826Liabilities and Stockholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    21,344
    
    
    $
    1,625
    
    
    $
    (146
    )
    
    $
    22,823Environmental Remediation Reserves
    
    
    -
    
    
    
    1,412
    
    
    
    -
    
    
    
    -
    
    
    
    1,412Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    6,218
    
    
    
    2,065
    
    
    
    -
    
    
    
    8,283Current Portion of Long-Term Debt
    
    
    -
    
    
    
    162
    
    
    
    51
    
    
    
    -
    
    
    
    213Intercompany Advances
    
    
    -
    
    
    
    79,918
    
    
    
    3,316
    
    
    
    (83,234
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    109,054
    
    
    
    7,057
    
    
    
    (83,380
    )
    
    
    32,731Long-Term Debt
    
    
    110,000
    
    
    
    -
    
    
    
    105
    
    
    
    -
    
    
    
    110,105Environmental Remediation Reserves
    
    
    -
    
    
    
    11,879
    
    
    
    -
    
    
    
    -
    
    
    
    11,879Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    16,838
    
    
    
    302
    
    
    
    -
    
    
    
    17,140Total Liabilities
    
    
    110,000
    
    
    
    137,771
    
    
    
    7,464
    
    
    
    (83,380
    )
    
    
    171,855Total Shareholders Equity
    
    
    81,971
    
    
    
    112,053
    
    
    
    5,262
    
    
    
    (117,315
    )
    
    
    81,971Total Liabilities and Shareholders Equity
    
    $
    191,971
    
    
    $
    249,824
    
    
    $
    12,726
    
    
    $
    (200,695
    )
    
    $
    253,826
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12.
    
    GUARANTOR SUBSIDIARIES (continued)
 Condensed Consolidating Statement of Operations - Three Months Ended June 30, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    29,485
    
    
    $
    2,054
    
    
    $
    (49
    )
    
    $
    31,490Cost of Revenues
    
    
    -
    
    
    
    22,686
    
    
    
    1,590
    
    
    
    (49
    )
    
    
    24,227Gross Profit
    
    
    -
    
    
    
    6,799
    
    
    
    464
    
    
    
    -
    
    
    
    7,263Operating Expenses
    
    
    -
    
    
    
    10,019
    
    
    
    896
    
    
    
    -
    
    
    
    10,915Operating Loss
    
    
    -
    
    
    
    (3,220
    )
    
    
    (432
    )
    
    
    -
    
    
    
    (3,652
    )Interest and Other Income
    
    
    2,666
    
    
    
    30
    
    
    
    5
    
    
    
    (2,673
    )
    
    
    28Interest Expense
    
    
    2,666
    
    
    
    2,682
    
    
    
    8
    
    
    
    (2,673
    )
    
    
    2,683Loss before Income Tax and

Equity Account for Subsidiaries
    
    
    -
    
    
    
    (5,872
    )
    
    
    (435
    )
    
    
    -
    
    
    
    (6,307
    )Income Tax Benefit
    
    
    -
    
    
    
    (2,752
    )
    
    
    -
    
    
    
    -
    
    
    
    (2,752
    )Loss before 

Equity Account for Subsidiaries
    
    
    -
    
    
    
    (3,120
    )
    
    
    (435
    )
    
    
    -
    
    
    
    (3,555
    )Equity Account for Subsidiaries
    
    
    (3,555
    )
    
    
    (435
    )
    
    
    -
    
    
    
    3,990
    
    
    
    -Net Loss
    
    $
    (3,555
    )
    
    $
    (3,555
    )
    
    $
    (435
    )
    
    $
    3,990
    
    
    $
    (3,555
    )
 Condensed Consolidating Statement of Operations - Nine Months Ended June 30, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    128,098
    
    
    $
    5,622
    
    
    $
    (166
    )
    
    $
    133,554Cost of Revenues
    
    
    -
    
    
    
    90,431
    
    
    
    3,995
    
    
    
    (166
    )
    
    
    94,260Gross Profit
    
    
    -
    
    
    
    37,667
    
    
    
    1,627
    
    
    
    -
    
    
    
    39,294Operating Expenses
    
    
    -
    
    
    
    31,213
    
    
    
    2,082
    
    
    
    -
    
    
    
    33,295Operating Income (Loss)
    
    
    -
    
    
    
    6,454
    
    
    
    (455
    )
    
    
    -
    
    
    
    5,999Interest and Other Income (Expense)
    
    
    7,999
    
    
    
    152
    
    
    
    (65
    )
    
    
    (8,016
    )
    
    
    70Interest Expense
    
    
    7,999
    
    
    
    8,052
    
    
    
    26
    
    
    
    (8,016
    )
    
    
    8,061Loss before Income Tax and

Equity Account for Subsidiaries
    
    
    -
    
    
    
    (1,446
    )
    
    
    (546
    )
    
    
    -
    
    
    
    (1,992
    )Income Tax Benefit
    
    
    -
    
    
    
    (627
    )
    
    
    -
    
    
    
    -
    
    
    
    (627
    )Loss before

Equity Account for Subsidiaries
    
    
    -
    
    
    
    (819
    )
    
    
    (546
    )
    
    
    -
    
    
    
    (1,365
    )Equity Account for Subsidiaries
    
    
    (1,365
    )
    
    
    (546
    )
    
    
    -
    
    
    
    1,911
    
    
    
    -Net Loss
    
    $
    (1,365
    )
    
    $
    (1,365
    )
    
    $
    (546
    )
    
    $
    1,911
    
    
    $
    (1,365
    )
 Condensed Consolidating Statement of Cash Flows - Nine Months Ended June 30, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided by Operating Activities
    
    $
    -
    
    
    $
    10,055
    
    
    $
    1,297
    
    
    $
    -
    
    
    $
    11,352Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (5,810
    )
    
    
    (502
    )
    
    
    -
    
    
    
    (6,312
    )Acquisition on business, net of cash acquired
    
    
    -
    
    
    
    (7,195
    )
    
    
    470
    
    
    
    -
    
    
    
    (6,725
    )Net Cash Used by Investing Activities
    
    
    -
    
    
    
    (13,005
    )
    
    
    (32
    )
    
    
    -
    
    
    
    (13,037
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (211
    )
    
    
    (61
    )
    
    
    -
    
    
    
    (272
    )Issuance of common stock
    
    
    32
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    32Excess tax benefit from exercise of stock options
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Intercompany advances, net
    
    
    (32
    )
    
    
    (509
    )
    
    
    541
    
    
    
    -
    
    
    
    -Net Cash Provided (Used) by Financing Activities
    
    
    -
    
    
    
    (720
    )
    
    
    480
    
    
    
    -
    
    
    
    (240
    )Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    (3,670
    )
    
    
    1,745
    
    
    
    -
    
    
    
    (1,925
    )Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    26,664
    
    
    
    229
    
    
    
    -
    
    
    
    26,893Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    22,994
    
    
    $
    1,974
    
    
    $
    -
    
    
    $
    24,968
 - 22 -




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##### Table of Contents



12.
    
    GUARANTOR SUBSIDIARIES (continued)
 Condensed Consolidating Balance Sheet - September 30, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiary
    
    
    Eliminations
    
    
    ConsolidatedAssets:Cash and Cash Equivalents
    
    $
    -
    
    
    $
    26,664
    
    
    $
    229
    
    
    $
    -
    
    
    $
    26,893Accounts Receivable, Net
    
    
    -
    
    
    
    27,083
    
    
    
    649
    
    
    
    (287
    )
    
    
    27,445Inventories
    
    
    -
    
    
    
    39,669
    
    
    
    688
    
    
    
    -
    
    
    
    40,357Prepaid Expenses and Other Assets
    
    
    -
    
    
    
    5,085
    
    
    
    111
    
    
    
    -
    
    
    
    5,196Deferred Income Taxes
    
    
    -
    
    
    
    6,859
    
    
    
    -
    
    
    
    -
    
    
    
    6,859Total Current Assets
    
    
    -
    
    
    
    105,360
    
    
    
    1,677
    
    
    
    (287
    )
    
    
    106,750Property, Plant and Equipment, Net
    
    
    -
    
    
    
    118,437
    
    
    
    171
    
    
    
    -
    
    
    
    118,608Intangible Assets, Net
    
    
    -
    
    
    
    3,013
    
    
    
    -
    
    
    
    -
    
    
    
    3,013Deferred Income Taxes
    
    
    -
    
    
    
    13,849
    
    
    
    -
    
    
    
    -
    
    
    
    13,849Other Assets
    
    
    -
    
    
    
    9,193
    
    
    
    -
    
    
    
    -
    
    
    
    9,193Intercompany Advances
    
    
    79,886
    
    
    
    2,664
    
    
    
    -
    
    
    
    (82,550
    )
    
    
    -Investment in Subsidiaries, Net
    
    
    113,076
    
    
    
    (1,143
    )
    
    
    -
    
    
    
    (111,933
    )
    
    
    -Total Assets
    
    $
    192,962
    
    
    $
    251,373
    
    
    $
    1,848
    
    
    $
    (194,770
    )
    
    $
    251,413Liabilities and Shareholders Equity:Accounts Payable and Other Current Liabilities
    
    $
    -
    
    
    $
    24,718
    
    
    $
    327
    
    
    $
    (287
    )
    
    $
    24,758Environmental Remediation Reserves
    
    
    -
    
    
    
    996
    
    
    
    -
    
    
    
    -
    
    
    
    996Deferred Revenues and Customer Deposits
    
    
    -
    
    
    
    3,091
    
    
    
    -
    
    
    
    -
    
    
    
    3,091Current Portion of Long-Term Debt
    
    
    -
    
    
    
    254
    
    
    
    -
    
    
    
    -
    
    
    
    254Intercompany Advances
    
    
    -
    
    
    
    79,886
    
    
    
    2,664
    
    
    
    (82,550
    )
    
    
    -Total Current Liabilities
    
    
    -
    
    
    
    108,945
    
    
    
    2,991
    
    
    
    (82,837
    )
    
    
    29,099Long-Term Debt
    
    
    110,000
    
    
    
    120
    
    
    
    -
    
    
    
    -
    
    
    
    110,120Environmental Remediation Reserves
    
    
    -
    
    
    
    13,282
    
    
    
    -
    
    
    
    -
    
    
    
    13,282Pension Obligations and Other Long-Term Liabilities
    
    
    -
    
    
    
    15,950
    
    
    
    -
    
    
    
    -
    
    
    
    15,950Total Liabilities
    
    
    110,000
    
    
    
    138,297
    
    
    
    2,991
    
    
    
    (82,837
    )
    
    
    168,451Total Shareholders Equity
    
    
    82,962
    
    
    
    113,076
    
    
    
    (1,143
    )
    
    
    (111,933
    )
    
    
    82,962Total Liabilities and Shareholders Equity
    
    $
    192,962
    
    
    $
    251,373
    
    
    $
    1,848
    
    
    $
    (194,770
    )
    
    $
    251,413
 Condensed
Consolidating Statement of Operations - Three Months Ended June 30, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    35,845
    
    
    $
    895
    
    
    
    
    
    
    $
    36,740Cost of Revenues
    
    
    -
    
    
    
    23,122
    
    
    
    868
    
    
    
    
    
    
    
    23,990Gross Profit
    
    
    -
    
    
    
    12,723
    
    
    
    27
    
    
    
    -
    
    
    
    12,750Operating Expenses
    
    
    -
    
    
    
    10,257
    
    
    
    120
    
    
    
    -
    
    
    
    10,377Operating Income (Loss)
    
    
    -
    
    
    
    2,466
    
    
    
    (93
    )
    
    
    -
    
    
    
    2,373Interest and Other Income
    
    
    2,658
    
    
    
    575
    
    
    
    -
    
    
    
    (2,658
    )
    
    
    575Interest Expense
    
    
    2,658
    
    
    
    2,682
    
    
    
    -
    
    
    
    (2,658
    )
    
    
    2,682Income (Loss) before Income Tax and 

Equity Account for Subsidiaries
    
    
    -
    
    
    
    359
    
    
    
    (93
    )
    
    
    -
    
    
    
    266Income Tax Expense
    
    
    -
    
    
    
    138
    
    
    
    -
    
    
    
    -
    
    
    
    138Income (Loss) before

Equity Account for Subsidiaries
    
    
    -
    
    
    
    221
    
    
    
    (93
    )
    
    
    -
    
    
    
    128Equity Account for Subsidiaries
    
    
    128
    
    
    
    (93
    )
    
    
    -
    
    
    
    (35
    )
    
    
    -Net Income (Loss)
    
    $
    128
    
    
    $
    128
    
    
    $
    (93
    )
    
    $
    (35
    )
    
    $
    128
 - 23 -




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##### Table of Contents



12.
    
    GUARANTOR SUBSIDIARIES (continued)
 Condensed Consolidating Statement of Operations - Nine Months Ended June 30, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    -
    
    
    $
    129,978
    
    
    $
    2,010
    
    
    $
    (11
    )
    
    $
    131,977Cost of Revenues
    
    
    -
    
    
    
    83,242
    
    
    
    1,957
    
    
    
    (11
    )
    
    
    85,188Gross Profit
    
    
    -
    
    
    
    46,736
    
    
    
    53
    
    
    
    -
    
    
    
    46,789Operating Expenses
    
    
    -
    
    
    
    31,390
    
    
    
    434
    
    
    
    -
    
    
    
    31,824Operating Income (Loss)
    
    
    -
    
    
    
    15,346
    
    
    
    (381
    )
    
    
    -
    
    
    
    14,965Interest and Other Income
    
    
    7,990
    
    
    
    1,221
    
    
    
    -
    
    
    
    (7,990
    )
    
    
    1,221Interest Expense
    
    
    7,990
    
    
    
    8,073
    
    
    
    -
    
    
    
    (7,990
    )
    
    
    8,073Income (Loss) before Income Tax and

Equity Account for Subsidiaries
    
    
    -
    
    
    
    8,494
    
    
    
    (381
    )
    
    
    -
    
    
    
    8,113Income Tax Expense
    
    
    -
    
    
    
    3,489
    
    
    
    -
    
    
    
    -
    
    
    
    3,489Income (Loss) before

Equity Account for Subsidiaries
    
    
    -
    
    
    
    5,005
    
    
    
    (381
    )
    
    
    -
    
    
    
    4,624Equity Account for Subsidiaries
    
    
    4,624
    
    
    
    (381
    )
    
    
    -
    
    
    
    (4,243
    )
    
    
    -Net Income (Loss)
    
    $
    4,624
    
    
    $
    4,624
    
    
    $
    (381
    )
    
    $
    (4,243
    )
    
    $
    4,624
 Condensed
Consolidating Statement of Cash Flows - Nine Months Ended June 30, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Cash Provided (Used) by Operating Activities
    
    $
    -
    
    
    $
    21,357
    
    
    $
    (216
    )
    
    $
    -
    
    
    $
    21,141Cash Flows from Investing Activities:Capital expenditures
    
    
    -
    
    
    
    (10,010
    )
    
    
    (17
    )
    
    
    -
    
    
    
    (10,027
    )Net Cash Used in Investing Activities
    
    
    -
    
    
    
    (10,010
    )
    
    
    (17
    )
    
    
    -
    
    
    
    (10,027
    )Cash Flows from Financing Activities:Payments of long-term debt
    
    
    -
    
    
    
    (208
    )
    
    
    -
    
    
    
    -
    
    
    
    (208
    )Issuance of common stock
    
    
    387
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    387Excess tax benefit from exercise of stock options
    
    
    244
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    244Purchases of treasury stock
    
    
    (193
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (193
    )Intercompany advances, net
    
    
    (438
    )
    
    
    208
    
    
    
    230
    
    
    
    -
    
    
    
    -Net Cash Provided by Financing Activities
    
    
    -
    
    
    
    -
    
    
    
    230
    
    
    
    -
    
    
    
    230Net Change in Cash and Cash Equivalents
    
    
    -
    
    
    
    11,347
    
    
    
    (3
    )
    
    
    -
    
    
    
    11,344Cash and Cash Equivalents, Beginning of Period
    
    
    -
    
    
    
    21,352
    
    
    
    74
    
    
    
    -
    
    
    
    21,426Cash and Cash Equivalents, End of Period
    
    $
    -
    
    
    $
    32,699
    
    
    $
    71
    
    
    $
    -
    
    
    $
    32,770
 - 24 -




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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
  - 25 -




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##### Table of Contents



OUR BUSINESS SEGMENTS
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Fine Chemicals
    
    
    50
    %
    
    
    53
    %
    
    
    51
    %
    
    
    58
    %Specialty Chemicals:Perchlorates
    
    
    14
    %
    
    
    29
    %
    
    
    28
    %
    
    
    28
    %Sodium Azide
    
    
    3
    %
    
    
    0
    %*
    
    
    1
    %
    
    
    0
    %*Halotron
    
    
    3
    %
    
    
    4
    %
    
    
    2
    %
    
    
    3
    %Total Specialty Chemicals
    
    
    20
    %
    
    
    33
    %
    
    
    31
    %
    
    
    31
    %Aerospace Equipment
    
    
    29
    %
    
    
    9
    %
    
    
    16
    %
    
    
    9
    %Other Businesses:Real Estate
    
    
    0
    %*
    
    
    0
    %*
    
    
    0
    %*
    
    
    0
    %*Water Treatment Equipment
    
    
    1
    %
    
    
    5
    %
    
    
    2
    %
    
    
    2
    %Total Other Businesses
    
    
    1
    %
    
    
    5
    %
    
    
    2
    %
    
    
    2
    %Total Revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 *
    less than 1% FINE CHEMICALS.
   - 26 -




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##### Table of Contents




    
    Alternative Supply May Not Be Readily Available.We are currently the sole-source supplier
on several of our fine chemicals products.
 
    
    Regulatory Approval.Applications to and approvals from the FDA and other regulatory
authorities generally require the chemical contractor to be named. Switching contractors may
require additional regulatory approval and could take as long as six months to two years.
 
    
    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.
   - 27 -




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##### Table of Contents



OTHER BUSINESSES.
 RESULTS OF OPERATIONS
 REVENUES
 June 30,
    
    
    Increase
    
    
    Percentage2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    15,644
    
    
    $
    19,654
    
    
    $
    (4,010
    )
    
    
    (20
    %)Specialty Chemicals
    
    
    6,299
    
    
    
    11,942
    
    
    
    (5,643
    )
    
    
    (47
    %)Aerospace Equipment
    
    
    9,085
    
    
    
    3,380
    
    
    
    5,705
    
    
    
    169
    %Other Businesses
    
    
    462
    
    
    
    1,764
    
    
    
    (1,302
    )
    
    
    (74
    %)Total Revenues
    
    $
    31,490
    
    
    $
    36,740
    
    
    $
    (5,250
    )
    
    
    (14
    %)Nine Months Ended:Fine Chemicals
    
    $
    67,766
    
    
    $
    76,920
    
    
    $
    (9,154
    )
    
    
    (12
    %)Specialty Chemicals
    
    
    40,940
    
    
    
    40,278
    
    
    
    662
    
    
    
    2
    %Aerospace Equipment
    
    
    21,977
    
    
    
    11,350
    
    
    
    10,627
    
    
    
    94
    %Other Businesses
    
    
    2,871
    
    
    
    3,429
    
    
    
    (558
    )
    
    
    (16
    %)Total Revenues
    
    $
    133,554
    
    
    $
    131,977
    
    
    $
    1,577
    
    
    
    1
    %
 Fine Chemicals
   Specialty Chemicals.
  
    
    A 75% decrease in perchlorate volume and a 70% increase in the related average price per
pound for the fiscal 2009 third quarter.
    
    A 25% decrease in perchlorate volume and a 32% increase in the related average price per
pound for the nine months ended June 30, 2009.
    
    Sodium azide revenues increased $1,287 for the nine-month period ended June 30, 2009.
    
    Halotron revenues decreased $529 for the nine-month period ended June 30, 2009.
 - 28 -




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##### Table of Contents



Aerospace Equipment.
   COST OF REVENUES AND GROSS MARGIN
 June 30,
    
    
    Increase
    
    
    Percentage2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Revenues
    
    $
    31,490
    
    
    $
    36,740
    
    
    $
    (5,250
    )
    
    
    (14
    %)Cost of Revenues
    
    
    24,227
    
    
    
    23,990
    
    
    
    237
    
    
    
    1
    %Gross Margin
    
    
    7,263
    
    
    
    12,750
    
    
    
    (5,487
    )
    
    
    (43
    %)Gross Margin Percentage
    
    
    23%
    
    
    
    35%Nine Months Ended:Revenues
    
    $
    133,554
    
    
    $
    131,977
    
    
    $
    1,577
    
    
    
    1
    %Cost of Revenues
    
    
    94,260
    
    
    
    85,188
    
    
    
    9,072
    
    
    
    11
    %Gross Margin
    
    
    39,294
    
    
    
    46,789
    
    
    
    (7,495
    )
    
    
    (16
    %)Gross Margin Percentage
    
    
    29%
    
    
    
    35%
  - 29 -




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##### Table of Contents



Fine Chemicals.
 
    
    A decrease in the gross margin percentage of approximately six points for the fiscal 2009
third quarter due to lower production volume and the related impact on gross margin due to
less absorption of fixed manufacturing costs.
 
    
    A decrease in gross margin percentage of approximately thirteen points for the nine months
ended June 30, 2009. In addition to the factor that contributed to the gross margin decline
in the fiscal 2009 third quarter, the fiscal 2009 year-to-date decline in gross margin
percentage includes:
 
    
    During the fourth quarter of fiscal 2008, we implemented a new process for a
large-volume anti-viral product and experienced start-up difficulties that negatively
impacted margins for this product for the first half of fiscal 2009. These
factors, combined with price reductions, account for approximately
eight points in the gross margin decline for the fiscal 2009 nine-month period.
    
    A decrease in revenues for central nervous system products, including a price
reduction for a large-volume product, account for approximately two points in the gross
margin decline.
    
    The remaining decline is attributed primarily to product mix.
 Specialty Chemicals.
 
    
    For the fiscal 2009 third quarter, perchlorates comprised 72% of Specialty Chemicals
segment revenues compared to 89% in the prior year third quarter. The change in product mix
to lower-margined azide and Halotron products was the primary contributor to a twenty-two
point reduction in Specialty Chemicals segment gross margins.
    
    Gross margin as a percentage of revenues was consistent between the nine-month periods.
 Aerospace Equipment.
   OPERATING EXPENSES
 June 30,
    
    
    Increase
    
    
    Percentage2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Operating Expenses
    
    $
    10,915
    
    
    $
    10,377
    
    
    $
    538
    
    
    
    5
    %Percentage of Revenues
    
    
    35%
    
    
    
    28%Nine Months Ended:Operating Expenses
    
    $
    33,295
    
    
    $
    31,824
    
    
    $
    1,471
    
    
    
    5
    %Percentage of Revenues
    
    
    25%
    
    
    
    24%
  - 30 -




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##### Table of Contents




    
    A $415 decrease in Fine Chemicals segment incentive compensation, as a result of recording
no incentive compensation in fiscal 2009.
    
    An increase in Aerospace Equipment segment operating expenses primarily due to additional
operating expenses in the amount of $736 from the acquisition of AMPAC ISP Holdings.
    
    A decrease in corporate expenses, primarily due to a decrease of $321 in incentive
compensation, as a result of recording no incentive compensation in fiscal 2009.
    
    Other increases of $538.
  
    
    A $1,218 decrease in Fine Chemicals segment incentive compensation, as a result of
recording no incentive compensation in fiscal 2009.
    
    A $783 increase in Specialty Chemicals operating expenses primarily due to increases in
employee benefit costs.
    
    An increase in Aerospace Equipment segment operating expenses primarily due to additional
operating expenses in the amount of $1,673 from the acquisition of AMPAC ISP Holdings.
    
    Consistent corporate expenses, primarily including increases in rent of $546, and increases
in stock-based compensation of $383, offset by a decrease of $1,034 in incentive compensation,
as a result of recording no incentive compensation in fiscal 2009.
    
    Other increases of $338.
 SEGMENT OPERATING INCOME (LOSS)
 June 30,
    
    
    Increase
    
    
    Percentage2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeThree Months Ended:Fine Chemicals
    
    $
    (752
    )
    
    $
    621
    
    
    $
    (1,373
    )
    
    
    NMSpecialty Chemicals
    
    
    552
    
    
    
    5,998
    
    
    
    (5,446
    )
    
    
    (91
    %)Aerospace Equipment
    
    
    417
    
    
    
    (330
    )
    
    
    747
    
    
    
    NMOther Businesses
    
    
    (215
    )
    
    
    341
    
    
    
    (556
    )
    
    
    NMSegment Operating Income
    
    
    2
    
    
    
    6,630
    
    
    
    (6,628
    )
    
    
    (100
    %)Corporate Expenses
    
    
    (3,654
    )
    
    
    (4,257
    )
    
    
    603
    
    
    
    14
    %Operating Income (Loss)
    
    $
    (3,652
    )
    
    $
    2,373
    
    
    $
    (6,025
    )
    
    
    NMNine Months Ended:Fine Chemicals
    
    $
    (370
    )
    
    $
    9,426
    
    
    $
    (9,796
    )
    
    
    NMSpecialty Chemicals
    
    
    16,481
    
    
    
    16,768
    
    
    
    (287
    )
    
    
    (2
    %)Aerospace Equipment
    
    
    1,571
    
    
    
    248
    
    
    
    1,323
    
    
    
    533%Other Businesses
    
    
    164
    
    
    
    340
    
    
    
    (176
    )
    
    
    (52
    %)Segment Operating Income
    
    
    17,846
    
    
    
    26,782
    
    
    
    (8,936
    )
    
    
    (33
    %)Corporate Expenses
    
    
    (11,847
    )
    
    
    (11,817
    )
    
    
    (30
    )
    
    
    0
    %Operating Income
    
    $
    5,999
    
    
    $
    14,965
    
    
    $
    (8,966
    )
    
    
    (60
    %)
 
   BACKLOG
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LIQUIDITY AND CAPITAL RESOURCES
 CASH FLOWS
 Nine Months Ended June 30,
    
    
    
    
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    ChangeCash Provided (Used) By:Operating activities
    
    $
    11,352
    
    
    $
    21,141
    
    
    $
    (9,789
    )
    
    
    (46
    %)Investing activities
    
    
    (13,037
    )
    
    
    (10,027
    )
    
    
    (3,010
    )
    
    
    (30
    %)Financing activities
    
    
    (240
    )
    
    
    230
    
    
    
    (470
    )
    
    
    NMNet change in cash for period
    
    $
    (1,925
    )
    
    $
    11,344
    
    
    $
    (13,269
    )
    
    
    (117
    %)
 
  Operating Activities .
  
    
    A decrease in cash due to less profit from our operations of $10,234.
    
    An increase in cash used for working capital accounts of $5,951, excluding the effects of
interest and income taxes.
    
    A decrease in cash taxes paid of $4,281.
    
    A decrease in cash paid for interest of $43.
    
    An increase in cash used for environmental remediation of $230.
    
    Other increases in cash provided by operating activities of $2,302.
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Investing Activities
 
    
    Capital expenditures decreased $3,715 to $6,312 in the fiscal 2009 nine-month period as
compared to $10,027 for the prior fiscal year nine-month period.
 For fiscal 2009, we anticipate spending approximately $10,000 for capital expenditures, most of
which is related to maintenance capital.
 
    
    Cash used for acquisition of business reflects the purchase of AMPAC ISP Holdings for
$7,196, net of cash acquired of $471.
 LIQUIDITY AND CAPITAL RESOURCES
     
    
    current results of operations, cash flows and backlog;
    
    anticipated changes in operating trends, including anticipated changes in revenues and
margins; and
    
    cash requirements related to our debt agreements, pension plans and remediation activities.
 
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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;
    
    until February 1, 2010, up to 35% of the principal amount of the Senior Notes at a
redemption price of 109% of the principal amount thereof, plus accrued and unpaid interest
thereon, with the proceeds of certain sales of our equity securities; 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.
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Revolving Credit Facility.
  
    
    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.
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PENSION BENEFITS.
   ENVIRONMENTAL
REMEDIATION  AMPAC HENDERSON SITE.
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CONTRACTUAL OBLIGATIONS
   
    
    We have recorded an estimated liability for environmental remediation of $13,291 (see Note
8 to the condensed consolidated financial statements included in Item 1 of this report). We
expect to spend approximately $1,800 for environmental remediation during fiscal 2009.
    
    We have recorded aggregate Pension Plans and SERP obligations of $16,677 (see Note 11 to
the condensed consolidated financial statements included in Item 1 of this report). We expect
to contribute $3,069 to our Pension Plans and SERP during fiscal 2009.
    
    We have uncertain tax positions totaling $464. 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. At
June 30, 2009, we had no balance outstanding under the Revolving Credit Facility. We may
prepay and terminate the Revolving Credit Facility at any time.
 
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OFF-BALANCE SHEET ARRANGEMENTS
 Letters of Credit.
 Employee Agreements.
   CRITICAL ACCOUNTING POLICIES
   SALES AND REVENUE RECOGNITION.
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DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS.
  IMPAIRMENT OF LONG-LIVED ASSETS .
  - 39 -




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ENVIRONMENTAL COSTS .
  INCOME TAXES .
   - 40 -




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PENSION BENEFITS . Employers
Accounting for Pensions
   RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS.
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
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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in Thousands)
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
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PART II.  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS (Dollars in Thousands)
   We depend on a limited number of customers for most of our sales in our Specialty Chemicals,
Aerospace Equipment and Fine Chemicals segments and the loss of one or more of these customers
could have a material adverse effect on our financial position, results of operations and cash
flows.
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The inherent limitations of our fixed-price or similar contracts may impact our profitability.
  The numerous and often complex laws and regulations and regulatory oversight to which our
operations and properties are subject, the cost of compliance, and the effect of any failure to
comply could reduce our profitability and liquidity.
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A significant portion of our business depends on contracts with the government or its prime
contractors 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
liabilities.
  Review of Perchlorate Toxicity by the EPA.
 Perchlorate Remediation Project in Henderson, Nevada.
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Henderson Site Environmental Remediation Reserve.
 Other Environmental Matters.
 Although we have established an environmental reserve for remediation activities in Henderson,
Nevada, given the many uncertainties involved in assessing environmental liabilities, our
environmental-related risks may from time to time exceed any related reserves.
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For each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment segments, most
production is conducted in a single facility and any significant disruption or delay at a
particular facility could have a material adverse effect on our business, financial position and
results of operations.
  The release or explosion of dangerous materials used in our business could disrupt our operations
and cause us to incur additional costs and liability.
  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.
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Successful commercialization of pharmaceutical products and product line extensions is very
difficult and subject to many uncertainties. If a customer is not able to successfully
commercialize its products for which AFC produces compounds or if a product is subsequently
recalled, then the operating results of AFC may be negatively impacted.
  A strike or other work stoppage, or the inability to renew collective bargaining agreements on
favorable terms, could have a material adverse effect on the cost structure and operational
capabilities of AFC.
  The pharmaceutical fine chemicals industry is a capital-intensive industry and if AFC does not have
sufficient financial resources to finance the necessary capital expenditures, its business and
results of operations may be harmed.
  We may be subject to potential liability claims for our products or services that could affect our
earnings and financial condition and harm our reputation.
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Technology innovations in the markets that we serve may create alternatives to our products and
result in reduced sales.
  We are subject to strong competition in certain industries in which we participate and therefore
may not be able to compete successfully.
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Due to the nature of our business, our sales levels may fluctuate causing our quarterly operating
results to fluctuate.
  The inherent volatility of the chemical industry affects our capacity utilization and causes
fluctuations in our results of operations.
  A loss of key personnel or highly skilled employees could disrupt our operations.
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We may continue to expand our operations in part through acquisitions, which could divert
managements attention and expose us to unanticipated liabilities and costs. We may experience
difficulties integrating the acquired operations, and we may incur costs relating to acquisitions
that are never consummated.
   We have a substantial amount of debt, and the cost of servicing that debt could adversely affect
our ability to take actions, our liquidity or our financial condition.
  
    
    make it more difficult for us to satisfy any other outstanding debt obligations;
    
    require us to dedicate a substantial portion of our cash flow from operations to payments
on our debt, reducing the amount of our cash flow available for working capital, capital
expenditures, acquisitions, developing our real estate assets and other general corporate
purposes;
    
    limit our flexibility in planning for, or reacting to, changes in the industries in which
we compete;
    
    place us at a competitive disadvantage compared to our competitors, some of which have
lower debt service obligations and greater financial resources than we do;
    
    limit our ability to borrow additional funds; or
    
    increase our vulnerability to general adverse economic and industry conditions.
 If we are unable to generate sufficient cash flow to service our debt and fund our operating costs,
our liquidity may be adversely affected.
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
    
    incur additional debt;
    
    pay dividends or make other restricted payments;
    
    create liens on assets to secure debt;
    
    incur dividend or other payment restrictions with regard to restricted subsidiaries;
    
    transfer or sell assets;
    
    enter into transactions with affiliates;
    
    enter into sale and leaseback transactions;
    
    create an unrestricted subsidiary;
    
    enter into certain business activities; or
    
    effect a consolidation, merger or sale of all or substantially all of our assets.
  Significant changes in discount rates, rates of return on pension assets, mortality tables and
other factors could affect our estimates of pension obligations, which in turn could affect future
funding requirements and related costs and impact our future earnings.
  Our shareholder rights plan, Restated Certificate of Incorporation, as amended, and Amended and
Restated By-laws discourage unsolicited takeover proposals and could prevent stockholders from
realizing a premium on their common stock.
  
    
    a classified board of directors;
    
    the ability of our board of directors to designate the terms of and issue new series of
preferred stock;
    
    advance notice requirements for nominations for election to our board of directors; and
    
    special voting requirements for the amendment, in certain cases, of our Restated
Certificate of Incorporation, as amended, and our Amended and Restated By-laws.
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Our proprietary and intellectual property rights may be violated, compromised, circumvented or
invalidated, which could damage our operations.
  
 ITEM 2.
    
    UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS  None.
 
 ITEM 3.
    
    DEFAULTS UPON SENIOR
SECURITIES  None.
 
 ITEM 4.
    
    SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS  None.
 
 ITEM 5.
    
    OTHER INFORMATION  None.
 
 ITEM 6.
    
    EXHIBITS  See attached exhibit index.
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SIGNATURES
  AMERICAN PACIFIC CORPORATIONDate: August 5, 2009
    
    /S/ JOHN R. GIBSONJohn R. GibsonChairman of the Board 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)10.1+
    
    Amended and Restated American Pacific Corporation Defined Benefit Pension Plan, as Amended
and Restated Effective October 1, 2008, executed by American Pacific Corporation on June 12,
200910.2+
    
    Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees, as Amended and Restated
Effective October 1, 2007, executed by American Pacific Corporation on June 12, 200910.3+
    
    Ampac Fine Chemicals LLC Pension Plan for Salaried Employees, as Amended and Restated
Effective October 1, 2007, executed by American Pacific Corporation on June 12, 200910.4
    
    First Amendment to Credit Agreement, dated as of July 7, 2009, by and among American Pacific
Corporation, certain subsidiaries thereof, the lenders party thereto, and Wachovia Bank,
National Association and Bank of America, N.A.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 2002
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32.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
 
 +
    
    Management contract or compensatory plan or arrangement.*
    
    Exhibits 32.1 and 32.2 are furnished to accompany this Quarterly Report on Form 10-Q but
shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, or otherwise subject to the liability of that section, and shall not be deemed to
be incorporated by reference into any filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended. - 60 -