9. EMPLOYEE BENEFIT PLANS

Defined Benefit Plan Descriptions. 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 Plan”), the Ampac Fine Chemicals LLC Pension Plan for Salaried Employees (the “AFC Salaried Plan”), and the Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees (the “AFC Bargaining Plan”), each as amended to date. Collectively, these three plans are referred to as the “Pension Plans.” Pension Plans 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 U.S. 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 (the “SERP”) that as of September 30, 2013, 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.

Defined Contribution Plan Descriptions. We maintain two 401(k) plans in which participating employees may make contributions. One covers substantially all U.S. employees, except bargaining unit employees of our Fine Chemicals segment, and the other covers those bargaining unit employees (collectively, the “401(k) Plans”). We make matching contributions for Fine Chemicals segment employees and eligible U.S. employees who began employment on or after July 1, 2010.

Summary Defined Benefit Plan Results. The table below presents the annual changes in benefit obligations and plan assets and the funded status of our Pension Plans and SERP as of and for the fiscal years ended September 30:



	Pension Plans						SERP
	2013			2012			2013			2012

Change in Benefit Obligation:
Benefit obligation, beginning of year	$	96,989		$	73,383		$	11,087		$	7,942
Service cost		3,326			2,653			817			435
Interest cost		3,944			3,915			422			369
Amendments		298			-			-			-
Actuarial losses		(18,090	)		18,693			(615	)		2,868
Benefits paid		(1,781	)		(1,655	)		(525	)		(527	)

Benefit obligation, end of year		84,686			96,989			11,186			11,087

Change in Plan Assets:
Fair value of plan assets, beginning of year		52,249			36,935			-			-
Actual return (loss) on plan assets		8,124			7,649			-			-
Employer contributions		6,704			9,320			525			527
Benefits paid		(1,781	)		(1,655	)		(525	)		(527	)

Fair value of plan assets, end of year		65,296			52,249			-			-

Funded status	$	(19,390	)	$	(44,740	)	$	(11,186	)	$	(11,087	)

Amounts pertaining to our Pension Plans and SERP recognized in our consolidated balance sheet are classified as follows as of September 30:



	Pension Plans						SERP
	2013			2012			2013			2012

Employee related liabilities	$	-		$	-		$	(677	)	$	(527	)
Pension obligations and other long-term liabilities		(19,390	)		(44,740	)		(10,509	)		(10,560	)

Net amount recognized	$	(19,390	)	$	(44,740	)	$	(11,186	)	$	(11,087	)

The following table summarizes changes in the components of unrecognized benefit plan costs for the year ended September 30:



	Pension Plans						SERP
	2013			2012			2013			2012

Net actuarial loss	$	(21,817	)	$	14,443		$	(616	)	$	2,867
Prior service costs		298			-			-			-
Amortization of:
Net actuarial loss from previous years		(3,590	)		(2,549	)		(376	)		-
Prior service costs		(70	)		(63	)		(420	)		(420	)
Income tax benefits related to above items		9,631			(4,732	)		540			(979	)

Changes in unrecognized benefit plan costs	$	(15,548	)	$	7,099		$	(872	)	$	1,468

The following table sets forth the amounts recognized as components of accumulated other comprehensive loss at September 30:



	Pension Plans						SERP
	2013			2012			2013			2012

Net actuarial loss	$	17,950		$	43,357		$	2,576		$	3,568
Prior service costs		642			414			982			1,402
Income tax benefits related to above items		(4,931	)		(14,562	)		(1,602	)		(2,142	)

Unrecognized benefit plan costs, net of tax	$	13,661		$	29,209		$	1,956		$	2,828

The table below sets forth the amounts in accumulated other comprehensive loss at September 30, 2013, that we expect to recognize in periodic pension cost in the year ending September 30, 2014.



	Pension Plans		SERP

Amortization of net actuarial loss	$	1,143	$	262
Amortization of prior service costs		67		420

	$	1,210	$	682

The table below provides data for our defined benefit plans as of September 30:



	2013		2012

Plan Assets:
Ampac Plan	$	49,913	$	41,055
AFC Salaried Plan		8,991		6,744
AFC Bargaining Plan		6,392		4,450
Accumulated Benefit Obligation:
Ampac Plan		54,786		61,368
AFC Salaried Plan		10,409		12,500
AFC Bargaining Plan		7,210		7,585
Projected Benefit Obligation:
Ampac Plan		65,838		74,645
AFC Salaried Plan		11,638		14,759
AFC Bargaining Plan		7,210		7,585

Net periodic benefit plan cost is comprised of the following for the years ended September 30:



	Pension Plans									SERP
	2013			2012			2011			2013		2012		2011

Net Periodic Benefit Plan Cost:
Service cost	$	3,326		$	2,653		$	2,432		$	817	$	435	$	324
Interest cost		3,944			3,914			3,541			422		369		356
Expected return on plan assets		(4,399	)		(3,398	)		(2,886	)		-		-		-
Recognized actuarial losses		3,589			2,549			1,752			376		-		-
Amortization of prior service costs		70			63			63			420		420		420

Net periodic pension cost	$	6,530		$	5,781		$	4,902		$	2,035	$	1,224	$	1,100

Assumptions.



	Pension Plans						SERP
	2013		2012		2011		2013		2012		2011

Weighted-Average Actuarial Assumptions
Used to Determine Benefit Obligation as of September 30:
Discount rate		5.31%		4.00%		5.40%		4.67%		3.90%		4.80%
Rate of compensation increase		3.50%		3.50%		4.00%		3.50%		3.50%		4.00%
Weighted-Average Actuarial Assumptions
Used to Determine Net Periodic Benefit
Plan Cost for the Years Ended
September 30:
Discount rate		4.00%		5.40%		5.80%		3.90%		4.80%		4.80%
Rate of compensation increase		3.50%		4.00%		4.00%		3.50%		4.00%		4.00%
Expected return on plan assets		8.00%		8.00%		8.00%		-		-		-

The discount rate is determined for the Pension Plans and SERP, respectively, by projecting the expected future benefit payments of the Pension Plans and SERP, discounting those payments using a theoretical zero-coupon spot-yield curve derived from a universe of high-quality bonds as of the measurement date, and solving for a single equivalent discount rate that results in the same projected benefit obligation.

Through consultation with investment advisors and actuaries, the expected long-term returns for each of the Pension Plans’ strategic asset classes were developed. Several factors were considered, including survey of investment managers’ expectations, current market data and historical returns of long periods. Using policy target allocation percentages and the asset class expected returns, a weighted average expected return was calculated.

Plan Assets and Investment Policy. The Pension Plans’ assets include no shares of our common stock. We developed assumptions for expected long-term returns for the targeted asset classes of each of the Pension Plans based on factors that include current market data such as yields/price-earnings ratios, and historical market returns over long periods. Using policy target allocation percentages and the asset class expected returns, a weighted average expected return was calculated. The actual and target asset allocation for the Pension Plans is as follows at September 30:



	Target		Actual
	2013		2013		2012

Equity securities		68%		68%		74%
Debt securities		24%		21%		22%
Real estate securities		5%		5%		0%
Cash and marketable securities		3%		6%		4%

Total		100%		100%		100%

The table below provides the fair values of the Pension Plans’ assets as of September 30, 2013 and 2012, by asset category, and identifies the level of inputs used to determine the fair value of assets in each category (see Note 1 for additional information regarding the level categories).



	Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

September 30, 2013:
Equity Securities
Domestic large-cap	$	15,964					$	15,964
Domestic mid-cap		3,331						3,331
Domestic small-cap		902						902
International		7,861						7,861
Mutual funds		15,478						15,478
Other		1,324						1,324
Fixed Income Securities
Mutual funds		6,216						6,216
Corporate bonds			$	3,999				3,999
Certificate of deposit								-
U.S. Treasuries		1,016						1,016
Mortgage-backed				303				303
Foreign bonds				1,901				1,901
Real Estate Securities		3,076						3,076
Cash and cash equivalents		3,859						3,859
Other		7		58				65

	$	59,034	$	6,261	$	-	$	65,295

September 30, 2012:
Equity Securities
Domestic large-cap	$	20,188					$	20,188
Domestic mid-cap		5,590						5,590
Domestic small-cap		1,768						1,768
International		5,939						5,939
Other		3,217						3,217
Fixed Income Securities								-
Mutual funds		6,146						6,146
Corporate bonds			$	3,652				3,652
Certificate of deposit				805				805
U.S. Treasuries		973						973
Mortgage-backed				477				477
Foreign bonds				1,366				1,366
Cash and cash equivalents		2,056						2,056
Other				72				72

	$	45,877	$	6,372	$	-	$	52,249

Contributions and Benefit Payments. We made total contributions of $1,061, $1,378 and $1,301 to the 401(k) Plans during the years ended September 30, 2013, 2012 and 2011, respectively. During the year ending September 30, 2014, we expect to contribute approximately $2,100 to the Pension Plans and approximately $677 to the SERP.

The table below sets forth expected future benefit payments for the years ending September 30:



Years ending September 30:	Pension Plans		SERP

2014	$	2,344	$	677
2015		2,464		662
2016		2,681		1,081
2017		2,779		1,055
2018		3,019		1,027
2019-2023		20,326		4,662