10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                     

Commission File Number: 001-08137

AMERICAN PACIFIC CORPORATION

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices) (Zip Code)

(702) 735-2200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock outstanding as of April 30, 2013 was 7,866,573.

AMERICAN PACIFIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)	2
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39
ITEM 4.	Controls and Procedures	39
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	40
ITEM 1A.	Risk Factors	40
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
ITEM 3.	Defaults Upon Senior Securities	54
ITEM 4.	Mine Safety Disclosures	54
ITEM 5.	Other Information	54
ITEM 6.	Exhibits	54

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN PACIFIC CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited, Dollars in Thousands, Except per Share Amounts)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues	$	50,044	$	39,918	$	86,362	$	78,403
Cost of Revenues		34,150		26,300		55,056		52,555
Gross Profit		15,894		13,618		31,306		25,848
Operating Expenses		11,049		8,823		21,513		18,308
Other Operating Gains		-		-		-		14
Operating Income		4,845		4,795		9,793		7,554
Interest Income and Other (Expense), Net		4		7		12		14
Interest Expense		554		2,591		1,836		5,230
Loss on Debt Extinguishment		-		-		2,835		-
Income from Continuing
Operations before Income Tax		4,295		2,211		5,134		2,338
Income Tax Expense		1,534		974		1,222		1,066
Income from Continuing Operations		2,761		1,237		3,912		1,272
Loss from Discontinued Operations, Net of Tax		(29)		(182)		(25)		(66)
Net Income	$	2,732	$	1,055	$	3,887	$	1,206
Basic Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.36	$	0.16	$	0.51	$	0.17
Loss from Discontinued
Operations, Net of Tax	$	(0.00)	$	(0.02)	$	(0.00)	$	(0.01)
Net Income	$	0.35	$	0.14	$	0.50	$	0.16
Diluted Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.34	$	0.16	$	0.49	$	0.17
Loss from Discontinued
Operations, Net of Tax	$	(0.00)	$	(0.02)	$	(0.00)	$	(0.01)
Net Income	$	0.34	$	0.14	$	0.49	$	0.16
Weighted-Average Shares Outstanding:
Basic		7,732,000		7,548,000		7,700,000		7,544,000
Diluted		8,039,000		7,634,000		7,961,000		7,626,000

See accompanying notes to condensed consolidated financial statements

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AMERICAN PACIFIC CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, Dollars in Thousands, Except per Share Amounts)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Net Income	$	2,732	$	1,055	$	3,887	$	1,206
Other Comprehensive Income (Loss):
Cash Flow Hedge:
Change in fair value arising during period
(net of income tax of $136, $0, $136, and $0)		(204)		-		(204)		-
Less reclassifications to net income
(net of income tax of $22, $0, $22, and $0)		34		-		34		-
		(170)		-		(170)		-
Defined Benefit Pension Plans:
Actuarial gains (losses) arising during period		-		-		-		-
Less amortization of losses to net income
(net of income tax of $442, $288, $886, and $576)		664		432		1,328		864
		664		432		1,328		864
Foreign currency translation adjustments		-		134		-		(57)
Total Other Comprehensive Income		494		566		1,158		807
Comprehensive Income	$	3,226	$	1,621	$	5,045	$	2,013

See accompanying notes to condensed consolidated financial statements

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AMERICAN PACIFIC CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited, Dollars in Thousands, Except per Share Amounts)

	March 31,		September 30,
	2013		2012
ASSETS
Current Assets:
Cash and Cash Equivalents	$	26,694	$	31,182
Accounts Receivable, Net		30,124		24,211
Inventories		57,635		44,157
Prepaid Expenses and Other Assets		1,389		1,477
Income Taxes Receivable		1,954		2
Deferred Income Taxes		13,150		13,028
Total Current Assets		130,946		114,057
Property, Plant and Equipment, Net		103,143		103,316
Deferred Income Taxes		19,001		20,796
Other Assets		8,531		8,295
TOTAL ASSETS	$	261,621	$	246,464
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	10,343	$	12,006
Accrued Liabilities		6,688		6,359
Accrued Interest		21		988
Employee Related Liabilities		9,083		10,568
Income Taxes Payable		-		2,098
Deferred Revenues and Customer Deposits		34,667		7,293
Current Portion of Environmental Remediation Reserves		3,191		5,114
Current Portion of Long-Term Debt		5,261		16
Total Current Liabilities		69,254		44,442
Long-Term Debt		52,500		65,004
Environmental Remediation Reserves		10,656		11,640
Pension Obligations		53,531		55,300
Other Long-Term Liabilities		506		1,745
Total Liabilities		186,447		178,131
Commitments and Contingencies
Stockholders’ Equity
Preferred Stock - $1.00 par value; 3,000,000 authorized; none outstanding		-		-
Common Stock - $0.10 par value; 20,000,000 shares authorized,
7,861,573 and 7,710,783 issued and outstanding		786		771
Capital in Excess of Par Value		76,577		74,796
Retained Earnings		28,690		24,803
Accumulated Other Comprehensive Loss		(30,879)		(32,037)
Total Stockholders’ Equity		75,174		68,333
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	261,621	$	246,464

See accompanying notes to condensed consolidated financial statements

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AMERICAN PACIFIC CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited, Dollars in Thousands)

	Six Months Ended
	March 31,
	2013		2012
Cash Flows from Operating Activities:
Net Income	$	3,887	$	1,206
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
Depreciation and amortization		6,414		7,404
Non-cash interest expense		150		380
Non-cash component of loss on debt extinguishment		1,252		-
Share-based compensation		369		320
Excess tax benefit from stock-based compensation		(432)		-
Deferred income taxes		1,333		1,172
Loss on sale of assets		1		23
Changes in operating assets and liabilities:
Accounts receivable, net		(6,045)		(12,379)
Inventories		(13,137)		(9,637)
Prepaid expenses and other current assets		88		(580)
Accounts payable		(2,321)		(3,251)
Income taxes		(4,050)		(55)
Accrued liabilities		25		(2,308)
Accrued interest		(967)		1
Employee related liabilities		(1,156)		(819)
Deferred revenues and customer deposits		27,374		19,426
Environmental remediation reserves		(2,907)		(2,864)
Pension obligations, net		445		(3,881)
Other		(1,770)		(170)
Discontinued operations, net		28		(769)
Net Cash Provided (Used) by Operating Activities		8,581		(6,781)
Cash Flows from Investing Activities:
Capital expenditures		(5,851)		(2,381)
Other investing activities		-		120
Discontinued operations, net		-		(423)
Net Cash Used by Investing Activities		(5,851)		(2,684)
Cash Flows from Financing Activities:
Issuances of long-term debt		60,000		-
Payments of long-term debt		(67,259)		(9)
Debt issuance costs		(1,386)		-
Issuances of common stock		995		-
Excess tax benefit from stock-based compensation		432		-
Discontinued operations, net		-		(28)
Net Cash Used by Financing Activities		(7,218)		(37)
Effect of Changes in Currency Exchange Rates on Cash		-		15
Net Change in Cash and Cash Equivalents		(4,488)		(9,487)
Cash and Cash Equivalents, Beginning of Period		31,182		30,703
Cash and Cash Equivalents, End of Period	$	26,694	$	21,216
Cash Paid (Received) For:
Interest	$	2,653	$	4,851
Income taxes		5,463		176
Non-Cash Investing and Financing Transactions:
Additions to Property, Plant and Equipment not yet paid		1,102		320

See accompanying notes to condensed consolidated financial statements

– 4 –

AMERICAN PACIFIC CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited, Dollars in Thousands, Except per Share Amounts)

1. INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Interim Basis of Presentation. The accompanying condensed consolidated financial statements of American Pacific Corporation and its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) are unaudited, but in the opinion of management, include all adjustments, which are of a normal recurring nature, necessary to a fair statement of the results for the interim periods presented. These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2012. The operating results for the three-month and six-month periods ended March 31, 2013 and cash flows for the six-month period ended March 31, 2013 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods.

Accounting Policies and Principles of Consolidation. A description of our significant accounting policies is included in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2012. Our consolidated financial statements include the accounts of American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have been eliminated. We report our results based on a fiscal year which ends on September 30. References to Fiscal years refer to the twelve months ended or ending September 30 of the Fiscal year referenced.

Discontinued Operations. In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). We completed the sale of substantially all of the assets of AMPAC-ISP effective August 1, 2012. The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines. Revenues and expenses associated with the Aerospace Equipment segment operations are presented as discontinued operations for all periods presented. (See Note 12).

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Judgments and assessments of uncertainties are required in applying our accounting policies in many areas. For example, key assumptions and estimates are particularly important when determining our projected liabilities for pension benefits, useful lives for depreciable and amortizable assets, and deferred tax assets. Other areas in which significant judgment exists include, but are not limited to, costs that may be incurred in connection with environmental matters and the resolution of litigation and other contingencies. Actual results may differ from estimates on which our consolidated financial statements were prepared.

Fair Value Disclosures. The current authoritative guidance on fair value clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant inputs to the valuation model are unobservable.

– 5 –

1. INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Continued)

We estimate the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. As of March 31, 2013, our floating-rate term loan had a carrying value of $57,750 and an estimated fair value of $56,851 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was a liability of $284 as of March 31, 2013 (level 2 in the fair value hierarchy). The estimated fair values of our floating-rate term loan and interest rate swap agreement are based on a valuation technique that takes into consideration expected cash flows, the then-current interest rates and then-current creditworthiness of the Company or the counterparty, as applicable. Refer to Notes 6 and 7 for additional information regarding our term loan and interest rate swap agreement.

Depreciation and Amortization Expense. Depreciation and amortization expense, associated with our continuing operations, is classified as follows in our statements of operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Depreciation classified as:
Cost of revenues	$	3,015	$	3,303	$	6,237	$	6,575
Operating expenses		89		101		177		202
Total continuing operations		3,104		3,404		6,414		6,777
Depreciation and amortization classified as discontinued operations		-		318		-		627
Total	$	3,104	$	3,722	$	6,414	$	7,404

Bill and Hold Transactions. Some of our fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” arrangements). The sales value of inventory, subject to Bill and Hold arrangements, at our facilities was $16,048 and $19,346 as of March 31, 2013 and September 30, 2012, respectively.

Recently Issued or Adopted Accounting Standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, which amends Topic 220, Comprehensive Income. The amendment allows an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This standard was effective for us beginning on October 1, 2012. This standard changes presentation requirements, and accordingly, the adoption of this standard did not have an impact on our results of operations, financial position or cash flows.

In February 2013, the FASB issued ASU No. 2013-2, which amends the Comprehensive Income Topic of the Accounting Standards Codification (ASC). The updated standard requires the presentation of information about reclassifications out of accumulated other comprehensive income. ASU No. 2013-2 is effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company has adopted the standard on a prospective basis. The updated standard affects the Company’s disclosures but has no impact on its results of operations, financial condition or liquidity.

– 6 –

2. SHARE-BASED COMPENSATION

We account for our share-based compensation arrangements under an accounting standard which requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair values of awards are recognized as additional compensation expense, which is classified as operating expenses, proportionately over the vesting period of the awards.

Our share-based compensation arrangements are designed to advance the long-term interests of the Company, including by attracting and retaining employees and directors and aligning their interests with those of our stockholders. The amount, frequency, and terms of share-based awards may vary based on competitive practices, our operating results, government regulations and availability under our equity incentive plans. Depending on the form of the share-based award, new shares of our common stock may be issued upon grant, option exercise or vesting of the award. We maintain three share-based plans, each as discussed below.

The American Pacific Corporation Amended and Restated 2001 Stock Option Plan (the “2001 Plan”) permitted the granting of stock options to employees, officers, directors and consultants. Options granted under the 2001 Plan generally vested 50% at the grant date and 50% on the one-year anniversary of the grant date, and expire ten years from the date of grant. Under the terms of the 2001 Plan, no options may be granted on or after January 16, 2011, but options previously granted, may extend beyond that date based on the terms of the relevant grant. This plan was approved by our stockholders.

The American Pacific Corporation 2002 Directors Stock Option Plan, as amended and restated (the “2002 Directors Plan”) compensates non-employee directors with stock options granted annually or upon other discretionary events. Options granted under the 2002 Directors Plan prior to September 30, 2007 generally vested 50% at the grant date and 50% on the one-year anniversary of the grant date, and expire ten years from the date of grant. Options granted under the 2002 Directors Plan in November 2007 vested 50% one year from the date of grant and 50% two years from the date of grant, and expire ten years from the date of grant. Under the terms of the 2002 Plan, no options may be granted on or after November 12, 2012, but options previously granted, may extend beyond that date based on the terms of the relevant grant. This plan was approved by our stockholders.

The American Pacific Corporation Amended and Restated 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 800,000 shares of common stock are authorized for issuance under the 2008 Plan, provided that no more than 400,000 shares of common stock may be granted pursuant to awards of restricted stock and restricted stock units. Generally, awards granted under the 2008 Plan vest in three equal annual installments beginning on the first anniversary of the grant date, and in the case of option awards, expire ten years from the date of grant. As of March 31, 2013, there were 239,899 shares available for grant under the 2008 Plan. This plan was approved by our stockholders.

– 7 –

2. SHARE-BASED COMPENSATION (Continued)

Stock Options and Restricted Stock. A summary of our outstanding and non-vested stock option and restricted stock activity for the six months ended March 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Fair				Fair
			Price				Value				Value
	Shares		Per Share		Shares		Per Share		Shares		Per Share
Balance, September 30, 2012		612,071	$	8.47		138,835	$	3.55		64,497	$	7.52
Granted		47,470		11.93		47,470		5.41		36,060		11.93
Vested		-		-		(77,184)		3.61		(29,505)		7.42
Exercised		(114,730)		8.67		-		-		-		-
Expired / Cancelled		(14,416)		8.48		(1,416)		4.50		-		-
Balance, March 31, 2013		530,395		8.74		107,705		4.31		71,052		9.80

A summary of our exercisable stock options as of March 31, 2013 is as follows:

Number of vested stock options		422,690
Weighted-average exercise price per share	$	8.55
Aggregate intrinsic value	$	6,156
Weighted-average remaining contractual term in years		4.9

We determine the fair value of stock option awards at their grant date, using a Black-Scholes Option-Pricing model applying the assumptions in the following table. We determine the fair value of restricted stock awards based on the fair market value of our common stock on the grant date. Actual compensation, if any, ultimately realized by optionees may differ significantly from the amount estimated using an option valuation model.

	Six Months Ended
	March 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	5.41	$	3.46
Significant fair value assumptions:
Expected term in years		5.70		5.70
Expected volatility		49%		49%
Expected dividends		0%		0%
Risk-free interest rates		0.64%		0.85%
Total intrinsic value of options exercised	$	1,495	$	-
Aggregate cash received for option exercises	$	995	$	-
Compensation cost (included in operating expenses)
Stock options	$	139	$	176
Restricted stock		230		144
Total		369		320
Tax benefit recognized		93		63
Net compensation cost	$	276	$	257
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	234	$	230
Restricted stock	$	367	$	271
Weighted-average years to be recognized
Stock options		1.7		1.6
Restricted stock		1.7		1.8

– 8 –

2. SHARE-BASED COMPENSATION (Continued)

Cash-Settled Restricted Stock Units. Cash-settled restricted stock units (“RSU”) are awards that, if vested, entitle the recipient to a cash payment equal to the fair market value of our common stock for each unit granted. The RSU awards cliff-vest on September 30, 2014, subject to the attainment of financial performance criteria that were established for the two-year period ending September 30, 2014 and continued employment by the recipient. RSUs are accounted for as liability awards, and accordingly, compensation cost is re-measured based on our closing stock price at the end of each reporting period. If we estimate that it is probable that the vesting criteria will be met, then we record compensation expense based on the proportionate share of the total estimated fair value of the award to the requisite service period.

A summary of our RSU activity for the six months ended March 31, 2013 is as follows:

	Number of Units		Weighted- Average Grant Date Fair Value   Per Unit
Outstanding, September 30, 2012		-	$	-
Grants		77,231		11.93
Forfeitures		-		-
Vested		-		-
Outstanding, March 31, 2013		77,231	$	11.93

A summary of estimated compensation expense for RSU awards is as follows:

	Six Months Ended
	March 31,
	2013		2012
Compensation cost (included in operating expenses)	$	298	$	-
Tax benefit recognized		119		-
Net compensation cost	$	179	$	-
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,486	$	-
Weighted-average years to be recognized		1.5		-

3. INVENTORIES

Inventories consist of the following:

	March 31,		September 30,
	2013		2012
Finished goods	$	8,963	$	2,075
Work-in-process		36,463		28,851
Raw materials and supplies		10,005		12,340
Deferred cost of revenues		4,941		891
Under(over) applied manufacturing overhead costs		(2,737)		-
Total	$	57,635	$	44,157

For our Specialty Chemicals segment, purchase price variances or volume or capacity cost variances associated with indirect manufacturing costs 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. EARNINGS (LOSS) PER SHARE

Shares used to compute earnings (loss) per share from continuing operations are as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Income from continuing operations	$	2,761	$	1,237	$	3,912	$	1,272
Basic weighted-average shares		7,732,000		7,548,000		7,700,000		7,544,000
Diluted:
Weighted-average shares, basic		7,732,000		7,548,000		7,700,000		7,544,000
Dilutive effect of stock options		271,000		60,000		228,000		62,000
Dilutive effect of restricted stock		36,000		26,000		33,000		20,000
Weighted-average shares, diluted		8,039,000		7,634,000		7,961,000		7,626,000
Basic earnings per share from continuing operations	$	0.36	$	0.16	$	0.51	$	0.17
Diluted earnings per share from continuing operations	$	0.34	$	0.16	$	0.49	$	0.17

As of March 31, 2013, we had an aggregate of 55,218 antidilutive options and unvested restricted shares outstanding. As of March 31, 2012, we had an aggregate of 425,064 antidilutive options and unvested restricted shares outstanding.

5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table provides changes in accumulated other comprehensive income (loss) by component, net of income tax:

	Gains (Losses) on Defined Benefit Plan Items		Gains (Losses) on Effective Cash Flow Hedge		Total
Balance, September 30, 2012	$	(32,037)	$	-	$	(32,037)
Other comprehensive income (loss) before reclassifications		-		(204)		(204)
Amounts reclassified from accumulated other comprehensive income (loss)		1,328		34		1,362
Net current period other comprehensive income (loss)		1,328		(170)		1,158
Balance, March 31, 2013	$	(30,709)	$	(170)	$	(30,879)

The following table provides details about reclassifications out of Accumulated Other Comprehensive Income (Loss) (“AOCI”) for the six months ended March 31, 2013:

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months		Six Months
	Ended March 31, 2013
Gains and losses on cash flow hedges -	$	(56)	$	(56)	Interest expense
interest rate swap agreement		22		22	Income tax expense
	$	(34)	$	(34)	Net of tax
Amortization of defined benefit plan items	$	(538)	$	(1,076)	Cost of revenues
		(568)		(1,138)	Operating expenses
		(1,106)		(2,214)	Total before tax
		442		886	Income tax expense
	$	(664)	$	(1,328)	Net of tax

(a) amounts in parenthesis represent a decrease to income

– 10 –

6. DEBT

Our outstanding debt balances consist of the following:

	March 31,		September 30,
	2013		2012
Term Loan, variable-rate interest, due through 2017	$	57,750	$	-
Senior Notes, 9%, due 2015		-		65,000
Capital Leases, due through 2014		11		20
Total Debt		57,761		65,020
Less Current Portion		(5,261)		(16)
Total Long-term Debt	$	52,500	$	65,004

Senior Notes. In February 2007, we issued and sold 9.0% Senior Notes due February 1, 2015 (the “Senior Notes”) with an initial aggregate principal amount of $110,000. The Senior Notes accrued interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes were guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries.

In connection with our entering into the Credit Facility (as defined below), on October 26, 2012, a notice of redemption was issued for all remaining outstanding Senior Notes specifying a redemption date of November 25, 2012. The Redemption Price for the Notes was 102.250% of the outstanding principal amount of $65,000, plus accrued and unpaid interest to, but not including, the redemption date. On October 26, 2012, we irrevocably deposited funds with the trustee in an amount equal to the Redemption Price for the Senior Notes and the related indenture was discharged. The transaction resulted in a net loss on debt retirement, during the six-months ended March 31, 2013, of $2,835 which includes the call premium of $1,463, the write-off of then unamortized debt issuances costs of $1,252 and other expenses of $120.

ABL Credit Facility. On January 31, 2011, American Pacific Corporation, as borrower, with certain domestic subsidiaries of the Company as guarantors, entered into an asset based lending credit agreement (the “ABL Credit Facility”) with Wells Fargo Bank, National Association, as agent and as lender, which provided a secured revolving credit facility in an aggregate principal amount of up to $20,000 at any time outstanding with an initial maturity of 90 days prior to the maturity date of the Senior Notes, which was February 1, 2015. The maximum borrowing availability under the ABL Credit Facility was based upon a percentage of our eligible account receivables and eligible inventories. On October 26, 2012, we terminated the ABL Credit Facility.

Credit Facility. On October 26, 2012, we entered into an $85,000 senior secured credit agreement (the “Credit Facility”) by and among American Pacific Corporation, the lenders party thereto (the “Lenders”) and KeyBank National Association, as the swing line lender, issuer of letters of credit under the Credit Facility and as the Administrative Agent of the Lenders. Under the Credit Facility, we (i) obtained a term loan in the aggregate principal amount of $60,000 with an initial maturity in 5 years (the “Term Loan”), and (ii) may obtain revolving loans of up to $25,000 in aggregate principal amount, of which up to $5,000 may be outstanding in connection with the issuance of letters of credit (the “Revolving Facility”). We may prepay and terminate the Credit Facility at any time, without premium or penalty. The Credit Facility contains certain mandatory prepayment provisions which are based upon certain asset sales, equity issuances, incurrence of certain indebtedness and events of loss.

Available borrowings under the Revolving Facility are computed as the $25,000 committed line less any outstanding revolving loans and outstanding letters of credits. As of March 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $2,707 and availability for revolving loans of $22,293.

– 11 –

6. DEBT (Continued)

For any loans under the Credit Facility, we elect between two options to determine the annual interest rates applicable to such loans: Base Rate Loans and Eurodollar Loans. These elections can be renewed or changed from time to time during the term of the Credit Facility. The interest rate for an election period is determined as the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Credit Facility), and in each case, plus an applicable margin, which shall range from 0.75% to 1.50% for Base Rate Loans or from 1.75% to 2.50% for Eurodollar Loans, subject to adjustment based on the leverage ratio. Interest payments are due at least quarterly and may be more frequent under certain Eurodollar Loan elections. The Term Loan includes quarterly principal amortization payments which commenced on December 31, 2012. Scheduled Amortization of the Term Loan is $4,500, $6,000, $6,000, $6,000 and $7,500 for each of the five years in the period ending September 30, 2017, respectively. The remaining balance of the Term Loan of $30,000 is due upon maturity.

The Credit Facility is guaranteed by our current and future domestic subsidiaries and is secured by substantially all of our assets and the assets of our current and future domestic subsidiaries, subject to certain exceptions as set forth in the Credit Facility. The Credit Facility contains customary affirmative, negative and financial covenants which, among other things, restrict our ability to:

• pay dividends, repurchase our stock, or make other restricted payments;

• make certain investments or acquisitions;

• incur additional indebtedness;

• create or permit to exist certain liens;

• enter into certain transactions with affiliates;

• consummate a merger, consolidation or sale of assets;

• change our business; and

• wind up, liquidate, or dissolve our affairs.

In each case, the covenants set forth above are subject to customary and negotiated exceptions and exclusions.

The Credit Facility includes two financial covenants that are measured quarterly.

Leverage Ratio.  The Leverage Ratio must be less than or equal to 3.00 to 1.00. The Credit Facility defines the Leverage Ratio as the ratio of Consolidated Total Debt as of the last day of a quarter (“Test Date”) to Consolidated EBITDA for the four consecutive quarters preceding the Test Date, each as defined in the Credit Facility.

Debt Service Coverage Ratio.  The Debt Service Coverage Ratio must be at least 2.00 to 1.00, with increases to 2.25 to 1.00 for the period commencing September 30, 2014 to September 29, 2015, and to 2.50 to 1.00 for the period commencing September 30, 2015 and thereafter. The Credit Facility defines the Debt Service Coverage Ratio as the ratio of Consolidated EBITDA minus Consolidated Capital Expenditures to Scheduled Repayments plus Consolidated Adjusted Interest Expense, each as defined in the Credit Facility.

With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the 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 Total Debt generally includes principal amounts outstanding under our Credit Facility, capital leases, drawn amounts for outstanding letters of credit and other indebtedness for borrowed money. Credit Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, and certain non-cash charges and less cash

– 12 –

6. DEBT (Continued)

payments for environmental remediation, extraordinary gains and certain other non-cash gains. In accordance with the definitions contained in the Credit Facility, as of March 31, 2013, our Leverage Ratio was 1.33 to 1.00 and our Debt Service Coverage Ratio was 4.99 to 1.00.

The Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods). If an event of default occurs and is continuing, the Company may be required to repay the obligations under the Credit Facility prior to the Credit Facility’s stated maturity and the related commitments may be terminated.

Debt Issue Costs. In connection with the issuance of the Credit Facility, we incurred debt issuance costs of approximately $1,386, which are capitalized and classified as other assets on our consolidated balance sheets. These costs are being amortized, using the effective interest rate method, as additional interest expense over the term of the Credit Facility.

Letters of Credit. We issue letters of credit principally to secure performance related to insurance, utilities, and certain product contracts. As of March 31, 2013, we had $2,707 in outstanding letters of credit, maturing through January 2014, which were issued under our Revolving Facility. In addition, as of March 31, 2013, we had $315 in outstanding standby letters of credit which mature through April 2016. Letters of credit that are not issued under our Revolving Facility are collateralized by cash on deposit with the issuing bank in the amount of 105% of the outstanding letters of credit. Collateral deposits are classified as other assets on our consolidated balance sheets.

7. DERIVATIVE INSTRUMENT

Interest Rate Swap Agreement. On January 24, 2013, we entered into a floating-to-fixed interest rate swap with an initial notional amount of $58,875 (such notional amount reducing over the life of the arrangement), terminating October 26, 2017, which will effectively convert our floating-rate debt to a fixed rate (the “Swap Agreement”). Under the terms of the Swap Agreement, we will pay a fixed rate of approximately 0.775%, we will receive a floating-rate payment tied to the one-month LIBOR, and there will be no exchange of notional amounts. Our objective in using an interest rate derivative is to add stability to interest expense and to manage our exposure to interest rate movements.

We designated the Swap Agreement as a cash flow hedge in accordance with the accounting guidance in ASC Topic 815. As of March 31, 2013, the fair value of the Swap Agreement was a liability of $284. The effective portion of the change in the fair value of a derivative designated and that qualifies as a cash flow hedge is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in the fair value of the derivative is recognized directly in earnings. For the six-months ended March 31, 2013, we had no hedge ineffectiveness.

The following table provides quantitative disclosures about the Swap Agreement before income tax effects:

	March 31,		September 30,
	2013		2012
Balance sheet location of fair value:
Other assets	$	20	$	-
Accrued liabilities	$	304	$	-

– 13 –

7. DERIVATIVE INSTRUMENT (Continued)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	(340)	$	-	$	(340)	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	56	$	-	$	56	$	-

8. SEGMENT INFORMATION

We report our continuing operations in three operating segments: Fine Chemicals, Specialty Chemicals, and Other Businesses. These segments are based upon business units that offer distinct products and services, are operationally managed separately and produce products using different production methods. Segment operating income or loss includes all sales and expenses directly associated with each segment. Environmental remediation charges, corporate general and administrative costs, which consist primarily of executive, investor relations, accounting, human resources and information technology expenses, and interest are not allocated to segment operating results.

Fine Chemicals. Our Fine Chemicals segment includes the operating results of our wholly-owned subsidiaries Ampac Fine Chemicals LLC and AMPAC Fine Chemicals Texas, LLC (collectively, “AFC”). AFC is a custom manufacturer of active pharmaceutical ingredients and registered intermediates for customers in the pharmaceutical industry. AFC operates in compliance with the U.S. Food and Drug Administration’s current Good Manufacturing Practices and the requirements of certain other regulatory agencies such as the European Union’s European Medicines Agency and Japan’s Pharmaceuticals and Medical Devices Agency. AFC also complies with Drug Enforcement Administration requirements related to the manufacture and sale of certain controlled substances. AFC has distinctive competencies and specialized engineering capabilities in performing chiral separations, manufacturing chemical compounds that require high containment, performing energetic chemistries at commercial scale, and manufacturing Schedule II controlled substances.

Specialty Chemicals. Our Specialty Chemicals segment manufactures and sells: (i) perchlorate chemicals, principally ammonium perchlorate, which is the predominant oxidizing agent for solid propellant rockets, booster motors and missiles used in space exploration, commercial satellite transportation and national defense programs, (ii) sodium azide, a chemical used in pharmaceutical manufacturing, and (iii) Halotron^®, a series of clean fire extinguishing agents used in fire extinguishing products ranging from portable fire extinguishers to total flooding systems.

Other Businesses. Our Other Businesses segment contains our water treatment equipment division and real estate activities. Our water treatment equipment business markets, designs, and manufactures electrochemical On Site Hypochlorite Generation, or OSHG, systems. These systems are used in the disinfection of drinking water, control of noxious odors, and the treatment of seawater to prevent the growth of marine organisms in cooling systems. We supply our equipment to municipal, industrial and offshore customers. Our real estate activities are not material.

– 14 –

8. SEGMENT INFORMATION (Continued)

Our revenues are characterized by individually significant orders and relatively few customers. As a result, in any given reporting period, certain customers may account for more than ten percent of our consolidated revenues. The following table provides disclosure of the percentage of our consolidated revenues from continuing operations attributed to customers that exceed ten percent of the total in each of the given periods.

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Fine chemicals customer		32%		33%		34%		32%
Fine chemicals customer		15%				11%
Specialty chemicals customer				27%				16%
Specialty chemicals customer				11%		16%		18%

The following provides financial information about our segment operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues:
Fine Chemicals	$	37,267	$	20,594	$	58,614	$	42,069
Specialty Chemicals		11,934		18,961		26,284		33,181
Other Businesses		843		363		1,464		3,153
Total Revenues	$	50,044	$	39,918	$	86,362	$	78,403
Segment Operating Income (Loss):
Fine Chemicals	$	3,750	$	(978)	$	5,027	$	(2,165)
Specialty Chemicals		5,218		9,297		13,135		16,941
Other Businesses		(233)		(357)		(393)		(429)
Total Segment Operating Income (Loss)		8,735		7,962		17,769		14,347
Corporate Expenses		(3,890)		(3,167)		(7,976)		(6,793)
Operating Income	$	4,845	$	4,795	$	9,793	$	7,554
Depreciation and Amortization:
Fine Chemicals	$	2,894	$	2,928	$	5,909	$	5,968
Specialty Chemicals		123		377		330		612
Other Businesses		5		5		10		9
Corporate		82		94		165		188
Total Depreciation and Amortization	$	3,104	$	3,404	$	6,414	$	6,777

9. INCOME TAXES

We review our portfolio of uncertain tax positions and recorded liabilities based on the applicable recognition standards. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. We classify uncertain tax positions as non-current income tax liabilities unless expected to be settled within one year.

As of March 31, 2013 and September 30, 2012, our recorded liability for unrecognized tax benefits was $204 and $1,274, of which $201 and $405 would affect our effective tax rate if recognized. In December 2012, the internal revenue service completed its examination of our federal income tax returns for Fiscal years 2008, 2009, and 2010 and the related net operating loss carryback claims to Fiscal years 2002, 2003, 2005, 2006, 2007 and 2008 with no significant adjustments. Upon completion of this audit, we released $1,070 of unrecognized tax benefits.

– 15 –

9. INCOME TAXES (Continued)

We have no additional significant statutes of limitations that are anticipated to expire in Fiscal 2013. Accordingly, it is reasonably possible that none of the gross liability for unrecognized tax benefits will be reversed during Fiscal 2013.

Unrecognized Tax Benefits - September 30, 2012	$	1,274
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		(1,070)
Lapse of statute of limitations		-
Unrecognized Tax Benefits - March 31, 2013	$	204

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of March 31, 2013 and September 30, 2012, we had accrued $7 and $679, respectively, for the payment of tax-related interest and penalties. For the six months ended March 31, 2013 and 2012, income tax expense (benefit) includes a benefit of $672 and an expense of $28, respectively, for interest and penalties.

We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, we are no longer subject to federal and state examinations before Fiscal 2008.

10. DEFINED BENEFIT PLANS

Defined Benefit Plan Descriptions. We maintain three defined benefit pension plans which cover substantially all of our employees who were employed by the Company prior to July 1, 2010: 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 to date. Collectively, these three plans are referred to as the “Pension Plans”. Pension Plan benefits are paid based on an average of earnings, retirement age, and length of service, among other factors. In May 2010, our board of directors approved amendments to our Pension Plans which effectively closed the Pension Plans to participation by any new employees. Retirement benefits for existing U.S. employees and retirees through June 30, 2010 were not affected by this change. Beginning July 1, 2010, new employees began participating solely in one of the Company’s 401(k) plans. In addition, we maintain the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and restated, (the “SERP”) that includes three executive officers and two former executive officers. We use a measurement date of September 30 to account for our Pension Plans and SERP.

Net periodic pension cost consists of the following:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Pension Plans:
Service Cost	$	830	$	720	$	1,660	$	1,440
Interest Cost		984		962		1,967		1,925
Expected Return on Plan Assets		(1,100)		(770)		(2,200)		(1,540)
Recognized Actuarial Losses		892		598		1,785		1,195
Amortization of Prior Service Costs		15		17		31		35
Net Periodic Pension Cost	$	1,621	$	1,527	$	3,243	$	3,055
Supplemental Executive Retirement Plan:
Service Cost	$	204	$	110	$	408	$	220
Interest Cost		105		92		211		185
Recognized Actuarial Losses		94		-		188		-
Amortization of Prior Service Costs		105		105		210		210
Net Periodic Pension Cost	$	508	$	307	$	1,017	$	615

– 16 –

10. DEFINED BENEFIT PLANS (Continued)

Defined Contribution Plan Descriptions. We maintain two 401(k) plans in which participating employees may make contributions. One covers substantially all employees except bargaining unit employees of our Fine Chemicals segment and the other covers those bargaining unit employees. We make matching contributions for all Fine Chemicals segment employees and, since July 1, 2010, for all eligible new employees.

Contributions and Benefit Payments. For the six months ended March 31, 2013, we contributed $3,552 to the Pension Plans to fund benefit payments and anticipate making approximately $3,152 in additional contributions through September 30, 2013. For the six months ended March 31, 2013, we contributed $264 to the SERP to fund benefit payments and anticipate making approximately $263 in additional contributions through September 30, 2013.

11. COMMITMENTS AND CONTINGENCIES

Environmental Matters.

Regulatory Review of Perchlorates.  Our Specialty Chemicals segment manufactures and sells products that contain perchlorates. Currently, perchlorate is on Contaminant Candidate List 3 of the U.S. Environmental Protection Agency (the “EPA”). In February 2011, the EPA announced that it had determined to move forward with the development of a regulation for perchlorates in drinking water, reversing its October 2008 preliminary determination not to promulgate such a regulation. Accordingly, the EPA announced its intention to begin to evaluate the feasibility and affordability of treatment technologies to remove perchlorate and to examine the costs and benefits of potential standards. The EPA has conducted various meetings, as required by the Safe Drinking Water Act, including a meeting of the Science Advisory Board, whose report has not yet been made public. We continue to monitor activities and currently expect, based on EPA statements, that the earliest a final regulation is expected to be published is December 2014. Regulatory review and anticipated regulatory actions present general business risk to the Company, but no regulatory proposal of the EPA or any state in which we operate, to date, has been publicly announced that we believe 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 (the “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. Legacy production at the AMPAC Henderson Site resulted in perchlorate presence in the groundwater near the vicinity of the former facility.

At the direction of the Nevada Division of Environmental Protection (“NDEP”) and the EPA, we conducted an investigation of remediation technologies for perchlorate in groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. In 2002, we conducted a pilot test and 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 of the permanent facility. The location of this facility is several miles, in the direction of groundwater flow, from the AMPAC Henderson Site.

From time to time, we have held discussions with NDEP to formalize our remediation efforts in an agreement that, if executed, would provide more detailed regulatory guidance on environmental characterization and remedies at the AMPAC Henderson Site and vicinity. Typically, such

– 17 –

11. COMMITMENTS AND CONTINGENCIES (Continued)

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 costs. Discussions regarding a formal agreement are currently active and we anticipate that a formal agreement is likely to be completed during our Fiscal 2013.

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 Fiscal 2005 and Fiscal 2006, we recorded aggregate charges of $26,000 representing our estimates at the time of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the costs for capital equipment and on-going operating and maintenance (“O&M”).

Late in Fiscal 2009, we gained additional information from groundwater modeling that indicates groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is moving toward our existing remediation facility at a much slower pace than previously estimated. Utilization of our existing facilities alone, at this slower groundwater pace, could, according to this groundwater model, extend the life of our remediation project to well in excess of fifty years. As a result of this additional data, related model interpretations and consultations with NDEP, we re-evaluated our remediation operations and determined that we should be able to improve the effectiveness of the treatment program and significantly reduce the total project time by expanding the treatment system existing at the time. The expansion includes installation of additional groundwater extraction wells in the deeper, more concentrated areas, construction of an underground pipeline to move extracted groundwater to our treatment facility, and the addition of fluidized bed reactor (“FBR”) bioremediation treatment equipment (the “Expansion Project”) that will enhance, and in some cases replace, primary components of the existing treatment system. In our Fiscal 2009 fourth quarter, we accrued $13,700 as our initial estimate of the capital cost of the Expansion Project and the related estimates of the effects of the enhanced operations on the on-going O&M costs and project life.

Through June 2011, and in cooperation with NDEP, we worked to develop the formal design, engineering and permitting of the Expansion Project. Based on data obtained through that date, which was largely comprised of firm quotations, we determined that significant modifications to our Fiscal 2009 assumptions were required. As a result, in June 2011, we accrued an additional $6,000 for the estimated increase in cost of the capital component of the Expansion Project, offset slightly by reductions in O&M cost estimates. The estimated capital costs of the Expansion Project increased by approximately $6,400. The increase reflected (i) an increase in the capacity of the FBR bioremediation treatment equipment to accommodate technical requirements based on the testing of new extraction wells in the fall of 2010, and (ii) higher than initially anticipated cost associated with the installation of the equipment and construction of the pipeline. Our estimate of total O&M costs was reduced by approximately $400.

In September 2012, we commenced initial operation of the Expansion Project. Related system optimization and other start-up activities will continue in Fiscal 2013. In September 2012, we recorded an additional remediation charge in the amount of $700, which is substantially attributed to the true-up of estimates to the expected final cost of the Expansion Project. Due to uncertainties inherent in making estimates, our estimates of capital and O&M costs may later require significant revision as new facts become available and circumstances change.

– 18 –

11. COMMITMENTS AND CONTINGENCIES (Continued)

The estimated life of the project is a key assumption underlying the accrued estimated cost of our remediation activities. Groundwater modeling and other information regarding the characteristics of the surrounding land and demographics indicate that at our targeted processing rate of 450 gallons per minute for the new groundwater extraction wells (750 gallons per minute in the aggregate with existing wells), the life of the project could range from 5 to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, 7 to 14 years is the more likely range. In accordance with generally accepted accounting principles, if no point within the more likely range is considered more likely than another, then estimates should be based on the low end of the range. Accordingly, our accrued remediation cost includes estimated O&M costs through 2019, which is the low end of the likely range of the project life. Groundwater speed, perchlorate concentrations, aquifer characteristics and forecasted groundwater extraction rates will continue to be key factors considered when estimating the life of the project. If additional information becomes available in the future that leads to a different interpretation of the model, thereby dictating a change in equipment and operations, our estimate of the resulting project life could change significantly.

The estimate of the annual O&M cost of the project is a key assumption in our computation of the estimated cost of our remediation activities. To estimate O&M costs, we consider, among other factors, the project scope and historical expense rates to develop assumptions regarding labor, utilities, repairs, maintenance supplies and professional services costs. We estimate average annual O&M costs to be approximately $1,900. If additional information becomes available in the future that is different than information currently available to us and thereby leads us to different conclusions, our estimate of O&M expenses could change significantly.

In addition, certain remediation activities are conducted on public lands under operating permits. In general, these permits may require us to relocate our underground pipeline or equipment to accommodate future public utilities and features and require us to return the land to its original condition at the end of the permit period. If we are required to relocate our underground pipeline or equipment in the future, the costs of such activities would be incremental to our current cost estimates. Estimated costs associated with removal of remediation equipment from the land are not material and are included in our range of estimated costs.

As of March 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $10,000 to approximately $33,900. This range represents a significant estimate and is based on the estimable elements of cost for capital and O&M costs, and an estimated remaining operating life of the project through a range from the years 2017 to 2030. As of March 31, 2013, the accrued amount was $13,847, based on an estimated remaining life of the project through the year 2019, or the low end of the more likely range of the expected life of the project. Cost estimates are based on our current assessments of the facility configuration. As we proceed with the project, we have, and may in the future, become aware of elements of the facility configuration that must be changed to meet the targeted operational requirements. Certain of these changes may result in corresponding cost increases. Costs associated with the changes are accrued when a reasonable alternative, or range of alternatives, is identified and the cost of such alternative is estimable. Our estimated reserve for environmental remediation is based on information currently available to us and may be subject to material adjustment upward or downward in future periods as new facts or circumstances may indicate.

A summary of our environmental reserve activity for the six months ended March 31, 2013 is shown below:

Balance, September 30, 2012	$	16,754
Expenditures		(2,907)
Balance, March 31, 2013	$	13,847

– 19 –

11. COMMITMENTS AND CONTINGENCIES (Continued)

AFC Environmental Matters.  The primary operations of our Fine Chemicals segment are 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 (predecessor in interest to Ampac Fine Chemicals LLC) as part of its operations, CERCLA, among other things, provides for joint and several liability for environmental liabilities including, for example, environmental remediation expenses.

As part of the agreement by which we acquired our Fine Chemicals segment business 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 premises of Ampac Fine Chemicals LLC 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.

12. DISCONTINUED OPERATIONS

In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines.

On June 4, 2012, we entered into an Asset Purchase Agreement with Moog Inc. (“Moog”) (the “Asset Purchase Agreement”), pursuant to which we sold to Moog substantially all of the assets of Ampac-ISP Corp., including all of the equity interests in its foreign subsidiaries (collectively, the “Purchased Assets”). Additionally, Moog assumed certain liabilities related to the operations and the Purchased Assets. The transaction was completed effective August 1, 2012.

Under the terms of the Asset Purchase Agreement, the total consideration was approximately $46,000 (the “Purchase Price”) in cash. In addition, $4,000 of the Purchase Price (the “Escrow Amount”) will be held in an escrow account for 15 months following the closing of the transaction (the “Escrow Period”) and applied towards our indemnification obligations in favor of Moog, if any. The Asset Purchase Agreement provides that we, subject to certain limitations, indemnify Moog for damages and losses incurred or suffered by Moog as a result of, among other things, breaches of our respective representations, warranties and covenants contained in the Asset Purchase Agreement as well as any of the liabilities that we retained. The balance of the Escrow Amount remaining at the end of the Escrow Period shall be released to us. We have accounted for the Escrow Amount as a contingent gain, and accordingly have deferred recognition of the amount until all contingencies have lapsed or been resolved.

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12. DISCONTINUED OPERATIONS (Continued)

Revenues and expenses associated with the operations of AMPAC-ISP are presented as discontinued operations for all periods presented. Summarized financial information for AMPAC-ISP is as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Discontinued Operations:
Revenues	$	-	$	15,042	$	-	$	27,839
Income (loss) from Discontinued Operations, Net of Tax:
Operating income (loss) before tax	$	(78)	$	(98)	$	(64)	$	301
Income tax expense (benefit)		(28)		84		(23)		367
Net loss from discontinued operations		(50)		(182)		(41)		(66)
Adjustment to gain on sale of discontinued operations before tax		32		-		25		-
Income tax expense (benefit)		11		-		9		-
Net adjustment to gain on sale of discontinued operations		21		-		16		-
Loss from discontinued operations, net of tax	$	(29)	$	(182)	$	(25)	$	(66)

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

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the safe harbor created by those sections. These forward-looking statements include, but are not limited to: our expectations regarding changes in cash flow and working capital and related variances in the future, our potential incurrence of additional debt, including through refinancing, or legal or other costs in the future, our belief that our cash flows and debt will be adequate for the foreseeable future to satisfy the needs of our operations, our expectations regarding anticipated contributions and obligations with respect to our defined benefit pension plans and supplemental executive retirement plan, our estimates and expectations regarding anticipated costs, timing and funding in the short and long term for environmental remediation in connection with our former Henderson, Nevada site, our statement regarding the impact that change in revenue mix among our segments will have on comparisons of our consolidated gross profit and gross margin in the future, our expectations with respect to the substantial fulfillment of existing backlog within the next twelve months, our statement regarding anticipated capital activities for Fiscal 2013, statements regarding our expectations for product revenues, sales volumes, interest expense, tax obligations and capital expenditures, statements regarding the impact of process improvements and other efficiency and cost savings initiatives, statements regarding the expected impact of the timing of individual orders, sales and production activities on quarterly revenues, statements regarding our perceived competitive advantages, statements regarding the expected benefits of our credit swap arrangement, statements regarding the potential future impact of critical accounting policies and changes in accounting standards and judgments, estimates and assumptions relating thereto, statements regarding the impact that principal payments under our Credit Facility will have on our liquidity, statements regarding our ability to focus on the growth and performance of our pharmaceutical-related product lines following the sale of our Aerospace Equipment segment, statements regarding the effects of regulatory proposals, statements regarding a potential formal agreement with NDEP regarding our remediation efforts at the AMPAC Henderson Site and all plans, objectives, expectations and intentions contained in this report that are not historical facts. We usually use words such as “may,” “can,” “will,” “could,” “would,” “should,” “continue,” “expect,” “anticipate,” “believe,” “estimate,” or “future,” or the negative of these terms or similar expressions to identify forward-looking statements. Discussions containing such forward-looking statements may be found throughout this document. These forward-looking statements involve certain risks and uncertainties, such as, for example, with respect to the actual placement, timing and delivery of orders for new and/or existing products, that could cause actual results to differ materially from future results or outcomes expressed or implied in such forward-looking statements. Please see the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q for further discussion of factors that could affect future results. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement, unless otherwise required by law. Any business risks discussed later in this Item 2, among other things, should be considered in evaluating our prospects and future financial performance.

The terms “Company,” “we,” “us,” and “our” are used herein to refer to American Pacific Corporation and, where the context requires, one or more of the direct and indirect subsidiaries or divisions of American Pacific Corporation. We report our results based on a fiscal year which ends on September 30. References to Fiscal years refer to the twelve months ended or ending September 30 of the Fiscal year referenced. The following discussion and analysis is intended to provide a narrative discussion of our financial results and an evaluation of our financial condition and results of operations with respect to the second quarter and six-month period of Fiscal 2013 as compared to the second fiscal quarter and six-month period of Fiscal 2012. The discussion should be read in conjunction with our Annual Report on Form 10-K for Fiscal 2012 filed with the Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for Fiscal 2012.

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OUR COMPANY

American Pacific Corporation and its predecessors have been engaged in chemical manufacturing since 1955. We are a leading custom manufacturer of fine chemicals and specialty chemicals within our focused markets. Through our Fine Chemicals segment, we supply active pharmaceutical ingredients (“APIs”) and registered intermediates to the pharmaceutical industry. Our Specialty Chemicals segment produces various perchlorate chemicals and is the only North American producer of Ammonium Perchlorate (“AP”), which is the predominant oxidizing agent for solid propellant rockets, booster motors and missiles used in space exploration, commercial satellite transportation and national defense programs. We produce clean agent chemicals for the fire protection industry, as well as electro-chemical equipment for the water treatment industry. Our products are designed to meet customer specifications and often must meet certain governmental and regulatory approvals. Our technical and manufacturing expertise and customer service focus has gained us a reputation for quality, reliability, technical performance and innovation. Given the mission critical nature of our products, we maintain long-standing strategic customer relationships and generally sell our products through long-term contracts under which we are the sole-source or limited-source supplier.

OUR BUSINESS SEGMENTS

Our continuing operations comprise three reportable business segments: Fine Chemicals, Specialty Chemicals, and Other Businesses. The following table reflects the revenue contribution percentage from our business segments and their major product lines:

	Three Months Ended		Six Months Ended
	March 31,		March 31,
	2013	2012	2013	2012
Fine Chemicals	74%	51%	68%	54%
Specialty Chemicals:
Perchlorates	18%	41%	25%	37%
Sodium Azide	3%	3%	3%	2%
Halotron	3%	4%	2%	3%
Total Specialty Chemicals	24%	48%	30%	42%
Other Businesses:
Real Estate	*	*	*	*
Water Treatment Equipment	2%	1%	2%	4%
Total Other Businesses	2%	1%	2%	4%
Total Revenues	100%	100%	100%	100%
* less than 1%

FINE CHEMICALS. Our Fine Chemicals segment, operated through our wholly-owned subsidiaries Ampac Fine Chemicals LLC and AMPAC Fine Chemicals Texas, LLC (collectively “AFC”), is a custom manufacturer of APIs and registered intermediates for customers in the pharmaceutical industry. The pharmaceutical ingredients we manufacture are generally used by our customers in drugs with indications in three primary areas: anti-viral, oncology, and central nervous system. AFC’s customers include some of the world’s largest pharmaceutical and biotechnology companies, as well as emerging pharmaceutical companies. Most of the products that AFC sells are proprietary to our customers and used in existing drugs that are approved by the U.S. Food and Drug Administration (“FDA”) and commercially available. We operate in compliance with the FDA’s current Good Manufacturing Practices (“cGMP”) and the requirements of certain other regulatory agencies such as the European Union’s European Medicines Agency and Japan’s Pharmaceuticals and Medical Devices Agency. Our Fine Chemicals segment’s strategy is to focus on high growth markets where our technological position, combined with our chemical process development and engineering expertise, lead to strong customer relationships and limited competition. We have distinctive competencies and specialized engineering capabilities in performing

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chiral separations, manufacturing products that require high containment and performing energetic chemistries at commercial scale. We have recently expanded our technology offerings to include commercial scale production of Schedule II to V controlled substances in our high-security facilities in Rancho Cordova, California.

We have invested significant resources in our facilities, workforce and technology base. We believe we are the U.S. leader in performing chiral separations using Simulated Moving Bed (“SMB”) chromatography and own and operate two large-scale SMB systems, both of which are among the largest in the world operating under cGMP. We offer a full range of SMB equipment and related services from laboratory-scale to our large systems. We believe our distinctive competency in manufacturing chemical compounds that require specialized high containment facilities and handling expertise provide us a significant competitive advantage in competing for various opportunities associated with high potency, highly toxic and cytotoxic products. Many oncology drugs are made with APIs that are high potency or cytotoxic. AFC is one of the few companies in the world that can manufacture such compounds at a multi-ton annual rate. Moreover, our significant experience and highly engineered facilities make us one of the few companies in the world with the capability to use energetic chemistry on a commercial-scale under cGMP. We use this capability in development and production of products such as those used in anti-viral drugs, including HIV-related and influenza-combating drugs.

We have established long-term, and in some cases sole-source, contracts with customers that represent the majority of our revenues. Contracts that are not sole-source are limited-source considering the nature of our industry and the products that we manufacture. The inherent nature of custom pharmaceutical fine chemicals manufacturing encourages stable, long-term customer relationships. We work collaboratively with our customers to develop reliable, safe and cost-effective, custom solutions. Once a custom manufacturer has been qualified as a supplier on a cGMP product, there are several potential barriers that discourage transferring the manufacturing of the product to an alternative supplier. For example, applications to and approvals from the FDA and other regulatory authorities generally require the chemical contractor to be named. Switching contractors may require additional regulatory approvals and could take as long as two years to complete. 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 around the world.

SPECIALTY CHEMICALS. Our Specialty Chemicals segment is principally engaged in the production of perchlorates, which include several grades of ammonium perchlorate (“AP”), sodium perchlorate and potassium perchlorate. AP is the predominant oxidizing agent for solid propellant rockets, booster motors and missiles used in national defense, space exploration and commercial satellite transportation programs. We have supplied rocket-grade AP for use in space and defense programs for over 50 years and we have been the only rocket-grade AP supplier in North America since 1998, when we acquired the AP business of our principal competitor, Kerr-McGee Chemical Corporation. AP is a key component of solid propellant rockets, booster motors and missiles that are utilized in U.S. Department of Defense (“DoD”) tactical and strategic missile programs, as well as various space programs such as the Delta and Atlas families of commercial space launch vehicles and space exploration programs for the National Aeronautics and Space Administration (“NASA”). There is currently no domestic alternative to these solid rocket motors. As a result, we believe that the U.S. government views us as a strategic national asset.

Alliant Techsystems Inc. or “ATK” is a significant AP customer. We sell rocket-grade AP to ATK under a long-term contract that requires us to maintain a ready and qualified capacity for rocket-grade AP and that requires ATK to purchase its rocket-grade AP requirements from us, subject to certain terms and conditions. The contract provides fixed pricing in the form of a price volume matrix for annual rocket-grade AP volumes ranging from 3 million to 20 million pounds through Fiscal 2013. In May 2013, we extended our contract with ATK through Fiscal 2016 and established a similar price volume matrix that provides fixed pricing for annual rocket-grade AP volumes ranging from 2.5 million to 7.5 million pounds. Pricing varies inversely to volume and includes annual escalations.

In addition, we produce and sell sodium azide, a chemical primarily used in pharmaceutical manufacturing, and Halotron^®, a series of clean fire extinguishing agents used in fire extinguishing products ranging from portable fire extinguishers to total flooding systems.

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OTHER BUSINESSES. Our Other Businesses segment contains our water treatment equipment division and real estate activities. Our water treatment equipment business markets, designs, and manufactures electrochemical On Site Hypochlorite Generation, or OSHG systems. These systems are used in the disinfection of drinking water, control of noxious odors, and the treatment of seawater to prevent the growth of marine organisms in cooling systems. We supply our equipment to municipal, industrial and offshore customers. Our real estate activities are not material.

DISCONTINUED OPERATIONS. In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). We completed the sale of substantially all of the assets of AMPAC-ISP effective August 1, 2012. The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines. Revenues and expenses associated with the operations of AMPAC-ISP are presented as discontinued operations for all periods presented.

CONSOLIDATED RESULTS OF OPERATIONS

REVENUES

For our Fiscal 2013 second quarter, revenues increased 25% to $50,044 compared to $39,918 for the Fiscal 2012 second quarter. For the six months ended March 31, 2013, revenues increased 10% to $86,362 compared to $78,403 for the prior year six-month period. The increases are supported by growth from our Fine Chemicals segment, offset partially by the inter-quarter timing of Specialty Chemicals segment revenues. See further discussion below under the heading “Business Segment Results”.

	March 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Fine Chemicals	$	37,267	$	20,594	$	16,673		81%
Specialty Chemicals		11,934		18,961		(7,027)		(37%)
Other Businesses		843		363		480		132%
Total Revenues	$	50,044	$	39,918	$	10,126		25%
Six Months Ended:
Fine Chemicals	$	58,614	$	42,069	$	16,545		39%
Specialty Chemicals		26,284		33,181		(6,897)		(21%)
Other Businesses		1,464		3,153		(1,689)		(54%)
Total Revenues	$	86,362	$	78,403	$	7,959		10%
COST OF REVENUES AND GROSS PROFIT
	March 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Revenues	$	50,044	$	39,918	$	10,126		25%
Cost of Revenues		34,150		26,300		7,850		30%
Gross Profit		15,894		13,618		2,276		17%
Gross Margin		32%		34%
Six Months Ended:
Revenues	$	86,362	$	78,403	$	7,959		10%
Cost of Revenues		55,056		52,555		2,501		5%
Gross Profit		31,306		25,848		5,458		21%
Gross Margin		36%		33%

In addition to the factors discussed below under the heading “Business Segment Results”, one of the most significant factors that affects, and should continue to affect, the comparison of our consolidated gross profit and gross margin from period to period is the change in revenue mix between our segments.

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OPERATING EXPENSES

	March 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Operating Expenses	$	11,049	$	8,823	$	2,226		25%
Percentage of Revenues		22%		22%
Six Months Ended:
Operating Expenses	$	21,513	$	18,308	$	3,205		18%
Percentage of Revenues		25%		23%

For our Fiscal 2013 second quarter, operating expenses were $11,049 compared to $8,823 for the Fiscal 2012 second quarter. For our Fiscal 2013 six-month period, operating expenses were $21,513 compared to $18,308 for the Fiscal 2012 six-month period. The most significant components of the six-month period increase were approximately $2,200 for accrued incentive compensation, approximately $600 for increased costs from our defined benefit retirement plans, and approximately $300 for corporate shareholder matters. The increase in incentive compensation occurred primarily due to the timing of incentive compensation accruals. Strong operating performance in the first half of Fiscal 2013 has resulted in incentive-based compensation costs of approximately $1,600 being recorded earlier in this fiscal year than in the prior fiscal year.

INTEREST AND LOSS ON DEBT EXTINGUISHMENT

	March 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Interest and Other Income. Net	$	4	$	7	$	(3)		(43%)
Interest Expense		554		2,591		(2,037)		(79%)
Loss on Debt Extinguishment		-		-		-		-
Six Months Ended:
Interest and Other Income. Net	$	12	$	14	$	(2)		(14%)
Interest Expense		1,836		5,230		(3,394)		(65%)
Loss on Debt Extinguishment		2,835		-		2,835		-

Interest expense decreased 79% and 65% in the Fiscal 2013 second quarter and six-month period, respectively, each compared to the prior year periods. The decreases reflect both a decrease in the average outstanding principal balance on our long term debt and a reduction in the effective interest rate that resulted from the refinancing of our long-term debt. See further discussion below under the heading “Long-Term Debt and Credit Facilities”.

In connection with our entering into the Credit Facility (as defined below), on October 26, 2012, a notice of redemption was issued for all remaining outstanding Senior Notes specifying a redemption date of November 25, 2012. The Redemption Price for the Notes was 102.250% of the outstanding principal amount of $65,000, plus accrued and unpaid interest to, but not including, the redemption date. On October 26, 2012, we irrevocably deposited funds with the trustee in an amount equal to the Redemption Price for the Senior Notes and the related indenture was discharged. The transaction resulted in a net loss on debt retirement of $2,835 which includes the call premium of $1,463, the write-off of then unamortized debt issuances costs of $1,252 and other expenses of $120.

DISCONTINUED OPERATIONS

In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines.

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On June 4, 2012, we entered into an Asset Purchase Agreement with Moog Inc. (“Moog”) (the “Asset Purchase Agreement”), pursuant to which we sold to Moog substantially all of the assets of Ampac-ISP Corp., including all of the equity interests in its foreign subsidiaries (collectively, the “Purchased Assets”). Additionally, Moog assumed certain liabilities related to the operations and the Purchased Assets. The transaction was completed effective August 1, 2012.

Under the terms of the Asset Purchase Agreement, the total consideration was approximately $46,000 (the “Purchase Price”) in cash. In addition, $4,000 of the Purchase Price (the “Escrow Amount”) will be held in an escrow account for 15 months following the closing of the transaction (the “Escrow Period”) and applied towards our indemnification obligations in favor of Moog, if any. The Asset Purchase Agreement provides that we, subject to certain limitations, indemnify Moog for damages and losses incurred or suffered by Moog as a result of, among other things, breaches of our respective representations, warranties and covenants contained in the Asset Purchase Agreement as well as any of the liabilities that we retained. The balance of the Escrow Amount remaining at the end of the Escrow Period shall be released to us. We have accounted for the Escrow Amount as a contingent gain, and accordingly have deferred recognition of the amount until all contingencies have lapsed or been resolved.

Revenues and expenses associated with the operations of AMPAC-ISP are presented as discontinued operations for all periods presented. Summarized financial information for AMPAC-ISP is as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Discontinued Operations:
Revenues	$	-	$	15,042	$	-	$	27,839
Income (loss) from Discontinued Operations, Net of Tax:
Operating income (loss) before tax	$	(78)	$	(98)	$	(64)	$	301
Income tax expense (benefit)		(28)		84		(23)		367
Net loss from discontinued operations		(50)		(182)		(41)		(66)
Adjustment to gain on sale of discontinued operations before tax		32		-		25		-
Income tax expense (benefit)		11		-		9		-
Net adjustment to gain on sale of discontinued operations		21		-		16		-
Loss from discontinued operations, net of tax	$	(29)	$	(182)	$	(25)	$	(66)

BUSINESS SEGMENT RESULTS

Segment operating income or loss includes all sales and expenses directly associated with each segment. Environmental remediation charges, corporate general and administrative costs and interest are not allocated to segment operating results.

FINE CHEMICALS SEGMENT

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues	$	37,267	$	20,594	$	58,614	$	42,069
Operating Income (Loss)	$	3,750	$	(978)	$	5,027	$	(2,165)
Operating Margin		10%		(5%)		9%		(5%)

Revenues. Fine Chemicals segment revenues increased 81% and 39% for the Fiscal 2013 second quarter and six month period, respectively, each compared to the corresponding Fiscal 2012 periods. Oncology product revenues increased in both the Fiscal 2013 second quarter and the six-month period, supported by revenues from new oncology products for drugs that were commercialized in the later part

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of Fiscal 2012. The Fiscal 2013 second quarter also includes increases from the anti-viral, central nervous systems and development product groups. These increases are substantially due to inter-quarter timing when compared to the prior fiscal year.

Operating Income (Loss). The Fine Chemicals segment reported operating income of $3,750 for the Fiscal 2013 second quarter compared to an operating loss of $978 for the Fiscal 2012 second quarter. The improvement includes a ten percentage point increase in gross margin, offset partially by increased operating expenses. Fine Chemicals segment operating income for the Fiscal 2013 six-month period was $5,027 compared to a loss of $2,165 for the six-month period in the prior Fiscal year. For the Fiscal 2013 six-month period, the gross margin percentage increased twelve percentage points. Gross margin improvements reflect significant improvements in manufacturing operations, as well as better contractual pricing on certain core products. Our Fine Chemicals segment has dedicated significant efforts over the last two fiscal years to improving the efficiency of its manufacturing activities. Redesigned key processes continued to yield targeted throughput ranges during the Fiscal 2013 periods. In contrast, during the Fiscal 2012 periods, the Fine Chemicals segment had not yet achieved the benefits of these improvements.

Fine Chemicals operating expenses increased in the Fiscal 2013 periods primarily due to the timing of incentive compensation accruals. Strong operating performance in the first half of Fiscal 2013 has resulted in incentive-based compensation costs being recorded earlier in this fiscal year than in the prior fiscal year.

Backlog. Agreements with our Fine Chemicals segment customers typically include multi-year supply agreements. These agreements may contain provisional order volumes, minimum order quantities, take-or-pay provisions, termination fees and other customary terms and conditions, which we do not include in our computation of backlog. Fine Chemicals segment backlog includes unfulfilled firm purchase orders received from a customer, including both purchase orders which are issued against a related supply agreement and stand-alone purchase orders. Fine Chemicals segment backlog was approximately $76,800 and $80,500 as of March 31, 2013 and September 30, 2012, respectively. We anticipate order backlog as of March 31, 2013 to be substantially filled within the next twelve months.

SPECIALTY CHEMICALS SEGMENT

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues	$	11,934	$	18,961	$	26,284	$	33,181
Operating Income	$	5,218	$	9,297	$	13,135	$	16,941
Operating Margin		44%		49%		50%		51%

Revenues. Specialty Chemicals segment revenues include revenues from our perchlorate, sodium azide and Halotron product lines, with our perchlorate product lines comprising 83% and 87% of Specialty Chemicals revenues in the Fiscal 2013 and 2012 six-month periods, respectively.

Specialty Chemicals segment revenues of $11,934 for the Fiscal 2013 second quarter and $26,284 for the Fiscal 2013 six-month period, reflect decreases of 37% and 21%, respectively, as compared to the prior fiscal year periods. The revenue variances reflect changes in inter-quarter timing of perchlorate volume. We anticipate that Specialty Chemicals segment revenues variances will reverse in the second half of Fiscal 2013.

The variance in Specialty Chemicals segment revenues reflects the following factors:

• A 30% decrease in perchlorate volume and a 20% decrease in the related average price per pound for the Fiscal 2013 second quarter compared to the Fiscal 2012 second quarter.

• A 27% decrease in perchlorate volume and a 5% increase in the related average price per pound for the Fiscal 2013 six-month period compared to the Fiscal 2012 six-month period.

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• Sodium azide revenues increased by approximately $300 for the Fiscal 2013 second quarter and increased by $200 for the Fiscal 2013 six-month period, in each case compared to the comparable Fiscal 2012 periods.

• Halotron revenues were consistent for the Fiscal 2013 second quarter and decreased by $100 for the Fiscal 2013 six-month period, in each case compared to the comparable Fiscal 2012 periods.

The average price per pound of perchlorates decreased in the Fiscal 2013 second quarter because lower-priced, non-rocket-grade perchlorate accounted for a larger percentage of the total perchlorate volume. Fiscal 2013 volume was predominately strategic and tactical missile programs. Both space programs and tactical missile programs had strong volume during the Fiscal 2012 periods.

Operating Income. The decreases in Specialty Chemicals segment operating income for the Fiscal 2013 periods are consistent with the associated revenue decreases. As a percentage of revenues, operating margins declined to 44% in the Fiscal 2013 second quarter and declined to 50% in the Fiscal 2013 six-month period, compared to 49% and 51%, respectively, for the corresponding prior fiscal year periods. The decreases occurred because the lower volume provided less gross profit to offset the consistent general and administrative expenses. Specialty Chemicals segment gross margins were consistent for the periods presented.

Backlog. Specialty Chemicals segment backlog includes unfulfilled firm purchase orders received from a customer, including both purchase orders which are issued against long-term supply agreements and stand-alone purchase orders. Specialty Chemicals segment backlog was approximately $60,800 and $25,100 as of March 31, 2013 and September 30, 2012, respectively. We anticipate order backlog as of March 31, 2013 to be substantially filled within the next twelve months. Specialty Chemicals product orders are typically characterized by individually large orders which occur at various times during the fiscal year. This usually results in a backlog and revenue pattern which can vary significantly from quarter to quarter.

OTHER BUSINESSES SEGMENT

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues	$	843	$	363	$	1,464	$	3,153
Operating Loss	$	(233)	$	(357)	$	(393)	$	(429)
Operating Margin		(28%)		(98%)		(27%)		(14%)

Other Businesses segment revenues include primarily our PEPCON Systems’ water treatment equipment and related spare parts sales. For the Fiscal 2013 second quarter, revenues increased $480 compared to the Fiscal 2012 second quarter. For the Fiscal 2013 six-month period, revenues decreased $1,689 compared to the Fiscal 2012 six-month period. Each variance occurs due to timing and order size for equipment shipments and related sales. For the Fiscal 2013 periods, one smaller equipment order shipped in the Fiscal 2013 second quarter. This compares to the Fiscal 2012 periods when two larger equipment orders shipped in the Fiscal 2012 first quarter. This segment has incurred operating losses for each period reported because the low equipment volume does not generate sufficient margins to cover selling, general and administrative expenses.

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CORPORATE EXPENSES

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Corporate Expenses	$	3,890	$	3,167	$	7,976	$	6,793

Corporate operating expenses increased $1,183 in the Fiscal 2013 six-month period compared to the Fiscal 2012 six-month period. The most significant components of the six-month period increase were approximately $600 for accrued incentive compensation, approximately $400 for increased costs from our defined benefit retirement plans, and approximately $300 for corporate shareholder matters.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

	Six Months Ended March 31,						Percentage
	2013		2012		Change		Change
Cash Provided (Used) By:
Operating activities	$	8,581	$	(6,781)	$	15,362		NM
Investing activities		(5,851)		(2,684)		(3,167)		118%
Financing activities		(7,218)		(37)		(7,181)		NM
Effect of changes in exchange rates on cash		—		15		(15)		(100%)
Net change in cash for period	$	(4,488)	$	(9,487)	$	4,999		(53%)
NM=Not meaningful

Operating Cash Flows. Operating activities provided cash of $8,581 for the Fiscal 2013 six-month period compared to a use of cash of $6,781 for the prior fiscal year six-month period, an improvement of $15,362.

Significant components of the change in cash flow from operating activities include:

• An increase in cash due to the improvement in cash profits provided by our operations.

• An improvement in cash provided by working capital accounts of approximately $14,400, excluding the effects of interest and income taxes.

• An increase in cash paid for income taxes of approximately $5,300.

• A decrease in cash paid for interest expense of approximately $2,200.

• An increase in cash paid for costs associated with the retirement of long-term debt of approximately $1,600.

• A decrease in cash used to fund pension obligations of approximately $4,300.

• Other increases in cash used by operating activities of approximately $500.

The improvement in working capital cash flow reflects additional customer deposits received by our Specialty Chemicals segment in the Fiscal 2013 second quarter.

Cash paid for income taxes increased because our federal operating loss carryforwards were fully utilized in Fiscal 2012. Accordingly, we expect to pay cash taxes in Fiscal 2013.

Cash paid for interest in the Fiscal 2013 six-month period decreased as compared to the Fiscal 2012 six-month period reflecting both lower outstanding debt balances and lower interest rates that resulted from our refinancing in October 2012. Also in connection with the October 2012 refinancing, we incurred cash redemption costs of approximately $1,600 comprised primarily of the call premium to redeem the senior notes. See further discussion below under the heading “Long-Term Debt and Credit Facilities”.

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We make payments to fund defined benefit pension obligations at a level of at least 80% of the obligation. Our contributions were reduced in the Fiscal 2013 six-month period, as compared to the Fiscal 2012 six-month period, primarily due to improved plan asset returns in Fiscal 2012. In Fiscal 2012, we made additional contributions to our pension plans because the return on pension plan assets in the preceding year was not sufficient to maintain our target funding requirements.

Investing Cash Flows. Capital expenditures in the Fiscal 2013 six-month period were $5,851 compared to $2,381 for the Fiscal 2012 six-month period. The increase primarily relates to Fiscal 2013 projects that will provide additional mid-scale capacity for our Fine Chemicals segment.

Financing Cash Flows. For our Fiscal 2013 six-month period financing activities used cash of $7,218 compared to a use of cash of $37 for the Fiscal 2012 six-month period. The Fiscal 2013 six-month period amount includes a reduction in our long-term debt of $5,000 and debt issuance costs of $1,386, each incurred in connection with our October 2012 refinancing activities. Subsequent to our October 2012 refinancing, we also made scheduled principal payments for our new term loan in the amount of $2,250. See further discussion below under the heading “Long-Term Debt and Credit Facilities”.

LIQUIDITY AND CAPITAL RESOURCES. As of March 31, 2013, we had cash of $26,694 and no borrowing outstanding against our revolving credit facility. Our primary source of working capital is cash flows from operations and our Revolving Facility (defined below). Available borrowings under the Revolving Facility are computed as the $25,000 committed line less any outstanding revolving loans and outstanding letters of credits. As of March 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $2,707 and availability for revolving loans of $22,293.

In October 2012, we called and terminated our senior notes with an aggregate principal amount of $65,000 and replaced the notes with a credit facility that includes a $60,000 term loan and a $25,000 revolving credit line. Funds used to call the notes of $68,315, were provided by the net proceeds from the term loan and available cash balances. The revolving credit line provides a committed revolving credit line, up to a maximum of $25,000. For further discussion, see below under the heading “Long-Term Debt and Credit Facilities”. The term loan requires quarterly principal amortization, which differs from the senior notes which had no principal amortization requirements. We do not anticipate that the principal payment requirements under the new facility will have a significant impact on our liquidity because we expect that the cash requirements for principal payments will be substantially offset by lower interest expense.

We believe that changes in cash flow from operations during our fiscal periods reflect short-term timing and accordingly do not represent significant changes in our sources and uses of cash. Because our revenues, and related customer invoices and collections, are characterized by relatively few individually significant transactions, our working capital balances can vary normally by as much as $10,000 from period to period.

We may incur additional debt to fund capital projects, strategic initiatives or for other general corporate purposes, subject to our existing leverage, the value of our unencumbered assets and borrowing limitations imposed by our lenders. The availability of our cash inflows is affected by the timing, pricing and magnitude of orders for our products. From time to time, we may explore options to refinance our borrowings.

The timing of our cash outflows is affected by payments and expenses related to the manufacture of our products, capital projects, pension funding, interest on our debt obligations and environmental remediation or other contingencies, which may place demands on our short-term liquidity. 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 and we have incurred legal and other costs as a result of litigation and other contingencies. We may incur material legal and other costs associated with the resolution of litigation and contingencies in future periods, and, to the extent not covered by insurance, they may adversely affect our liquidity.

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In contemplating the adequacy of our liquidity and available capital, we consider factors such as:

• current results of operations, cash flows and backlog;

• anticipated changes in operating trends, including anticipated changes in revenues and margins;

• cash requirements related to our debt agreements and pension plans; and

• cash requirements related to our remediation activities.

We do not currently anticipate that the factors noted above will have material effects on our ability to meet our future liquidity requirements. We continue to believe that our cash flows from operations, existing cash balances and existing or future debt arrangements will be adequate for the foreseeable future to satisfy the needs of our operations on both a short-term and long-term basis.

LONG-TERM DEBT AND CREDIT FACILITIES

Senior Notes. In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0% Senior Notes due February 1, 2015 (the “Senior Notes”). The Senior Notes accrued interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes were guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries.

In connection with our entering into the Credit Facility (as defined below), on October 26, 2012, a notice of redemption was issued for all remaining outstanding Senior Notes specifying a redemption date of November 25, 2012. The Redemption Price for the Notes was 102.250% of the outstanding principal amount of $65,000, plus accrued and unpaid interest to, but not including, the redemption date. On October 26, 2012, we irrevocably deposited funds with the trustee in an amount equal to the Redemption Price for the Senior Notes and the related indenture was discharged. The transaction resulted in a net loss on debt retirement of $2,835, which includes the call premium of $1,463, the write-off of then unamortized debt issuances costs of $1,252 and other expenses of $120.

ABL Credit Facility. On January 31, 2011, American Pacific Corporation, as borrower, with certain domestic subsidiaries of the Company as guarantors, entered into an asset based lending credit agreement (the “ABL Credit Facility”) with Wells Fargo Bank, National Association, as agent and as lender, which provided a secured revolving credit facility in an aggregate principal amount of up to $20,000 at any time outstanding with an initial maturity of 90 days prior to the maturity date of the Senior Notes, which was February 1, 2015. The maximum borrowing availability under the ABL Credit Facility was based upon a percentage of our eligible account receivables and eligible inventories. On October 26, 2012, we terminated the ABL Credit Facility.

Credit Facility. On October 26, 2012, we entered into an $85,000 senior secured credit agreement (the “Credit Facility”) by and among American Pacific Corporation, the lenders party thereto (the “Lenders”) and KeyBank National Association, as the swing line lender, issuer of letters of credit under the Credit Facility and as the Administrative Agent of the Lenders. Under the Credit Facility, we (i) obtained a term loan in the aggregate principal amount of $60,000 with an initial maturity in 5 years (the “Term Loan”), and (ii) may obtain revolving loans of up to $25,000 in aggregate principal amount, of which up to $5,000 may be outstanding in connection with the issuance of letters of credit (the “Revolving Facility”). We may prepay and terminate the Credit Facility at any time, without premium or penalty. The Credit Facility contains certain mandatory prepayment provisions which are based upon certain asset sales, equity issuances, incurrence of certain indebtedness and events of loss.

For any loans under the Credit Facility, we elect between two options to determine the annual interest rates applicable to such loans: Base Rate Loans and Eurodollar Loans. These elections can be renewed or changed from time to time during the term of the Credit Facility. The interest rate for an election period is determined as the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Credit Facility), and in each case, plus an applicable margin, which shall range from 0.75% to 1.50% for Base Rate Loans or from 1.75% to 2.50% for Eurodollar Loans, subject to adjustment based on the leverage ratio. Interest payments are due at least quarterly and may be more frequent under certain Eurodollar Loan elections. The Term Loan includes quarterly principal amortization payments which commenced on

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December 31, 2012. Scheduled Amortization of the Term Loan is $4,500, $6,000, $6,000, $6,000 and $7,500 for each of the five years in the period ending September 30, 2017, respectively. The remaining balance of the Term Loan of $30,000 is due upon maturity.

The Credit Facility is guaranteed by our current and future domestic subsidiaries and is secured by substantially all of our assets and the assets of our current and future domestic subsidiaries, subject to certain exceptions as set forth in the Credit Facility. The Credit Facility contains customary affirmative, negative and financial covenants which, among other things, restrict our ability to:

• pay dividends, repurchase our stock, or make other restricted payments;

• make certain investments or acquisitions;

• incur additional indebtedness;

• create or permit to exist certain liens;

• enter into certain transactions with affiliates;

• consummate a merger, consolidation or sale of assets;

• change our business; and

• wind up, liquidate, or dissolve our affairs.

In each case, the covenants set forth above are subject to customary and negotiated exceptions and exclusions.

The Credit Facility includes two financial covenants that are measured quarterly.

Leverage Ratio. The Leverage Ratio must be less than or equal to 3.00 to 1.00. The Credit Facility defines the Leverage Ratio as the ratio of Consolidated Total Debt as of the last day of a quarter (“Test Date”) to Consolidated EBITDA for the four consecutive quarters preceding the Test Date, each as defined in the Credit Facility.

Debt Service Coverage Ratio. The Debt Service Coverage Ratio must be at least 2.00 to 1.00, with increases to 2.25 to 1.00 for the period commencing September 30, 2014 to September 29, 2015, and to 2.50 to 1.00 for the period commencing September 30, 2015 and thereafter. The Credit Facility defines the Debt Service Coverage Ratio as the ratio of Consolidated EBITDA minus Consolidated Capital Expenditures to Scheduled Repayments plus Consolidated Adjusted Interest Expense, each as defined in the Credit Facility.

With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the 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 Total Debt generally includes principal amounts outstanding under our Credit Facility, capital leases, drawn amounts for outstanding letters of credit and other indebtedness for borrowed money. Credit Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, and certain non-cash charges and less cash payments for environmental remediation, extraordinary gains and certain other non-cash gains. In accordance with the definitions contained in the Credit Facility, as of March 31, 2013, our Leverage Ratio was 1.33 to 1.00 and our Debt Service Coverage Ratio was 4.99 to 1.00.

The Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods). If an event of default occurs and is continuing, the Company may be required to repay the obligations under the Credit Facility prior to the Credit Facility’s stated maturity and the related commitments may be terminated.

Letters of Credit. We issue letters of credit principally to secure performance related to insurance, utilities, and certain product contracts. As of March 31, 2013, we had $2,707 in outstanding letters of

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credit, maturing through January 2014, which were issued under our Revolving Facility. In addition, as of March 31, 2013, we had $315 in outstanding standby letters of credit which mature through April 2016. Letters of credit that are not issued under our Revolving Facility are collateralized by cash on deposit with the issuing bank in the amount of 105% of the outstanding letters of credit. Collateral deposits are classified as other assets on our consolidated balance sheets.

Interest Rate Swap Agreement. On January 24, 2013, we entered into a floating-to-fixed interest rate swap with an initial notional amount of $58,875 (such notional amount reducing over the life of the arrangement), terminating October 26, 2017, which will effectively convert our floating-rate debt to a fixed rate. Under the terms of the swap, we will pay a fixed rate of approximately 0.775% and we will receive a floating-rate payment tied to the one-month LIBOR.

PENSION BENEFITS. We maintain three defined benefit pension plans which cover substantially all of our employees: 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 to date. Collectively, these three plans are referred to as the “Pension Plans”. In May 2010, our board of directors approved amendments to our Pension Plans which effectively closed the Pension Plans to participation by any new employees. Retirement benefits for existing U.S. employees and retirees through June 30, 2010 were not affected by this change. Beginning July 1, 2010, new U.S. employees began participating solely in one of our 401(k) plans. Pension Plan benefits are paid based on an average of earnings, retirement age, and length of service, among other factors.

Benefit obligations are measured annually as of September 30. As of September 30, 2012, the Pension Plans had an unfunded benefit obligation of $44,740. For Fiscal 2012, we made contributions to the Pension Plans in the amount of $9,320. We anticipate making Pension Plan contributions in the amount of approximately $6,704 during Fiscal 2013. We are required to make minimum contributions to our Pension Plans pursuant to the minimum funding requirements of the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974, as amended. In accordance with federal requirements, our minimum funding obligations are determined annually based on a measurement date of October 1. The fair value of Pension Plan assets is a key factor in determining our minimum funding obligations. Holding all other variables constant, a 10% decline in asset value as of September 30, 2012 would increase our minimum funding obligations for Fiscal 2013 by approximately $295.

In addition, we maintain the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and restated (the “SERP”), that includes three active and two former executive officers. The SERP is an unfunded plan and as of September 30, 2012 the SERP obligation was $11,087. For Fiscal 2012, we paid SERP retirement benefits of $527. We anticipate contributing the amount of approximately $527 to the SERP during Fiscal 2013 for the payment of retirement benefits. Payments for retirement benefits should increase in future years when each of the three current active participants retires. The future increase in such retirement benefits will be determined based on certain variables including each participating individual’s actual retirement date, rate of compensation and years of service.

During Fiscal 2012 and Fiscal 2011, our aggregate Pension Plans and SERP liability increased significantly primarily due to reductions in the actuarial assumption for the discount rate on the obligation, returns on plan assets at levels substantially lower than the expected long-term rate of return on plan assets and losses on certain plan assets. These changes are recorded as an increase in Pension Obligations and a corresponding decrease in Stockholders’ Equity (Accumulated Other Comprehensive Loss). If interest rates remain low and/or returns on plan assets do not trend with the expected long-term rate of return, our liquidity could be impacted by pension plan funding requirements.

ENVIRONMENTAL REMEDIATION – AMPAC HENDERSON SITE. During Fiscal 2005 and Fiscal 2006, we recorded aggregate charges of $26,000 representing our estimates at the time of the probable costs of our remediation efforts at our former perchlorate chemicals manufacturing facility in Henderson, Nevada (the “AMPAC Henderson Site”), including the costs for capital equipment and on-going operating and maintenance (“O&M”).

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Late in Fiscal 2009, we gained additional information from groundwater modeling that indicates groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is moving toward our existing remediation facility at a much slower pace than previously estimated. Utilization of our existing facilities alone, at this slower groundwater pace, could, according to this groundwater model, extend the life of our remediation project to well in excess of fifty years. As a result of this additional data, related model interpretations and consultations with the Nevada Division of Environmental Protection (“NDEP”), we re-evaluated our remediation operations and determined that we should be able to improve the effectiveness of the treatment program and significantly reduce the total project time by expanding the treatment system existing at the time. The expansion includes installation of additional groundwater extraction wells in the deeper, more concentrated areas, construction of an underground pipeline to move extracted groundwater to our treatment facility, and the addition of fluidized bed reactor (“FBR”) bioremediation treatment equipment (the “Expansion Project”) that will enhance, and in some cases replace, primary components of the existing treatment system. In our Fiscal 2009 fourth quarter, we accrued $13,700 as our initial estimate of the capital cost of the Expansion Project and the related estimates of the effects of the enhanced operations on the on-going O&M costs and project life.

Through June 2011, and in cooperation with NDEP, we worked to develop the formal design, engineering and permitting of the Expansion Project. Based on data obtained through that date, which was largely comprised of firm quotations, we determined that significant modifications to our Fiscal 2009 assumptions were required. As a result, in June 2011, we accrued an additional $6,000 for the estimated increase in cost of the capital component of the Expansion Project, offset slightly by reductions in O&M cost estimates. The estimated capital costs of the Expansion Project increased by approximately $6,400. The increase reflects (i) an increase in the capacity of the FBR bioremediation treatment equipment to accommodate technical requirements based on the testing of new extraction wells in the fall of 2010, and (ii) higher than initially anticipated cost associated with the installation of the equipment and construction of the pipeline. Our estimate of total O&M costs was reduced by approximately $400.

In September 2012, we commenced initial operation of the Expansion Project. Related system optimization and other start-up activities will continue in Fiscal 2013. In September 2012, we recorded an additional remediation charge in the amount of $700, which is substantially attributed to the true-up of estimates to the expected final cost of the expansion project. Due to uncertainties inherent in making estimates, our estimates of capital and O&M costs may later require significant revision as new facts become available and circumstances change.

The estimated life of the project is a key assumption underlying the accrued estimated cost of our remediation activities. Groundwater modeling and other information regarding the characteristics of the surrounding land and demographics indicate that at our targeted processing rate of 450 gallons per minute for the new groundwater extraction wells (750 gallons per minute in the aggregate with existing wells), the life of the project could range from 5 to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, 7 to 14 years is the more likely range. In accordance with generally accepted accounting principles, if no point within the more likely range is considered more likely than another, then estimates should be based on the low end of the range. Accordingly, our accrued remediation cost includes estimated O&M costs through 2019, which is the low end of the likely range of the project life. Groundwater speed, perchlorate concentrations, aquifer characteristics and forecasted groundwater extraction rates will continue to be key factors considered when estimating the life of the project. If additional information becomes available in the future that leads to a different interpretation of the model, thereby dictating a change in equipment and operations, our estimate of the resulting project life could change significantly.

The estimate of the annual O&M cost of the project is a key assumption in our computation of the estimated cost of our remediation activities. To estimate O&M costs, we consider, among other factors, the project scope and historical expense rates to develop assumptions regarding labor, utilities, repairs, maintenance supplies and professional services costs. We estimate average annual O&M costs to be approximately $1,900. If additional information becomes available in the future that is different than

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information currently available to us and thereby leads us to different conclusions, our estimate of O&M expenses could change significantly.

In addition, certain remediation activities are conducted on public lands under operating permits. In general, these permits may require us to relocate our underground pipeline or equipment to accommodate future public utilities and features and require us to return the land to its original condition at the end of the permit period. If we are required to relocate our underground pipeline or equipment in the future, the costs of such activities would be incremental to our current cost estimates. Estimated costs associated with removal of remediation equipment from the land are not material and are included in our range of estimated costs.

As of March 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $10,000 to approximately $33,900. This range represents a significant estimate and is based on the estimable elements of cost for capital and O&M costs, and an estimated remaining operating life of the project through a range from the years 2017 to 2030. As of March 31, 2013, the accrued amount was $13,847, based on an estimated remaining life of the project through the year 2019, or the low end of the more likely range of the expected life of the project. Cost estimates are based on our current assessments of the facility configuration. As we proceed with the project, we have, and may in the future, become aware of elements of the facility configuration that must be changed to meet the targeted operational requirements. Certain of these changes may result in corresponding cost increases. Costs associated with the changes are accrued when a reasonable alternative, or range of alternatives, is identified and the cost of such alternative is estimable. Our estimated reserve for environmental remediation is 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.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires that we adopt accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses.

Application of the critical accounting policies discussed below requires significant judgment, often as the result of the need to make estimates of matters that are inherently uncertain. If actual results were to differ materially from the estimates made, the reported results could be materially affected. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.

SALES AND REVENUE RECOGNITION. We recognize revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, title passes, the price is fixed or determinable and collectability is reasonably assured. Almost all products sold by our Fine Chemicals segment are subject to customer acceptance periods. Specifically, these customers have contractually negotiated acceptance periods from the time they receive certificates of analysis and compliance (“Certificates”) to reject the material based on issues with the quality of the product, as defined in the applicable agreement. At times we receive payment in advance of customer acceptance. If we receive payment in advance of customer acceptance, we record deferred revenues and deferred costs of revenue upon delivery of the product and recognize revenues in the period when the acceptance period lapses or the customer’s acceptance has occurred.

Some of our perchlorate and fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” transactions or arrangements). We recognize revenue prior to shipment of these Bill and Hold transactions when we have satisfied the applicable revenue recognition criteria, which include the point at which title and risk of ownership transfer to our customers. These customers have specifically requested in writing, pursuant to a contract, that we invoice for the finished product and hold the finished product until a later date. For our Bill and Hold arrangements that contain customer acceptance periods, we record deferred revenues and deferred costs of revenues when

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such products are available for delivery and Certificates have been delivered to the customers. We recognize revenue on our Bill and Hold transactions in the period when the acceptance period lapses or the customer’s acceptance has occurred. The sales value of inventory, subject to Bill and Hold arrangements, at our facilities was $16,048 and $19,346 as of March 31, 2013 and September 30, 2012, respectively.

DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS. Our depreciable or amortizable long-lived assets include property, plant and equipment, which are recorded at cost. Depreciation or amortization is recorded using the straight-line method over the shorter of the asset’s estimated economic useful life or the lease term, if the asset is subject to a capital lease. Economic useful life is the duration of time that we expect the asset to be productively employed by us, which may be less than its physical life. Significant assumptions that affect the determination of estimated economic useful life include: wear and tear, obsolescence, technical standards, contract life, and changes in market demand for products.

The estimated economic useful life of an asset is monitored to determine its appropriateness, especially in light of changed business circumstances. For example, changes in technological advances, changes in the estimated future demand for products, or excessive wear and tear may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis. Likewise, if the estimated useful life is increased, the adjustment to the useful life decreases depreciation expense per year on a prospective basis.

IMPAIRMENT OF LONG-LIVED ASSETS. We test our property, plant and equipment for recoverability when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Examples of such circumstances include, but are not limited to, operating or cash flow losses from the use of such assets or changes in our intended uses of such assets. To test for recovery, we group assets (an “Asset Group”) in a manner that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Our Asset Groups are typically identified by facility because each facility has a unique cost overhead and general and administrative expense structure that is supported by cash flows from products produced at the facility. The carrying amount of an Asset Group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the Asset Group.

If we determine that an Asset Group is not recoverable, then we would record an impairment charge if the carrying value of the Asset Group exceeds its fair value. Fair value is based on estimated discounted future cash flows expected to be generated by the Asset Group. The assumptions underlying cash flow projections would represent management’s best estimates at the time of the impairment review. Some of the factors that management would consider or estimate include: industry and market conditions, sales volume and prices, costs to produce and inflation. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. We use reasonable and supportable assumptions when performing impairment reviews, but cannot predict the occurrence of future events and circumstances that could result in impairment charges.

When we review Asset Groups for recoverability, we also consider depreciation estimates and methods or the amortization period, in each case as required by applicable accounting standards. Any revision to the remaining useful life of a long-lived asset resulting from that review also is considered in developing estimates of future cash flows used to test the Asset Group for recoverability.

ENVIRONMENTAL COSTS. We are subject to environmental regulations that relate to our past and current operations. We record liabilities for environmental remediation costs when our assessments indicate that remediation efforts are probable and the costs can be reasonably estimated. 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. Estimates of liabilities are based on currently available facts, existing technologies and presently enacted laws and regulations. These estimates are subject to revision in future periods based on actual costs or new

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circumstances. Accrued environmental remediation costs include the undiscounted cost of equipment, operating and maintenance costs, and fees to outside law firms and consultants, for the estimated duration of the remediation activity and do not include an assumption for inflation. Estimating environmental cost requires us to exercise substantial judgment regarding the cost, effectiveness and duration of our remediation activities. Actual future expenditures could differ materially from our current estimates.

We evaluate potential claims for recoveries from other parties separately from our estimated liabilities. We record an asset for expected recoveries when recoveries of the amounts are probable.

INCOME TAXES. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured, separately for each tax-paying entity in each tax jurisdiction, using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

When measuring deferred tax assets, we assess whether a valuation allowance should be established by evaluating both positive and negative factors. This evaluation requires that we exercise judgment in determining the relative significance of each factor. A valuation allowance is established if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The assessment of valuation allowance requirements, if any, involves significant estimates regarding the timing and amount of reversal of taxable temporary differences, future taxable income and the implementation of tax planning strategies. We rely on deferred tax liabilities in our assessment of the realizability of deferred tax assets if the temporary timing difference is anticipated to reverse in the same period and jurisdiction and the deferred tax liabilities are of the same character as the temporary differences giving rise to the deferred tax assets. We weigh both positive and negative evidence in determining whether it is more likely than not that a valuation allowance is required. Greater weight is given to evidence which is objectively verifiable such as historical results. If we report a cumulative loss from continuing operations before income taxes for a three-year period, we do not rely on forecasted improvements in earnings to recover deferred tax assets.

We account for uncertain tax positions in accordance with an accounting standard which creates a single model to address uncertainty in income tax positions and prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under this standard, we may recognize tax benefits from an uncertain position only if it is more likely than not that the position will be sustained upon examination by taxing authorities based on the technical merits of the issue. The amount recognized is the largest benefit that we believe has greater than a 50% likelihood of being realized upon settlement. Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed.

PENSION BENEFITS. We sponsor four defined benefit pension plans in various forms for employees who meet eligibility requirements. Applicable accounting standards require that we make assumptions and use statistical variables in actuarial models to calculate our pension obligations and the related periodic pension expense. The most significant assumptions are the discount rate and the expected rate of return on plan assets. Additional assumptions include the future rate of compensation increases, which is based on historical plan data and assumptions on demographic factors such as retirement, mortality and turnover. Depending on the assumptions selected, pension expense could vary significantly and could have a material effect on reported earnings. The assumptions used can also materially affect the measurement of benefit obligations.

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The discount rate is used to estimate the present value of projected future pension payments to all participants. The discount rate is generally based on the yield on AAA/AA-rated corporate long-term bonds. At September 30 of each year, the discount rate is determined using bond yield curve models matched with the timing of expected retirement plan payments. Our discount rate assumption was 5.40 percent as of September 30, 2012. Holding all other assumptions constant, a hypothetical increase or decrease of 25 basis points in the discount rate assumption would increase or decrease annual pension expense by approximately $526.

The expected long-term rate of return on plan assets represents the average rate of earnings expected on the plan funds invested in a specific target asset allocation. The expected long-term rate of return assumption on pension plan assets was 8.00 percent in Fiscal 2012. Holding all other assumptions constant, a hypothetical 25 basis point increase or decrease in the assumed long-term rate of return would increase or decrease annual pension expense by approximately $131.

RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, which amends Topic 220, Comprehensive Income. The amendment allows an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This standard was effective for us beginning on October 1, 2012. This standard changes presentation requirements, and accordingly, the adoption of this standard did not have an impact on our results of operations, financial position or cash flows.

In February 2013, the FASB issued ASU No. 2013-2, which amends the Comprehensive Income Topic of the Accounting Standards Codification (ASC). The updated standard requires the presentation of information about reclassifications out of accumulated other comprehensive income. ASU No. 2013-2 is effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company has adopted the standard on a prospective basis as required. The updated standard affects the Company’s disclosures but has no impact on its results of operations, financial condition or liquidity.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK – Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of March 31, 2013, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of such date to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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. Any such claims and lawsuits could be costly and time consuming and could divert our management and key personnel from our business operations. In connection with any such claims and lawsuits, we may be subject to significant damages or equitable remedies relating to the operation of our business. Any such claims and lawsuits may materially harm our business, results of operations and financial condition.

ITEM 1A. RISK FACTORS (Dollars in Thousands)

This description includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for Fiscal 2012. The following risk factors should be considered carefully before you decide whether to buy, hold or sell our common stock. Additional risks not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations and stock price. We report our results based on a fiscal year which ends on September 30. References to Fiscal years refer to the twelve months ended or ending September 30 of the Fiscal year referenced.

We depend on a limited number of customers for most of our sales 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.

Most of the perchlorate chemicals we produce, which accounted for 88% of our revenues in the Specialty Chemicals segment for Fiscal 2012 and approximately 33% of our consolidated revenues for Fiscal 2012, are purchased by two customers. Should our relationship with any of our major Specialty Chemicals customers change adversely, the resulting loss of business could have a material adverse effect on our financial position, results of operations and cash flows. In addition, if any of our major Specialty Chemicals customers substantially reduced their volume of purchases from us or otherwise delayed some or all of their purchases from us, it could have a material adverse effect on our financial position, results of operations and cash flows. Should one of our major Specialty Chemicals customers encounter financial difficulties, the exposure on uncollectible receivables and unusable inventory could have a material adverse effect on our financial position, results of operations and cash flows.

Furthermore, our Fine Chemicals segment’s success is largely dependent upon the manufacturing by AFC of a limited number of active pharmaceutical ingredients and registered intermediates for a limited number of key customers. One customer of AFC accounted for 31% of our consolidated revenue and the top two customers of AFC accounted for approximately 72% of its revenues, and 43% of our consolidated revenues, in Fiscal 2012. Negative developments in these customer relationships or in either of the customer’s business, or failure to renew or extend certain contracts, may have a material adverse effect on the results of operations of AFC. Moreover, from time to time key customers have reduced their orders, and one or more of these customers might reduce their orders in the future, or one or more of them may attempt to negotiate lower prices, any of which could have a similar negative effect on the results of operations of AFC. If the pharmaceutical products that AFC’s customers produce using its compounds experience any problems, including problems related to their safety or efficacy, delays in filing with or approval by the FDA, or other regulatory agencies, failures in achieving success in the market, expiration or loss of patent/regulatory protection, or competition, including competition from generic drugs, these customers may substantially reduce or cease to purchase AFC’s compounds, which could have a material adverse effect on the revenues and results of operations of AFC.

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The inherent limitations of our fixed-price or similar contracts may impact our profitability.

A substantial portion of our revenues are derived from our fixed-price or similar contracts. When we enter into fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price. Many of our fixed-price or similar contracts require us to provide a customized product over a long period at a pre-established price or prices for such product. For example, when AFC is initially engaged to manufacture a product, we often agree to set the price for such product, and any time-based increases to such price, at the beginning of the contracting period and prior to fully testing and beginning the customized manufacturing process. Depending on the fixed price negotiated, these contracts may provide us with an opportunity to achieve higher profits based on the relationship between our total estimated contract costs and the contract’s fixed price. However, we bear the risk that increased or unexpected costs, or external factors that may impact contract costs, fixed prices or profit yields, such as fluctuations in international currency exchange rates, may reduce our profit or cause us to incur a loss on the contract, which could reduce our net sales and net earnings. Ultimately, fixed-price contracts and similar types of contracts present the inherent risk of un-reimbursed cost overruns and unanticipated external factors that negatively impact contract costs, fixed prices or profit yields, any of which could have a material adverse effect on our operating results, financial condition, or cash flows. Moreover, to the extent that we do not anticipate the increase in cost or the effect of external factors over time on the production or pricing of the products which are the subject of our fixed-price contracts, our profitability could be adversely affected.

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.

The nature of our operations subject us to extensive and often complex and frequently changing federal, state, local and foreign laws and regulations and regulatory oversight, including with respect to emissions to air, discharges to water and waste management as well as with respect to the sale and, in certain cases, export of controlled products. For example, in our Fine Chemicals segment, modifications, enhancements or changes in manufacturing sites of approved products are subject to complex regulations of the FDA, and, in many circumstances, such actions may require the express approval of the FDA, which in turn may require a lengthy application process and, ultimately, may not be obtainable. The facilities of AFC are periodically subject to scheduled and unscheduled inspection by the FDA and other governmental agencies. Operations at these facilities could be interrupted or halted if such inspections are unsatisfactory and we could experience fines and/or other regulatory actions if we are found not to be in regulatory compliance. AFC’s customers face similarly high regulatory requirements. Before marketing most drug products, AFC’s customers generally are required to obtain approval from the FDA based upon pre-clinical testing, clinical trials showing safety and efficacy, chemistry and manufacturing control data, and other data and information. The generation of these required data is regulated by the FDA and can be time-consuming and expensive, and the results might not justify approval. In some cases, approval is required from other regulatory agencies such as the DEA. Even if AFC’s customers are successful in obtaining all required pre-marketing approvals, post-marketing requirements and any failure on either AFC’s or its customers’ part to comply with other regulations could result in suspension or limitation of approvals or commercial activities pertaining to affected products.

Because we operate in highly regulated industries, we may be affected significantly by legislative and other regulatory actions and developments concerning or impacting various aspects of our operations and products or our customers. To meet changing licensing and regulatory standards, we may be required to make additional significant site or operational modifications, potentially involving substantial expenditures or the reduction or suspension of certain operations. For example, in our Fine Chemicals segment, any regulatory changes could impose, on AFC or its customers, changes to manufacturing methods or facilities, pharmaceutical importation, expanded or different labeling, new approvals, the recall, replacement or discontinuance of certain products, additional record keeping, testing, price or purchase controls or limitations, and expanded documentation of the properties of certain products and scientific substantiation. AFC’s failure to comply with governmental regulations, in particular those of the FDA and DEA, can result in fines, unanticipated compliance expenditures, recall or seizure of products, delays in,

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or total or partial suspension or withdrawal of, approval of production or distribution, suspension of the FDA’s review of relevant product applications, termination of ongoing research, disqualification of data for submission to regulatory authorities, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. Although we have instituted internal compliance programs, if regulations or the standards by which they are enforced change and/or compliance is deficient in any significant way, such as a failure to materially comply with the FDA’s current Good Manufacturing Practices or “cGMP” guidelines, or if a regulatory authority asserts publically or otherwise such a deficiency or takes action against us whether or not the underlying asserted deficiency is ultimately found to be sustainable, it could have a material adverse effect on us. In our Specialty Chemicals and Fine Chemicals segments, changes in environmental regulations could result in requirements to add or modify emissions control, water treatment, or waste handling equipment, processes or arrangements, which could impose significant additional costs for equipment at and operation of our facilities.

Moreover, in other areas of our business, we, like other government and military subcontractors, are subject indirectly in many cases to government contracting regulations and the additional costs, burdens and risks associated with meeting these heightened contracting requirements. Failure to comply with government contracting regulations may result in contract termination, the potential for substantial civil and criminal penalties, and, under certain circumstances, our suspension and debarment from future U.S. government contracts for a period of time. For example, these consequences could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. In addition, the U.S. government and its principal prime contractors periodically investigate the U.S. government’s subcontractors, including with respect to financial viability, as part of the U.S. government’s risk assessment process associated with the award of new contracts. Consequently, for example, if the U.S. government or one or more prime contractors were to determine that we were not financially viable, our ability to continue to act as a government subcontractor would be impaired. Further, a portion of our business involves the sale of controlled products overseas, such as supplying ammonium perchlorate, or “AP”, to various foreign defense programs and commercial space programs. Foreign sales subject us to numerous additional complex U.S. and foreign laws and regulations, including laws and regulations governing import-export controls applicable to the sale and export of munitions and other controlled products and commodities, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act, and the anti-boycott provisions of the U.S. Export Administration Act. The costs of complying with the various and often complex and frequently changing laws and regulations and regulatory oversight applicable to us and the businesses in which we engage, and the consequences should we fail to comply, even inadvertently, with such requirements, could be significant and could reduce our profitability and liquidity.

A significant portion of our business is based on contracts with contractors or subcontractors to the U.S. government 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.

Sales to U.S. government prime contractors and subcontractors represent a significant portion of our business. We also make sales to the U.S. government from time to time. In Fiscal 2012, our Specialty Chemicals segment generated approximately 30% of consolidated revenues, primarily sales of rocket-grade AP, from sales to U.S. government prime contractors and subcontractors. Funding of U.S. governmental programs is generally subject to annual congressional appropriations, and congressional priorities are subject to change. In the case of major programs, U.S. government contracts are usually incrementally funded. In addition, U.S. government expenditures for defense and NASA programs may fluctuate from year to year and specific programs, in connection with which we may receive significant revenue, may be terminated or curtailed. For example, one significant use of rocket-grade AP historically has been in NASA’s Space Shuttle program. Consequently, with the recent retirement of the Space Shuttle fleet, the long-term demand for rocket-grade AP may be uncertain. While rocket-grade AP volume increased in Fiscal 2012, supported by the return in Fiscal 2012 of quantities for development motors for the NASA’s Heavy Launch Vehicle (“HLV”) which is part of the new Space Launch System, the HLV is still

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in the development phase and NASA could shift away from the use of AP as the oxidizing agent for solid propellant rockets or the use of solid propellant rockets in NASA’s space exploration programs in the future. If the use of AP as the oxidizing agent for solid propellant rockets or the use of solid propellant rockets in NASA’s space exploration programs are discontinued or significantly reduced, it could have a material adverse effect on our operating results, financial condition, or cash flows.

Recent economic crises, and the U.S. government’s corresponding actions, may result in cutbacks in major government programs. A decline in government expenditures or any failure by Congress to appropriate additional funds to any program in which we or our customers participate, or any contract modification as a result of funding changes, could materially delay or terminate the program for us or for our customers. Moreover, the U.S. government may terminate its contracts with its suppliers either for its convenience or in the event of a default by the supplier. Since a significant portion of our customer base is U.S. government contractors or subcontractors, we may have limited ability to collect fully on our contracts when the U.S. government terminates its contracts. If a contract is terminated by the U.S. government where we are a subcontractor, the U.S. government contractor may cease purchasing our products if its contracts are terminated. We may have resources applied to specific government-related contracts and, if any of those contracts were terminated, we may incur substantial costs redeploying these resources. Given the significance to our business of contracts based on U.S. government contracts, fluctuations or reductions in governmental funding for particular governmental programs and/or termination of existing governmental programs and related contracts may have a material adverse effect on our operating results, financial condition or cash flows.

We may be subject to potentially material costs and liabilities in connection with environmental or health matters.

Some of our operations may create risks of adverse environmental and health effects, any of which might not be covered by insurance. In the past, we have been required to take remedial action to address particular environmental and health concerns identified by governmental agencies in connection with the production of perchlorate. It is possible that we may be required to take further remedial action in the future in connection with our production of perchlorate, whether at our former facility in Henderson, Nevada, or at our current production facility in Iron County, Utah, or we may enter voluntary agreements with governmental agencies to take such actions. Moreover, in connection with other operations, we may become obligated in the future for environmental liabilities if we fail to abide by limitations placed on us by governmental agencies. There can be no assurance that material costs or liabilities will not be incurred or restrictions will not be placed upon us in order to rectify any past or future occurrences related to environmental or health matters. Such material costs or liabilities, or increases in, or charges associated with, existing environmental or health-related liabilities, also may have a material adverse effect on our operating results, earnings or financial condition.

Review of Perchlorate Toxicity by the EPA. Currently, perchlorate is on the EPA’s Contaminant Candidate List 3. In February 2011, the EPA announced that it had determined to move forward with the development of a regulation for perchlorates in drinking water, reversing its October 2008 preliminary determination not to promulgate such a regulation. Accordingly, the EPA announced its intention to begin to evaluate the feasibility and affordability of treatment technologies to remove perchlorate and to examine the costs and benefits of potential standards. At the time, the EPA stated that its intention was to publish a proposed regulation and analyses for public review and comment within 24 months, and, if a regulation is adopted, to promulgate a final regulation within 18 months after publication of its proposal. Regulatory review and anticipated regulatory actions present general business risk to us, but no regulatory proposal of the EPA or any state in which we operate, to date, has been publicly announced that we believe 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.

However, the outcome of the federal EPA action, as well as any similar state regulatory action, will influence the number, if any, of potential sites that may be subject to remediation action, which could, in turn, cause us to incur material costs. It is possible that federal and, potentially, one or more state or local

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regulatory agencies may change existing, or establish new, standards for perchlorate, which could lead to additional expenditures for environmental remediation in the future, and/or additional, potentially material costs to defend against new claims resulting from such regulatory agency actions.

Perchlorate Remediation Project in Henderson, Nevada. We commercially manufactured perchlorate chemicals at a facility in Henderson, Nevada (the “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. Legacy production at the AMPAC Henderson Site resulted in perchlorate presence in the groundwater near the vicinity of the former facility.

At the direction of the Nevada Division of Environmental Protection (“NDEP”) and the EPA, we conducted an investigation of remediation technologies for perchlorate in groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. In 2002, we conducted a pilot test and 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 of the permanent facility. The location of this facility is several miles, in the direction of groundwater flow, from the AMPAC Henderson Site.

Late in Fiscal 2009, we gained additional information from groundwater modeling that indicates groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is moving toward our existing remediation facility at a much slower pace than previously estimated. As a result of this additional data, related model interpretations and consultations with NDEP, we re-evaluated our remediation operations and determined that we should be able to improve the effectiveness of the treatment program and significantly reduce the total project time by expanding the treatment system existing at the time. The expansion includes the installation of additional groundwater extraction wells in the deeper, more concentrated areas, construction of an underground pipeline to move extracted groundwater to our treatment facility, and the addition of fluidized bed reactor (“FBR”) bioremediation treatment equipment (the “Expansion Project”).

Henderson Site Environmental Remediation Reserve. During Fiscal 2005 and Fiscal 2006, we recorded aggregate charges of $26,000 representing our estimates at the time of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the costs for capital equipment and on-going operating and maintenance (“O&M”). Following the receipt of new data regarding groundwater movement late in Fiscal 2009, we added the Expansion Project to the planned scope of our remediation operations. As a result, we increased our accruals by approximately $13,700.

Through June 2011, and in cooperation with NDEP, we worked to develop the formal design and engineering of the Expansion Project. Based on data obtained through that date, which was largely comprised of firm quotations, we determined that significant modifications to our Fiscal 2009 assumptions were required. As a result, in June 2011, we accrued an additional $6,000 for the estimated increase in cost of the capital component of the Expansion Project, offset slightly by reductions in O&M cost estimates. The estimated capital costs of the Expansion Project increased by approximately $6,400. The increase reflected (i) an increase in the capacity of the FBR bioremediation treatment equipment to accommodate technical requirements based on the testing of new extraction wells in the fall of 2010, and (ii) higher than initially anticipated cost associated with the installation of the equipment and construction of the pipeline. Our estimate of total O&M costs was reduced by approximately $400. Due to uncertainties inherent in making estimates, our estimates of capital and O&M costs may later require significant revision as new facts become available and circumstances change.

In September 2012, we commenced initial operation of the Expansion Project. Related system optimization and other start-up activities will continue in Fiscal 2013. In September 2012, we recorded an additional remediation charge in the amount of $700, which is substantially attributed to the true-up of estimates to the expected final cost of the expansion project. Due to uncertainties inherent in making

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estimates, our estimates of capital and O&M costs may later require significant revision as new facts become available and circumstances change.

As of March 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $10,000 to approximately $33,900. This range represents a significant estimate and is based on the estimable elements of cost for capital and O&M costs, and an estimated remaining operating life of the project through a range from the years 2017 to 2030. As of March 31, 2013, the accrued amount was $13,847, based on an estimated remaining life of the project through the year 2019, or the low end of the more likely range of the expected life of the project. Cost estimates are based on our current assessments of the facility configuration. As we have proceeded with the project, we have, and may in the future, become aware of elements of the facility configuration that must be changed to meet the targeted operational requirements. Certain of these changes may result in corresponding cost increases. Costs associated with the changes are accrued when a reasonable alternative, or range of alternatives, is identified and the cost of such alternative is estimable. Our estimated reserve for environmental remediation is 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.

Other Environmental Matters. As part of our acquisition of the fine chemicals business of GenCorp Inc., AFC leased 241 acres of land on a Superfund site in Rancho Cordova, California, owned by Aerojet-General Corporation, a wholly-owned subsidiary of GenCorp Inc. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, has very strict joint and several liability provisions that make any “owner or operator” of a “Superfund site” a “potentially responsible party” for remediation activities. AFC could be considered an “operator” for purposes of CERCLA and, in theory, could be a potentially responsible party for purposes of contribution to the site remediation, although we received a letter from the EPA in November 2005 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 Superfund site. Additionally, pursuant to the EPA consent order governing remediation for this site, AFC must abide by certain limitations regarding construction and development of the site which may restrict AFC’s operational flexibility and require additional substantial capital expenditures that could negatively affect the results of operations for AFC.

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 exceed any related reserves.

As of March 31, 2013, we had recorded reserves in connection with the AMPAC Henderson Site of approximately $13,847. However, as of such date, we had not established any other environmental-related reserves. Given the many uncertainties involved in assessing and estimating environmental liabilities, our environmental-related risks may exceed any related reserves, as we may not have established reserves with respect to such environmental liabilities, or any reserves we have established may prove to be insufficient. We continually evaluate the adequacy of our reserves on a quarterly basis, and they could change. For example, during the quarter ended June 30, 2011, we increased our environmental reserves in connection with the AMPAC Henderson Site by approximately $6,000 as a result of an increase in anticipated costs associated with remediation efforts at the site. In addition, reserves with respect to environmental matters are based only on known sites and the known contamination at those sites. It is possible that additional remediation sites will be identified in the future or that unknown contamination, or further contamination beyond that which is currently known, at previously identified sites will be discovered. The discovery of additional environmental exposures at sites that we currently own or operate or at which we formerly operated, or at sites to which we have sent hazardous substances or wastes for treatment, recycling or disposal, could result in us having additional expenditures for environmental remediation in the future and, given the many uncertainties involved in assessing environmental liabilities, we may not have adequately reserved for such liabilities or any reserves we have established may prove to be insufficient.

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For each of our Specialty Chemicals and Fine Chemicals segments, 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.

Our Specialty Chemicals segment products are produced at our Iron County, Utah facility and our Fine Chemicals segment products are currently produced at our Rancho Cordova, California facility. Any of these facilities could be disrupted or damaged by fire, floods, earthquakes, power loss, systems failures or similar or other events. Although we have contingency plans in effect for natural disasters or other catastrophic events, these events could still disrupt our operations. Even though we carry business interruption insurance, we may suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies. A significant disruption at one of our facilities, even on a short-term basis, could impair our ability to produce and ship the particular business segment’s products to market on a timely basis, which could have a material adverse effect on our business, financial position and results of operations.

The release or explosion of dangerous materials used in our business could disrupt our operations and cause us to incur additional costs and liabilities.

Our operations involve the handling, production, storage, and disposal of potentially explosive or hazardous materials and other dangerous chemicals, including materials used in rocket propulsion. Despite our use of specialized facilities to handle dangerous materials and intensive employee training programs, the handling and production of hazardous materials could result in incidents that shut down (on a short-term basis or for longer periods) or otherwise disrupt our manufacturing operations and could cause production delays. Our manufacturing operations could also be the subject of an external or internal event, such as a terrorist attack or external or internal accident, that, despite our security, safety and other precautions, results in a disruption or delay in our operations. It is possible that a release of hazardous materials or other dangerous chemicals from one of our facilities or an explosion could result in death or significant injuries to employees and others. Material property damage to us and third parties could also occur. For example, on May 4, 1988, our former manufacturing and office facilities in Henderson, Nevada were destroyed by a series of massive explosions and associated fires. Extensive property damage occurred both at our facilities and in immediately adjacent areas, the principal damage occurring within a three-mile radius. Production of AP ceased for a 15-month period following that incident. Significant interruptions were also experienced in our other businesses, which occupied the same or adjacent sites. There can be no assurance that another incident would not interrupt some or all of the activities carried on at our current AP manufacturing site. The use of our products in applications by our customers could also result in liability if an explosion, fire or other similarly disruptive event were to occur. Any release or explosion could expose us to adverse publicity or liability for damages or cause production delays, any of which could have a material adverse effect on our reputation and profitability and could cause us to incur additional costs and liabilities.

Disruptions in the supply of key raw materials and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact our operations.

Key raw materials used in our operations include sodium chlorate, graphite, ammonia, sodium metal, nitrous oxide, HCFC-123, and hydrochloric acid. We closely monitor sources of supply to assure that adequate raw materials and other supplies and components needed in our manufacturing processes are available. In addition, as a supplier to U.S. government contractors or subcontractors, we are frequently limited to procuring materials and components from sources of supply that can meet rigorous government and/or customer specifications. If a supplier provides us raw materials or other supplies or components that are deficient or defective or if a supplier fails to provide us such materials, supplies or components in a timely manner or at all, we may have limited ability to find appropriate substitutes or otherwise meet required specifications and deadlines. In addition, as business conditions, the U.S. defense budget, and congressional allocations change, suppliers of specialty chemicals and materials sometimes consider dropping or in fact drop low volume items from their product lines, which may require, as it has in the past, qualification of new suppliers for raw materials on key programs. The qualification process may impact our profitability or ability to meet contract deliveries and/or delivery timelines. Moreover, we could

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experience inventory shortages if we are required to use an alternative supplier on short notice, which also could lead to raw materials being purchased on less favorable terms than we have with our regular suppliers. We are further impacted by the cost of raw materials used in production on fixed-price contracts. The increased cost of natural gas and electricity also has a significant impact on the cost of operating our Specialty Chemicals segment facility.

AFC uses substantial amounts of raw materials in its production processes, in particular chemicals, including specialty and bulk chemicals, which include petroleum-based solvents. Increases in the prices of raw materials which AFC purchases from third party suppliers could adversely impact operating results. In certain cases, the customer either provides some of the raw materials which are used by AFC to produce or manufacture the customer’s products or requires AFC to use a particular or limited number of suppliers for a raw material. Failure to receive raw materials in a timely manner, whether from a third party supplier or a customer, could cause AFC to fail to meet production schedules and adversely impact revenues and operating results. A delay in the arrival of a shipment of raw materials from a third party supplier could have a significant impact on AFC’s ability to meet its contractual commitments to customers. Certain key raw materials are obtained from sources from outside the U.S., including the People’s Republic of China. Factors that can cause delays in the arrival of raw materials include weather or other natural events, political unrest in countries from which raw materials are sourced or through which they are delivered, terrorist attacks or related events in such countries or in the U.S., and work stoppages by suppliers or shippers. In addition, the availability of certain chemicals is subject to DEA quotas.

Prolonged disruptions in the supply of any of our key raw materials, difficulty completing qualification of new sources of supply, implementing use of replacement materials or new sources of supply, or a continuing increase in the prices of raw materials and energy could have a material adverse effect on our operating results, financial condition or cash flows.

Each of our Specialty Chemicals and Fine Chemicals 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.

Each of our Specialty Chemicals and Fine Chemicals segments produces products that are highly customized, require high levels of precision to manufacture and are subject to exacting customer and other requirements, including strict timing and delivery requirements. For example, our Fine Chemicals segment produces chemical compounds that are difficult to manufacture, including highly energetic and highly toxic materials. These chemical compounds are manufactured to exacting specifications of our customers’ filings with the FDA and other regulatory authorities worldwide. The production of these chemicals requires a high degree of precision and strict adherence to safety and quality standards. Regulatory agencies, such as the FDA and the European Medicines Agency, or EMEA, have regulatory oversight over the production process for many of the products that AFC manufactures for its customers. For controlled substances, compliance with DEA regulations is also required. AFC employs sophisticated and rigorous manufacturing and testing practices to ensure compliance with the FDA’s cGMP guidelines and the International Conference on Harmonization Q7A. Because the chemical compounds produced by AFC are so highly customized, they are also subject to customer acceptance requirements, including strict timing and delivery requirements. If AFC is unable to adhere to the standards required or fails to meet the customer’s timing and delivery requirements, the customer may reject the chemical compounds. In such instances, AFC may also be in breach of its customer’s contract.

Like our Fine Chemicals segment, our Specialty Chemicals segment faces similar production demands and requirements. A significant failure or inability to comply with customer specifications and manufacturing requirements or delays or other problems with existing or new products could result in increased costs, losses of sales and potential breaches of customer contracts, which could affect our operating results and revenues.

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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.

Successful commercialization of pharmaceutical products and product line extensions requires accurate anticipation of market and customer acceptance of particular products, customers’ needs, the sale of competitive products, and emerging technological trends, among other things. Additionally, for successful product development, our customers must complete many complex formulation and analytical testing requirements and timely obtain regulatory approvals from the FDA and other regulatory agencies. When developed, new or reformulated drugs may not exhibit desired characteristics or may not be accepted by the marketplace. Complications can also arise during production scale-up. In addition, a customer’s product that includes ingredients that are manufactured by AFC may be subsequently recalled or withdrawn from the market by the customer. The recall or withdrawal may be for reasons beyond the control of AFC. Moreover, products may encounter unexpected, irresolvable patent conflicts or may not have enforceable intellectual property rights. If the customer is not able to successfully commercialize a product for which AFC produces compounds, or if there is a subsequent recall or withdrawal of a product manufactured by AFC or that includes ingredients manufactured by AFC for its customers, it could have an adverse impact on AFC’s operating results, including its forecasted or actual revenues.

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.

As of September 30, 2012, AFC had approximately 162 employees that were covered by collective bargaining or similar agreements. We consider our relationships with our unionized employees to be satisfactory. In July 2010, AFC’s collective bargaining and similar agreements were renegotiated and extended to June 2013. If we are unable to negotiate acceptable new agreements with the union representing these employees upon expiration of the existing contracts, we could experience strikes or work stoppages. Even if AFC is successful in negotiating new agreements, the new agreements could call for higher wages or benefits paid to union members, which would increase AFC’s operating costs and could adversely affect its profitability. If the unionized workers were to engage in a strike or other work stoppage, or other non-unionized operations were to become unionized, AFC could experience a significant disruption of operations at its facilities or higher ongoing labor costs. A strike or other work stoppage in the facilities of any of its major customers or suppliers could also have similar effects on 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.

The pharmaceutical fine chemicals industry is a capital-intensive industry. Consequently, AFC’s capital expenditures consume cash from our Fine Chemicals segment and our other operations and may also consume cash from borrowings. Increases in capital expenditures may result in low levels of working capital or require us to finance working capital deficits, and such financing may be costly or even unavailable given on-going conditions of the credit markets in the U.S. Changes in the availability, terms and costs of capital or a reduction in credit rating or outlook could cause our cost of doing business to increase and place us at a competitive disadvantage. These factors could substantially constrain AFC’s growth, increase AFC’s costs and negatively impact its operating results.

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.

We may face potential liability claims based on our products or services in our several lines of business under certain circumstances, and any such claims could result in significant expenses, disrupt sales and affect our reputation and that of our products. For example, a customer’s product may include ingredients that are manufactured by AFC. Although such ingredients are generally made pursuant to specific

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instructions from our customer and tested using techniques provided by our customer, the customer’s product may, nevertheless, be subsequently recalled or withdrawn from the market by the customer, and the recall or withdrawal may be due in part or wholly to product failures or inadequacies that may or may not be related to the ingredients we manufactured for the customer. In such a case, the recall or withdrawal may result in claims being made against us. Although we seek to reduce our potential liability through measures such as contractual indemnification provisions with customers, we cannot assure you that such measures will be enforced or effective. We could be materially and adversely affected if we were required to pay damages or incur defense costs in connection with a claim that is outside the scope of the indemnification agreements, if the indemnity, although legally enforceable, is not applicable in accordance with its terms or if our liability exceeds the amount of the applicable indemnification, or if the amount of the indemnification exceeds the financial capacity of our customer. In certain instances, we may have in place product liability insurance coverage, which is generally available in the market, but which may be limited in scope and amount. In other instances, we may have self-insured the risk for any such potential claim. There can be no assurance that our insurance coverage, if available, will be adequate or that insurance coverage will continue to be available on terms acceptable to us. Given the current economic environment, it is also possible that our insurers may not be able to pay on any claims we might bring. Unexpected results could cause us to have financial exposure in these matters in excess of insurance coverage and recorded reserves, requiring us to provide additional reserves to address these liabilities, impacting profits. Moreover, any claim brought against us, even if ultimately found to be insignificant or without merit, could damage our reputation, which, in turn, may impact our business prospects and future results.

Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales.

Technology innovations to which our current and potential customers might have access could reduce or eliminate their need for our products, which could negatively impact the sale of those products. Our customers constantly attempt to reduce their manufacturing costs and improve product quality, such as by seeking out producers using the latest manufacturing techniques or by producing component products themselves, if outsourcing is perceived to be not cost effective. To continue to succeed, we will need to manufacture and deliver products, and develop better and more efficient means of manufacturing and delivering products, that address evolving customer needs and changes in the market on a timely and cost-effective basis, using the latest and/or most efficient technology available. We may be unable to respond on a timely basis to any or all of the changing needs of our customer base. Separately, our competitors may develop technologies that render our existing technology and products obsolete or uncompetitive. Our competitors may also implement new technologies before we are able to do so, allowing them to provide products at more competitive prices. Technology developed by others in the future could, among other things, require us to write-down obsolete facilities, equipment and technology or require us to make significant capital expenditures in order to stay competitive. Our failure to develop, introduce or enhance products and technologies able to compete with new products and technologies in a timely manner could have an adverse effect on our business, results of operations and financial condition.

We are subject to strong competition in certain industries in which we participate and therefore may not be able to compete successfully.

Other than the sale of AP, for which we are the only North American provider, we face competition in all of the other industries in which we participate. Many of our competitors have financial, technical, production, marketing, research and development and other resources substantially greater than ours. As a result, they may be better able to withstand the effects of periodic economic or business segment downturns. Moreover, barriers to entry, other than capital availability, are low in some of the product segments of our business. Consequently, we may encounter intense bidding for contracts. Capacity additions or technological advances by existing or future competitors may also create greater competition, particularly in pricing. Further, the pharmaceutical fine chemicals market is fragmented and competitive. Pharmaceutical fine chemicals manufacturers generally compete based on their breadth of technology base, research and development and chemical expertise, flexibility and scheduling of manufacturing capabilities, safety record, regulatory compliance history and price. AFC faces increasing competition

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from pharmaceutical contract manufacturers, in particular competitors located in the People’s Republic of China and India, where facilities, construction and operating costs are significantly less. If AFC is unable to compete successfully, its results of operations may be materially adversely impacted. Furthermore, there is a worldwide over-capacity of the ability to produce sodium azide, which creates significant price competition for that product. Maintaining and improving our competitive position will require continued investment in our existing and potential future customer relationships as well as in our technical, production, and marketing operations. We may be unable to compete successfully with our competitors and our inability to do so could result in a decrease in revenues that we historically have generated from the sale of our products.

Due to the nature of our business, our sales levels may fluctuate causing our quarterly operating results to fluctuate.

Our quarterly and annual sales are affected by a variety of factors that could lead to significant variability in our operating results, including as a result of the actual placement, timing and delivery of orders for new and/or existing products. In our Specialty Chemicals segment, the need for our products is generally based on contractually defined milestones that our customers are bound by and these milestones may fluctuate from quarter to quarter resulting in corresponding sales fluctuations. In our Fine Chemicals segment, some of our products require multiple steps of chemistry, the production of which can span multiple quarterly periods. Revenue is typically recognized after the final step and when the product has been delivered and accepted by the customer. As a result of this multi-quarter process, revenues and related profits can vary from quarter to quarter. Consequently, due to factors inherent in the process by which we sell our products, changes in our operating results may fluctuate from quarter to quarter and could result in volatility in our common stock price.

The inherent volatility of the chemical industry affects our capacity utilization and causes fluctuations in our results of operations.

Our Specialty Chemicals and Fine Chemicals segments are subject to volatility that characterizes the chemical industry generally. Thus, the operating rates at our facilities will impact the comparison of period-to-period results. Different facilities may have differing operating rates from period to period depending on many factors, such as transportation costs and supply and demand for the product produced at the facility during that period. As a result, individual facilities may be operated below or above rated capacities in any period. We may idle a facility for an extended period of time because an oversupply of a certain product or a lack of demand for that product makes production uneconomical. The expenses of the shutdown and restart of facilities may adversely affect quarterly results when these events occur. In addition, a temporary shutdown may become permanent, resulting in a write-down or write-off of the related assets. Moreover, workforce reductions in connection with any short-term or long-term shutdowns, or related cost-cutting measures, could result in an erosion of morale, affect the focus and productivity of our remaining employees, including those directly responsible for revenue generation, and impair our ability to retain and recruit talent, all of which in turn may adversely affect our future results of operations.

A loss of key personnel or highly skilled employees, or the inability to attract and retain such personnel, could disrupt our operations or impede our growth.

Our executive officers are critical to the management and direction of our businesses. Our future success depends, in large part, on our ability to retain these officers and other capable management personnel. From time to time we have entered into employment or similar agreements with our executive officers and we may do so in the future, as competitive needs require. These agreements typically allow the officer to terminate employment with certain levels of severance under particular circumstances, such as a change of control affecting our company. In addition, these agreements generally provide an officer with severance benefits if we terminate the officer without cause. Our inability to attract and retain talented personnel and replace key personnel in a timely fashion could disrupt the operations of the segment affected or our overall operations. Furthermore, our business is very technical and the technological and creative skills of our personnel are essential to establishing and maintaining our competitive advantage.

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For example, customers often turn to AFC because very few companies have the specialized experience and capabilities and associated personnel required for performing chiral separations, energetic chemistries and projects that require high containment. Our future growth and profitability in part depend upon the knowledge and efforts of our highly skilled employees, including their ability to keep pace with technological changes in the fine chemicals and specialty chemicals industries, as applicable. We compete vigorously with various other firms to recruit these highly skilled employees. Our operations could be disrupted by a shortage of available skilled employees or if we are unable to attract and retain these highly skilled and experienced employees.

We may continue to expand our operations through acquisitions, but the acquisitions could divert management’s attention and expose us to unanticipated liabilities and costs. We may experience difficulties integrating the acquired operations, and we may incur costs relating to acquisitions that are never consummated.

Our business strategy may include growth through future possible acquisitions, in particular in connection with our Fine Chemicals segment. Our future growth is likely to depend, in significant part, on our ability to successfully implement this acquisition strategy. However, our ability to consummate and integrate effectively, any future acquisitions on terms that are favorable to us may be limited by the number of attractive and suitable acquisition targets, internal demands on our resources and our ability to obtain or otherwise facilitate cost-effective financing, especially during difficult and unsettled economic times in the credit market. Any future acquisitions would currently challenge our existing resources. To the extent that we were to effect a new acquisition, if we did not properly meet the increasing expenses and demands on our resources resulting from such future growth, our results could be adversely affected. Our success in integrating newly acquired businesses will depend upon our ability to retain key personnel, avoid diversion of management’s attention from operational matters, integrate general and administrative services and key information processing systems and, where necessary, requalify our customer programs. In addition, future acquisitions could result in the incurrence of additional debt, costs and contingent liabilities. We may also incur costs and divert management’s attention to acquisitions that are never consummated. Integration of acquired operations may take longer, or be more costly or disruptive to our business, than originally anticipated. It is also possible that expected synergies from past or future acquisitions may not materialize.

Although we undertake a diligence investigation of each acquisition target that we pursue, there may be liabilities of the acquired companies or assets that we fail to or are unable to discover during the diligence investigation and for which we, as a successor owner, may be responsible. In connection with acquisitions, we generally seek to minimize the impact of these types of potential liabilities through indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the ultimate actual liabilities due to limitations in scope, amount or duration, financial limitations of the indemnitor or warrantor or other reasons.

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.

As of March 31, 2013, we had outstanding debt of approximately $57,750, for which we are required to make principal and interest payments. Subject to the limits contained in some of the agreements governing our outstanding debt, we may incur additional debt in the future or we may refinance some or all of this debt. Our level of debt places significant demands on our cash resources, which could:

• 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;

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• limit our ability to borrow additional funds; or

• increase our vulnerability to general adverse economic and industry conditions.

We are obligated to comply with various ongoing covenants in our debt, which could restrict our operations, and if we should fail to satisfy any of these covenants, the payment under our debt could be accelerated, which would negatively impact our liquidity.

We are obligated to comply with various ongoing covenants in our debt, including in certain cases financial covenants, that could restrict our operating activities, and the failure to comply could result in defaults that accelerate the payment under our debt. Our outstanding debt generally contains various affirmative, negative and financial covenants. These covenants include provisions restricting our and our current and future domestic subsidiaries’ ability to, among other things:

• pay dividends, repurchase our stock, or make other restricted payments;

• make certain investments or acquisitions;

• incur additional indebtedness;

• create or permit to exist certain liens;

• enter into certain transactions with affiliates;

• consummate a merger, consolidation or sale of assets;

• change our business; and

• wind up, liquidate, or dissolve our affairs.

Any of the covenants described above may restrict our operations and our ability to pursue potentially advantageous business opportunities. Our failure to comply with these covenants could also result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt, which would negatively impact our liquidity. In light of our continued working capital requirements and challenging market conditions, there is a risk that we may be unable to continue to comply with one or more of our debt covenants in the future. Such noncompliance could require us to re-negotiate new terms with our lenders which, in all likelihood, would lead to the incurrence of transaction costs and potentially other less favorable terms and conditions being placed upon us, thereby further negatively impacting our liquidity and results of operations.

Significant changes in discount rates, rates of return on pension assets and other factors could affect our estimates of pension obligations, which in turn could affect future funding requirements, related costs and our future financial condition, results of operations and cash flows.

As of September 30, 2012, we had unfunded pension obligations, including the current and non-current portions, of $55,827. The cost of our defined benefit pension plans is recognized through operations over extended periods of time and involves many uncertainties during those periods of time. Our funding policy for our U.S. tax-qualified defined benefit pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations. Our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Changes in these and related factors can affect our estimates of pension obligations. Additionally, significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change of the expected rate of return on plan assets.

We have unfunded obligations under our U.S. tax-qualified defined benefit pension plans totaling approximately $44,741 on a projected benefit obligation basis as of September 30, 2012. Declines in the value of plan investments or unfavorable changes in law or regulations that govern pension plan funding could materially change the timing and amount of required funding.

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Our suspended stockholder 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.

We have a stockholder rights plan that, although currently suspended, may have the effect of discouraging unsolicited takeover proposals. The rights issued under the stockholder rights plan would cause substantial dilution to a person or group which attempts to acquire us on terms not approved in advance by our board of directors. In addition, our Restated Certificate of Incorporation, as amended, and Amended and Restated By-laws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include:

• 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.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, our charter provisions, Delaware law and the stockholder rights plan may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.

Our proprietary and intellectual property rights may be violated, compromised, circumvented or invalidated, which could damage our operations.

We have numerous patents, patent applications, exclusive and non-exclusive licenses to patents, and unpatented trade secret technologies in the U.S. and certain foreign countries. There can be no assurance that the steps taken by us to protect our proprietary and intellectual property rights will be adequate to deter misappropriation of these rights. In addition, independent third parties may develop competitive or superior technologies that could circumvent the future need to use our intellectual property, thereby reducing its value. They may also attempt to invalidate patent rights that we own directly or that we are entitled to exploit through a license. If we are unable to adequately protect and utilize our intellectual property or proprietary rights, our results of operations may be adversely affected.

Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure.

We rely upon the capacity, reliability and security of our information technology hardware and software infrastructure and our ability to expand and update this infrastructure in response to our changing needs. We are constantly updating our information technology infrastructure. Any failure to manage, expand and update our information technology infrastructure or any failure in the operation of this infrastructure could harm our business.

Despite our implementation of security measures, our systems are vulnerable to damages from computer viruses, natural disasters, unauthorized access and other similar disruptions. Any system failure, accident or security breach could result in disruptions to our operations. To the extent that any disruptions or security breach results in a loss or damage to our data, or in inappropriate disclosure of confidential information, it could harm our business. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

We are exposed to counterparty risk through our interest rate swap and a counterparty default could adversely affect our financial condition.

We have entered into an interest rate swap with HSBC Bank USA, N.A. (“HSBC”), which subjects us to counterparty risk. The ability of HSBC to perform its obligations under the contract will depend upon a number of factors that are beyond our control and may include, among other things, general economic

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conditions and the overall financial condition of HSBC. Should HSBC fail to honor its obligations under its agreement with us, we could sustain significant losses which could have an adverse effect on our financial condition, results of operations and cash flows.

Our common stock price may fluctuate substantially, and a stockholder’s investment could decline in value.

The market price of our common stock has been highly volatile during the past several years. For example, during Fiscal 2012, the highest closing sale price for our common stock was $13.47 and the lowest closing sale price for our common stock was $6.85. The realization of any of the risks described in these Risk Factors or other unforeseen risks could have a dramatic and adverse effect on the market price of our common stock. Moreover, the market price of our common stock may fluctuate substantially due to many factors, including:

• actual or anticipated fluctuations in our results of operations;

• events or concerns related to our products or operations or those of our competitors, including public health, environmental and safety concerns related to products and operations;

• material public announcements by us or our competitors;

• changes in government regulations or policies, such as new legislation, laws or regulatory decisions that are adverse to us and/or our products;

• changes in key members of management;

• developments in our industries;

• changes in investors’ acceptable levels of risk;

• trading volume of our common stock; and

• general economic conditions.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to companies’ operating performance. In addition, the global economic environment and potential uncertainty have created significant additional volatility in the United States capital markets. Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, stockholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, and whether with or without merit, could result in substantial costs and divert management’s attention and resources, which could harm our business and financial condition, as well as the market price of our common stock. Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees or to use our stock to acquire other companies at a time when use of cash or financing for such acquisitions may not be available or in the best interests of our stockholders.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS – None.

ITEM  3. DEFAULTS UPON SENIOR SECURITIES – None.

ITEM 4. MINE SAFETY DISCLOSURES – Not Applicable.

ITEM 5. OTHER INFORMATION

On May 7, 2013, the Board of Directors (the “Board”) of the Company, upon the recommendation of the Compensation Committee of the Board, authorized the Company to replace the existing severance agreement with Aslam Malik, Ph.D., President of Ampac Fine Chemicals, LLC and Vice President of American Pacific Corporation (the “Executive”) with a severance agreement (the “Severance Agreement”) that conformed generally to similar arrangements with other executive officers. The Severance Agreement was executed on May 7, 2013.

The Compensation Committee completed a review of the severance benefits provided to the Company’s executive officers. To better conform the benefits provided to our executive officers, they determined that it was appropriate to provide the Executive with the Severance Agreement in lieu of his existing severance benefits provided by the Ampac Fine Chemicals LLC Severance Pay Plan. The Severance Agreement is substantially similar in form and substance to the existing severance agreements the Company entered into with Dana M. Kelley and Linda G. Ferguson in July 2008 and was entered into by the Company to, among other things, assist the Company’s on-going retention practices and help promote stability and continuity of senior management of the Company, and in the context of the overall compensation philosophy and policy of the Company and the total compensation of senior executive officers of the Company.

Under the terms of the Severance Agreement, unless Executive’s employment is terminated for cause or by death or disability, if the Company terminates Executive’s employment ( a “Discretionary Termination”), the Company shall, upon receipt of a mutually satisfactory release of potential claims against the Company, continue to pay to Executive, in accordance with the Company’s then effective payroll practices, Executive’s then effective base salary (but not any employee benefits), less applicable withholding, for a period of three (3) years from the date the employment relationship with the Company terminates (the “Termination Date”); provided, however, that such payments by the Company shall be offset, during the third year following the Termination Date, by income paid to Executive by another employer other than the Company. For purposes of the Severance Agreement, base salary shall not include any perquisites or similar benefits provided to Executive prior to the Termination Date. In addition, under the terms of the Severance Agreement, upon a Discretionary Termination, if Executive elects to convert his Company group health coverage under COBRA, the Company will pay Executive’s COBRA premiums until the earlier of (1) the eighteenth (18th) month anniversary of the Termination Date or (2) Executive becomes covered by another employer’s group health plans. Finally, under the terms of the Severance Agreement, upon a Discretionary Termination, all shares of restricted stock granted to Executive, all unexercised options to purchase Company common stock and any other equity awards of the Company, in each case that are unvested at the time of such termination of employment of Executive, shall become, immediately prior to the Termination Date, fully vested and, as applicable, exercisable.

Under the terms of the Severance Agreement, in the event of Executive’s termination, other than for cause or by death or disability, following a Corporate Transition (as described below), and upon receipt of a mutually satisfactory release of potential claims against the Company and any successor, Executive shall be entitled to the payments and benefits described above with respect to base salary and COBRA premiums following termination of employment. In addition, all unvested shares of restricted stock granted to Executive, all unvested and unexercised options to purchase Company stock granted to Executive, and all other unvested equity awards under the Company’s 2008 Stock Incentive Plan or similar employee benefit plan, in each case at the time of the Corporate Transition, shall become, immediately prior to such Corporate Transition, fully vested and, as applicable, exercisable.

The Severance Agreement defines a Corporate Transition as any of the following transactions to which the Company is a party: (A) a merger or consolidation in which the Company is not the surviving entity and securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a holder different from those who held such securities immediately prior to such merger; (B) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company; (C) any reverse merger in which the Company is the surviving entity but in which securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a holder(s) different from those who held such securities immediately prior to such merger; or (D) any cash dividend paid by the Company that, in the aggregate with all other dividends paid in any twelve month period, is greater than the combined earnings of the Company for the Company’s two fiscal years prior to such dividend payment date. In addition, a Corporate Transition also includes a “Change in Control” as such term is defined in the Company’s 2008 Stock Incentive Plan. None of the foregoing events, however, shall be considered a Corporate Transition under the Severance Agreement unless the event also qualifies as a change in the ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, under Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended, the regulations thereunder, and any other published interpretive authority, as issued or amended from time to time.

The Severance Agreement also provides that the Executive may, at any time, terminate his employment with the Company, for any or no reason, by providing the Company 30 days’ advance written notice and the Company could thereafter terminate the Executive’s employment at any time, provided the Company paid him all compensation due and owing through the last day actually worked, plus an amount equal to the effective base salary he would have earned through the balance of the above notice period.

The Severance Agreement further provides that, during the period when payments to Executive are being made, or for two years after the termination of Executive for cause or by disability, Executive shall be subject to noncompetition and nonsolicitation restrictions with the Company, as described more fully in the Severance Agreement.

The Severance Agreement is attached as Exhibit 10.2 hereto and is incorporated herein by reference. The foregoing description of the Severance Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Severance Agreement.

ITEM 6. EXHIBITS – See attached exhibit index.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMERICAN PACIFIC CORPORATION
Date: May 10, 2013	/s/ JOSEPH CARLEONE
	Joseph Carleone President and Chief Executive Officer (Principal Executive Officer)
Date: May 10, 2013	/s/ DANA M. KELLEY
	Dana M. Kelley Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

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EXHIBIT INDEX

EXHIBIT NO.	DOCUMENT DESCRIPTION
2.1	Asset Purchase Agreement, dated June 4, 2012, by and among Moog Inc., Ampac-Isp Corp., and American Pacific Corporation (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2012 (SEC File No. 001-08137)).
3.1	Restated Certificate of Incorporation, as amended, of American Pacific Corporation (incorporated by reference to Exhibit 4.(a) to the registrant’s Registration Statement on Form S-3 (File No. 33-15674)).
3.2	Articles of Amendment to the Restated Certificate of Incorporation of American Pacific Corporation, as filed with the Secretary of State, State of Delaware, on October 7, 1991 (incorporated by reference to Exhibit 4.3 to the registrant’s Registration Statement on Form S-3 (File No. 33-52196)).
3.3	Articles of Amendment to the Restated Certificate of Incorporation of American Pacific Corporation, as filed with the Secretary of State, State of Delaware, on April 21, 1992 (incorporated by reference to Exhibit 4.4 to the registrant’s Registration Statement on Form S-3 (File No. 33-52196)).
3.4	Certificate of Amendment of Restated Certificate of Incorporation of American Pacific Corporation, as filed with the Secretary of State, State of Delaware, on March 8, 2011 (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and Exchange Commission on March 11, 2011).
3.5	American Pacific Corporation Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and Exchange Commission on March 11, 2011).
4.1	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).
4.2	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).
4.3	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).
4.4	Amendment No. 2 to Rights Agreement, dated as of September 14, 2010, between American Pacific Corporation and American Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and Exchange Commission on September 20, 2010).

– 56 –

10.1	Settlement Agreement, dated January 14, 2013, by and among Cornwall Master LP, Cornwall Capital Management LP, Cornwall GP, LLC, CMGP LLC, and James Mai and American Pacific Corporation (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (File No. 001-08137) filed by the registrant with the Securities and Exchange Commission on January 15, 2013).
10.2 †	Severance Agreement, dated as of May 7, 2013, between American Pacific Corporation and Aslam Malik.
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 *	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 *	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2012, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes (furnished herewith)

†   Management contract or compensatory arrangement.

*   Exhibits 32.1 and 32.2 are furnished to accompany this Quarterly Report on Form 10-Q but shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

– 57 –

EX-10.2

EXHIBIT 10.2

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”), entered into effective May 7, 2013, is between American Pacific Corporation, a Delaware corporation having its principal place of business at 3883 Howard Hughes Parkway, Suite 700, Las Vegas, Nevada 89169 (the “Company”), and Aslam Malik, an individual residing at the address set forth below his signature at the end of this Agreement and currently the President of Ampac Fine Chemicals, LLC and Vice President of American Pacific Corporation (“Executive”) (collectively, “the parties”).

1. Severance Benefits

Unless Executive’s employment is terminated for Cause or by death or Disability (as defined below), if the Company terminates Executive’s employment:

(a) The Company, in an attempt to ease Executive’s transition, and upon receipt of a mutually satisfactory release of potential claims against the Company, shall pay Executive all compensation due and owing through the last day actually worked, and shall continue to pay to Executive, in accordance with the Company’s then effective payroll practices, Executive’s then effective base salary (but not any employee benefits), less applicable withholding, for a period of three (3) years from the date the employment relationship with the Company terminates (the “Termination Date”); provided, however, that such payments by the Company shall be offset, during the third year following the Termination Date, by income paid to Executive by another employer other than the Company, which income Executive shall promptly report to the Company. For the avoidance of doubt, for purposes of this Section 1(a), base salary shall not include any perquisites or similar benefits provided to Executive prior to the Termination Date, including, without limitation, any automobile allowance, club membership or right to use aircraft otherwise provided by the Company for the use by the Company’s executives.

(b) If Executive elects to convert his Company group health coverage under COBRA, the Company will pay Executive’s COBRA premiums until the earlier of (1) the eighteenth (18th) month anniversary of the Termination Date or (2) Executive becomes covered by another employer’s group health plans.

(c) All shares of restricted stock granted to Executive, all unexercised options to purchase Company common stock and any other equity awards of the Company, in each case that are unvested at the time of such termination of employment of Executive, shall become, immediately prior to the Termination Date, fully vested and, as applicable, exercisable.

(d) The payments and benefits described in this Section 1 shall be conditioned upon Executive’s continued compliance with the material obligations described in this Agreement. Should Executive violate any such obligations, as determined by the Company in good faith, all further payment obligations shall cease.

2. Other Terminations

(a) Termination by Company for Cause. At any time, and without prior notice, the Company may terminate Executive’s employment for Cause (as defined below). In such case, the Company shall pay Executive all compensation then due and owing; thereafter, all of the Company’s obligations under this Agreement shall cease. Termination for “Cause” shall mean termination of Executive’s employment because of Executive’s (i) involvement in fraud, misappropriation or embezzlement related to the business or property of the Company and/or its subsidiaries or affiliates; (ii) conviction for, or guilty or “no contest” plea to, a felony; and/or (iii) a pattern of failure to substantially perform his duties to the Company, provided, however, that if such Cause is reasonably curable, the Company shall not terminate Executive’s employment unless the Company first gives notice of its intention to terminate and the grounds of such termination, and Executive has not, within thirty (30) days following receipt of such notice, cured such Cause, to the satisfaction of the Company.

(b) Termination by Executive. At any time, Executive may terminate his employment with the Company for any reason, for any or no reason, by providing the Company thirty (30) days’ advance written notice. The Company shall have the option, in its complete discretion, to make such termination of employment effective at any time prior to the end of such notice period, provided that the Company pays Executive all compensation due and owing through the last day actually worked, plus an amount equal to the then effective base salary, less applicable withholding, Executive would have earned through the balance of the above notice period; thereafter, all of the Company’s obligations under this Agreement shall cease.

Page 1 of Exhibit 10.2

(c) Termination by Death. If Executive shall die while still an employee of the Company, Executive’s employment with the Company shall be deemed to have terminated upon the date of death of Executive. The Company shall pay to Executive’s beneficiaries or estate, as appropriate, compensation then due and owing as of the date of death, and shall continue to pay Executive’s salary and benefits (to the extent consistent with the terms of the relevant benefit plan), through the second full month after Executive’s death. As of the date of death, all unvested stock options or other equity awards granted to Executive to the date of death shall become fully vested and, as applicable, exercisable, and may be exercised by the appropriate representative of Executive’s estate. Thereafter, all obligations of the Company under this Agreement shall cease. Nothing in this Section 2(c) shall affect any entitlement of Executive’s heirs to the benefits of any life insurance, vested funds in plans governed by provisions of state or federal laws, including but not limited to 401(k), deferred compensation, pension, or other similar employee benefit plans.

(d) Termination by Disability. If, in the sole opinion of the Company, Executive shall suffer a Disability (as defined below), and, to the extent permitted by law, the Company shall terminate Executive’s employment, the Company shall pay to Executive all compensation to which Executive is entitled through the last day of the month in which Executive has been determined to have a Disability, and, thereafter, there shall be no other obligations of the Company under this Agreement. Nothing in this Section 2(d) shall affect Executive’s rights under any disability plan in which he is a participant. For purposes of this Agreement, “Disability” shall mean (i) Executive’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) Executive’s receipt, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, of income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.

3. Termination of Employment Following Corporate Transition

(a) Corporate Transition Defined. For purposes of this Agreement, a “Corporate Transition” shall include any of the following transactions to which the Company is a party: (A) a merger or consolidation in which the Company is not the surviving entity and securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a holder different from those who held such securities immediately prior to such merger; (B) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company; (C) any reverse merger in which the Company is the surviving entity but in which securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a holder(s) different from those who held such securities immediately prior to such merger; or (D) any cash dividend paid by the Company that, in the aggregate with all other dividends paid in any twelve month period, is greater than the combined earnings of the Company for the Company’s two fiscal years prior to such dividend payment date. In addition, a Corporate Transition shall also include a “Change in Control” as such term is defined in the Company’s 2008 Stock Incentive Plan. None of the foregoing events, however, shall be considered a Corporate Transition under this Agreement unless the event also qualifies as a change in the ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, under Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended, the regulations thereunder, and any other published interpretive authority, as issued or amended from time to time. Except as provided otherwise in this Section 3, in the event of a Corporate Transition, the provisions of Section 1 and Section 2(b) above shall not apply.

(b) Acceleration of Vesting at Time of Corporate Transition. Should a Corporate Transition take place, all unvested shares of restricted stock granted to Executive, all unvested and unexercised options to purchase Company stock granted to Executive, and all other unvested equity awards under the 2008 Stock Incentive Plan or similar employee benefit plan, in each case at the time of the Corporate Transition, shall become, immediately prior to such Corporate Transition, fully vested and, as applicable, exercisable.

Page 2 of Exhibit 10.2

(c) Severance Benefits in the Event of Termination Following Corporate Transition. In the event of Executive’s termination, other than for Cause or by death or Disability, following a Corporate Transition, and upon receipt of a mutually satisfactory release of potential claims against the Company and any successor, Executive shall be entitled to the payments and benefits described in Sections 1(a) and 1(b) above. Such payments and benefits shall be conditioned upon Executive’s continued compliance with the material obligations described in this Agreement. Should Executive violate any such obligations, as determined by the Company in good faith, all further obligations shall cease.

4. Termination Obligations

(a) Return of Company’s Property. Executive hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, blueprints, and other documents, or materials, or copies thereof, and equipment, furnished to or prepared by Executive in the course of or incident to Executive’s employment, belong to the Company and shall be promptly returned to the Company upon termination of Executive’s employment.

(b) Representations and Warranties Survive Termination of Employment. The representations and warranties contained herein shall survive termination of Executive’s employment and expiration of this Agreement.

(c) Cooperation in Pending Work. Following termination of Executive’s employment with the Company for any reason, Executive shall fully cooperate with the Company in all matters relating to the winding up of pending work on behalf of the Company and the orderly transfer of work to other employees of the Company. Executive shall also cooperate in the defense of any litigation, whether judicial or administrative, brought by any third party against the Company that relates in any way to Executive’s knowledge, acts or omissions or duties while employed by the Company. If Executive’s cooperation in the defense of any such action requires more than ten (10) hours of Executive’s time, Executive and the Company shall agree on appropriate remuneration for Executive’s time and expenses.

(d) Post-Employment Obligations. Executive acknowledges and agrees that during his employment with the Company, he has had, and will have, access to Confidential Information (as defined below) and the activities forbidden by this subsection would necessarily involve the improper use and disclosure of this Confidential Information.

(1) To forestall this use or disclosure, Executive agrees that during the period described in Section 1(a) or Section 3(c) when payments to Executive are being made, or for two years after the termination of Executive for Cause or by Disability, Executive shall not, directly or indirectly, (i) divert or attempt to divert from the Company (or any affiliate thereof) any business of any kind in which the Company (or any affiliate thereof) is engaged at the time the Executive’s employment terminates; or (ii) employ or recommend for employment any person employed by the Company (or any affiliate thereof), unless Executive can prove that any of the above actions was done without the use of Confidential Information.

(2) In addition to the above restrictions on competitive activity, and regardless of whether any use of Confidential Information is involved, Executive agrees that during the payment period referred to in Section 1(a) or 3(c) Executive shall not, directly or indirectly, (i) solicit any Customer of the Company (or any affiliate thereof) known to Executive (while he was employed by the Company) to have been a Customer with respect to products offered by the Company; or (ii) solicit for employment any person employed by the Company (or any affiliate thereof). For purposes of this subsection (d)(2) “Customer” shall mean a person or entity that within the twelve months immediately preceding Executive’s termination of employment, purchased or placed orders for a product made or to be made by the Company, having an aggregate price for a single product of greater than $2,000,000.

(e) Restriction on Use of Proprietary and Confidential Information. Following termination of employment with the Company for any reason, Executive shall neither, directly or indirectly, use any Proprietary Information (as defined below) nor disclose any Confidential Information (as defined below), except as expressly and specifically authorized in writing by the Company. The disclosure or publication, whether to an individual employed by the Company or not, of any Proprietary Information, through literature, speeches or discussion, must be approved in advance in writing by the Company.

Page 3 of Exhibit 10.2

(f) Proprietary and Confidential Information Defined. “Proprietary Information” is all information and any idea in whatever form, tangible or intangible, pertaining in any manner to the business of the Company and its subsidiaries and affiliates, or any of their employees, clients, consultants, or business associates, which was produced by any employee of the Company or its subsidiaries or affiliates, in the course of his employment or otherwise produced or acquired by or on behalf of the Company or its subsidiaries or affiliates. All Proprietary Information not generally known outside of the Company’s organization, and all Proprietary Information so known only through improper means, shall be deemed “Confidential Information.” Without limiting the foregoing definition, Proprietary and Confidential Information shall include, but not be limited to: (i) formulas, teaching and development techniques, processes, trade secrets, computer programs, electronic codes, inventions, improvements, and research projects; (ii) information about costs, profits, markets, and sales; (iii) customer lists, records of customer services, usages and requirements, sketches and diagrams of the Company’s or customers’ facilities, and similar records; (iv) business, marketing, and strategic plans; and (v) employee personnel files and compensation information. All information disclosed to Executive or to which Executive obtains access during Executive’s employment with the Company, or to which Executive obtains access by reason of his employment by the Company, that Executive has a reasonable basis to believe is or may be Confidential Information, shall be presumed to be Confidential Information. Executive should consult any Company procedures instituted to identify and protect certain types of Confidential Information, which are considered by the Company to be safeguards in addition to the protection provided by this Agreement. Nothing contained in those procedures or in this Agreement is intended to limit the effect of the other.

5. 409A Provisions

This Agreement is intended to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be construed accordingly; provided, however, that the Company makes no representation that the amounts or benefits payable under this Agreement will comply with Code Section 409A and makes no undertaking to prevent Code Section 409A from applying to any amounts or benefits payable under this Agreement, or to mitigate its effects on any amounts or benefits payable under this Agreement. The payment of any amounts or benefits under this Agreement shall be delayed to the extent necessary to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “specified employees” of certain publicly-traded companies) and in such event, any such amount to which Executive would otherwise be entitled during the six (6) month period immediately following his termination of employment will be paid on the first business day following the expiration of such six (6) month period. For all purposes under this Agreement, “Termination Date”, “termination of employment” and “terminate(s)” shall mean the occurrence of a “separation from service” as that term is defined in Code Section 409A(a)(2)(A)(i) and Treas. Regs. Section 1.409A-1(h), and as amplified by any other official guidance.

6. Notices

All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to the Company:

American Pacific Corporation

Attention: Chief Executive Officer

3883 Howard Hughes Parkway, Suite 700

Las Vegas, Nevada 89169

and addressed to Executive at Executive’s address as set forth on the signature page to this Agreement.

Executive and the Company shall be obligated to notify the other party of any change in address. Notice of a change of address shall be effective only when made in accordance with this Section 6.

7. Entire Agreement

This Agreement is intended to be the final, complete, and exclusive statement of the terms of Executive’s rights to severance from the Company, and specifically supersedes that certain Notice of Eligibility to the Executive

Page 4 of Exhibit 10.2

dated January 24, 2007, with respect to the Ampac Fine Chemicals LLC Severance Pay Plan. Except for any stock option agreements, this Agreement supersedes all other prior and contemporaneous agreements and statements pertaining in any manner to its subject matter and it may not be contradicted by evidence of any prior or contemporaneous statements or agreements. To the extent that the practices, policies, or procedures of the Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.

8. Amendments, Waivers

This Agreement and the terms and conditions herein may not be modified, amended, or waived except by an instrument in writing, signed by Executive and by the Company’s Chief Executive Officer pursuant to authorization of the Board of Directors or the Corporate Governance Committee thereof (or such other committee of the Board of Directors acting as the compensation committee of the Board of Directors). No failure to exercise and no delay in exercising any right, remedy, or power under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, remedy, or power provided herein or by law or in equity.

9. Assignment; Successors and Assigns

Executive agrees that he will not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Executive’s rights be subject to encumbrance or the claims of creditors. Any purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation or other legal entity, or the sale by the Company of all or substantially all of its properties or assets, or the assignment by the Company of this Agreement and the performance of its obligations hereunder to any successor in interest. In the event of a change in ownership or control of the Company, the terms of this Agreement will remain in effect and shall be binding upon any successor in interest. Notwithstanding and subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above.

10. Severability; Enforcement

If any provision of this Agreement, or the application thereof to any person, place, or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable, or void, the remainder of this Agreement and such provisions as applied to other persons, places, and circumstances shall remain in full force and effect.

11. Governing Law

The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the law of the State of Nevada.

12. Arbitration

Any claim or controversy between Executive and the Company or its successor arising under or in connection with this Agreement shall be settled by arbitration in accordance with the then current Employment Dispute Resolution Rules of the American Arbitration Association and shall be the exclusive remedy for all arbitrable claims. The Company and Executive agree that arbitration shall be held in or near Clark County, Nevada, before an arbitrator licensed to practice law in the State of Nevada. The arbitrator shall have authority to award or grant legal, equitable, and declaratory relief. Such arbitration shall be final and binding on the parties. The Federal Arbitration Act shall govern the interpretation and enforcement of this section pertaining to arbitration.

This Agreement to arbitrate shall survive termination of Executive’s employment with the Company.

In any dispute arising under or in connection with this Agreement, the prevailing party shall be entitled to recover all costs and reasonable attorney’s fees.

Page 5 of Exhibit 10.2

In the event Executive elects to file suit over a dispute covered by this Section 12, the Company shall have the option to seek an order from any court of competent jurisdiction, or proceed to defend the case filed by Executive, who agrees herein to waive trial by jury and proceed to a trial by judge without jury.

13. Acknowledgment of Parties

The parties acknowledge (a) that they have consulted with or have had the opportunity to consult with independent counsel of their own choice concerning this Agreement, and (b) that they have read and understand the Agreement, are fully aware of its legal effect, and have entered into it freely based on their own judgment and not on any representations or promises other than those contained in this Agreement.

14. Execution of Agreement

This Agreement may be signed by the parties hereto in counterparts, each of which shall be deemed an original and all of which, together, shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

AMERICAN PACIFIC CORPORATION
/s/ JOSEPH CARLEONE
Name:	Joseph Carleone
Title:	Chairman, President and CEO
/s/ ASLAM MALIK
Name:	Aslam Malik
Address:	3001 Oakwood Drive
	Cameron Park, CA 95682

Page 6 of Exhibit 10.2

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer

CERTIFICATION

I, Joseph Carleone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Pacific Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2013	By:	/s/ JOSEPH CARLEONE
	Joseph Carleone President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer

CERTIFICATION

I, Dana M. Kelley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Pacific Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2013	By:	/s/ DANA M. KELLEY
	Dana M. Kelley Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), the undersigned, Joseph Carleone, President and Chief Executive Officer of American Pacific Corporation, a Delaware corporation (the “Company”), does hereby certify, as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that, to his knowledge:

(i) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2013 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: May 10, 2013	/s/ JOSEPH CARLEONE
	Joseph Carleone President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), the undersigned, Dana M. Kelley, Vice President, Chief Financial Officer and Treasurer of American Pacific Corporation, a Delaware corporation (the “Company”), does hereby certify, as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that, to her knowledge:

(i) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2013, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: May 10, 2013	/s/ DANA M. KELLEY
	Dana M. Kelley
	Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

XML

Summary of RSU Activity (Detail) (Restricted Stock Units, USD $)	6 Months Ended
	Mar. 31, 2013
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants	77,231
Forfeitures
Vested
Ending Balance, Outstanding and Non-Vested Shares	77,231
Grants	$ 11.93
Forfeitures
Vested
Ending Balance, Outstanding and Non-Vested, Weighted Average Fair Value Per Share	$ 11.93

XML

Financial Information about Segment Operations (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Segment Reporting Information [Line Items]
Revenues	$ 50,044	$ 39,918	$ 86,362	$ 78,403
Corporate Expenses	(3,890)	(3,167)	(7,976)	(6,793)
Operating Income (Loss)	4,845	4,795	9,793	7,554
Depreciation and amortization	3,104	3,404	6,414	6,777
Fine Chemicals
Segment Reporting Information [Line Items]
Revenues	37,267	20,594	58,614	42,069
Operating Income (Loss)	3,750	(978)	5,027	(2,165)
Depreciation and amortization	2,894	2,928	5,909	5,968
Specialty Chemicals
Segment Reporting Information [Line Items]
Revenues	11,934	18,961	26,284	33,181
Operating Income (Loss)	5,218	9,297	13,135	16,941
Depreciation and amortization	123	377	330	612
Other Businesses
Segment Reporting Information [Line Items]
Revenues	843	363	1,464	3,153
Operating Income (Loss)	(233)	(357)	(393)	(429)
Depreciation and amortization	5	5	10	9
Total Operating Segments
Segment Reporting Information [Line Items]
Operating Income (Loss)	8,735	7,962	17,769	14,347
Corporate
Segment Reporting Information [Line Items]
Depreciation and amortization	$ 82	$ 94	$ 165	$ 188

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Debt - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended		6 Months Ended			6 Months Ended		6 Months Ended						1 Months Ended	6 Months Ended		1 Months Ended		1 Months Ended	6 Months Ended	1 Months Ended	6 Months Ended	1 Months Ended		6 Months Ended
	Mar. 31, 2013	Sep. 30, 2012	Mar. 31, 2012 Maximum	Mar. 31, 2013 Year One	Mar. 31, 2013 Year One Minimum	Mar. 31, 2013 Year Two	Mar. 31, 2013 Year Two Average	Mar. 31, 2013 There After	Mar. 31, 2013 There After Maximum	Mar. 31, 2013 Base Rate Loans Maximum	Mar. 31, 2013 Base Rate Loans Minimum	Mar. 31, 2013 Eurodollar Loans Maximum	Mar. 31, 2013 Eurodollar Loans Minimum	Oct. 26, 2012 Credit Facility	Mar. 31, 2013 Credit Facility	Mar. 31, 2013 Term Loan	Feb. 28, 2007 Senior Notes	Oct. 26, 2012 Senior Notes Credit Facility	Oct. 26, 2012 Senior Notes Credit Agreement	Mar. 31, 2013 Senior Notes Credit Agreement	Jan. 31, 2011 ABL Credit Facility	Mar. 31, 2013 ABL Credit Facility Credit Facility	Oct. 26, 2012 Revolving Loans Credit Facility	Mar. 31, 2013 Revolving Loans Credit Facility	Mar. 31, 2013 Letter of Credit
Debt Instrument [Line Items]
Aggregate principal amount																	$ 110,000
Annual interest rate	9.00%	9.00%								1.50%	0.75%	2.50%	1.75%				9.00%
Line of credit facility, expiration date																	Feb. 01, 2015				Feb. 01, 2015	Jan. 01, 2014			Apr. 01, 2016
Aggregate principal amount outstanding																			65,000
Redemption price percentage of principal amount																			102.25%
Net loss on debt retirement	(2,835)																			2,835
Call premium amount included in the debt retirement net loss																				1,463
Unamortized debt issuance cost included in the debt retirement net loss																				1,252
Other expenses included in the debt retirement net loss																				120
Drawn amount under the credit facility																		85,000			20,000		25,000
Maturity period for the credit facility														5 years							90 days
Principal amount under the credit facility														60,000
Outstanding amount in connection with the issuance of letter of credit																							5,000
Letter of credit outstanding	2,707																							2,707
Letter of credit available																								22,293
Amortization of term loan, 2013																4,500
Amortization of term loan, 2014																6,000
Amortization of term loan, 2015																6,000
Amortization of term loan, 2016																6,000
Amortization of term loan, 2017																7,500
Amortization of term loan, thereafter																30,000
Leverage Ratio	1.33		3.00
Debt Service Coverage Ratio	4.99%				2.00%		2.25%		2.50%
Debt Service Coverage Ratio Commencing Date				Sep. 30, 2014		Sep. 29, 2015		Sep. 30, 2015
Debt issuance cost															$ 1,386
Percentage of Letter of credit outstanding																									105.00%

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Income Taxes - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	6 Months Ended
	Dec. 31, 2012	Mar. 31, 2013	Mar. 31, 2012	Sep. 30, 2012
Deferred Tax Liability Not Recognized [Line Items]
Unrecognized tax benefit		$ 204		$ 1,274
Unrecognized tax benefits that would affect the effective tax rate		201		405
Unrecognized tax benefits released	1,070	1,070
Accrued interest and penalties		7		679
Interest and penalties expense		$ 672	$ 28

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Outstanding Debt Balance (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Sep. 30, 2012
Debt Instrument [Line Items]
Term Loan, variable-rate interest, due through 2017	$ 57,750
Senior Notes, 9%, due 2015		65,000
Capital Leases, due through 2014	11	20
Total Debt	57,761	65,020
Less Current Portion	(5,261)	(16)
Total Long-term Debt	$ 52,500	$ 65,004

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Interim Basis of Presentation and Accounting Policies - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Mar. 31, 2013	Sep. 30, 2012
Schedule Of Significant Accounting Policies [Line Items]
Carrying value of floating-rate term loan	$ 57,750
Fair value of floating-rate term loan	56,851
Sales value of Bill and Hold Inventory	16,048	19,346
Interest Rate Swap
Schedule Of Significant Accounting Policies [Line Items]
Fair value of the swap agreement	$ (284)

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Defined Benefit Plans - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2013 ExecutiveOfficers
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit pension plans	3
Number of 401K Plans	2
Supplemental Executive Retirement Plan
Defined Benefit Plan Disclosure [Line Items]
Number of executive officers	3
Number of former executive officers	2
Contribution and benefit payments	$ 264
Additional Contribution to plans	263
Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Contribution and benefit payments	3,552
Additional Contribution to plans	$ 3,152

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Mar. 31, 2013

Changes in Accumulated Other Comprehensive Income (Loss) by Component, Net of Income Tax

The following table provides changes in accumulated other comprehensive income (loss) by component, net of income tax:

	Gains (Losses) on Defined Benefit Plan Items		Gains (Losses) on Effective Cash Flow Hedge		Total
Balance, September 30, 2012	$	(32,037)	$	-	$	(32,037)
Other comprehensive income (loss) before reclassifications		-		(204)		(204)
Amounts reclassified from accumulated other comprehensive income (loss)		1,328		34		1,362
Net current period other comprehensive income (loss)		1,328		(170)		1,158
Balance, March 31, 2013	$	(30,709)	$	(170)	$	(30,879)

Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI)

The following table provides details about reclassifications out of Accumulated Other Comprehensive Income (Loss) (“AOCI”) for the six months ended March 31, 2013:

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months		Six Months
	Ended March 31, 2013
Gains and losses on cash flow hedges -	$	(56)	$	(56)	Interest expense
interest rate swap agreement		22		22	Income tax expense
	$	(34)	$	(34)	Net of tax
Amortization of defined benefit plan items	$	(538)	$	(1,076)	Cost of revenues
		(568)		(1,138)	Operating expenses
		(1,106)		(2,214)	Total before tax
		442		886	Income tax expense
	$	(664)	$	(1,328)	Net of tax

(a) amounts in parenthesis represent a decrease to income

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Quantitative Disclosures About the Swap Agreement Before Income Tax Effects (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Balance sheet location of fair value:
Other assets	$ 20
Accrued liabilities	$ 304

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Shares Used to Compute Earnings (Loss) Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Income from continuing operations	$ 2,761	$ 1,237	$ 3,912	$ 1,272
Basic weighted-average shares	7,732,000	7,548,000	7,700,000	7,544,000
Diluted:
Weighted-average shares, basic	7,732,000	7,548,000	7,700,000	7,544,000
Weighted-average shares, diluted	8,039,000	7,634,000	7,961,000	7,626,000
Basic earnings per share from continuing operations	$ 0.36	$ 0.16	$ 0.51	$ 0.17
Diluted earnings per share from continuing operations	$ 0.34	$ 0.16	$ 0.49	$ 0.17
Stock Option
Diluted:
Dilutive Effect of Stock	271,000	60,000	228,000	62,000
Restricted Stock
Diluted:
Dilutive Effect of Stock	36,000	26,000	33,000	20,000

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Summary of Exercisable Stock Options (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of vested stock options	422,690
Weighted-average exercise price per share	$ 8.55
Aggregate intrinsic value	$ 6,156
Weighted-average remaining contractual term in years	4 years 10 months 24 days

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Segment Information - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2013 Segment
Segment Reporting, Revenue Reconciling Item [Line Items]
Number of reporting segments	3
Entity-Wide Revenue, Major Customer, Percentage	More than ten percent

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Discontinued Operations - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2013	Jun. 04, 2012
Discontinued Operations [Line Items]
Total consideration for asset purchase agreement		$ 46,000
Purchase Price held in escrow account		$ 4,000
Escrow account maturity	15 months

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Outstanding Debt Balance (Parenthetical) (Detail)	Mar. 31, 2013	Sep. 30, 2012
Debt Instrument [Line Items]
Term Loan, due date	2017	2017
Senior Notes, interest rate	9.00%	9.00%
Senior Notes, due date	2015	2015
Capital Leases, due date	2014	2014

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SHARE-BASED COMPENSATION

6 Months Ended

Mar. 31, 2013

SHARE-BASED COMPENSATION

2. SHARE-BASED COMPENSATION

We account for our share-based compensation arrangements under an accounting standard which requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair values of awards are recognized as additional compensation expense, which is classified as operating expenses, proportionately over the vesting period of the awards.

Our share-based compensation arrangements are designed to advance the long-term interests of the Company, including by attracting and retaining employees and directors and aligning their interests with those of our stockholders. The amount, frequency, and terms of share-based awards may vary based on competitive practices, our operating results, government regulations and availability under our equity incentive plans. Depending on the form of the share-based award, new shares of our common stock may be issued upon grant, option exercise or vesting of the award. We maintain three share-based plans, each as discussed below.

The American Pacific Corporation Amended and Restated 2001 Stock Option Plan (the “2001 Plan”) permitted the granting of stock options to employees, officers, directors and consultants. Options granted under the 2001 Plan generally vested 50% at the grant date and 50% on the one-year anniversary of the grant date, and expire ten years from the date of grant. Under the terms of the 2001 Plan, no options may be granted on or after January 16, 2011, but options previously granted, may extend beyond that date based on the terms of the relevant grant. This plan was approved by our stockholders.

The American Pacific Corporation 2002 Directors Stock Option Plan, as amended and restated (the “2002 Directors Plan”) compensates non-employee directors with stock options granted annually or upon other discretionary events. Options granted under the 2002 Directors Plan prior to September 30, 2007 generally vested 50% at the grant date and 50% on the one-year anniversary of the grant date, and expire ten years from the date of grant. Options granted under the 2002 Directors Plan in November 2007 vested 50% one year from the date of grant and 50% two years from the date of grant, and expire ten years from the date of grant. Under the terms of the 2002 Plan, no options may be granted on or after November 12, 2012, but options previously granted, may extend beyond that date based on the terms of the relevant grant. This plan was approved by our stockholders.

The American Pacific Corporation Amended and Restated 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 800,000 shares of common stock are authorized for issuance under the 2008 Plan, provided that no more than 400,000 shares of common stock may be granted pursuant to awards of restricted stock and restricted stock units. Generally, awards granted under the 2008 Plan vest in three equal annual installments beginning on the first anniversary of the grant date, and in the case of option awards, expire ten years from the date of grant. As of March 31, 2013, there were 239,899 shares available for grant under the 2008 Plan. This plan was approved by our stockholders.

Stock Options and Restricted Stock. A summary of our outstanding and non-vested stock option and restricted stock activity for the six months ended March 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Fair				Fair
			Price				Value				Value
	Shares		Per Share		Shares		Per Share		Shares		Per Share
Balance, September 30, 2012		612,071	$	8.47		138,835	$	3.55		64,497	$	7.52
Granted		47,470		11.93		47,470		5.41		36,060		11.93
Vested		-		-		(77,184)		3.61		(29,505)		7.42
Exercised		(114,730)		8.67		-		-		-		-
Expired / Cancelled		(14,416)		8.48		(1,416)		4.50		-		-
Balance, March 31, 2013		530,395		8.74		107,705		4.31		71,052		9.80

A summary of our exercisable stock options as of March 31, 2013 is as follows:

Number of vested stock options		422,690
Weighted-average exercise price per share	$	8.55
Aggregate intrinsic value	$	6,156
Weighted-average remaining contractual term in years		4.9

We determine the fair value of stock option awards at their grant date, using a Black-Scholes Option-Pricing model applying the assumptions in the following table. We determine the fair value of restricted stock awards based on the fair market value of our common stock on the grant date. Actual compensation, if any, ultimately realized by optionees may differ significantly from the amount estimated using an option valuation model.

	Six Months Ended
	March 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	5.41	$	3.46
Significant fair value assumptions:
Expected term in years		5.70		5.70
Expected volatility		49%		49%
Expected dividends		0%		0%
Risk-free interest rates		0.64%		0.85%
Total intrinsic value of options exercised	$	1,495	$	-
Aggregate cash received for option exercises	$	995	$	-
Compensation cost (included in operating expenses)
Stock options	$	139	$	176
Restricted stock		230		144
Total		369		320
Tax benefit recognized		93		63
Net compensation cost	$	276	$	257
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	234	$	230
Restricted stock	$	367	$	271
Weighted-average years to be recognized
Stock options		1.7		1.6
Restricted stock		1.7		1.8

Cash-Settled Restricted Stock Units. Cash-settled restricted stock units (“RSU”) are awards that, if vested, entitle the recipient to a cash payment equal to the fair market value of our common stock for each unit granted. The RSU awards cliff-vest on September 30, 2014, subject to the attainment of financial performance criteria that were established for the two-year period ending September 30, 2014 and continued employment by the recipient. RSUs are accounted for as liability awards, and accordingly, compensation cost is re-measured based on our closing stock price at the end of each reporting period. If we estimate that it is probable that the vesting criteria will be met, then we record compensation expense based on the proportionate share of the total estimated fair value of the award to the requisite service period.

A summary of our RSU activity for the six months ended March 31, 2013 is as follows:

	Number of Units		Weighted- Average Grant Date Fair Value   Per Unit
Outstanding, September 30, 2012		-	$	-
Grants		77,231		11.93
Forfeitures		-		-
Vested		-		-
Outstanding, March 31, 2013		77,231	$	11.93

A summary of estimated compensation expense for RSU awards is as follows:

	Six Months Ended
	March 31,
	2013		2012
Compensation cost (included in operating expenses)	$	298	$	-
Tax benefit recognized		119		-
Net compensation cost	$	179	$	-
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,486	$	-
Weighted-average years to be recognized		1.5		-

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Revenues and Expenses Associated with Operations of Ampac-Isp (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Assets Held For Sale [Line Items]
Revenues		$ 15,042		$ 27,839
Operating income (loss) before tax	(78)	(98)	(64)	301
Income tax expense (benefit)	(28)	84	(23)	367
Net loss from discontinued operations	(50)	(182)	(41)	(66)
Adjustment to gain on sale of discontinued operations before tax	32		25
Income tax expense (benefit)	11		9
Net adjustment to gain on sale of discontinued operations	21		16
Loss from discontinued operations, net of tax	$ (29)	$ (182)	$ (25)	$ (66)

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Earnings (Loss) Per Share - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities and unvested restricted shares outstanding excluded from computation of earnings per share amount	55,218	425,064

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INCOME TAXES (Tables)

6 Months Ended

Mar. 31, 2013

Gross Liability for Unrecognized Tax benefits

Unrecognized Tax Benefits - September 30, 2012	$	1,274
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		(1,070)
Lapse of statute of limitations		-
Unrecognized Tax Benefits - March 31, 2013	$	204

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SEGMENT INFORMATION (Tables)

6 Months Ended

Mar. 31, 2013

Percentage of Our Consolidated Revenues Attributed To Customers

The following table provides disclosure of the percentage of our consolidated revenues from continuing operations attributed to customers that exceed ten percent of the total in each of the given periods.

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Fine chemicals customer		32%		33%		34%		32%
Fine chemicals customer		15%				11%
Specialty chemicals customer				27%				16%
Specialty chemicals customer				11%		16%		18%

Financial Information about Segment Operations

The following provides financial information about our segment operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues:
Fine Chemicals	$	37,267	$	20,594	$	58,614	$	42,069
Specialty Chemicals		11,934		18,961		26,284		33,181
Other Businesses		843		363		1,464		3,153
Total Revenues	$	50,044	$	39,918	$	86,362	$	78,403
Segment Operating Income (Loss):
Fine Chemicals	$	3,750	$	(978)	$	5,027	$	(2,165)
Specialty Chemicals		5,218		9,297		13,135		16,941
Other Businesses		(233)		(357)		(393)		(429)
Total Segment Operating Income (Loss)		8,735		7,962		17,769		14,347
Corporate Expenses		(3,890)		(3,167)		(7,976)		(6,793)
Operating Income	$	4,845	$	4,795	$	9,793	$	7,554
Depreciation and Amortization:
Fine Chemicals	$	2,894	$	2,928	$	5,909	$	5,968
Specialty Chemicals		123		377		330		612
Other Businesses		5		5		10		9
Corporate		82		94		165		188
Total Depreciation and Amortization	$	3,104	$	3,404	$	6,414	$	6,777

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Gross Liability for Unrecognized Tax benefits (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	6 Months Ended
	Dec. 31, 2012	Mar. 31, 2013
Income Tax Contingency [Line Items]
Unrecognized Tax Benefits - September 30, 2012		$ 1,274
Additions for tax positions of prior years
Reductions for tax positions of prior years	(1,070)	(1,070)
Lapse of statute of limitations
Unrecognized Tax Benefits - March 31, 2013		$ 204

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Changes in Accumulated Other Comprehensive Income (Loss) by Component, Net of Income Tax (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Other Comprehensive Income (Loss) [Line Items]
Balance, September 30, 2012			$ (32,037)
Other comprehensive income (loss) before reclassifications			(204)
Amounts reclassified from accumulated other comprehensive income (loss)			1,362
Net current period other comprehensive income (loss)	494	566	1,158	807
Balance, March 31, 2013	(30,879)		(30,879)
Gains (Losses) on Defined Benefit Plan Items
Other Comprehensive Income (Loss) [Line Items]
Balance, September 30, 2012			(32,037)
Amounts reclassified from accumulated other comprehensive income (loss)			1,328
Net current period other comprehensive income (loss)			1,328
Balance, March 31, 2013	(30,709)		(30,709)
Gains (Losses) on Effective Cash Flow Hedge
Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications			(204)
Amounts reclassified from accumulated other comprehensive income (loss)			34
Net current period other comprehensive income (loss)			(170)
Balance, March 31, 2013	$ (170)		$ (170)

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DEFINED BENEFIT PLANS (Tables)

6 Months Ended

Mar. 31, 2013

Net Periodic Pension Cost

Net periodic pension cost consists of the following:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Pension Plans:
Service Cost	$	830	$	720	$	1,660	$	1,440
Interest Cost		984		962		1,967		1,925
Expected Return on Plan Assets		(1,100)		(770)		(2,200)		(1,540)
Recognized Actuarial Losses		892		598		1,785		1,195
Amortization of Prior Service Costs		15		17		31		35
Net Periodic Pension Cost	$	1,621	$	1,527	$	3,243	$	3,055
Supplemental Executive Retirement Plan:
Service Cost	$	204	$	110	$	408	$	220
Interest Cost		105		92		211		185
Recognized Actuarial Losses		94		-		188		-
Amortization of Prior Service Costs		105		105		210		210
Net Periodic Pension Cost	$	508	$	307	$	1,017	$	615

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Mar. 31, 2013

Summary of Our Environmental Reserve Activity

A summary of our environmental reserve activity for the six months ended March 31, 2013 is shown below:

Balance, September 30, 2012	$	16,754
Expenditures		(2,907)
Balance, March 31, 2013	$	13,847

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2013

INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

1. INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Interim Basis of Presentation. The accompanying condensed consolidated financial statements of American Pacific Corporation and its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) are unaudited, but in the opinion of management, include all adjustments, which are of a normal recurring nature, necessary to a fair statement of the results for the interim periods presented. These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2012. The operating results for the three-month and six-month periods ended March 31, 2013 and cash flows for the six-month period ended March 31, 2013 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods.

Accounting Policies and Principles of Consolidation. A description of our significant accounting policies is included in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2012. Our consolidated financial statements include the accounts of American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have been eliminated. We report our results based on a fiscal year which ends on September 30. References to Fiscal years refer to the twelve months ended or ending September 30 of the Fiscal year referenced.

Discontinued Operations. In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). We completed the sale of substantially all of the assets of AMPAC-ISP effective August 1, 2012. The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines. Revenues and expenses associated with the Aerospace Equipment segment operations are presented as discontinued operations for all periods presented. (See Note 12).

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Judgments and assessments of uncertainties are required in applying our accounting policies in many areas. For example, key assumptions and estimates are particularly important when determining our projected liabilities for pension benefits, useful lives for depreciable and amortizable assets, and deferred tax assets. Other areas in which significant judgment exists include, but are not limited to, costs that may be incurred in connection with environmental matters and the resolution of litigation and other contingencies. Actual results may differ from estimates on which our consolidated financial statements were prepared.

Fair Value Disclosures. The current authoritative guidance on fair value clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant inputs to the valuation model are unobservable.

We estimate the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. As of March 31, 2013, our floating-rate term loan had a carrying value of $57,750 and an estimated fair value of $56,851 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was a liability of $284 as of March 31, 2013 (level 2 in the fair value hierarchy). The estimated fair values of our floating-rate term loan and interest rate swap agreement are based on a valuation technique that takes into consideration expected cash flows, the then-current interest rates and then-current creditworthiness of the Company or the counterparty, as applicable. Refer to Notes 6 and 7 for additional information regarding our term loan and interest rate swap agreement.

Depreciation and Amortization Expense. Depreciation and amortization expense, associated with our continuing operations, is classified as follows in our statements of operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Depreciation classified as:
Cost of revenues	$	3,015	$	3,303	$	6,237	$	6,575
Operating expenses		89		101		177		202
Total continuing operations		3,104		3,404		6,414		6,777
Depreciation and amortization classified as discontinued operations		-		318		-		627
Total	$	3,104	$	3,722	$	6,414	$	7,404

Bill and Hold Transactions. Some of our fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” arrangements). The sales value of inventory, subject to Bill and Hold arrangements, at our facilities was $16,048 and $19,346 as of March 31, 2013 and September 30, 2012, respectively.

Recently Issued or Adopted Accounting Standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, which amends Topic 220, Comprehensive Income. The amendment allows an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This standard was effective for us beginning on October 1, 2012. This standard changes presentation requirements, and accordingly, the adoption of this standard did not have an impact on our results of operations, financial position or cash flows.

In February 2013, the FASB issued ASU No. 2013-2, which amends the Comprehensive Income Topic of the Accounting Standards Codification (ASC). The updated standard requires the presentation of information about reclassifications out of accumulated other comprehensive income. ASU No. 2013-2 is effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company has adopted the standard on a prospective basis. The updated standard affects the Company’s disclosures but has no impact on its results of operations, financial condition or liquidity.

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DISCONTINUED OPERATIONS (Tables)

6 Months Ended

Mar. 31, 2013

Revenues and Expenses Associated with Operations of Ampac-Isp

Summarized financial information for AMPAC-ISP is as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Discontinued Operations:
Revenues	$	-	$	15,042	$	-	$	27,839
Income (loss) from Discontinued Operations, Net of Tax:
Operating income (loss) before tax	$	(78)	$	(98)	$	(64)	$	301
Income tax expense (benefit)		(28)		84		(23)		367
Net loss from discontinued operations		(50)		(182)		(41)		(66)
Adjustment to gain on sale of discontinued operations before tax		32		-		25		-
Income tax expense (benefit)		11		-		9		-
Net adjustment to gain on sale of discontinued operations		21		-		16		-
Loss from discontinued operations, net of tax	$	(29)	$	(182)	$	(25)	$	(66)

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Estimated Compensation Expenses For RSU Award (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost (included in operating expenses)	$ 369	$ 320
Tax benefit recognized	93	63
Net compensation cost	276	257
Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost (included in operating expenses)	298
Tax benefit recognized	119
Net compensation cost	179
Total compensation cost for non-vested awards not yet recognized	$ 1,486
Weighted-average years to be recognized	1 year 6 months	0 years

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Percentage of Consolidated Revenues Attributed To Customers (Detail)	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Fine Chemicals Customer One
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	32.00%	33.00%	34.00%	32.00%
Fine Chemicals Customer Two
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	15.00%		11.00%
Specialty Chemicals Customer
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage		27.00%		16.00%
Specialty Chemicals Customer Two
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage		11.00%	16.00%	18.00%

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Revenues	$ 50,044	$ 39,918	$ 86,362	$ 78,403
Cost of Revenues	34,150	26,300	55,056	52,555
Gross Profit	15,894	13,618	31,306	25,848
Operating Expenses	11,049	8,823	21,513	18,308
Other Operating Gains				14
Operating Income	4,845	4,795	9,793	7,554
Interest Income and Other (Expense), Net	4	7	12	14
Interest Expense	554	2,591	1,836	5,230
Loss on Debt Extinguishment			2,835
Income from Continuing Operations before Income Tax	4,295	2,211	5,134	2,338
Income Tax Expense	1,534	974	1,222	1,066
Income from Continuing Operations	2,761	1,237	3,912	1,272
Loss from Discontinued Operations, Net of Tax	(29)	(182)	(25)	(66)
Net Income	$ 2,732	$ 1,055	$ 3,887	$ 1,206
Basic Earnings (Loss) Per Share:
Income from Continuing Operations	$ 0.36	$ 0.16	$ 0.51	$ 0.17
Loss from Discontinued Operations, Net of Tax	$ 0.00	$ (0.02)	$ 0.00	$ (0.01)
Net Income	$ 0.35	$ 0.14	$ 0.50	$ 0.16
Diluted Earnings (Loss) Per Share:
Income from Continuing Operations	$ 0.34	$ 0.16	$ 0.49	$ 0.17
Loss from Discontinued Operations, Net of Tax	$ 0.00	$ (0.02)	$ 0.00	$ (0.01)
Net Income	$ 0.34	$ 0.14	$ 0.49	$ 0.16
Weighted-Average Shares Outstanding:
Basic	7,732,000	7,548,000	7,700,000	7,544,000
Diluted	8,039,000	7,634,000	7,961,000	7,626,000

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Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Mar. 31, 2013		Mar. 31, 2012	Mar. 31, 2013		Mar. 31, 2012
Accumulated Other Comprehensive Income [Line Items]
Cost of revenues	$ (34,150)		$ (26,300)	$ (55,056)		$ (52,555)
Interest expense	(554)		(2,591)	(1,836)		(5,230)
Operating expenses	(11,049)		(8,823)	(21,513)		(18,308)
Income from Continuing Operations before Income Tax	4,295		2,211	5,134		2,338
Income tax expense	(1,534)		(974)	(1,222)		(1,066)
Net Income	2,732		1,055	3,887		1,206
Reclassification out of Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income [Line Items]
Net Income	(664)	[1]		(1,328)	[1]
Reclassification out of Accumulated Other Comprehensive Income | Gains (Losses) on Effective Cash Flow Hedge
Accumulated Other Comprehensive Income [Line Items]
Income tax expense	22	[1]		22	[1]
Net Income	(34)	[1]		(34)	[1]
Reclassification out of Accumulated Other Comprehensive Income | Gains (Losses) on Effective Cash Flow Hedge | Interest Rate Swap
Accumulated Other Comprehensive Income [Line Items]
Interest expense	(56)	[1]		(56)	[1]
Reclassification out of Accumulated Other Comprehensive Income | Gains (Losses) on Defined Benefit Plan Items
Accumulated Other Comprehensive Income [Line Items]
Cost of revenues	(538)	[1]		(1,076)	[1]
Operating expenses	(568)	[1]		(1,138)	[1]
Income from Continuing Operations before Income Tax	(1,106)	[1]		(2,214)	[1]
Income tax expense	$ 442	[1]		$ 886	[1]

[1] amounts in parenthesis represent a decrease to income

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2013	Sep. 30, 2012
Preferred Stock, par value	$ 1.00	$ 1.00
Preferred Stock, shares authorized	3,000,000	3,000,000
Preferred Stock, shares outstanding
Common Stock, par value	$ 0.10	$ 0.10
Common Stock, shares authorized	20,000,000	20,000,000
Common Stock, shares issued	7,861,573	7,710,783
Common Stock, shares outstanding	7,861,573	7,710,783

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Commitments and Contingencies - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended	24 Months Ended
	Jun. 30, 2011	Sep. 30, 2009	Mar. 31, 2013 gal	Sep. 30, 2012	Sep. 30, 2006
Commitment And Contingencies [Line Items]
Environmental Remediation Charges	$ 6,000	$ 13,700		$ 700	$ 26,000
Extension of remediation project, minimum			50 years
Estimated increase in capital cost of expansion project	6,400
Estimate cost of O&M	400
Measurement for new ground water extraction wells			450
Measurement for existing wells			750
Estimated life of project, minimum			5 years
Estimated life of project, maximum			18 years
More likely estimated life of project, minimum			7 years
More likely estimated life of project, maximum			14 years
Maturity life of the project			2019
Estimated project costs			1,900
Amount accrued through estimated life of the project			13,847	16,754
Minimum
Commitment And Contingencies [Line Items]
Environmental Remediation Charges			10,000
Maximum
Commitment And Contingencies [Line Items]
Environmental Remediation Charges			$ 33,900

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Share-Based Compensation - Additional Information (Detail)	6 Months Ended
	Mar. 31, 2013
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Share-based compensation number of plans maintained	3
Restricted Stock Awards And Units
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
RSU awards cliff-vest date	Sep. 30, 2014
RSU awards cliff-vest period	2 years
2001 Stock Option Plan
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Options vested at the grant date	50.00%
Options vested at the grant date	50.00%
Expiration period, from grant date	10 years
Shares available for grant	0
2002 directors stock option plan
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Shares available for grant	0
2002 directors plan prior to September 30, 2007
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Options vested at the grant date	50.00%
Options vested at the grant date	50.00%
Expiration period, from grant date	10 years
2002 directors plan in November 2007
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Options vested at the grant date	50.00%
Expiration period, from grant date	10 years
Options vested on the one-year anniversary of the grant date	50.00%
2008 Stock Incentive Plan
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Expiration period, from grant date	10 years
Shares available for grant	239,899
Common stock authorized	800,000
Maximum shares of common stock able to be granted pursuant to awards of restricted stock and restricted stock units	400,000
Number of annual installments	3

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SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Mar. 31, 2013

Summary of Outstanding and Non-Vested Stock Option and Restricted Stock Activity

Stock Options and Restricted Stock. A summary of our outstanding and non-vested stock option and restricted stock activity for the six months ended March 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Fair				Fair
			Price				Value				Value
	Shares		Per Share		Shares		Per Share		Shares		Per Share
Balance, September 30, 2012		612,071	$	8.47		138,835	$	3.55		64,497	$	7.52
Granted		47,470		11.93		47,470		5.41		36,060		11.93
Vested		-		-		(77,184)		3.61		(29,505)		7.42
Exercised		(114,730)		8.67		-		-		-		-
Expired / Cancelled		(14,416)		8.48		(1,416)		4.50		-		-
Balance, March 31, 2013		530,395		8.74		107,705		4.31		71,052		9.80

Summary of Exercisable Stock Options

A summary of our exercisable stock options as of March 31, 2013 is as follows:

Number of vested stock options		422,690
Weighted-average exercise price per share	$	8.55
Aggregate intrinsic value	$	6,156
Weighted-average remaining contractual term in years		4.9

Fair Value of Stock Option

We determine the fair value of restricted stock awards based on the fair market value of our common stock on the grant date. Actual compensation, if any, ultimately realized by optionees may differ significantly from the amount estimated using an option valuation model.

	Six Months Ended
	March 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	5.41	$	3.46
Significant fair value assumptions:
Expected term in years		5.70		5.70
Expected volatility		49%		49%
Expected dividends		0%		0%
Risk-free interest rates		0.64%		0.85%
Total intrinsic value of options exercised	$	1,495	$	-
Aggregate cash received for option exercises	$	995	$	-
Compensation cost (included in operating expenses)
Stock options	$	139	$	176
Restricted stock		230		144
Total		369		320
Tax benefit recognized		93		63
Net compensation cost	$	276	$	257
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	234	$	230
Restricted stock	$	367	$	271
Weighted-average years to be recognized
Stock options		1.7		1.6
Restricted stock		1.7		1.8

Summary of RSU Activity

A summary of our RSU activity for the six months ended March 31, 2013 is as follows:

	Number of Units		Weighted- Average Grant Date Fair Value   Per Unit
Outstanding, September 30, 2012		-	$	-
Grants		77,231		11.93
Forfeitures		-		-
Vested		-		-
Outstanding, March 31, 2013		77,231	$	11.93

Estimated Compensation Expenses For RSU Award

A summary of estimated compensation expense for RSU awards is as follows:

	Six Months Ended
	March 31,
	2013		2012
Compensation cost (included in operating expenses)	$	298	$	-
Tax benefit recognized		119		-
Net compensation cost	$	179	$	-
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,486	$	-
Weighted-average years to be recognized		1.5		-

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Summary of Outstanding and Non-Vested Stock Option and Restricted Stock Activity (Detail) (USD $)	6 Months Ended
	Mar. 31, 2013
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Shares	612,071
Granted, Shares	47,470
Exercised, Shares	(114,730)
Expired / Cancelled, Shares	(14,416)
Ending Balance, Shares	530,395
Beginning Balance, Weighted Average Exercise price	$ 8.47
Granted, Weighted Average Fair Value	$ 11.93
Exercised, Weighted Average Fair Value	$ 8.67
Expired / Cancelled, Restricted Stock Weighted Average Exercise Price	$ 8.48
End of period, Weighted Average Exercise Price	$ 8.74
Non Vested Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Shares	138,835
Granted, Shares	47,470
Vested, Shares	(77,184)
Expired / Cancelled, Shares	(1,416)
Ending Balance, Shares	107,705
Beginning Balance, Weighted Average Exercise price	$ 3.55
Granted, Weighted Average Fair Value	$ 5.41
Vested, Weighted Average Fair Value	$ 3.61
Expired / Cancelled, Restricted Stock Weighted Average Exercise Price	$ 4.50
End of period, Weighted Average Exercise Price	$ 4.31
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Outstanding and Non-Vested shares	64,497
Granted, Outstanding and Non vested shares	36,060
Vested Outstanding and Non vested, shares	(29,505)
Exercised, Outstanding and Non vested, shares
Expired / Cancelled, Outstanding and Non vested, shares
Ending Balance, Outstanding and Non-Vested Shares	71,052
Beginning Balance, Outstanding and Non Vested, Weighted average fair value per share	$ 7.52
Granted, Restricted Stock Weighted Average Exercise Price	$ 11.93
Vested Outstanding and Non-Vested Weighted Average Fair Value	$ 7.42
Exercised, Restricted Stock Weighted Average Exercise Price
Expired / Cancelled, Restricted Stock Weighted Average Exercise Price
Ending Balance, Outstanding and Non-Vested, Weighted Average Fair Value Per Share	$ 9.80

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EARNINGS (LOSS) PER SHARE (Tables)

6 Months Ended

Mar. 31, 2013

Shares used to Compute Earnings (Loss) Per Share

Shares used to compute earnings (loss) per share from continuing operations are as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Income from continuing operations	$	2,761	$	1,237	$	3,912	$	1,272
Basic weighted-average shares		7,732,000		7,548,000		7,700,000		7,544,000
Diluted:
Weighted-average shares, basic		7,732,000		7,548,000		7,700,000		7,544,000
Dilutive effect of stock options		271,000		60,000		228,000		62,000
Dilutive effect of restricted stock		36,000		26,000		33,000		20,000
Weighted-average shares, diluted		8,039,000		7,634,000		7,961,000		7,626,000
Basic earnings per share from continuing operations	$	0.36	$	0.16	$	0.51	$	0.17
Diluted earnings per share from continuing operations	$	0.34	$	0.16	$	0.49	$	0.17

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash Flows from Operating Activities:
Net Income	$ 3,887	$ 1,206
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
Depreciation and amortization	6,414	7,404
Non-cash interest expense	150	380
Non-cash component of loss on debt extinguishment	1,252
Share-based compensation	369	320
Excess tax benefit from stock-based compensation	(432)
Deferred income taxes	1,333	1,172
Loss on sale of assets	1	23
Changes in operating assets and liabilities:
Accounts receivable, net	(6,045)	(12,379)
Inventories	(13,137)	(9,637)
Prepaid expenses and other current assets	88	(580)
Accounts payable	(2,321)	(3,251)
Income taxes	(4,050)	(55)
Accrued liabilities	25	(2,308)
Accrued interest	(967)	1
Employee related liabilities	(1,156)	(819)
Deferred revenues and customer deposits	27,374	19,426
Environmental remediation reserves	(2,907)	(2,864)
Pension obligations, net	445	(3,881)
Other	(1,770)	(170)
Discontinued operations, net	28	(769)
Net Cash Provided (Used) by Operating Activities	8,581	(6,781)
Cash Flows from Investing Activities:
Capital expenditures	(5,851)	(2,381)
Other investing activities		120
Discontinued operations, net		(423)
Net Cash Used by Investing Activities	(5,851)	(2,684)
Cash Flows from Financing Activities:
Issuances of long-term debt	60,000
Payments of long-term debt	(67,259)	(9)
Debt issuance costs	(1,386)
Issuances of common stock	995
Excess tax benefit from stock-based compensation	432
Discontinued operations, net		(28)
Net Cash Used by Financing Activities	(7,218)	(37)
Effect of Changes in Currency Exchange Rates on Cash		15
Net Change in Cash and Cash Equivalents	(4,488)	(9,487)
Cash and Cash Equivalents, Beginning of Period	31,182	30,703
Cash and Cash Equivalents, End of Period	26,694	21,216
Cash Paid (Received) For:
Interest	2,653	4,851
Income taxes	5,463	176
Non-Cash Investing and Financing Transactions:
Additions to Property, Plant and Equipment not yet paid	$ 1,102	$ 320

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Net Income	$ 2,732	$ 1,055	$ 3,887	$ 1,206
Cash Flow Hedge:
Change in fair value arising during period (net of income tax of $136, $0, $136, and $0)	(204)		(204)
Less reclassifications to net income (net of income tax of $22, $0, $22, and $0)	34		34
OCI (Loss), Derivatives Qualifying as Hedges, Net of Tax	(170)		(170)
Defined Benefit Pension Plans:
Actuarial gains (losses) arising during period
Less amortization of losses to net income (net of income tax of $442, $288, $886, and $576)	664	432	1,328	864
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax	664	432	1,328	864
Foreign currency translation adjustments		134		(57)
Net current period other comprehensive income (loss)	494	566	1,158	807
Comprehensive Income	$ 3,226	$ 1,621	$ 5,045	$ 2,013

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DEFINED BENEFIT PLANS

6 Months Ended

Mar. 31, 2013

DEFINED BENEFIT PLANS

10. DEFINED BENEFIT PLANS

Defined Benefit Plan Descriptions. We maintain three defined benefit pension plans which cover substantially all of our employees who were employed by the Company prior to July 1, 2010: 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 to date. Collectively, these three plans are referred to as the “Pension Plans”. Pension Plan benefits are paid based on an average of earnings, retirement age, and length of service, among other factors. In May 2010, our board of directors approved amendments to our Pension Plans which effectively closed the Pension Plans to participation by any new employees. Retirement benefits for existing U.S. employees and retirees through June 30, 2010 were not affected by this change. Beginning July 1, 2010, new employees began participating solely in one of the Company’s 401(k) plans. In addition, we maintain the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and restated, (the “SERP”) that includes three executive officers and two former executive officers. We use a measurement date of September 30 to account for our Pension Plans and SERP.

Net periodic pension cost consists of the following:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Pension Plans:
Service Cost	$	830	$	720	$	1,660	$	1,440
Interest Cost		984		962		1,967		1,925
Expected Return on Plan Assets		(1,100)		(770)		(2,200)		(1,540)
Recognized Actuarial Losses		892		598		1,785		1,195
Amortization of Prior Service Costs		15		17		31		35
Net Periodic Pension Cost	$	1,621	$	1,527	$	3,243	$	3,055
Supplemental Executive Retirement Plan:
Service Cost	$	204	$	110	$	408	$	220
Interest Cost		105		92		211		185
Recognized Actuarial Losses		94		-		188		-
Amortization of Prior Service Costs		105		105		210		210
Net Periodic Pension Cost	$	508	$	307	$	1,017	$	615

Defined Contribution Plan Descriptions. We maintain two 401(k) plans in which participating employees may make contributions. One covers substantially all employees except bargaining unit employees of our Fine Chemicals segment and the other covers those bargaining unit employees. We make matching contributions for all Fine Chemicals segment employees and, since July 1, 2010, for all eligible new employees.

Contributions and Benefit Payments. For the six months ended March 31, 2013, we contributed $3,552 to the Pension Plans to fund benefit payments and anticipate making approximately $3,152 in additional contributions through September 30, 2013. For the six months ended March 31, 2013, we contributed $264 to the SERP to fund benefit payments and anticipate making approximately $263 in additional contributions through September 30, 2013.

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Document and Entity Information	6 Months Ended
	Mar. 31, 2013	Apr. 30, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	APFC
Entity Registrant Name	AMERICAN PACIFIC CORP
Entity Central Index Key	0000350832
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,866,573

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2013

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Environmental Matters.

Regulatory Review of Perchlorates.  Our Specialty Chemicals segment manufactures and sells products that contain perchlorates. Currently, perchlorate is on Contaminant Candidate List 3 of the U.S. Environmental Protection Agency (the “EPA”). In February 2011, the EPA announced that it had determined to move forward with the development of a regulation for perchlorates in drinking water, reversing its October 2008 preliminary determination not to promulgate such a regulation. Accordingly, the EPA announced its intention to begin to evaluate the feasibility and affordability of treatment technologies to remove perchlorate and to examine the costs and benefits of potential standards. The EPA has conducted various meetings, as required by the Safe Drinking Water Act, including a meeting of the Science Advisory Board, whose report has not yet been made public. We continue to monitor activities and currently expect, based on EPA statements, that the earliest a final regulation is expected to be published is December 2014. Regulatory review and anticipated regulatory actions present general business risk to the Company, but no regulatory proposal of the EPA or any state in which we operate, to date, has been publicly announced that we believe 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 (the “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. Legacy production at the AMPAC Henderson Site resulted in perchlorate presence in the groundwater near the vicinity of the former facility.

At the direction of the Nevada Division of Environmental Protection (“NDEP”) and the EPA, we conducted an investigation of remediation technologies for perchlorate in groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. In 2002, we conducted a pilot test and 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 of the permanent facility. The location of this facility is several miles, in the direction of groundwater flow, from the AMPAC Henderson Site.

From time to time, we have held discussions with NDEP to formalize our remediation efforts in an agreement that, if executed, would provide more detailed regulatory guidance on environmental characterization and remedies at the AMPAC Henderson Site and vicinity. 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 costs. Discussions regarding a formal agreement are currently active and we anticipate that a formal agreement is likely to be completed during our Fiscal 2013.

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 Fiscal 2005 and Fiscal 2006, we recorded aggregate charges of $26,000 representing our estimates at the time of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the costs for capital equipment and on-going operating and maintenance (“O&M”).

Late in Fiscal 2009, we gained additional information from groundwater modeling that indicates groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) is moving toward our existing remediation facility at a much slower pace than previously estimated. Utilization of our existing facilities alone, at this slower groundwater pace, could, according to this groundwater model, extend the life of our remediation project to well in excess of fifty years. As a result of this additional data, related model interpretations and consultations with NDEP, we re-evaluated our remediation operations and determined that we should be able to improve the effectiveness of the treatment program and significantly reduce the total project time by expanding the treatment system existing at the time. The expansion includes installation of additional groundwater extraction wells in the deeper, more concentrated areas, construction of an underground pipeline to move extracted groundwater to our treatment facility, and the addition of fluidized bed reactor (“FBR”) bioremediation treatment equipment (the “Expansion Project”) that will enhance, and in some cases replace, primary components of the existing treatment system. In our Fiscal 2009 fourth quarter, we accrued $13,700 as our initial estimate of the capital cost of the Expansion Project and the related estimates of the effects of the enhanced operations on the on-going O&M costs and project life.

Through June 2011, and in cooperation with NDEP, we worked to develop the formal design, engineering and permitting of the Expansion Project. Based on data obtained through that date, which was largely comprised of firm quotations, we determined that significant modifications to our Fiscal 2009 assumptions were required. As a result, in June 2011, we accrued an additional $6,000 for the estimated increase in cost of the capital component of the Expansion Project, offset slightly by reductions in O&M cost estimates. The estimated capital costs of the Expansion Project increased by approximately $6,400. The increase reflected (i) an increase in the capacity of the FBR bioremediation treatment equipment to accommodate technical requirements based on the testing of new extraction wells in the fall of 2010, and (ii) higher than initially anticipated cost associated with the installation of the equipment and construction of the pipeline. Our estimate of total O&M costs was reduced by approximately $400.

In September 2012, we commenced initial operation of the Expansion Project. Related system optimization and other start-up activities will continue in Fiscal 2013. In September 2012, we recorded an additional remediation charge in the amount of $700, which is substantially attributed to the true-up of estimates to the expected final cost of the Expansion Project. Due to uncertainties inherent in making estimates, our estimates of capital and O&M costs may later require significant revision as new facts become available and circumstances change.

The estimated life of the project is a key assumption underlying the accrued estimated cost of our remediation activities. Groundwater modeling and other information regarding the characteristics of the surrounding land and demographics indicate that at our targeted processing rate of 450 gallons per minute for the new groundwater extraction wells (750 gallons per minute in the aggregate with existing wells), the life of the project could range from 5 to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, 7 to 14 years is the more likely range. In accordance with generally accepted accounting principles, if no point within the more likely range is considered more likely than another, then estimates should be based on the low end of the range. Accordingly, our accrued remediation cost includes estimated O&M costs through 2019, which is the low end of the likely range of the project life. Groundwater speed, perchlorate concentrations, aquifer characteristics and forecasted groundwater extraction rates will continue to be key factors considered when estimating the life of the project. If additional information becomes available in the future that leads to a different interpretation of the model, thereby dictating a change in equipment and operations, our estimate of the resulting project life could change significantly.

The estimate of the annual O&M cost of the project is a key assumption in our computation of the estimated cost of our remediation activities. To estimate O&M costs, we consider, among other factors, the project scope and historical expense rates to develop assumptions regarding labor, utilities, repairs, maintenance supplies and professional services costs. We estimate average annual O&M costs to be approximately $1,900. If additional information becomes available in the future that is different than information currently available to us and thereby leads us to different conclusions, our estimate of O&M expenses could change significantly.

In addition, certain remediation activities are conducted on public lands under operating permits. In general, these permits may require us to relocate our underground pipeline or equipment to accommodate future public utilities and features and require us to return the land to its original condition at the end of the permit period. If we are required to relocate our underground pipeline or equipment in the future, the costs of such activities would be incremental to our current cost estimates. Estimated costs associated with removal of remediation equipment from the land are not material and are included in our range of estimated costs.

As of March 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $10,000 to approximately $33,900. This range represents a significant estimate and is based on the estimable elements of cost for capital and O&M costs, and an estimated remaining operating life of the project through a range from the years 2017 to 2030. As of March 31, 2013, the accrued amount was $13,847, based on an estimated remaining life of the project through the year 2019, or the low end of the more likely range of the expected life of the project. Cost estimates are based on our current assessments of the facility configuration. As we proceed with the project, we have, and may in the future, become aware of elements of the facility configuration that must be changed to meet the targeted operational requirements. Certain of these changes may result in corresponding cost increases. Costs associated with the changes are accrued when a reasonable alternative, or range of alternatives, is identified and the cost of such alternative is estimable. Our estimated reserve for environmental remediation is based on information currently available to us and may be subject to material adjustment upward or downward in future periods as new facts or circumstances may indicate.

A summary of our environmental reserve activity for the six months ended March 31, 2013 is shown below:

Balance, September 30, 2012	$	16,754
Expenditures		(2,907)
Balance, March 31, 2013	$	13,847

AFC Environmental Matters.  The primary operations of our Fine Chemicals segment are 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 (predecessor in interest to Ampac Fine Chemicals LLC) as part of its operations, CERCLA, among other things, provides for joint and several liability for environmental liabilities including, for example, environmental remediation expenses.

As part of the agreement by which we acquired our Fine Chemicals segment business 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 premises of Ampac Fine Chemicals LLC 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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Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Change in fair value arising during period, tax	$ 136	$ 0	$ 136	$ 0
Reclassifications to net income, tax	22	0	22	0
Amortization of losses to net income, tax	$ 442	$ 288	$ 886	$ 576

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Mar. 31, 2013

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table provides changes in accumulated other comprehensive income (loss) by component, net of income tax:

	Gains (Losses) on Defined Benefit Plan Items		Gains (Losses) on Effective Cash Flow Hedge		Total
Balance, September 30, 2012	$	(32,037)	$	-	$	(32,037)
Other comprehensive income (loss) before reclassifications		-		(204)		(204)
Amounts reclassified from accumulated other comprehensive income (loss)		1,328		34		1,362
Net current period other comprehensive income (loss)		1,328		(170)		1,158
Balance, March 31, 2013	$	(30,709)	$	(170)	$	(30,879)

The following table provides details about reclassifications out of Accumulated Other Comprehensive Income (Loss) (“AOCI”) for the six months ended March 31, 2013:

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months		Six Months
	Ended March 31, 2013
Gains and losses on cash flow hedges -	$	(56)	$	(56)	Interest expense
interest rate swap agreement		22		22	Income tax expense
	$	(34)	$	(34)	Net of tax
Amortization of defined benefit plan items	$	(538)	$	(1,076)	Cost of revenues
		(568)		(1,138)	Operating expenses
		(1,106)		(2,214)	Total before tax
		442		886	Income tax expense
	$	(664)	$	(1,328)	Net of tax

(a) amounts in parenthesis represent a decrease to income

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EARNINGS (LOSS) PER SHARE

6 Months Ended

Mar. 31, 2013

EARNINGS (LOSS) PER SHARE

4. EARNINGS (LOSS) PER SHARE

Shares used to compute earnings (loss) per share from continuing operations are as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Income from continuing operations	$	2,761	$	1,237	$	3,912	$	1,272
Basic weighted-average shares		7,732,000		7,548,000		7,700,000		7,544,000
Diluted:
Weighted-average shares, basic		7,732,000		7,548,000		7,700,000		7,544,000
Dilutive effect of stock options		271,000		60,000		228,000		62,000
Dilutive effect of restricted stock		36,000		26,000		33,000		20,000
Weighted-average shares, diluted		8,039,000		7,634,000		7,961,000		7,626,000
Basic earnings per share from continuing operations	$	0.36	$	0.16	$	0.51	$	0.17
Diluted earnings per share from continuing operations	$	0.34	$	0.16	$	0.49	$	0.17

As of March 31, 2013, we had an aggregate of 55,218 antidilutive options and unvested restricted shares outstanding. As of March 31, 2012, we had an aggregate of 425,064 antidilutive options and unvested restricted shares outstanding.

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INVENTORIES (Tables)

6 Months Ended

Mar. 31, 2013

Inventories

Inventories consist of the following:

	March 31,		September 30,
	2013		2012
Finished goods	$	8,963	$	2,075
Work-in-process		36,463		28,851
Raw materials and supplies		10,005		12,340
Deferred cost of revenues		4,941		891
Under(over) applied manufacturing overhead costs		(2,737)		-
Total	$	57,635	$	44,157

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DISCONTINUED OPERATIONS

6 Months Ended

Mar. 31, 2013

DISCONTINUED OPERATIONS

12. DISCONTINUED OPERATIONS

In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines.

On June 4, 2012, we entered into an Asset Purchase Agreement with Moog Inc. (“Moog”) (the “Asset Purchase Agreement”), pursuant to which we sold to Moog substantially all of the assets of Ampac-ISP Corp., including all of the equity interests in its foreign subsidiaries (collectively, the “Purchased Assets”). Additionally, Moog assumed certain liabilities related to the operations and the Purchased Assets. The transaction was completed effective August 1, 2012.

Under the terms of the Asset Purchase Agreement, the total consideration was approximately $46,000 (the “Purchase Price”) in cash. In addition, $4,000 of the Purchase Price (the “Escrow Amount”) will be held in an escrow account for 15 months following the closing of the transaction (the “Escrow Period”) and applied towards our indemnification obligations in favor of Moog, if any. The Asset Purchase Agreement provides that we, subject to certain limitations, indemnify Moog for damages and losses incurred or suffered by Moog as a result of, among other things, breaches of our respective representations, warranties and covenants contained in the Asset Purchase Agreement as well as any of the liabilities that we retained. The balance of the Escrow Amount remaining at the end of the Escrow Period shall be released to us. We have accounted for the Escrow Amount as a contingent gain, and accordingly have deferred recognition of the amount until all contingencies have lapsed or been resolved.

Revenues and expenses associated with the operations of AMPAC-ISP are presented as discontinued operations for all periods presented. Summarized financial information for AMPAC-ISP is as follows:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Discontinued Operations:
Revenues	$	-	$	15,042	$	-	$	27,839
Income (loss) from Discontinued Operations, Net of Tax:
Operating income (loss) before tax	$	(78)	$	(98)	$	(64)	$	301
Income tax expense (benefit)		(28)		84		(23)		367
Net loss from discontinued operations		(50)		(182)		(41)		(66)
Adjustment to gain on sale of discontinued operations before tax		32		-		25		-
Income tax expense (benefit)		11		-		9		-
Net adjustment to gain on sale of discontinued operations		21		-		16		-
Loss from discontinued operations, net of tax	$	(29)	$	(182)	$	(25)	$	(66)

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SEGMENT INFORMATION

6 Months Ended

Mar. 31, 2013

SEGMENT INFORMATION

8. SEGMENT INFORMATION

We report our continuing operations in three operating segments: Fine Chemicals, Specialty Chemicals, and Other Businesses. These segments are based upon business units that offer distinct products and services, are operationally managed separately and produce products using different production methods. Segment operating income or loss includes all sales and expenses directly associated with each segment. Environmental remediation charges, corporate general and administrative costs, which consist primarily of executive, investor relations, accounting, human resources and information technology expenses, and interest are not allocated to segment operating results.

Fine Chemicals. Our Fine Chemicals segment includes the operating results of our wholly-owned subsidiaries Ampac Fine Chemicals LLC and AMPAC Fine Chemicals Texas, LLC (collectively, “AFC”). AFC is a custom manufacturer of active pharmaceutical ingredients and registered intermediates for customers in the pharmaceutical industry. AFC operates in compliance with the U.S. Food and Drug Administration’s current Good Manufacturing Practices and the requirements of certain other regulatory agencies such as the European Union’s European Medicines Agency and Japan’s Pharmaceuticals and Medical Devices Agency. AFC also complies with Drug Enforcement Administration requirements related to the manufacture and sale of certain controlled substances. AFC has distinctive competencies and specialized engineering capabilities in performing chiral separations, manufacturing chemical compounds that require high containment, performing energetic chemistries at commercial scale, and manufacturing Schedule II controlled substances.

Specialty Chemicals. Our Specialty Chemicals segment manufactures and sells: (i) perchlorate chemicals, principally ammonium perchlorate, which is the predominant oxidizing agent for solid propellant rockets, booster motors and missiles used in space exploration, commercial satellite transportation and national defense programs, (ii) sodium azide, a chemical used in pharmaceutical manufacturing, and (iii) Halotron^®, a series of clean fire extinguishing agents used in fire extinguishing products ranging from portable fire extinguishers to total flooding systems.

Other Businesses. Our Other Businesses segment contains our water treatment equipment division and real estate activities. Our water treatment equipment business markets, designs, and manufactures electrochemical On Site Hypochlorite Generation, or OSHG, systems. These systems are used in the disinfection of drinking water, control of noxious odors, and the treatment of seawater to prevent the growth of marine organisms in cooling systems. We supply our equipment to municipal, industrial and offshore customers. Our real estate activities are not material.

Our revenues are characterized by individually significant orders and relatively few customers. As a result, in any given reporting period, certain customers may account for more than ten percent of our consolidated revenues. The following table provides disclosure of the percentage of our consolidated revenues from continuing operations attributed to customers that exceed ten percent of the total in each of the given periods.

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Fine chemicals customer		32%		33%		34%		32%
Fine chemicals customer		15%				11%
Specialty chemicals customer				27%				16%
Specialty chemicals customer				11%		16%		18%

The following provides financial information about our segment operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Revenues:
Fine Chemicals	$	37,267	$	20,594	$	58,614	$	42,069
Specialty Chemicals		11,934		18,961		26,284		33,181
Other Businesses		843		363		1,464		3,153
Total Revenues	$	50,044	$	39,918	$	86,362	$	78,403
Segment Operating Income (Loss):
Fine Chemicals	$	3,750	$	(978)	$	5,027	$	(2,165)
Specialty Chemicals		5,218		9,297		13,135		16,941
Other Businesses		(233)		(357)		(393)		(429)
Total Segment Operating Income (Loss)		8,735		7,962		17,769		14,347
Corporate Expenses		(3,890)		(3,167)		(7,976)		(6,793)
Operating Income	$	4,845	$	4,795	$	9,793	$	7,554
Depreciation and Amortization:
Fine Chemicals	$	2,894	$	2,928	$	5,909	$	5,968
Specialty Chemicals		123		377		330		612
Other Businesses		5		5		10		9
Corporate		82		94		165		188
Total Depreciation and Amortization	$	3,104	$	3,404	$	6,414	$	6,777

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Summary of Environmental Reserve Activity (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2013
Environment Matters And Other Contingencies [Line Items]
Accrual for Environmental Loss Contingencies, Beginning Balance	$ 16,754
Expenditures	(2,907)
Accrual for Environmental Loss Contingencies, Ending Balance	$ 13,847

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DEBT

6 Months Ended

Mar. 31, 2013

DEBT

6. DEBT

Our outstanding debt balances consist of the following:

	March 31,		September 30,
	2013		2012
Term Loan, variable-rate interest, due through 2017	$	57,750	$	-
Senior Notes, 9%, due 2015		-		65,000
Capital Leases, due through 2014		11		20
Total Debt		57,761		65,020
Less Current Portion		(5,261)		(16)
Total Long-term Debt	$	52,500	$	65,004

Senior Notes. In February 2007, we issued and sold 9.0% Senior Notes due February 1, 2015 (the “Senior Notes”) with an initial aggregate principal amount of $110,000. The Senior Notes accrued interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes were guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries.

In connection with our entering into the Credit Facility (as defined below), on October 26, 2012, a notice of redemption was issued for all remaining outstanding Senior Notes specifying a redemption date of November 25, 2012. The Redemption Price for the Notes was 102.250% of the outstanding principal amount of $65,000, plus accrued and unpaid interest to, but not including, the redemption date. On October 26, 2012, we irrevocably deposited funds with the trustee in an amount equal to the Redemption Price for the Senior Notes and the related indenture was discharged. The transaction resulted in a net loss on debt retirement, during the six-months ended March 31, 2013, of $2,835 which includes the call premium of $1,463, the write-off of then unamortized debt issuances costs of $1,252 and other expenses of $120.

ABL Credit Facility. On January 31, 2011, American Pacific Corporation, as borrower, with certain domestic subsidiaries of the Company as guarantors, entered into an asset based lending credit agreement (the “ABL Credit Facility”) with Wells Fargo Bank, National Association, as agent and as lender, which provided a secured revolving credit facility in an aggregate principal amount of up to $20,000 at any time outstanding with an initial maturity of 90 days prior to the maturity date of the Senior Notes, which was February 1, 2015. The maximum borrowing availability under the ABL Credit Facility was based upon a percentage of our eligible account receivables and eligible inventories. On October 26, 2012, we terminated the ABL Credit Facility.

Credit Facility. On October 26, 2012, we entered into an $85,000 senior secured credit agreement (the “Credit Facility”) by and among American Pacific Corporation, the lenders party thereto (the “Lenders”) and KeyBank National Association, as the swing line lender, issuer of letters of credit under the Credit Facility and as the Administrative Agent of the Lenders. Under the Credit Facility, we (i) obtained a term loan in the aggregate principal amount of $60,000 with an initial maturity in 5 years (the “Term Loan”), and (ii) may obtain revolving loans of up to $25,000 in aggregate principal amount, of which up to $5,000 may be outstanding in connection with the issuance of letters of credit (the “Revolving Facility”). We may prepay and terminate the Credit Facility at any time, without premium or penalty. The Credit Facility contains certain mandatory prepayment provisions which are based upon certain asset sales, equity issuances, incurrence of certain indebtedness and events of loss.

Available borrowings under the Revolving Facility are computed as the $25,000 committed line less any outstanding revolving loans and outstanding letters of credits. As of March 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $2,707 and availability for revolving loans of $22,293.

For any loans under the Credit Facility, we elect between two options to determine the annual interest rates applicable to such loans: Base Rate Loans and Eurodollar Loans. These elections can be renewed or changed from time to time during the term of the Credit Facility. The interest rate for an election period is determined as the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Credit Facility), and in each case, plus an applicable margin, which shall range from 0.75% to 1.50% for Base Rate Loans or from 1.75% to 2.50% for Eurodollar Loans, subject to adjustment based on the leverage ratio. Interest payments are due at least quarterly and may be more frequent under certain Eurodollar Loan elections. The Term Loan includes quarterly principal amortization payments which commenced on December 31, 2012. Scheduled Amortization of the Term Loan is $4,500, $6,000, $6,000, $6,000 and $7,500 for each of the five years in the period ending September 30, 2017, respectively. The remaining balance of the Term Loan of $30,000 is due upon maturity.

The Credit Facility is guaranteed by our current and future domestic subsidiaries and is secured by substantially all of our assets and the assets of our current and future domestic subsidiaries, subject to certain exceptions as set forth in the Credit Facility. The Credit Facility contains customary affirmative, negative and financial covenants which, among other things, restrict our ability to:

• pay dividends, repurchase our stock, or make other restricted payments;

• make certain investments or acquisitions;

• incur additional indebtedness;

• create or permit to exist certain liens;

• enter into certain transactions with affiliates;

• consummate a merger, consolidation or sale of assets;

• change our business; and

• wind up, liquidate, or dissolve our affairs.

In each case, the covenants set forth above are subject to customary and negotiated exceptions and exclusions.

The Credit Facility includes two financial covenants that are measured quarterly.

Leverage Ratio.  The Leverage Ratio must be less than or equal to 3.00 to 1.00. The Credit Facility defines the Leverage Ratio as the ratio of Consolidated Total Debt as of the last day of a quarter (“Test Date”) to Consolidated EBITDA for the four consecutive quarters preceding the Test Date, each as defined in the Credit Facility.

Debt Service Coverage Ratio.  The Debt Service Coverage Ratio must be at least 2.00 to 1.00, with increases to 2.25 to 1.00 for the period commencing September 30, 2014 to September 29, 2015, and to 2.50 to 1.00 for the period commencing September 30, 2015 and thereafter. The Credit Facility defines the Debt Service Coverage Ratio as the ratio of Consolidated EBITDA minus Consolidated Capital Expenditures to Scheduled Repayments plus Consolidated Adjusted Interest Expense, each as defined in the Credit Facility.

With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the 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 Total Debt generally includes principal amounts outstanding under our Credit Facility, capital leases, drawn amounts for outstanding letters of credit and other indebtedness for borrowed money. Credit Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, and certain non-cash charges and less cash payments for environmental remediation, extraordinary gains and certain other non-cash gains. In accordance with the definitions contained in the Credit Facility, as of March 31, 2013, our Leverage Ratio was 1.33 to 1.00 and our Debt Service Coverage Ratio was 4.99 to 1.00.

The Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods). If an event of default occurs and is continuing, the Company may be required to repay the obligations under the Credit Facility prior to the Credit Facility’s stated maturity and the related commitments may be terminated.

Debt Issue Costs. In connection with the issuance of the Credit Facility, we incurred debt issuance costs of approximately $1,386, which are capitalized and classified as other assets on our consolidated balance sheets. These costs are being amortized, using the effective interest rate method, as additional interest expense over the term of the Credit Facility.

Letters of Credit. We issue letters of credit principally to secure performance related to insurance, utilities, and certain product contracts. As of March 31, 2013, we had $2,707 in outstanding letters of credit, maturing through January 2014, which were issued under our Revolving Facility. In addition, as of March 31, 2013, we had $315 in outstanding standby letters of credit which mature through April 2016. Letters of credit that are not issued under our Revolving Facility are collateralized by cash on deposit with the issuing bank in the amount of 105% of the outstanding letters of credit. Collateral deposits are classified as other assets on our consolidated balance sheets.

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DERIVATIVE INSTRUMENT

6 Months Ended

Mar. 31, 2013

DERIVATIVE INSTRUMENT

7. DERIVATIVE INSTRUMENT

Interest Rate Swap Agreement. On January 24, 2013, we entered into a floating-to-fixed interest rate swap with an initial notional amount of $58,875 (such notional amount reducing over the life of the arrangement), terminating October 26, 2017, which will effectively convert our floating-rate debt to a fixed rate (the “Swap Agreement”). Under the terms of the Swap Agreement, we will pay a fixed rate of approximately 0.775%, we will receive a floating-rate payment tied to the one-month LIBOR, and there will be no exchange of notional amounts. Our objective in using an interest rate derivative is to add stability to interest expense and to manage our exposure to interest rate movements.

We designated the Swap Agreement as a cash flow hedge in accordance with the accounting guidance in ASC Topic 815. As of March 31, 2013, the fair value of the Swap Agreement was a liability of $284. The effective portion of the change in the fair value of a derivative designated and that qualifies as a cash flow hedge is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in the fair value of the derivative is recognized directly in earnings. For the six-months ended March 31, 2013, we had no hedge ineffectiveness.

The following table provides quantitative disclosures about the Swap Agreement before income tax effects:

	March 31,		September 30,
	2013		2012
Balance sheet location of fair value:
Other assets	$	20	$	-
Accrued liabilities	$	304	$	-

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	(340)	$	-	$	(340)	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	56	$	-	$	56	$	-

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INCOME TAXES

6 Months Ended

Mar. 31, 2013

INCOME TAXES

9. INCOME TAXES

We review our portfolio of uncertain tax positions and recorded liabilities based on the applicable recognition standards. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. We classify uncertain tax positions as non-current income tax liabilities unless expected to be settled within one year.

As of March 31, 2013 and September 30, 2012, our recorded liability for unrecognized tax benefits was $204 and $1,274, of which $201 and $405 would affect our effective tax rate if recognized. In December 2012, the internal revenue service completed its examination of our federal income tax returns for Fiscal years 2008, 2009, and 2010 and the related net operating loss carryback claims to Fiscal years 2002, 2003, 2005, 2006, 2007 and 2008 with no significant adjustments. Upon completion of this audit, we released $1,070 of unrecognized tax benefits.

We have no additional significant statutes of limitations that are anticipated to expire in Fiscal 2013. Accordingly, it is reasonably possible that none of the gross liability for unrecognized tax benefits will be reversed during Fiscal 2013.

Unrecognized Tax Benefits - September 30, 2012	$	1,274
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		(1,070)
Lapse of statute of limitations		-
Unrecognized Tax Benefits - March 31, 2013	$	204

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of March 31, 2013 and September 30, 2012, we had accrued $7 and $679, respectively, for the payment of tax-related interest and penalties. For the six months ended March 31, 2013 and 2012, income tax expense (benefit) includes a benefit of $672 and an expense of $28, respectively, for interest and penalties.

We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, we are no longer subject to federal and state examinations before Fiscal 2008.

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Depreciation and Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Depreciation classified as:
Cost of revenues	$ 3,015	$ 3,303	$ 6,237	$ 6,575
Operating expenses	89	101	177	202
Total continuing operations	3,104	3,404	6,414	6,777
Depreciation and amortization classified as discontinued operations		318		627
Total	$ 3,104	$ 3,722	$ 6,414	$ 7,404

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Interest Rate Swap Agreement Amount of Gain (Loss) and Reclassification (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Mar. 31, 2013		Mar. 31, 2012	Mar. 31, 2013		Mar. 31, 2012
Interest Rate Swaps [Line Items]
Interest Expense	$ 554		$ 2,591	$ 1,836		$ 5,230
Gains (Losses) on Effective Cash Flow Hedge
Interest Rate Swaps [Line Items]
Net current period other comprehensive income (loss)	(340)			(340)
Interest Rate Swap | Gains (Losses) on Effective Cash Flow Hedge | Reclassification out of Accumulated Other Comprehensive Income
Interest Rate Swaps [Line Items]
Interest Expense	$ 56	[1]		$ 56	[1]

[1] amounts in parenthesis represent a decrease to income

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Tables)

6 Months Ended

Mar. 31, 2013

Depreciation and Amortization Expense

Depreciation and Amortization Expense. Depreciation and amortization expense, associated with our continuing operations, is classified as follows in our statements of operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Depreciation classified as:
Cost of revenues	$	3,015	$	3,303	$	6,237	$	6,575
Operating expenses		89		101		177		202
Total continuing operations		3,104		3,404		6,414		6,777
Depreciation and amortization classified as discontinued operations		-		318		-		627
Total	$	3,104	$	3,722	$	6,414	$	7,404

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DEBT (Tables)

6 Months Ended

Mar. 31, 2013

Outstanding Debt Balance

Our outstanding debt balances consist of the following:

	March 31,		September 30,
	2013		2012
Term Loan, variable-rate interest, due through 2017	$	57,750	$	-
Senior Notes, 9%, due 2015		-		65,000
Capital Leases, due through 2014		11		20
Total Debt		57,761		65,020
Less Current Portion		(5,261)		(16)
Total Long-term Debt	$	52,500	$	65,004

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Derivative Instrument - Additional Information (Detail) (Interest Rate Swap, USD $) In Thousands, unless otherwise specified	1 Months Ended
	Jan. 24, 2013	Mar. 31, 2013
Interest Rate Swap
Derivative Instruments Notional And Fair Value [Line Items]
Initial notional amount	$ 58,875
Derivative agreement maturity date	Oct. 26, 2017
Interest rate swap fixed rate	0.775%
Fair value of the swap agreement		$ (284)

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Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Sep. 30, 2012
Components Of Inventory [Line Items]
Finished goods	$ 8,963	$ 2,075
Work-in-process	36,463	28,851
Raw materials and supplies	10,005	12,340
Deferred cost of revenues	4,941	891
Under(over) applied manufacturing overhead costs	(2,737)
Total	$ 57,635	$ 44,157

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Sep. 30, 2012
Current Assets:
Cash and Cash Equivalents	$ 26,694	$ 31,182
Accounts Receivable, Net	30,124	24,211
Inventories	57,635	44,157
Prepaid Expenses and Other Assets	1,389	1,477
Income Taxes Receivable	1,954	2
Deferred Income Taxes	13,150	13,028
Total Current Assets	130,946	114,057
Property, Plant and Equipment, Net	103,143	103,316
Deferred Income Taxes	19,001	20,796
Other Assets	8,531	8,295
TOTAL ASSETS	261,621	246,464
Current Liabilities:
Accounts Payable	10,343	12,006
Accrued Liabilities	6,688	6,359
Accrued Interest	21	988
Employee Related Liabilities	9,083	10,568
Income Taxes Payable		2,098
Deferred Revenues and Customer Deposits	34,667	7,293
Current Portion of Environmental Remediation Reserves	3,191	5,114
Current Portion of Long-Term Debt	5,261	16
Total Current Liabilities	69,254	44,442
Long-Term Debt	52,500	65,004
Environmental Remediation Reserves	10,656	11,640
Pension Obligations	53,531	55,300
Other Long-Term Liabilities	506	1,745
Total Liabilities	186,447	178,131
Commitments and Contingencies
Stockholders' Equity
Preferred Stock - $1.00 par value; 3,000,000 authorized; none outstanding
Common Stock - $0.10 par value; 20,000,000 shares authorized, 7,861,573 and 7,710,783 issued and outstanding	786	771
Capital in Excess of Par Value	76,577	74,796
Retained Earnings	28,690	24,803
Accumulated Other Comprehensive Loss	(30,879)	(32,037)
Total Stockholders' Equity	75,174	68,333
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 261,621	$ 246,464

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INVENTORIES

6 Months Ended

Mar. 31, 2013

INVENTORIES

3. INVENTORIES

Inventories consist of the following:

	March 31,		September 30,
	2013		2012
Finished goods	$	8,963	$	2,075
Work-in-process		36,463		28,851
Raw materials and supplies		10,005		12,340
Deferred cost of revenues		4,941		891
Under(over) applied manufacturing overhead costs		(2,737)		-
Total	$	57,635	$	44,157

For our Specialty Chemicals segment, purchase price variances or volume or capacity cost variances associated with indirect manufacturing costs 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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Net Periodic Pension Cost (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 830	$ 720	$ 1,660	$ 1,440
Interest Cost	984	962	1,967	1,925
Expected Return on Plan Assets	(1,100)	(770)	(2,200)	(1,540)
Recognized Actuarial Losses	892	598	1,785	1,195
Amortization of Prior Service Costs	15	17	31	35
Net Periodic Pension Cost	1,621	1,527	3,243	3,055
Supplemental Executive Retirement Plan
Defined Benefit Plan Disclosure [Line Items]
Service Cost	204	110	408	220
Interest Cost	105	92	211	185
Recognized Actuarial Losses	94		188
Amortization of Prior Service Costs	105	105	210	210
Net Periodic Pension Cost	$ 508	$ 307	$ 1,017	$ 615

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DERIVATIVE INSTRUMENT (Tables)

6 Months Ended

Mar. 31, 2013

Quantitative Disclosures About the Swap Agreement Before Income Tax Effects

The following table provides quantitative disclosures about the Swap Agreement before income tax effects:

	March 31,		September 30,
	2013		2012
Balance sheet location of fair value:
Other assets	$	20	$	-
Accrued liabilities	$	304	$	-

Interest Rate Swap Agreement Amount of Gain (Loss) and Reclassification

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	(340)	$	-	$	(340)	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	56	$	-	$	56	$	-

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Fair Value of Stock Option (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value per share of options granted	$ 5.41	$ 3.46
Significant fair value assumptions:
Expected term in years	5 years 8 months 12 days	5 years 8 months 12 days
Expected volatility	49.00%	49.00%
Expected dividends	0.00%	0.00%
Risk-free interest rates	0.64%	0.85%
Total intrinsic value of options exercised	$ 1,495
Aggregate cash received for option exercises	995
Compensation cost (included in operating expenses)
Compensation cost	369	320
Tax benefit recognized	93	63
Net compensation cost	276	257
Stock Options
Compensation cost (included in operating expenses)
Compensation cost	139	176
Total compensation cost for non-vested awards not yet recognized:
Total compensation cost for non-vested awards	234	230
Weighted-average years to be recognized
Weighted-average years	1 year 8 months 12 days	1 year 7 months 6 days
Restricted Stock
Compensation cost (included in operating expenses)
Compensation cost	230	144
Total compensation cost for non-vested awards not yet recognized:
Total compensation cost for non-vested awards	$ 367	$ 271
Weighted-average years to be recognized
Weighted-average years	1 year 8 months 12 days	1 year 9 months 18 days

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2013

Interim Basis of Presentation

Interim Basis of Presentation. The accompanying condensed consolidated financial statements of American Pacific Corporation and its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) are unaudited, but in the opinion of management, include all adjustments, which are of a normal recurring nature, necessary to a fair statement of the results for the interim periods presented. These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2012. The operating results for the three-month and six-month periods ended March 31, 2013 and cash flows for the six-month period ended March 31, 2013 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods.

Accounting Policies and Principles of Consolidation

Accounting Policies and Principles of Consolidation. A description of our significant accounting policies is included in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2012. Our consolidated financial statements include the accounts of American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have been eliminated. We report our results based on a fiscal year which ends on September 30. References to Fiscal years refer to the twelve months ended or ending September 30 of the Fiscal year referenced.

Discontinued Operations

Discontinued Operations. In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). We completed the sale of substantially all of the assets of AMPAC-ISP effective August 1, 2012. The divestiture is a strategic shift that allows us to place more focus on the growth and performance of our pharmaceutical-related product lines. Revenues and expenses associated with the Aerospace Equipment segment operations are presented as discontinued operations for all periods presented. (See Note 12).

Use of Estimates

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Judgments and assessments of uncertainties are required in applying our accounting policies in many areas. For example, key assumptions and estimates are particularly important when determining our projected liabilities for pension benefits, useful lives for depreciable and amortizable assets, and deferred tax assets. Other areas in which significant judgment exists include, but are not limited to, costs that may be incurred in connection with environmental matters and the resolution of litigation and other contingencies. Actual results may differ from estimates on which our consolidated financial statements were prepared.

Fair Value Disclosures

Fair Value Disclosures. The current authoritative guidance on fair value clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant inputs to the valuation model are unobservable.

We estimate the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. As of March 31, 2013, our floating-rate term loan had a carrying value of $57,750 and an estimated fair value of $56,851 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was a liability of $284 as of March 31, 2013 (level 2 in the fair value hierarchy). The estimated fair values of our floating-rate term loan and interest rate swap agreement are based on a valuation technique that takes into consideration expected cash flows, the then-current interest rates and then-current creditworthiness of the Company or the counterparty, as applicable. Refer to Notes 6 and 7 for additional information regarding our term loan and interest rate swap agreement.

Depreciation and Amortization Expense

Depreciation and Amortization Expense. Depreciation and amortization expense, associated with our continuing operations, is classified as follows in our statements of operations:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Depreciation classified as:
Cost of revenues	$	3,015	$	3,303	$	6,237	$	6,575
Operating expenses		89		101		177		202
Total continuing operations		3,104		3,404		6,414		6,777
Depreciation and amortization classified as discontinued operations		-		318		-		627
Total	$	3,104	$	3,722	$	6,414	$	7,404

Bill and Hold Transactions

Bill and Hold Transactions. Some of our fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” arrangements). The sales value of inventory, subject to Bill and Hold arrangements, at our facilities was $16,048 and $19,346 as of March 31, 2013 and September 30, 2012, respectively.

Recently Issued or Adopted Accounting Standards

Recently Issued or Adopted Accounting Standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, which amends Topic 220, Comprehensive Income. The amendment allows an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This standard was effective for us beginning on October 1, 2012. This standard changes presentation requirements, and accordingly, the adoption of this standard did not have an impact on our results of operations, financial position or cash flows.

In February 2013, the FASB issued ASU No. 2013-2, which amends the Comprehensive Income Topic of the Accounting Standards Codification (ASC). The updated standard requires the presentation of information about reclassifications out of accumulated other comprehensive income. ASU No. 2013-2 is effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company has adopted the standard on a prospective basis. The updated standard affects the Company’s disclosures but has no impact on its results of operations, financial condition or liquidity.