DISCONTINUED OPERATIONS

12 Months Ended

Sep. 30, 2013

DISCONTINUED OPERATIONS

13. DISCONTINUED OPERATIONS

In May 2012, our board of directors approved and we committed to a plan to sell our Aerospace Equipment segment, which is 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.

The Asset Purchase Agreement provides that $4,000 of the Purchase Price be held in an escrow account for 15 months following the closing of the transaction, or until October 31, 2013. Amounts in the escrow account may be 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 retain. During Fiscal 2013, $650 of the escrow account was released to Moog in settlement of certain retained liabilities.

In October 2013, we received a claim for indemnification from Moog under the Asset Purchase Agreement (the “Moog Claim”). The Moog Claim demands payment for alleged losses of approximately $6,800 from the claimed breach of certain of our representations and warranties in the Asset Purchase Agreement. In November 2013, we responded to Moog denying Moog’s claim for indemnification. We intend to vigorously defend ourselves in this matter, but the ultimate outcome is uncertain.

We have accounted for the portion of the Purchase Price that was placed in the escrow account as a contingent gain, and accordingly have deferred recognition of the amount until all contingencies have lapsed or been resolved. The balance in the escrow account as of September 30, 2013 is $3,350. If the Moog Claim is resolved for an amount less than the balance in the escrow account, then any amounts remaining in the escrow account after settlement of the Moog Claim will be released to us and recorded as a gain. If the Moog Claim is resolved for an amount greater than the escrow account, then the amount of the settlement that is in excess of the escrow account balance would be recorded by us as a loss.

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:

	Year Ended September 30,
	2013			2012		2011
Revenues	$	-		$	44,039	$	48,941
Income from Discontinued Operations, Net of Tax
Operating income (loss) before tax	$	83		$	643	$	3,328
Income tax expense (benefit)		(62	)		506		1,185
Net income from discontinued operations		145			137		2,143
Gain (Loss) on Sale of Discontinued Operations
Gain (Loss) on sale of discontinued operations before tax		(74	)		5,059		-
Income tax expense (benefit)		(28	)		209		-
Net gain (loss) on sale of discontinued operations		(46	)		4,850		-
Income from discontinued operations, net of tax	$	99		$	4,987	$	2,143