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

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 January 31, 2014 was 7,997,913.

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 (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	23
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	41
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
ITEM 3.	Defaults Upon Senior Securities	56
ITEM 4.	Mine Safety Disclosures	56
ITEM 5.	Other Information	56
ITEM 6.	Exhibits	56

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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
	December 31,
	2013		2012
Revenues	$	51,513	$	36,318
Cost of Revenues		33,536		20,906
Gross Profit		17,977		15,412
Operating Expenses		11,372		10,464
Other Operating Gains		713		-
Operating Income		7,318		4,948
Interest and Other Income		14		8
Interest Expense		610		1,282
Loss on Debt Extinguishment		-		2,835
Income from Continuing
Operations before Income Tax		6,722		839
Income Tax Expense		2,378		(312)
Income from Continuing Operations		4,344		1,151
Income (Loss) from Discontinued
Operations, Net of Tax		(21)		4
Net Income	$	4,323	$	1,155
Basic Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.55	$	0.15
Income (Loss) from Discontinued
Operations, Net of Tax	$	(0.00)	$	0.00
Net Income	$	0.55	$	0.15
Diluted Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.53	$	0.15
Income (Loss) from Discontinued
Operations, Net of Tax	$	(0.00)	$	0.00
Net Income	$	0.53	$	0.15
Weighted-Average Shares Outstanding:
Basic		7,890,000		7,670,000
Diluted		8,224,000		7,876,000

See accompanying notes to condensed consolidated financial statements

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AMERICAN PACIFIC CORPORATION

Condensed Consolidated Statements of Comprehensive Income

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

	Three Months Ended
	December 31,
	2013		2012
Net Income	$	4,323	$	1,155
Other Comprehensive Income (Loss):
Cash Flow Hedge:
Change in fair value arising during period
(net of income tax of $3 and $0)		196		-
Less reclassifications to net income
(net of tax of $33 and $0)		(53)		-
		143		-
Defined Benefit Pension Plans:
Actuarial gains (losses) arising during period		-		-
Less amortization of losses to net income
(net of tax of $194 and $444)		312		664
		312		664
Total Other Comprehensive Income		455		664
Comprehensive Income	$	4,778	$	1,819

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)

	December 31,		September 30,
	2013		2013
ASSETS
Current Assets:
Cash and Cash Equivalents	$	52,797	$	60,864
Accounts Receivable, Net		37,006		21,309
Inventories		64,690		59,572
Prepaid Expenses and Other Assets		2,035		1,541
Income Taxes Receivable		1,699		1,567
Deferred Income Taxes		16,690		16,214
Total Current Assets		174,917		161,067
Property, Plant and Equipment, Net		102,377		103,847
Deferred Income Taxes		6,178		6,446
Other Assets		6,148		5,947
TOTAL ASSETS	$	289,620	$	277,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	13,933	$	13,501
Accrued Liabilities		8,203		5,453
Accrued Interest		6		7
Employee Related Liabilities		9,424		11,325
Income Taxes Payable		2,386		629
Customer Deposits		37,007		26,936
Deferred Revenues		6,812		8,677
Current Portion of Environmental Remediation Reserves		2,091		2,244
Current Portion of Long-Term Debt		6,001		6,002
Total Current Liabilities		85,863		74,774
Long-Term Debt		48,000		49,500
Environmental Remediation Reserves		9,217		9,703
Pension Obligations		29,379		29,899
Other Long-Term Liabilities		237		2,094
Total Liabilities		172,696		165,970
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,
7,997,913 and 7,949,000 issued and outstanding		800		795
Capital in Excess of Par Value		78,770		77,966
Retained Earnings		52,358		48,035
Accumulated Other Comprehensive Loss		(15,004)		(15,459)
Total Stockholders’ Equity		116,924		111,337
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	289,620	$	277,307

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)

	Three Months Ended
	December 31,
	2013		2012
Cash Flows from Operating Activities:
Net Income	$	4,323	$	1,155
Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities:
Depreciation and amortization		3,421		3,310
Non-cash interest expense		83		64
Non-cash component of loss on debt extinguishment		-		1,252
Share-based compensation		373		253
Excess tax benefit from stock-based compensation		(326)		(71)
Deferred income taxes		(46)		1,080
Loss (gain) on sale of assets		(34)		1
Changes in operating assets and liabilities:
Accounts receivable, net		(15,705)		6,032
Inventories		(5,077)		(13,684)
Prepaid expenses and other current assets		(494)		(470)
Accounts payable		144		(2,483)
Income taxes		1,625		(2,192)
Accrued liabilities		2,760		(111)
Accrued interest		(1)		(853)
Employee related liabilities		(3,744)		(3,566)
Customer deposits		10,071		7,440
Deferred revenues		(1,865)		4,139
Environmental remediation reserves		(639)		(2,088)
Pension obligations, net		(14)		(393)
Other		(155)		(2,068)
Discontinued operations, net		15		(19)
Net Cash Used by Operating Activities		(5,285)		(3,272)
Cash Flows from Investing Activities:
Capital expenditures		(1,755)		(1,961)
Other investing activities		38		-
Net Cash Used by Investing Activities		(1,717)		(1,961)
Cash Flows from Financing Activities:
Issuances of long-term debt		-		60,000
Payments of long-term debt		(1,501)		(66,129)
Debt issuance costs		-		(1,364)
Issuances of common stock		110		248
Excess tax benefit from stock-based compensation		326		71
Net Cash Used by Financing Activities		(1,065)		(7,174)
Net Change in Cash and Cash Equivalents		(8,067)		(12,407)
Cash and Cash Equivalents, Beginning of Period		60,864		31,182
Cash and Cash Equivalents, End of Period	$	52,797	$	18,775
Cash Paid For:
Interest	$	526	$	2,071
Income taxes		761		2,342
Non-Cash Investing and Financing Transactions:
Additions to Property, Plant and Equipment not yet paid		241		1,707

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, 2013. The operating results and cash flows for the three-month period ended December 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, 2013. 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 was 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 13.)

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 December 31, 2013, our floating-rate term loan had a carrying value of $54,000 and an estimated fair value of $53,070 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was an asset of $369 as of December 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 is classified as follows in our statements of operations:

	Three Months Ended
	December 31,
	2013		2012
Depreciation classified as:
Cost of revenues	$	3,370	$	3,222
Operating expenses		51		88
Total		3,421		3,310

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 $11,898 and $9,517 as of December 31, 2013 and September 30, 2013, respectively.

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.

The purposes of our share-based compensation arrangements are to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of the Company’s business. 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

– 6 –

2. SHARE-BASED COMPENSATION (Continued)

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. In addition, certain grants of restricted stock made in December 2013 cliff-vest on September 30, 2015, subject to the attainment of financial performance criteria that were established for the two-year period ending September 30, 2015 and continued employment by the recipient. As of December 31, 2013, there were 157,563 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 three months ended December 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Fair Value Per Share		Shares		Weighted Average Fair Value Per Share
Balance, September 30, 2013		437,635	$	8.73		104,372	$	4.34		69,052	$	9.87
Granted		51,622		40.19		51,622		19.28		36,047		40.19
Vested		-		-		(44,404)		4.15		(28,519)		9.43
Exercised		(12,866)		8.51		-		-		-		-
Expired / Cancelled		-		-		-		-		-		-
Balance, December 31, 2013		476,391		12.15		111,590		11.33		76,580		24.30

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

Number of vested stock options		364,801
Weighted-average exercise price per share	$	8.56
Aggregate intrinsic value	$	10,471
Weighted-average remaining contractual term in years		4.7

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

– 7 –

2. SHARE-BASED COMPENSATION (Continued)

	Three Months Ended
	December 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	19.28	$	5.41
Significant fair value assumptions:
Expected term in years		5.46		5.70
Expected volatility		52%		49%
Expected dividends		0%		0%
Risk-free interest rates		1.46%		0.64%
Total intrinsic value of options exercised	$	1,560	$	503
Aggregate cash received for option exercises	$	110	$	248
Compensation cost (included in operating expenses)
Stock options	$	164	$	94
Restricted stock		209		159
Total		373		253
Tax benefit recognized		80		64
Net compensation cost	$	293	$	189
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	969	$	285
Restricted stock	$	1,458	$	438
Weighted-average years to be recognized
Stock options		1.9		1.8
Restricted stock		1.5		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 one share 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 three months ended December 31, 2013 is as follows:

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

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2. SHARE-BASED COMPENSATION (Continued)

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

	Three Months Ended
	December 31,
	2013		2012
Compensation cost (included in operating expenses)	$	(199)	$	36
Tax expense (benefit) recognized		(76)		14
Net compensation cost	$	(123)	$	22
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,194	$	1,156
Weighted-average years to be recognized		0.8		1.8

3. INVENTORIES

Inventories consist of the following:

	December 31,		September 30,
	2013		2013
Finished goods	$	5,442	$	9,020
Work-in-process		40,180		36,032
Raw materials and supplies		16,249		14,520
Under(over) applied manufacturing overhead costs		2,819		-
Total	$	64,690	$	59,572

Finished goods include final product that has shipped to our customers but remains subject to a specified customer acceptance period before revenues and the related costs of revenues are recognized.

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.

4. EARNINGS PER SHARE

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

	Three Months Ended
	December 31,
	2013		2012
Income from continuing operations	$	4,344	$	1,151
Basic weighted-average shares		7,890,000		7,670,000
Diluted:
Weighted-average shares, basic		7,890,000		7,670,000
Dilutive effect of stock options		293,000		171,000
Dilutive effect of restricted stock		41,000		35,000
Weighted-average shares, diluted		8,224,000		7,876,000
Basic earnings per share from continuing operations	$	0.55	$	0.15
Diluted earnings per share from continuing operations	$	0.53	$	0.15

As of December 31, 2013, we had an aggregate of 51,622 antidilutive options and unvested restricted shares outstanding. As of December 31, 2012, we had an aggregate of 68,896 antidilutive options and unvested restricted shares outstanding.

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5. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides changes in accumulated other comprehensive 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, 2013	$	(15,617)	$	158	$	(15,459)
Other comprehensive income before reclassifications		-		196		196
Amounts reclassified from accumulated other comprehensive loss		312		(53)		259
Net current period other comprehensive income		312		143		455
Balance, December 31, 2013	$	(15,305)	$	301	$	(15,004)

The following table provides details about reclassifications out of Accumulated Other Comprehensive Loss (“AOCI”):

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months Ended December 31,
	2013		2012
Gains and losses on cash flow hedges -	$	86	$	-	Interest expense
interest rate swap agreement		(33)		-	Income tax expense
	$	53	$	-	Net of tax
Amortization of defined benefit plan items	$	(186)	$	(512)	Cost of revenues
		(320)		(596)	Operating expenses
		(506)		(1,108)	Total before tax
		194		444	Income tax expense
	$	(312)	$	(664)	Net of tax

(a) amounts in parenthesis represent a decrease to income

6. DEBT

Our outstanding debt balances consist of the following:

	December 31,		September 30,
	2013		2013
Term Loan, variable-rate interest, due through 2017	$	54,000	$	55,500
Capital Leases, due through 2014		1		2
Total Debt		54,001		55,502
Less Current Portion		(6,001)		(6,002)
Total Long-term Debt	$	48,000	$	49,500

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

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6. DEBT (Continued)

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.

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 December 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $4,791 and availability for revolving loans of $20,209.

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.

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6. DEBT (Continued)

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 December 31, 2013, our Leverage Ratio was 0.97 to 1.00 and our Debt Service Coverage Ratio was 6.24 to 1.00, each of which are in compliance with the applicable covenant.

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 December 31, 2013, we had $4,791 in outstanding letters of credit, maturing through April 2017, which were issued under our Revolving Facility. In addition, as of December 31, 2013, we had $169 in outstanding standby letters of credit which mature through April 2016 that were not issued under our Revolving Facility. 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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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 December 31, 2013, the fair value of the Swap Agreement was an asset of $369. 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 three months ended December 31, 2013, we had no hedge ineffectiveness.

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

	December 31,		September 30,
	2013		2013
Balance sheet location of fair value:
Other assets	$	657	$	554
Accrued liabilities	$	288	$	298

	Three Months Ended
	December 31,
	2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	199	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	(86)	$	-

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 commercial 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 large scale, and manufacturing Schedule II controlled substances.

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8. SEGMENT INFORMATION (Continued)

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
	December 31,
	2013		2012
Fine chemicals customer		32%		36%
Specialty chemicals customer				30%
Specialty chemicals customer		21%

The following provides financial information about our segment operations:

	Three Months Ended
	December 31,
	2013		2012
Revenues:
Fine Chemicals	$	36,411	$	21,347
Specialty Chemicals		14,464		14,350
Other Businesses		638		621
Total Revenues	$	51,513	$	36,318
Segment Operating Income (Loss):
Fine Chemicals	$	5,676	$	1,277
Specialty Chemicals		6,216		7,917
Other Businesses		7		(160)
Total Segment Operating Income		11,899		9,034
Corporate Expenses		(4,581)		(4,086)
Operating Income	$	7,318	$	4,948
Depreciation and Amortization:
Fine Chemicals	$	3,061	$	3,015
Specialty Chemicals		307		207
Other Businesses		6		5
Corporate		47		83
Total Depreciation and Amortization	$	3,421	$	3,310

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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 December 31, 2013 and September 30, 2013, our recorded liability for unrecognized tax benefits was $228 and $204, respectively, of which $225 and $201, respectively, 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 2014. Accordingly, it is reasonably possible that none of the gross liability for unrecognized tax benefits will be reversed during Fiscal 2014.

Unrecognized Tax Benefits - September 30, 2013	$	204
Additions for tax positions of prior years		24
Reductions for tax positions of prior years		-
Lapse of statute of limitations		-
Unrecognized Tax Benefits - December 31, 2013	$	228

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2013 and September 30, 2013, we had accrued $12 and $10, respectively, for the payment of tax-related interest and penalties. For the three months ended December 31, 2013 and 2012, income tax expense (benefit) includes an expense of $2 and a benefit of $671, 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.

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10. DEFINED BENEFIT PLANS (Continued)

Net periodic pension cost consists of the following:

	Three Months Ended
	December 31,
	2013		2012
Pension Plans:
Service Cost	$	632	$	830
Interest Cost		1,131		983
Expected Return on Plan Assets		(1,297)		(1,100)
Recognized Actuarial Losses		318		893
Amortization of Prior Service Costs		17		16
Net Periodic Pension Cost	$	801	$	1,622
Supplemental Executive Retirement Plan:
Service Cost	$	183	$	204
Interest Cost		127		106
Recognized Actuarial Losses		66		94
Amortization of Prior Service Costs		105		105
Net Periodic Pension Cost	$	481	$	509

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 three months ended December 31, 2013, we contributed $1,161 to the Pension Plans to fund benefit payments and anticipate making approximately $1,321 in additional contributions through September 30, 2014. For the three months ended December 31, 2013, we contributed $134 to the SERP to fund benefit payments and anticipate making approximately $542 in additional contributions through September 30, 2014.

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 was issued May 29, 2013. 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 2015. 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.

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11. COMMITMENTS AND CONTINGENCIES (Continued)

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 held discussions with NDEP to formalize our remediation efforts in an agreement. In June 2013, we entered into an Administrative Order on Consent (the “AOC”) with NDEP. We have been conducting our remediation efforts in cooperation with NDEP. Accordingly, the formalization of our remediation efforts under an AOC had no significant effect on our scope of activities or cost estimates. Significant terms of the AOC include:

• formalizing the oversight of ongoing or modified remediation efforts required by NDEP;

• procedures for reimbursing NDEP for past and future oversight costs;

• providing NDEP with enforcement mechanisms to ensure compliance with the AOC, including stipulated penalties for failures to comply with certain requirements under the AOC;

• preservation of AMPAC’s right to make future cost recovery or contribution claims;

• providing a procedure for closing parts or all of the remediation efforts once goals are achieved; and

• resolving certain environmental liability claims that NDEP might have had without the AOC.

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,

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11. COMMITMENTS AND CONTINGENCIES (Continued)

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 with planned start up activities completed in Fiscal 2013. System optimization will continue in Fiscal 2014. 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 rates and targeted perchlorate mass destruction rates, the life of the project could range from five to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, seven 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 future O&M costs, we consider, among other factors, the remaining 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 range from approximately $1,800 to $2,100. 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

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11. COMMITMENTS AND CONTINGENCIES (Continued)

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 December 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $7,600 to approximately $31,300. 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 December 31, 2013, the accrued amount was $11,308, 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 three months ended December 31, 2013 is shown below:

Balance, September 30, 2013	$	11,947
Expenditures		(639)
Balance, December 31, 2013	$	11,308

AFC Environmental Matters.  The primary operations of our Fine Chemicals segment are located on land leased from Aerojet Rocketdyne, Inc. (“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. Five putative class action lawsuits were filed regarding our proposed merger transaction with H.I.G. Capital LLC (See Note 14.) Although we are not currently party to any other 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,

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11. COMMITMENTS AND CONTINGENCIES (Continued)

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. GAIN CONTINGENCIES – OTHER OPERATING GAINS

We recognize gain contingencies in our consolidated statement of operations when all contingencies have been resolved, which generally coincides with the receipt of cash, if applicable. During the Fiscal 2014 first quarter, our Fine Chemicals segment reported other operating gains of $713 that resulted from the resolution of a gain contingency.

Our Fine Chemicals segment is undertaking several mandatory capital projects. Most of the capital activities are complete and others are in progress or otherwise expected to be completed during Fiscal 2014. In connection with these projects, our Fine Chemicals segment held, and continues to hold, negotiations with the former owner of its facilities. During the Fiscal 2014 first quarter, we received from the former owner cash consideration in the amount of $713 for a limited release of liability of the former owner with respect to the recently completed project.

13. 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 was 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 the Fiscal 2014 first quarter and Fiscal 2013, respectively, $177 and $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 demanded 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.

In January 2014, the Moog Claim was fully settled in the amount of $2,000. The settlement includes a release, covenant not to sue, and a waiver from Moog of all current and future claims for indemnification pursuant to the Asset Purchase Agreement, with certain limited exceptions. As a result, the escrow account will be distributed and closed. On or before February 14, 2014, we anticipate that Moog will receive $2,000 and we will receive approximately $1,173. 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. When we receive our final distribution from the escrow account, we will report that amount as additional gain in the period in which the funds are received.

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13. DISCONTINUED OPERATIONS (Continued)

Revenues and expenses associated with the operations of AMPAC-ISP are not material and are presented as discontinued operations for all periods presented.

14 SUBSEQUENT EVENT

Moog Claim. In October 2013, we received a claim for indemnification from Moog under the Asset Purchase Agreement associated with the sale of our former Aerospace Equipment segment which was settled in January 2014 (see Note 13).

Pending Acquisition by H.I.G. Capital LLC. On January 9, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and with Flamingo Parent Corp., a Delaware corporation (“Parent”), and Flamingo Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), both of which are affiliates of and controlled by H.I.G. Capital, LLC, a Delaware limited liability company.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub commenced a tender offer (the “Offer”) on January 24, 2014 to acquire all of the outstanding shares of common stock of the Company (the “Shares”), at a purchase price of $46.50 per share, in cash (the “Offer Price”), payable without interest and less any applicable withholding taxes. The Offer is scheduled to expire at midnight, New York City time, on February 24, 2014, unless the Offer is extended or earlier terminated.

Following the consummation of the Offer and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into us, and we will continue as a wholly-owned subsidiary of Parent (the “Merger”). As of the effective time of the Merger, each outstanding Share (other than Shares owned by the Company as treasury stock, Shares owned by Parent, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent, Merger Sub or the Company or Shares held by stockholders that have properly exercised and perfected appraisal rights under Delaware law) will be converted automatically into the right to receive an amount in cash equal to the Offer Price, without interest.

On January 16, 2014, a putative class action lawsuit captioned Quick, et al. v. American Pacific Corp., et al., Case No. A-14-694633-C, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition and subsequently amended on January 30, 2014. The amended complaint (the “Quick Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub and H.I.G. The Quick Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by failing to maximize stockholder value in a proposed sale of the Company and by engaging in self-dealing. The Quick Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition and that the Company and H.I.G. aided and abetted the alleged breaches by the Company’s directors. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

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14. SUBSEQUENT EVENT (Continued)

On January 29, 2014 and February 4, 2014, two putative class action lawsuits captioned Berger v. Campbell, et al., Case No. 9292, and Jeweltex Manufacturing Inc. Retirement Plan v. American Pacific Corporation, et al., Case No. 9308, were filed in the Court of Chancery in the State of Delaware regarding the proposed acquisition. The complaints (the “Berger Complaint” and “Jeweltex Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company, and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Berger Complaint and Jeweltex Complaint allege, among other things, that the Company’s directors breached their fiduciary duties by agreeing to deal protection devices designed to prevent unsolicited bids and by engaging in self-dealing. The Berger Complaint and the Jeweltex Complaint further allege that the Company’s directors failed to provide material information relating to the acquisition and that the Company’s directors effectuated a scheme to temporarily lower the Company’s share price through deliberate misleading acts, allowing a sale of the Company to take place and providing immediate liquidity for the stock holdings of the Company’s directors and management. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 30, 2014, two putative class action lawsuits captioned Norcini v. American Pacific Corporation, et al., Case No. A-14-695381-B, and Solak v. American Pacific Corporation, et al., Case No. A-14695365-C were filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaints (the “Norcini Complaint” and “Solak Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Norcini and Solak Complaints allege, among other things, that the Company’s directors breached their fiduciary duties by not maximizing stockholder value and not fully informing themselves about whether greater value could be achieved. The Norcini and Solak Complaints further allege that the Company’s directors agreed to onerous deal protection devices that assured consummation of the deal and collectively engaged in a scheme to unfairly sell the Company to H.I.G. at a bargain price. The Solak Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 31, 2014, a putative class action lawsuit captioned Pill v. Gibson, et al., Case No. A-14-695405, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaint (the “Pill Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Pill Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by allowing allegedly conflicted directors and an allegedly conflicted financial advisor to negotiate, analyze, and approve the acquisition, which contained alleged deal protection devices. The Pill Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

We believe that the allegations in the complaints described above lack merit, and we intend to vigorously defend the actions.

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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 expectation that we will be able to successfully operate our business without disruption due to the pending merger transaction with H.I.G. Capital, LLC, whether we will obtain regulatory approvals and satisfy other conditions to closing of the merger transaction and successfully complete the merger, whether we will be able to manage unexpected costs, liabilities, or delays in completing the merger transaction, 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, existing cash balances 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, statements regarding our expectations for product revenues, sales volumes, interest expense, tax obligations and capital expenditures, 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 interest rate 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 the effects of regulatory proposals, 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 first quarter of Fiscal 2014 as compared to the first quarter of Fiscal 2013. The discussion should be read in conjunction with our Annual Report on Form 10-K for Fiscal 2013 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 2013.

PENDING ACQUISITION BY H.I.G. CAPITAL LLC

On January 9, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and with Flamingo Parent Corp., a Delaware corporation (“Parent”), and Flamingo Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), both of which are affiliates of and controlled by H.I.G. Capital, LLC, a Delaware limited liability company (“H.I.G.”).

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub commenced a tender offer (the “Offer”) on January 24, 2014 to acquire all of the outstanding shares of common stock of the Company (the “Shares”), at a purchase price of $46.50 per share, in cash (the “Offer Price”), payable without interest and less any applicable withholding taxes. The Offer is scheduled to expire at midnight, New York City time, on February 24, 2014, unless the Offer is extended or earlier terminated.

Following the consummation of the Offer and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into us, and we will continue as a wholly-owned subsidiary of Parent (the “Merger”). As of the effective time of the Merger, each outstanding Share (other than Shares owned by the Company as treasury stock, Shares owned by Parent, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent, Merger Sub or the Company or Shares held by stockholders that have properly exercised and perfected appraisal rights under Delaware law) will be converted automatically into the right to receive an amount in cash equal to the Offer Price, without interest.

Our board of directors has unanimously approved the Merger Agreement and, on January 27, we have filed with the SEC a solicitation/recommendation statement on Schedule 14D-9 setting forth in detail, among other things, the recommendation of our board of directors that the Company’s stockholders tender their Shares in the Offer.

If we consummate the Merger, we will become a wholly-owned subsidiary of Parent. Accordingly, the remainder of the discussion in this “Overview” section — which assumes we remain a stand-alone business — should be read with the understanding that should the Merger be completed, Parent will have the power to control the conduct of our business.

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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 electrochemical 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:

	Three Months Ended December 31,
	2013		2012
Fine Chemicals		71%		59%
Specialty Chemicals		28%		39%
Other Businesses		1%		2%
Total		100%		100%

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 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 AFC sells are proprietary to our customers and used in existing drugs that are FDA approved and commercially available. We operate in compliance with the U.S. Food and Drug Administration’s (the “FDA”) 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, leads to strong customer allegiances and limited competition. We have distinctive competencies and specialized engineering capabilities in performing chiral separations, manufacturing products that require high containment and performing energetic chemistries at large scale. Additionally, our technology offerings include large 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 SMB technology 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

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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 large 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, and drugs with CNS, oncology and pain management indications.

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 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 refiling 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, initially established in 1997, 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. Under the long-term contract, pricing varies inversely to volume and includes annual escalations. In May 2013, we extended our contract with ATK to include Fiscal 2014 through Fiscal 2016 and established a price volume matrix that provides fixed pricing for annual rocket-grade AP volumes ranging from 2.5 million to 7.5 million pounds.

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.

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 is 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

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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 2014 first quarter, revenues increased 42% to $51,513 compared to $36,318 for the Fiscal 2013 first quarter. The increase is supported primarily by growth from our Fine Chemicals segment. See further discussion below under the heading “Business Segment Results”.

	December 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Fine Chemicals	$	36,411	$	21,347	$	15,064		71%
Specialty Chemicals		14,464		14,350		114		1%
Other Businesses		638		621		17		3%
Total Revenues	$	51,513	$	36,318	$	15,195		42%

COST OF REVENUES AND GROSS PROFIT

	December 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Revenues	$	51,513	$	36,318	$	15,195		42%
Cost of Revenues		33,536		20,906		12,630		60%
Gross Profit		17,977		15,412		2,565		17%
Gross Margin		35%		42%

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.

OPERATING EXPENSES

	December 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Operating Expenses	$	11,372	$	10,464	$	908		9%
Percentage of Revenues		22%		29%

For our Fiscal 2014 first quarter, operating expenses were $11,372 compared to $10,464 for the Fiscal 2013 first quarter. Specialty Chemicals segment operating expenses increased by approximately $400 due to higher regulatory compliance costs. Corporate operating expenses increased $495 in the Fiscal 2014 first quarter compared to the Fiscal 2013 first quarter. During the Fiscal 2014 first quarter, we incurred costs of approximately $1,000 in support of strategic corporate initiatives. This increase was offset partially by reductions in costs for long-term incentive compensation and shareholder matters.

INTEREST AND LOSS ON DEBT EXTINGUISHMENT

	December 31,				Increase		Percentage
	2013		2012		(Decrease)		Change
Three Months Ended:
Interest and Other Income, Net	$	14	$	8	$	6		75%
Interest Expense		610		1,282		(672)		(52%)
Loss on Debt Extinguishment		-		2,835		(2,835)		(100%)

Interest expense decreased 52% in the Fiscal 2014 first quarter compared to the prior year period. The decrease reflects 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”.

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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.

OTHER OPERATING GAINS

We recognize gain contingencies in our consolidated statement of operations when all contingencies have been resolved, which generally coincides with the receipt of cash, if applicable. During the Fiscal 2014 first quarter, our Fine Chemicals segment reported other operating gains of $713 that resulted from the resolution of a gain contingency.

Our Fine Chemicals segment is undertaking several mandatory capital projects. Most of the capital activities are complete and others are in progress or otherwise expected to be completed during Fiscal 2014. In connection with these projects, our Fine Chemicals segment held, and continues to hold, negotiations with the former owner of its facilities. During the Fiscal 2014 first quarter, we received from the former owner cash consideration in the amount of $713 for a limited release of liability of the former owner with respect to the recently completed project.

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 was 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 the Fiscal 2014 first quarter and Fiscal 2013 respectively, $177 and $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 demanded 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. In January 2014, the Moog Claim was fully settled in the amount of $2,000. The settlement includes a release, covenant not to sue, and a waiver from Moog of all current and future claims for indemnification pursuant to the Asset Purchase Agreement, with certain limited exceptions. As a result, the escrow account will be distributed and closed. On or before February 14, 2014, we anticipate that Moog will receive $2,000 and we will receive approximately $1,173.

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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. When we receive our final distribution from the escrow account, we will report that amount as additional gain in the period in which the funds are received.

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
	December 31,
	2013		2012
Revenues	$	36,411	$	21,347
Operating Income	$	5,676	$	1,277
Operating Margin		16%		6%

Revenues. Fine Chemicals segment revenues increased 71% for the Fiscal 2014 first quarter compared to the Fiscal 2013 first quarter. The increase in revenues is primarily due to inter-quarter timing as the first quarter of Fiscal 2014 included a greater percentage of expected Fiscal 2014 revenues when compared to the similar ratio for Fiscal 2013. The Fiscal 2014 first quarter included a greater percentage of revenues because a new core anti-viral product became FDA approved during the quarter. For Fiscal 2014, we expect that Fine Chemicals revenues will increase by at least 10% compared to Fiscal 2013. Accordingly, some of the favorable revenue variance for the first quarter is expected to reverse in remaining quarters of Fiscal 2014.

Operating Income. The Fine Chemicals segment operating income of $5,676 for the Fiscal 2014 first quarter reflects a substantial increase compared to the Fiscal 2013 first quarter. The increase reflects the following factors:

• Gross profit increased as a result of the revenue increase, with gross margins remaining consistent between the Fiscal 2014 and Fiscal 2013 first quarters.

• Operating expenses increased by approximately 3% in the Fiscal 2014 first quarter compared to the Fiscal 2013 first quarter.

• Fine Chemicals segment operating profit for the Fiscal 2014 first quarter includes other operating gains in the amount of $713, discussed above under the heading “Other Operating Gains”.

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 $103,800 and $90,300 as of December 31, 2013 and September 30, 2013, respectively. We anticipate order backlog as of December 31, 2013 to be substantially filled within the next twelve months. The amount in backlog can fluctuate and is dependent on a number of factors, including the timing of when customers issue purchase orders to AFC.

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SPECIALTY CHEMICALS SEGMENT

	Three Months Ended
	December 31,
	2013		2012
Revenues	$	14,464	$	14,350
Operating Income	$	6,216	$	7,917
Operating Margin		43%		55%

Revenues. Specialty Chemicals segment revenues include revenues from our perchlorate, sodium azide and Halotron product lines, with our perchlorate product lines comprising 86% and 88% of Specialty Chemicals revenues in the Fiscal 2014 and 2013 first quarters, respectively.

Specialty Chemicals segment revenues of $14,464 for the Fiscal 2014 first quarter was consistent with the Fiscal 2013 first quarter. Space launch programs were the greatest contributor to perchlorate volume in the Fiscal 2014 first quarter.

Operating Income. Specialty Chemicals segment operating margin decreased in the Fiscal 2014 first quarter when compared to the Fiscal 2013 first quarter. For Fiscal 2014, lower production volume is expected to negatively affect operating margins due to less absorption of fixed manufacturing overhead. In addition, during the Fiscal 2014 first quarter, Specialty Chemicals segment operating expenses increased by approximately $400 due to higher regulatory compliance costs.

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 $40,200 and $28,000 as of December 31, 2013 and September 30, 2013, respectively. We anticipate order backlog as of December 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
	December 31,
	2013		2012
Revenues	$	638	$	621
Operating Income (Loss)	$	7	$	(160)
Operating Margin		1%		(26%)

Other Businesses segment revenues include primarily our PEPCON Systems’ water treatment equipment and related spare parts sales. Revenues for the Fiscal 2014 and Fiscal 2013 first quarters are comprised primarily of spare parts sales. For the Fiscal 2014 first quarter, the Other Businesses segment reported operating income of $7 compared to an operating loss of $160 for the Fiscal 2013 first quarter.

CORPORATE EXPENSES

	Three Months Ended
	December 31,
	2013		2012
Corporate Expenses	$	4,581	$	4,086

Corporate operating expenses increased $495 in the Fiscal 2014 first quarter compared to the Fiscal 2013 first quarter. During the Fiscal 2014 first quarter, we incurred costs of approximately $1,000 in support of strategic corporate initiatives. This increase was offset partially be reductions in costs for long-term incentive compensation and shareholder matters.

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LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

	Three Months Ended December 31,						Percentage
	2013		2012		Change		Change
Cash Used By:
Operating activities	$	(5,285)	$	(3,272)	$	(2,013)		62%
Investing activities		(1,717)		(1,961)		244		(12%)
Financing activities		(1,065)		(7,174)		6,109		(85%)
Net change in cash for period	$	(8,067)	$	(12,407)	$	4,340		(35%)

Operating Cash Flows. Operating activities used cash of $5,285 for the Fiscal 2014 first quarter compared to $3,272 for the Fiscal 2013 first quarter, a decrease of $2,013.

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 increase in cash used by working capital accounts of approximately $11,200, excluding the effects of interest and income taxes.

• A decrease in cash paid for income taxes of approximately $1,600.

• A decrease in cash paid for interest expense and refinancing costs of approximately $3,100.

• A decrease in cash used for environmental remediation activities of approximately $1,400.

• An increase in cash provided by other operating activities of approximately $500.

The increase in cash used for working capital reflects higher accounts receivable balances from Fine Chemicals customers at December 31, 2013 arising from large shipments near the end of the Fiscal 2014 first quarter. These accounts receivable balances were substantially collected in January 2014.

Cash paid for income taxes decreased due to the timing of our quarterly income tax estimated payments.

Cash paid for interest in the Fiscal 2014 first quarter decreased as compared to the Fiscal 2013 first quarter 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”.

Environmental remediation spending decreased because the Fiscal 2013 first quarter included spending associated with the capital expansion of our remediation facilities. These expansion activities were completed during Fiscal 2013.

Investing Cash Flows. Capital expenditures in the Fiscal 2014 first quarter were $1,755 compared to $1,961 for the Fiscal 2013 first quarter. The slight decrease is due to timing of capital activities within each fiscal year. For the full Fiscal 2014 year we anticipate that capital expenditures will increase to support capacity expansion of our Fine Chemicals facilities.

Financing Cash Flows. For our Fiscal 2014 first quarter financing activities used cash of $1,065. This amount includes our quarterly principal payment for our Term Loan (defined below) of $1,500, offset by cash provided by stock option exercises of $436, including tax benefits. Financing cash flows in our Fiscal 2013 first quarter are primarily associated with our October 2012 refinancing. See further discussion below under the heading “Long-Term Debt and Credit Facilities”.

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LIQUIDITY AND CAPITAL RESOURCES. As of December 31, 2013, we had cash of $52,797 and no borrowing outstanding against our Revolving 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 credit. As of December 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $4,791 and availability for revolving loans of $20,209.

In October 2012, we called and terminated our senior notes with an aggregate principal amount of $65,000 and replaced the notes with the Credit Facility (defined below) 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.

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.

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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.

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 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.

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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 December 31, 2013, our Leverage Ratio was 0.97 to 1.00 and our Debt Service Coverage Ratio was 6.24 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 December 31, 2013, we had $4,791 in outstanding letters of credit, maturing through April 2017, which were issued under our Revolving Facility. In addition, as of December 31, 2013, we had $169 in outstanding standby letters of credit which mature through April 2016 that were not issued under our Revolving Facility. 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.

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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, 2013, the Pension Plans had an unfunded benefit obligation of $19,390. For Fiscal 2013, we made contributions to the Pension Plans in the amount of $6,704. We anticipate making Pension Plan contributions in the amount of approximately $2,482 during Fiscal 2014. 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, 2013 would increase our minimum funding obligations for Fiscal 2014 by approximately $364.

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, 2013 the SERP projected benefit obligation was $11,186. For Fiscal 2013, we paid SERP retirement benefits of $525. We anticipate contributing the amount of approximately $676 to the SERP during Fiscal 2014 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.

ENVIRONMENTAL REMEDIATION RESERVES. 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 indicated groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) was 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 50 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 included 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

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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 costs 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 with planned start up activities completed in Fiscal 2013. System optimization will continue in Fiscal 2014. 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 rates and targeted perchlorate mass destruction rates, the life of the project could range from five to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, seven 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 future O&M costs, we consider, among other factors, the remaining 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 range from approximately $1,800 to $2,100. 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 December 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $7,600 to approximately $31,300. 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 December 31, 2013, the accrued amount was $11,308, 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.

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CONTRACTUAL OBLIGATIONS. Our contractual obligations are summarized in our Annual Report on Form 10-K for the year ended September 30, 2013. We have contractual obligations related to our long-term debt, interest on our long-term debt, operating leases and capital leases. As of December 31, 2013, there has been no material change in our contractual obligations from September 30, 2013.

In addition, at December 31, 2013:

• We have recorded an estimated liability for environmental remediation of $11,308 (see Note 11 to the consolidated financial statements included in Item 1 of this report). We expect to spend approximately $2,100 for environmental remediation during Fiscal 2014.

• We have recorded aggregate Pension Plans and SERP obligations of $30,056 (see Note 10 to the consolidated financial statements included in Item 1 of this report). We expect to contribute $3,158 to our Pension Plans and SERP during Fiscal 2014.

• We have uncertain tax positions totaling $228. We are unable to reasonably estimate the timing of the related payments, if any.

• We have recorded an aggregate liability for amounts that may become payable upon vesting of outstanding grants of restricted stock units (“RSU”) in the amounts of $1,684. Under the terms of the RSU agreements, vesting is contingent upon attainment of a financial performance target for the two-year period ending September 30, 2014, and settlement, if any, will be made in cash. If vesting criteria is met, the actual cash payment will be based on the then current share price of the Company’s common stock multiplied by the number of vested RSUs.

• We also maintain the Revolving Facility, which provides revolving credit in an aggregate principal amount of up to $25,000 with an initial maturity in October 2017. At December 31, 2013, we had no balance outstanding under the Revolving Facility. We may prepay and terminate the Revolving Credit Facility at any time.

• We have issued letters of credit principally to secure performance related to insurance, utilities, and certain product contracts, in an aggregate amount of $4,960 as of December 31, 2013.

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

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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 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 $11,898 and $9,517 as of December 31, 2013 and September 30, 2013, 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

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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 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 as of the balance sheet date and net periodic benefit plan costs in the subsequent fiscal year. 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 5.31% as of September 30, 2013. 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 $551.

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% in Fiscal 2013. 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 $137.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have limited exposure to market risk. Currently, we do not engage in financial transactions for trading or speculative purposes.

Interest Rate Risk. Our principal interest rate exposure relates to outstanding amounts under our Credit Facilities. We manage our exposure to changes in interest rates through the use of interest rate swap agreements.

As of December 31, 2013, we had variable-rate borrowings under the Term Loan component of our Credit Facility in the amount of $54,000 maturing through October 2017. The interest rate on this borrowing varies with changes in the LIBOR rate. In addition, we are counterparty to an interest rate swap agreement with a notional amount and maturities that are matched 100% with the outstanding principal and maturity schedule for the Term Loan. Because we have hedged 100% of our outstanding variable-rate debt, our interest rate and related cash interest expense is effectively fixed at 3.025% annually.

At December 31, 2013, we had no amount outstanding under our Revolving Facility. The interest payable on our Revolving Facility is based on variable interest rates and, therefore, to the extent we draw down on such facility in the future, it could be affected by changes in market interest rates.

Foreign Currency Exchange Rate Risk. Although we do have a significant amount of export sales, these transactions have been settled substantially in U.S. dollars and, therefore, we believe we have only minimal exposure at present to foreign currency exchange risks. Historically, we have not hedged our currency risk and do not currently anticipate doing so in the future. However, it is possible that in the future a growing number of our export sales could be made in currencies other than the U.S. dollar. Consequently, fluctuations in the rates of exchange between the U.S. dollar and other currencies may subject us to foreign currency exchange risks in the future.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of December 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

On January 16, 2014, a putative class action lawsuit captioned Quick, et al. v. American Pacific Corp., et al., Case No. A-14-694633-C, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition and subsequently amended on January 30, 2014. The amended complaint (the “Quick Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub and H.I.G. The Quick Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by failing to maximize stockholder value in a proposed sale of the Company and by engaging in self-dealing. The Quick Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition and that the Company and H.I.G. aided and abetted the alleged breaches by the Company’s directors. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 29, 2014 and February 4, 2014, two putative class action lawsuits captioned Berger v. Campbell, et al., Case No. 9292, and Jeweltex Manufacturing Inc. Retirement Plan v. American Pacific Corporation, et al., Case No. 9308, were filed in the Court of Chancery in the State of Delaware regarding the proposed acquisition. The complaints (the “Berger Complaint” and “Jeweltex Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company, and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Berger Complaint and Jeweltex Complaint allege, among other things, that the Company’s directors breached their fiduciary duties by agreeing to deal protection devices designed to prevent unsolicited bids and by engaging in self-dealing. The Berger Complaint and the Jeweltex Complaint further allege that the Company’s directors failed to provide material information relating to the acquisition and that the Company’s directors effectuated a scheme to temporarily lower the Company’s share price through deliberate misleading acts, allowing a sale of the Company to take place and providing immediate liquidity for the stock holdings of the Company’s directors and management. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 30, 2014, two putative class action lawsuits captioned Norcini v. American Pacific Corporation, et al., Case No. A-14-695381-B, and Solak v. American Pacific Corporation, et al., Case No. A-14695365-C were filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaints (the “Norcini Complaint” and “Solak Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Norcini and Solak Complaints allege, among other things, that the Company’s directors breached their fiduciary duties by not maximizing stockholder value and not fully informing themselves about whether greater value could be achieved. The Norcini and Solak Complaints further allege that the Company’s directors agreed to onerous deal protection devices that assured consummation of the deal and collectively engaged in a scheme to unfairly sell the Company to H.I.G. at a bargain price. The Solak Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 31, 2014, a putative class action lawsuit captioned Pill v. Gibson, et al., Case No. A-14-695405, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaint (the “Pill Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Pill Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by allowing allegedly conflicted directors and an allegedly conflicted financial advisor to negotiate, analyze, and approve the acquisition, which contained alleged deal protection devices. The Pill Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

We believe that the allegations in the complaints described above lack merit, and we intend to vigorously defend the actions.

Although we are not currently party to any other 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.

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ITEM 1A. RISK FACTORS (Dollars in Thousands)

Our business, financial condition and operating results can be affected by a number of factors, including those described below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. Any of these risks could also materially and adversely affect our business, financial condition or the price of our common stock or other securities. In addition to the other information contained in our Fiscal 2013 annual report on Form 10-K and our other filings with the SEC, 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 conditions, results of operations and stock price.

RISKS RELATED TO THE ACQUISITION BY H.I.G.

The Merger is subject to a number of conditions beyond our control. Failure to complete the Merger within the expected time frame or at all could adversely affect our future business and financial results and our stock price.

Completion of the Merger is subject to certain conditions, including among other things, there having been validly tendered and not validly withdrawn Shares that represent one more than 50% of the total number of Shares outstanding at the time of the expiration of the Offer. We cannot predict whether and when these conditions will be satisfied. If one or more of these conditions is not satisfied, and as a result, we do not complete the Merger, or in the event the proposed Merger is not completed or delayed for any other reason, our business may be harmed because:

• management’s and our employees’ attention may be diverted from our day-to-day business because matters related to the proposed Merger may require additional commitments of their time and resources;

• employees may experience uncertainty about their future roles with us, which might adversely affect our ability to retain and hire key personnel and other employees;

• our relationships with customers, partners and suppliers may be harmed as a result of the Merger as well as uncertainties with regard to the combined company’s plans with respect to our products, employees and business;

• certain costs related to the proposed Merger, such as legal and accounting fees and reimbursement of certain expenses, are payable by us whether or not the proposed Merger is completed; and

• we would not realize any of the anticipated benefits of having completed the proposed Merger.

Our stock price may also fluctuate significantly based on announcements by H.I.G. and other third-parties or us regarding the proposed Merger. Any of these events could harm our results of operations and financial condition and could cause a decline in the price of our common stock, particularly if the Merger does not close.

While the Merger Agreement is in effect, we are subject to restrictions on our business activities.

Until the Merger closes or the Merger Agreement is terminated, we are subject to restrictions on our business activities and must generally operate our business in the ordinary course consistent with past practice (subject to certain exceptions). These restrictions may prevent us from exploring and pursing certain business opportunities. This could have a material adverse effect on our future results of operations or financial condition should the Merger not be completed.

In certain instances, the Merger Agreement could require us to pay a termination fee of $13.5 million to Parent, a payment which could affect the decisions of a third party considering making an alternative acquisition proposal.

There is no assurance that the proposed Merger will occur. If the proposed Merger or a similar transaction is not completed, the share price of our common stock may decline to the extent that the current market price of our common stock reflects an assumption that a transaction will be completed. In addition, the Merger Agreement contains certain termination rights and provides that upon termination of the Merger Agreement by us or Parent upon specified conditions, including a termination by us to accept a “Superior Proposal” (as defined in the Merger Agreement) or by Parent upon a change in the recommendation of our board of directors, we will be required to pay Parent a termination fee of $13.5 million. The payment of a termination fee may have a material adverse impact on our financial condition and could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us or deter such third party from making a competing acquisition proposal. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community.

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Pending stockholder litigation could prevent or delay the closing of the Merger or otherwise negatively impact our business and operations.

Five putative class action lawsuits were filed regarding the proposed merger transaction. For additional information about these litigation proceedings, see “Item 1. Legal Proceedings.” We may incur additional costs in connection with the defense or settlement of these or other similar litigation. In some cases, these or other similar litigation may adversely affect our desire to proceed with, or our ability to complete, a particular transaction. These litigation proceedings or other similar litigation could also have a material adverse effect on our financial condition or results of operations.

RISKS RELATED TO OUR BUSINESS

We depend on a limited number of customers and products for most of our sales and the loss of one or more of these customers or products 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 89% of our revenues in the Specialty Chemicals segment for Fiscal 2013 and approximately 34% of our consolidated revenues for Fiscal 2013, 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 28% of our consolidated revenue and the top two customers of AFC accounted for 64% of its revenues, and 37% of our consolidated revenues, in Fiscal 2013. 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

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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.

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 preestablished 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 unreimbursed 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 are required to obtain approval from the FDA based upon preclinical 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 premarketing approvals, postmarketing 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

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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, 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 2013, 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.

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Government fiscal year 2013 ended on September 30, 2013 without Congress completing work on any government fiscal year 2014 appropriations bills. Congress also failed to reach an agreement prior to the start of the government fiscal year 2014 on a short-term continuing resolution to temporarily fund the government, resulting in a partial government shutdown. When agreement was ultimately reached to fund the government in the new fiscal year, a short-term current resolution (which expires January 2014) was used rather than a government fiscal year 2014 appropriation for most government agencies. Additionally, absent a larger budget deal, Sequestration, under the terms of the Budget Control Act of 2012, remains in effect for government fiscal year 2014, forcing DOD and NASA to undergo another round of budget cuts beginning on January 1, 2014. 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. 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 into voluntary agreements with governmental agencies to take such actions. We have entered into such a voluntary agreement with NDEP that formalized our ongoing remedial actions in connection with perchlorate production at our former facility in Henderson, Nevada. 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 or fail to abide by the agreement with NDEP. 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.

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

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the Science Advisory Board, whose report was issued May 29, 2013. 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 2015. 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.

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 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 indicated groundwater emanating from the AMPAC Henderson Site in certain areas in deeper zones (more than 150 feet below ground surface) was 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 included 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, 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

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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 with planned start-up activities completed in Fiscal 2013. System optimization will continue in Fiscal 2014. 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.

As of December 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $7,600 to approximately $31,300. 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 December 31, 2013, the accrued amount was $11,308, 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.

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 Rocketdyne, Inc., 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 December 31, 2013, we had recorded reserves in connection with the AMPAC Henderson Site of approximately $11,308. 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

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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 our 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.

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

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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 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 EMA, 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.

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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.

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, 2013, AFC had approximately 176 employees that were covered by a collective bargaining agreement. We consider our relationships with our unionized employees to be satisfactory. In June 2013, AFC’s collective bargaining agreement was renegotiated and extended to June 2016. 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 nonunionized 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 ongoing 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.

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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 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. 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

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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 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 lower. 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 to 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

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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. 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 due 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 due 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.

Acquisitions, divestitures and other strategic transactions are inherently risky, and we cannot provide any assurance that our previous or future transactions will be successful. The inability to effectively manage the risks associated with these transactions could materially and adversely affect our business, financial condition or results of operations.

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.

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As of December 31, 2013, we had outstanding debt of approximately $54,000, 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;

• 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, 2013, we had unfunded pension obligations, including the current and non-current portions, of $30,576 on a projected benefit obligation basis. 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

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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 $19,390 on a projected benefit obligation basis as of September 30, 2013. 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.

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 nonexclusive 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.

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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 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 2013, the highest closing sale price for our common stock was $54.76 and the lowest closing sale price for our common stock was $11.26. 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.

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 – None.

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: February 6, 2014	/s/ JOSEPH CARLEONE
	Joseph Carleone
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: February 6, 2014	/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)).
2.2	Agreement and Plan of Merger, dated as of January 9, 2014, by and among American Pacific Corporation, Flamingo Parent Corp. and Flamingo Merger Sub Corp. (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 January 10, 2014 (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).

– 58 –

10.1 †	Form of Notice of Restricted Stock Performance Award and Restricted Stock Performance Award Agreement under the American Pacific Corporation 2008 Stock Incentive Plan.
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, 2013, 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)

*  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.

†  Management contract or compensatory plan or arrangement.

– 59 –

EX-10.1

Exhibit 10.1

AMERICAN PACIFIC CORPORATION

2008 STOCK INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK PERFORMANCE AWARD

Grantee’s Name and Address:

You (the “Grantee”) have been granted shares of Common Stock of the of the Company (the “Award”), subject to the terms and conditions of this Notice of Restricted Stock Performance Award (the “Notice”), the American Pacific Corporation 2008 Stock Incentive Plan (the “Plan”), as amended from time to time, and the Restricted Stock Performance Award Agreement (the “Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.

Date of Award:

Performance Period Commencement Date:

Total Number of Shares of Common Stock Awarded (the “Shares”): Return on Capital Employed Goal for the two years ended [date]:

Subject to the other limitations set forth in this Notice, the Plan and the Agreement, the Shares will vest following the earlier of (i) the last day of the second fiscal year following the Performance Period Commencement Date (two fiscal year performance period), provided that the Return on Capital Employed Goal as set forth above has been met (“Normal Vesting”), or (ii) the date of an Acceleration Event (“Accelerated Vesting”), Vesting shall be accelerated and the Return on Capital Employed Goal will be deemed to have been met regardless of the Company’s actual performance upon (a) the Grantee’s termination of Continuous Service due to (i) an involuntary termination by the Company of the Grantee’s Continuous Service for a reason other than Cause, or (ii) a voluntary termination by the Grantee for Good Reason, or (b) notwithstanding the provisions of Section 11 of the Plan, the occurrence of a Corporate Transaction or Change in Control, each an “Acceleration Event”.

For purposes of this Notice and the Agreement, the term “vest” shall mean, with respect to any Shares, that such Shares are no longer subject to forfeiture to the Company. Shares that have not vested are deemed “Restricted Shares.” If the Grantee would become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Grantee becomes vested in the entire Share.

1

During any leave of absence authorized by the Company; the vesting of the Shares shall be suspended after the leave of absence exceeds six (6) months, and a return to service upon expiration of such leave is not guaranteed by statute or contract, then (a) the Grantee’s Continuous Service shall be deemed to terminate on the first date following such six-month period and (b) the Grantee will forfeit the Shares, unless such termination of Continuous Service occurs as a result of any of the events described in (ii) in the preceding paragraph. An authorized leave of absence shall include sick leave, military leave, or other bona fide leave of absence (such as temporary employment by the government).

For purposes of this Agreement, “Good Reason” shall mean any of the following events occurring without the Grantee’s consent: (i) a material reduction in the Grantee’s job responsibilities, provided that neither a mere change in title alone nor reassignment to a position that is substantially similar to the position held prior to the sale of a majority of the Company’s shares shall constitute a material reduction in job responsibilities; (ii) relocation by the Company or an affiliate of the Company, as appropriate, of the Grantee’s work site to a facility or location more than fifty (50) miles from the Grantee’s principal work site for the Company; or (iii) a material reduction in the Grantee’s then-current base salary by at least twenty percent (20%), provided that an across-the-board reduction in the salary level of other employees in positions similar to the Grantee’s by a similar percentage amount as part of a general salary level reduction shall not constitute such a salary reduction; provided, that the Grantee’s Termination of Continuous Service shall be considered for “Good Reason” only if (i) the Grantee provides written notice to the Company of the Good Reason within fifteen (15) days of the initial occurrence of the event constituting Good Reason; (ii) provides the Company with a period of thirty (30) days to cure the event constituting Good Reason; (iii) the Company fails to cure the Good Reason within that period; and (iv) the Grantee has a Termination of Continuous Service within thirty (30) days of the expiration of such cure period.

In the event of the Grantee’s change in status from Employee to any other status of Director or Consultant, and the Shares have not vested by means of Normal Vesting or Accelerated Vesting, the Shares shall be forfeited. Except as provided otherwise above, in the event the Grantee’s Continuous Service is terminated for any reason, including retirement, voluntary departure without reason, death or Disability, any Shares held by the Grantee immediately following such termination of Continuous Service shall be deemed reconveyed to the Company and the Company shall thereafter be the legal and beneficial owner of the Shares and shall have all rights and interest in or related thereto without further action by the Grantee.

IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Award is to be governed by the terms and conditions of this Notice, the Plan and the Agreement.

American Pacific Corporation,

a Delaware corporation

By: 

Title: 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE AGREEMENT NOR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF THE GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE GRANTEE’S CONTINUOUS SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE GRANTEE’S STATUS IS AT WILL.

The Grantee acknowledges receipt of a copy of the Plan and the Agreement and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Agreement and the Plan. The Grantee hereby agrees that all questions of interpretation and administration relating to this Notice, the Plan and the Agreement shall be resolved by the Administrator in accordance with Section 11 of the Agreement. The Grantee further agrees to the venue selection in accordance with Section 12 of the Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

Dated:   Signed:  

AMERICAN PACIFIC CORPORATION

2008 STOCK INCENTIVE PLAN

RESTRICTED STOCK PERFORMANCE AWARD AGREEMENT

1.     Issuance of Shares. American Pacific Corporation, a Delaware corporation (the “Company”), hereby issues to the Grantee (the “Grantee”) named in the Notice of Restricted Stock Performance Award (the “Notice”), the Total Number of Shares of Common Stock Awarded set forth in the Notice (the “Shares”), subject to the Notice, this Restricted Stock Performance Award Agreement (the “Agreement”) and the terms and provisions of the Company’s 2008 Stock Incentive Plan (the “Plan”), as amended from time to time, which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement. All Shares issued hereunder will be deemed issued to the Grantee as fully paid and nonassessable shares, and the Grantee will have the right to vote the Shares at meetings of the Company’s stockholders. The Company shall pay any applicable stock transfer taxes imposed upon the issuance of the Shares to the Grantee hereunder.

2.     Transfer Restrictions. The Shares issued to the Grantee hereunder may not be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by the Grantee prior to the date when the Shares become vested by means of Normal Vesting or Accelerated Vesting as defined in the Notice. Any attempt to transfer Restricted Shares in violation of this Section 2 will be null and void and will be disregarded.

3.     Escrow of Stock. For purposes of facilitating the enforcement of the provisions of this Agreement, the Grantee agrees, immediately upon receipt of the certificate(s) for the Restricted Shares, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached hereto as Exhibit A, executed in blank by the Grantee with respect to each such stock certificate, to the Secretary or Assistant Secretary of the Company, or their designee, to hold in escrow for so long as such Restricted Shares have not vested pursuant to the Vesting Schedule set forth in the Notice, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof. The Grantee hereby acknowledges that the appointment of the Secretary or Assistant Secretary of the Company (or their designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled with an interest and is accordingly irrevocable. The Grantee agrees that the Restricted Shares may be held electronically in a book entry system maintained by the Company’s transfer agent or other third party and that all the terms and conditions of this Section 3 applicable to certificated Restricted Shares will apply with the same force and effect to such electronic method for holding the Restricted Shares. The Grantee agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent relative thereto. The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Upon the vesting of Restricted Shares, the escrow holder will, without further order or instruction, transmit to the Grantee the certificate evidencing such Shares; provided, however, that no transmittal of certificates evidencing the Shares will occur unless and until the Grantee has satisfied all Tax Withholding Obligations (as defined in Section 5(c) below).

4. Additional Securities and Distributions.

(a) Any securities or cash received (other than a regular cash dividend) as the result of ownership of the Restricted Shares (the “Additional Securities”), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the Company’s capital structure, shall be retained in escrow in the same manner and subject to the same conditions and restrictions as the Restricted Shares with respect to which they were issued, including, without limitation, the Vesting Schedule set forth in the Notice. The Grantee shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but the Grantee may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible security, the Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities.

(b) The Company shall disburse to the Grantee all regular cash dividends with respect to the Shares and Additional Securities (whether vested or not), less any applicable withholding obligations.

5. Taxes.

(a) No Section 83(b) Election. As a condition to receiving the Shares, the Grantee agrees to refrain from making an election pursuant to Section 83(b) of the Code with respect to the Shares.

(b) Tax Liability. The Grantee is ultimately liable and responsible for all taxes owed by the Grantee in connection with the Award, regardless of any action the Company or any Related Entity takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor any Related Entity makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or payment of the Award or the subsequent sale of Shares subject to the Award. The Company and its Related Entities do not commit and are under no obligation to structure the Award to reduce or eliminate the Grantee’s tax liability.

(c) Payment of Withholding Taxes. Prior to any event in connection with the Award (e.g., vesting) that the Company determines may result in any tax withholding obligation, whether United States federal, state, local or non-U.S., including any employment tax obligation (the “Tax Withholding Obligation”), the Grantee must arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company.

(i)     By Share Withholding. The Grantee authorizes the Company to, upon the exercise of its sole discretion, withhold from those Shares issuable to the Grantee the whole number of Shares sufficient to satisfy the minimum applicable Tax Withholding Obligation. The Grantee acknowledges that the withheld Shares may not be sufficient to satisfy the Grantee’s minimum Tax Withholding Obligation. Accordingly, the Grantee agrees to pay to the Company or any Related Entity as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the withholding of Shares described above.

(ii)    By Sale of Shares. Unless the Grantee determines to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, the Grantee’s acceptance of this Award constitutes the Grantee’s instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to sell on the Grantee’s behalf a whole number of Shares from those Shares issuable to the Grantee as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the minimum applicable Tax Withholding Obligation. Such Shares will be sold on the day such Tax Withholding Obligation arises (e.g., a vesting date) or as soon thereafter as practicable. The Grantee will be responsible for all broker’s fees and other costs of sale, and the Grantee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed the Grantee’s minimum Tax Withholding Obligation, the Company agrees to pay such excess in cash to the Grantee. The Grantee acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Grantee’s minimum Tax Withholding Obligation. Accordingly, the Grantee agrees to pay to the Company or any Related Entity as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of Shares described above.

(iii)   By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or such fewer number of business days as determined by the Administrator) before any Tax Withholding Obligation arises (e.g., a vesting date), the Grantee may elect to satisfy the Grantee’s Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified from time to time by the Administrator.

(iv)   Notwithstanding the foregoing, the Company also may satisfy any Tax Withholding Obligation by offsetting any amounts (including, but not limited to, salary, bonus and severance payments) due to the Grantee by the Company.

6.     Stop-Transfer Notices. In order to ensure compliance with the restrictions on transfer set forth in this Agreement, the Notice or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company may issue a “stop transfer” instruction if the Grantee fails to satisfy any Tax Withholding Obligations.

7.     Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

8.     Restrictive Legends. The Grantee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THAT CERTAIN RESTRICTED STOCK PERFORMANCE AWARD AGREEMENT BETWEEN THE COMPANY AND THE NAMED STOCKHOLDER. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

9.     Entire Agreement: Governing Law. The Notice, the Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. These agreements are to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. Should any provision of the Notice or this Agreement be determined to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

10.   Construction. The captions used in the Notice and this Agreement are inserted for convenience and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

11.   Administration and Interpretation. Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this Agreement shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.

12.   Venue. The parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Agreement shall be brought in the United States District Court for the District of Nevada -Las Vegas (or should such court lack jurisdiction to hear such

action, suit or proceeding, in a Nevada state court in the County of Clark) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. If anyone or more provisions of this Section 12 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

13.   Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.

END OF AGREEMENT

EXHIBIT A

RETURN ON CAPITAL EMPLOYED “ROCE” CRITERIA

“Return on Capital Employed” or “ROCE” is the ratio of “Adjusted Net Income” over “Capital Employed” as determined by the Administrator in its reasonable discretion for the Performance Period with respect to any Restricted Stock Performance Award. ROCE shall be computed on a consolidated basis for the Company.

The “Performance Period” with respect to any Restricted Stock Performance Award is (i) the two-year period ending on the last day of the fiscal year following the Performance Period Commencement Date.

“Adjusted Net Income” is the average of net income of the Company for each of the two fiscal years in the Performance Period, adjusted (i) to exclude interest expense and other financing related costs, net of tax, and (ii) to take into account other adjustments consistent with the definition of Adjusted EBITDA as applied for the Annual Incentive Compensation Plan, (e.g. remediation charges).

“Capital Employed” is the average assets less current liabilities of the Company over the Performance Period, excluding (a) cash, (b) assets and current liabilities associated with financing activities (e.g. debt issue costs, accrued interest, loans payable, and similar items), and (c) deferred tax assets or current liabilities associated with items of Accumulated Other Comprehensive Income (Loss) on the Company’s balance sheet.

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: February 6, 2014	By:	/s/ JOSEPH CARLEONE
	Joseph Carleone
	Chairman of the Board, 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: February 6, 2014	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 December 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: February 6, 2014	/s/ JOSEPH CARLEONE
	Joseph Carleone
	Chairman of the Board, 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 December 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: February 6, 2014	/s/ DANA M. KELLEY
	Dana M. Kelley
	Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

XML

Fair Value of Stock Option (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value per share of options granted	$ 19.28	$ 5.41
Significant fair value assumptions:
Expected term in years	5 years 5 months 16 days	5 years 8 months 12 days
Expected volatility	52.00%	49.00%
Expected dividends	0.00%	0.00%
Risk-free interest rates	1.46%	0.64%
Total intrinsic value of options exercised	$ 1,560	$ 503
Aggregate cash received for option exercises	110	248
Compensation cost (included in operating expenses)
Compensation cost	373	253
Tax benefit recognized	80	64
Net compensation cost	293	189
Stock Options
Compensation cost (included in operating expenses)
Compensation cost	164	94
Total compensation cost for non-vested awards not yet recognized:
Total compensation cost for non-vested awards	969	285
Weighted-average years to be recognized
Weighted-average years	1 year 10 months 24 days	1 year 9 months 18 days
Restricted Stock
Compensation cost (included in operating expenses)
Compensation cost	209	159
Total compensation cost for non-vested awards not yet recognized:
Total compensation cost for non-vested awards	$ 1,458	$ 438
Weighted-average years to be recognized
Weighted-average years	1 year 6 months	1 year 9 months 18 days

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Percentage of Consolidated Revenues Attributed To Customers (Detail) (Sales)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fine Chemicals Customer One
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	32.00%	36.00%
Specialty Chemicals Customer
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage		30.00%
Specialty Chemicals Customer Two
Revenue, Major Customer [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	21.00%

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Outstanding Debt Balance (Parenthetical) (Detail)	Dec. 31, 2013	Sep. 30, 2013
Debt Instrument [Line Items]
Term Loan, due date	2017	2017
Capital Leases, due date	2014	2014

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Financial Information about Segment Operations (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Revenues	$ 51,513	$ 36,318
Operating Income (Loss)	7,318	4,948
Operating Expenses	(11,372)	(10,464)
Depreciation and amortization	3,421	3,310
Total Operating Segments
Segment Reporting Information [Line Items]
Operating Income (Loss)	11,899	9,034
Total Operating Segments | Fine Chemicals
Segment Reporting Information [Line Items]
Revenues	36,411	21,347
Operating Income (Loss)	5,676	1,277
Depreciation and amortization	3,061	3,015
Total Operating Segments | Specialty Chemicals
Segment Reporting Information [Line Items]
Revenues	14,464	14,350
Operating Income (Loss)	6,216	7,917
Depreciation and amortization	307	207
Total Operating Segments | Other Businesses
Segment Reporting Information [Line Items]
Revenues	638	621
Operating Income (Loss)	7	(160)
Depreciation and amortization	6	5
Corporate, Non-Segment
Segment Reporting Information [Line Items]
Operating Expenses	(4,581)	(4,086)
Depreciation and amortization	$ 47	$ 83

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Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of revenues	$ (33,536)		$ (20,906)
Interest expense	(610)		(1,282)
Operating Expenses	(11,372)		(10,464)
Income from Continuing Operations before Income Tax	6,722		839
Income tax expense	(2,378)		312
Net Income	4,323		1,155
Reclassification out of Accumulated Other Comprehensive Loss
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net Income	(312)	[1]	(664)	[1]
Reclassification out of Accumulated Other Comprehensive Loss | Gains (Losses) on Effective Cash Flow Hedge
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	(33)	[1]
Net Income	53	[1]
Reclassification out of Accumulated Other Comprehensive Loss | Gains (Losses) on Effective Cash Flow Hedge | Interest Rate Swap
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	86	[1]
Reclassification out of Accumulated Other Comprehensive Loss | Gains (Losses) on Defined Benefit Plan Items
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of revenues	(186)	[1]	(512)	[1]
Operating Expenses	(320)	[1]	(596)	[1]
Income from Continuing Operations before Income Tax	(506)	[1]	(1,108)	[1]
Income tax expense	$ 194	[1]	$ 444	[1]

[1] amounts in parenthesis represent a decrease to income

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Dec. 31, 2013

Summary of Our Environmental Reserve Activity

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

Balance, September 30, 2013	$	11,947
Expenditures		(639)
Balance, December 31, 2013	$	11,308

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Reconciliation of Unrecognized Tax Benefits (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2013
Reconciliation of Unrecognized Tax Benefits [Line Items]
Unrecognized Tax Benefits - Beginning of Year		$ 204
Additions for tax positions of prior years		24
Reductions for tax positions of prior years	(1,070)
Lapse of statute of limitations
Unrecognized Tax Benefits - End of Year		$ 228

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INVENTORIES (Tables)

3 Months Ended

Dec. 31, 2013

Inventories

Inventories consist of the following:

	December 31,		September 30,
	2013		2013
Finished goods	$	5,442	$	9,020
Work-in-process		40,180		36,032
Raw materials and supplies		16,249		14,520
Under(over) applied manufacturing overhead costs		2,819		-
Total	$	64,690	$	59,572

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Derivative Instrument - Additional Information (Detail) (Interest Rate Swap, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Jan. 24, 2013	Dec. 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		$ 369

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Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Inventory [Line Items]
Finished goods	$ 5,442	$ 9,020
Work-in-process	40,180	36,032
Raw materials and supplies	16,249	14,520
Under (over) applied manufacturing overhead costs	2,819
Total	$ 64,690	$ 59,572

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Summary of Outstanding and Non-Vested Stock Option and Restricted Stock Activity (Detail) (USD $)	3 Months Ended
	Dec. 31, 2013
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Shares	437,635
Granted, Shares	51,622
Exercised, Shares	(12,866)
Expired / Cancelled, Shares
Ending Balance, Shares	476,391
Beginning Balance, Weighted Average Exercise price	$ 8.73
Granted, Weighted Average Fair Value	$ 40.19
Exercised, Weighted Average Fair Value	$ 8.51
Expired / Cancelled, Weighted Average Exercise Price
End of period, Weighted Average Exercise Price	$ 12.15
Non Vested Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Shares	104,372
Granted, Shares	51,622
Vested, Shares	(44,404)
Expired / Cancelled, Shares
Ending Balance, Shares	111,590
Beginning Balance, Weighted Average Exercise price	$ 4.34
Granted, Weighted Average Fair Value	$ 19.28
Vested, Weighted Average Fair Value	$ 4.15
Expired / Cancelled, Weighted Average Exercise Price
End of period, Weighted Average Exercise Price	$ 11.33
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Outstanding and Non-Vested shares	69,052
Granted, Outstanding and Non vested shares	36,047
Vested Outstanding and Non vested, shares	(28,519)
Exercised, Outstanding and Non vested, shares
Expired / Cancelled, Outstanding and Non vested, shares
Ending Balance, Outstanding and Non-Vested Shares	76,580
Beginning Balance, Outstanding and Non Vested, Weighted average fair value per share	$ 9.87
Granted, Restricted Stock Weighted Average Exercise Price	$ 40.19
Vested Outstanding and Non-Vested Weighted Average Fair Value	$ 9.43
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	$ 24.30

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Interest Rate Swap Agreement Amount of Gain (Loss) and Reclassification (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Interest Rate Swaps [Line Items]
Interest Expense	$ 610		$ 1,282
Gains (Losses) on Effective Cash Flow Hedge
Interest Rate Swaps [Line Items]
Net current period other comprehensive income (loss)	199
Interest Rate Swap | Gains (Losses) on Effective Cash Flow Hedge | Reclassification out of Accumulated Other Comprehensive Loss
Interest Rate Swaps [Line Items]
Interest Expense	$ (86)	[1]

[1] amounts in parenthesis represent a decrease to income

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Summary of Environmental Reserve Activity (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Environment Matters And Other Contingencies [Line Items]
Accrual for Environmental Loss Contingencies, Beginning Balance	$ 11,947
Expenditures	(639)
Accrual for Environmental Loss Contingencies, Ending Balance	$ 11,308

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Outstanding Debt Balance (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Debt Instrument [Line Items]
Term Loan, variable-rate interest, due through 2017	$ 54,000	$ 55,500
Capital Leases, due through 2014	1	2
Total Debt	54,001	55,502
Less Current Portion	(6,001)	(6,002)
Total Long-term Debt	$ 48,000	$ 49,500

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SHARE-BASED COMPENSATION

3 Months Ended

Dec. 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.

The purposes of our share-based compensation arrangements are to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of the Company’s business. 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. In addition, certain grants of restricted stock made in December 2013 cliff-vest on September 30, 2015, subject to the attainment of financial performance criteria that were established for the two-year period ending September 30, 2015 and continued employment by the recipient. As of December 31, 2013, there were 157,563 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 three months ended December 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Fair Value Per Share		Shares		Weighted Average Fair Value Per Share
Balance, September 30, 2013		437,635	$	8.73		104,372	$	4.34		69,052	$	9.87
Granted		51,622		40.19		51,622		19.28		36,047		40.19
Vested		-		-		(44,404)		4.15		(28,519)		9.43
Exercised		(12,866)		8.51		-		-		-		-
Expired / Cancelled		-		-		-		-		-		-
Balance, December 31, 2013		476,391		12.15		111,590		11.33		76,580		24.30

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

Number of vested stock options		364,801
Weighted-average exercise price per share	$	8.56
Aggregate intrinsic value	$	10,471
Weighted-average remaining contractual term in years		4.7

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

	Three Months Ended
	December 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	19.28	$	5.41
Significant fair value assumptions:
Expected term in years		5.46		5.70
Expected volatility		52%		49%
Expected dividends		0%		0%
Risk-free interest rates		1.46%		0.64%
Total intrinsic value of options exercised	$	1,560	$	503
Aggregate cash received for option exercises	$	110	$	248
Compensation cost (included in operating expenses)
Stock options	$	164	$	94
Restricted stock		209		159
Total		373		253
Tax benefit recognized		80		64
Net compensation cost	$	293	$	189
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	969	$	285
Restricted stock	$	1,458	$	438
Weighted-average years to be recognized
Stock options		1.9		1.8
Restricted stock		1.5		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 one share 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 three months ended December 31, 2013 is as follows:

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

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

	Three Months Ended
	December 31,
	2013		2012
Compensation cost (included in operating expenses)	$	(199)	$	36
Tax expense (benefit) recognized		(76)		14
Net compensation cost	$	(123)	$	22
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,194	$	1,156
Weighted-average years to be recognized		0.8		1.8

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Gain Contingencies - Other Operating Gains - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Components of Other Operating Income [Line Items]
Other Operating Gains	$ 713
Cash consideration for a limited release liability	$ 713

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Shares Used to Compute Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]
Income from continuing operations	$ 4,344	$ 1,151
Basic weighted-average shares	7,890,000	7,670,000
Diluted:
Weighted-average shares, basic	7,890,000	7,670,000
Weighted-average shares, diluted	8,224,000	7,876,000
Basic earnings per share from continuing operations	$ 0.55	$ 0.15
Diluted earnings per share from continuing operations	$ 0.53	$ 0.15
Stock Option
Diluted:
Dilutive effect of restricted stock	293,000	171,000
Restricted Stock
Diluted:
Dilutive effect of restricted stock	41,000	35,000

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DERIVATIVE INSTRUMENT (Tables)

3 Months Ended

Dec. 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:

	December 31,		September 30,
	2013		2013
Balance sheet location of fair value:
Other assets	$	657	$	554
Accrued liabilities	$	288	$	298

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

	Three Months Ended
	December 31,
	2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	199	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	(86)	$	-

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DEBT (Tables)

3 Months Ended

Dec. 31, 2013

Outstanding Debt Balance

Our outstanding debt balances consist of the following:

	December 31,		September 30,
	2013		2013
Term Loan, variable-rate interest, due through 2017	$	54,000	$	55,500
Capital Leases, due through 2014		1		2
Total Debt		54,001		55,502
Less Current Portion		(6,001)		(6,002)
Total Long-term Debt	$	48,000	$	49,500

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Income Taxes - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Income Tax Contingency [Line Items]
Unrecognized tax benefit		$ 228		$ 204
Unrecognized tax benefits that would affect the effective tax rate		225		201
Unrecognized tax benefits released	1,070
Accrued interest and penalties		12		10
Interest and penalties expense		$ 2	$ 671

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Earnings Per Share - Additional Information (Detail)	3 Months Ended
	Dec. 31, 2013	Dec. 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	51,622	68,896

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SEGMENT INFORMATION (Tables)

3 Months Ended

Dec. 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
	December 31,
	2013		2012
Fine chemicals customer		32%		36%
Specialty chemicals customer				30%
Specialty chemicals customer		21%

Financial Information about Segment Operations

The following provides financial information about our segment operations:

	Three Months Ended
	December 31,
	2013		2012
Revenues:
Fine Chemicals	$	36,411	$	21,347
Specialty Chemicals		14,464		14,350
Other Businesses		638		621
Total Revenues	$	51,513	$	36,318
Segment Operating Income (Loss):
Fine Chemicals	$	5,676	$	1,277
Specialty Chemicals		6,216		7,917
Other Businesses		7		(160)
Total Segment Operating Income		11,899		9,034
Corporate Expenses		(4,581)		(4,086)
Operating Income	$	7,318	$	4,948
Depreciation and Amortization:
Fine Chemicals	$	3,061	$	3,015
Specialty Chemicals		307		207
Other Businesses		6		5
Corporate		47		83
Total Depreciation and Amortization	$	3,421	$	3,310

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INCOME TAXES (Tables)

3 Months Ended

Dec. 31, 2013

Gross Liability for Unrecognized Tax benefits

Unrecognized Tax Benefits - September 30, 2013	$	204
Additions for tax positions of prior years		24
Reductions for tax positions of prior years		-
Lapse of statute of limitations		-
Unrecognized Tax Benefits - December 31, 2013	$	228

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES

3 Months Ended

Dec. 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, 2013. The operating results and cash flows for the three-month period ended December 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, 2013. 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 was 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 13.)

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 December 31, 2013, our floating-rate term loan had a carrying value of $54,000 and an estimated fair value of $53,070 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was an asset of $369 as of December 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 is classified as follows in our statements of operations:

	Three Months Ended
	December 31,
	2013		2012
Depreciation classified as:
Cost of revenues	$	3,370	$	3,222
Operating expenses		51		88
Total		3,421		3,310

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 $11,898 and $9,517 as of December 31, 2013 and September 30, 2013, respectively.

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DEFINED BENEFIT PLANS (Tables)

3 Months Ended

Dec. 31, 2013

Net Periodic Pension Cost

Net periodic pension cost consists of the following:

	Three Months Ended
	December 31,
	2013		2012
Pension Plans:
Service Cost	$	632	$	830
Interest Cost		1,131		983
Expected Return on Plan Assets		(1,297)		(1,100)
Recognized Actuarial Losses		318		893
Amortization of Prior Service Costs		17		16
Net Periodic Pension Cost	$	801	$	1,622
Supplemental Executive Retirement Plan:
Service Cost	$	183	$	204
Interest Cost		127		106
Recognized Actuarial Losses		66		94
Amortization of Prior Service Costs		105		105
Net Periodic Pension Cost	$	481	$	509

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Summary of RSU Activity (Detail) (Restricted Stock Units, USD $)	3 Months Ended
	Dec. 31, 2013
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Outstanding and Non-Vested shares	77,231
Grants
Forfeitures
Vested
Ending Balance, Outstanding and Non-Vested Shares	77,231
Beginning Balance, Outstanding and Non Vested, Weighted average fair value per share	$ 11.93
Grants
Forfeitures
Vested
Ending Balance, Outstanding and Non-Vested, Weighted Average Fair Value Per Share	$ 11.93

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Segment Information - Additional Information (Detail)	3 Months Ended
	Dec. 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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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Revenues	$ 51,513	$ 36,318
Cost of Revenues	33,536	20,906
Gross Profit	17,977	15,412
Operating Expenses	11,372	10,464
Other Operating Gains	713
Operating Income	7,318	4,948
Interest and Other Income	14	8
Interest Expense	610	1,282
Loss on Debt Extinguishment		2,835
Income from Continuing Operations before Income Tax	6,722	839
Income Tax Expense	2,378	(312)
Income from Continuing Operations	4,344	1,151
Income (Loss) from Discontinued Operations, Net of Tax	(21)	4
Net Income	$ 4,323	$ 1,155
Basic Earnings (Loss) Per Share:
Income from Continuing Operations	$ 0.55	$ 0.15
Income (Loss) from Discontinued Operations, Net of Tax	$ 0.00	$ 0.00
Net Income	$ 0.55	$ 0.15
Diluted Earnings (Loss) Per Share:
Income from Continuing Operations	$ 0.53	$ 0.15
Income (Loss) from Discontinued Operations, Net of Tax	$ 0.00	$ 0.00
Net Income	$ 0.53	$ 0.15
Weighted-Average Shares Outstanding:
Basic	7,890,000	7,670,000
Diluted	8,224,000	7,876,000

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Changes in Accumulated Other Comprehensive Loss by Component, Net of Income Tax (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Accumulated Other Comprehensive Loss [Line Items]
Balance, September 30, 2013	$ (15,459)
Other comprehensive income before reclassifications	196
Amounts reclassified from accumulated other comprehensive loss	259
Total Other Comprehensive Income	455	664
Balance, December 31, 2013	(15,004)
Gains (Losses) on Defined Benefit Plan Items
Accumulated Other Comprehensive Loss [Line Items]
Balance, September 30, 2013	(15,617)
Amounts reclassified from accumulated other comprehensive loss	312
Total Other Comprehensive Income	312
Balance, December 31, 2013	(15,305)
Gains (Losses) on Effective Cash Flow Hedge
Accumulated Other Comprehensive Loss [Line Items]
Balance, September 30, 2013	158
Other comprehensive income before reclassifications	196
Amounts reclassified from accumulated other comprehensive loss	(53)
Total Other Comprehensive Income	143
Balance, December 31, 2013	$ 301

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Sep. 30, 2013
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	7,997,913	7,949,000
Common Stock, shares outstanding	7,997,913	7,949,000

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Net Periodic Benefit Cost (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service Cost	$ 632	$ 830
Interest Cost	1,131	983
Expected Return on Plan Assets	(1,297)	(1,100)
Recognized Actuarial Losses	318	893
Amortization of Prior Service Costs	17	16
Net Periodic Pension Cost	801	1,622
SERP
Defined Benefit Plan Disclosure [Line Items]
Service Cost	183	204
Interest Cost	127	106
Recognized Actuarial Losses	66	94
Amortization of Prior Service Costs	105	105
Net Periodic Pension Cost	$ 481	$ 509

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Depreciation and Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Depreciation classified as:
Cost of revenues	$ 3,370	$ 3,222
Operating expenses	51	88
Total	$ 3,421	$ 3,310

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Policies)

3 Months Ended

Dec. 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, 2013. The operating results and cash flows for the three-month period ended December 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, 2013. 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 was 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 13.)

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 December 31, 2013, our floating-rate term loan had a carrying value of $54,000 and an estimated fair value of $53,070 (level 3 in the fair value hierarchy). Our interest rate swap agreement is recorded at fair value which was an asset of $369 as of December 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 is classified as follows in our statements of operations:

	Three Months Ended
	December 31,
	2013		2012
Depreciation classified as:
Cost of revenues	$	3,370	$	3,222
Operating expenses		51		88
Total		3,421		3,310

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 $11,898 and $9,517 as of December 31, 2013 and September 30, 2013, respectively.

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Share-Based Compensation - Additional Information (Detail)	3 Months Ended
	Dec. 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	157,563
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
RSU awards cliff-vest date	Sep. 30, 2015
RSU awards cliff-vest period	2 years

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SHARE-BASED COMPENSATION (Tables)

3 Months Ended

Dec. 31, 2013

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

A summary of our outstanding and non-vested stock option and restricted stock activity for the three months ended December 31, 2013 is as follows:

	Stock Options								Restricted Stock
	Outstanding				Non-Vested				Outstanding and Non-Vested
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Fair Value Per Share		Shares		Weighted Average Fair Value Per Share
Balance, September 30, 2013		437,635	$	8.73		104,372	$	4.34		69,052	$	9.87
Granted		51,622		40.19		51,622		19.28		36,047		40.19
Vested		-		-		(44,404)		4.15		(28,519)		9.43
Exercised		(12,866)		8.51		-		-		-		-
Expired / Cancelled		-		-		-		-		-		-
Balance, December 31, 2013		476,391		12.15		111,590		11.33		76,580		24.30

Summary of Exercisable Stock Options

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

Number of vested stock options		364,801
Weighted-average exercise price per share	$	8.56
Aggregate intrinsic value	$	10,471
Weighted-average remaining contractual term in years		4.7

Fair Value of Stock Option

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.

	Three Months Ended
	December 31,
	2013		2012
Weighted-average grant date fair value per share of options granted	$	19.28	$	5.41
Significant fair value assumptions:
Expected term in years		5.46		5.70
Expected volatility		52%		49%
Expected dividends		0%		0%
Risk-free interest rates		1.46%		0.64%
Total intrinsic value of options exercised	$	1,560	$	503
Aggregate cash received for option exercises	$	110	$	248
Compensation cost (included in operating expenses)
Stock options	$	164	$	94
Restricted stock		209		159
Total		373		253
Tax benefit recognized		80		64
Net compensation cost	$	293	$	189
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	969	$	285
Restricted stock	$	1,458	$	438
Weighted-average years to be recognized
Stock options		1.9		1.8
Restricted stock		1.5		1.8

Summary of RSU Activity

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

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

Estimated Compensation Expenses For RSU Award

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

	Three Months Ended
	December 31,
	2013		2012
Compensation cost (included in operating expenses)	$	(199)	$	36
Tax expense (benefit) recognized		(76)		14
Net compensation cost	$	(123)	$	22
As of period end date:
Total compensation cost for non-vested awards not yet recognized	$	1,194	$	1,156
Weighted-average years to be recognized		0.8		1.8

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash Flows from Operating Activities:
Net Income	$ 4,323	$ 1,155
Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities:
Depreciation and amortization	3,421	3,310
Non-cash interest expense	83	64
Non-cash component of loss on debt extinguishment		1,252
Share-based compensation	373	253
Excess tax benefit from stock-based compensation	(326)	(71)
Deferred income taxes	(46)	1,080
Loss (gain) on sale of assets	(34)	1
Changes in operating assets and liabilities:
Accounts receivable, net	(15,705)	6,032
Inventories	(5,077)	(13,684)
Prepaid expenses and other current assets	(494)	(470)
Accounts payable	144	(2,483)
Income taxes	1,625	(2,192)
Accrued liabilities	2,760	(111)
Accrued interest	(1)	(853)
Employee related liabilities	(3,744)	(3,566)
Customer deposits	10,071	7,440
Deferred revenues	(1,865)	4,139
Environmental remediation reserves	(639)	(2,088)
Pension obligations, net	(14)	(393)
Other	(155)	(2,068)
Discontinued operations, net	15	(19)
Net Cash Used by Operating Activities	(5,285)	(3,272)
Cash Flows from Investing Activities:
Capital expenditures	(1,755)	(1,961)
Other investing activities	38
Net Cash Used by Investing Activities	(1,717)	(1,961)
Cash Flows from Financing Activities:
Issuances of long-term debt		60,000
Payments of long-term debt	(1,501)	(66,129)
Debt issuance costs		(1,364)
Issuances of common stock	110	248
Excess tax benefit from stock-based compensation	326	71
Net Cash Used by Financing Activities	(1,065)	(7,174)
Net Change in Cash and Cash Equivalents	(8,067)	(12,407)
Cash and Cash Equivalents, Beginning of Period	60,864	31,182
Cash and Cash Equivalents, End of Period	52,797	18,775
Cash Paid For:
Interest	526	2,071
Income taxes	761	2,342
Non-Cash Investing and Financing Transactions:
Additions to Property, Plant and Equipment not yet paid	$ 241	$ 1,707

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Net Income	$ 4,323	$ 1,155
Cash Flow Hedge:
Change in fair value arising during period (net of income tax of $3 and $0)	196
Less reclassifications to net income (net of tax of $33 and $0)	(53)
OCI (Loss), Derivatives Qualifying as Hedges, Net of Tax	143
Defined Benefit Pension Plans:
Actuarial gains (losses) arising during period
Less amortization of losses to net income (net of tax of $194 and $444)	312	664
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax	312	664
Total Other Comprehensive Income	455	664
Comprehensive Income	$ 4,778	$ 1,819

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DEFINED BENEFIT PLANS

3 Months Ended

Dec. 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
	December 31,
	2013		2012
Pension Plans:
Service Cost	$	632	$	830
Interest Cost		1,131		983
Expected Return on Plan Assets		(1,297)		(1,100)
Recognized Actuarial Losses		318		893
Amortization of Prior Service Costs		17		16
Net Periodic Pension Cost	$	801	$	1,622
Supplemental Executive Retirement Plan:
Service Cost	$	183	$	204
Interest Cost		127		106
Recognized Actuarial Losses		66		94
Amortization of Prior Service Costs		105		105
Net Periodic Pension Cost	$	481	$	509

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 three months ended December 31, 2013, we contributed $1,161 to the Pension Plans to fund benefit payments and anticipate making approximately $1,321 in additional contributions through September 30, 2014. For the three months ended December 31, 2013, we contributed $134 to the SERP to fund benefit payments and anticipate making approximately $542 in additional contributions through September 30, 2014.

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Document and Entity Information	3 Months Ended
	Dec. 31, 2013	Jan. 31, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	APFC
Entity Registrant Name	AMERICAN PACIFIC CORP
Entity Central Index Key	0000350832
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		7,997,913

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 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 was issued May 29, 2013. 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 2015. 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 held discussions with NDEP to formalize our remediation efforts in an agreement. In June 2013, we entered into an Administrative Order on Consent (the “AOC”) with NDEP. We have been conducting our remediation efforts in cooperation with NDEP. Accordingly, the formalization of our remediation efforts under an AOC had no significant effect on our scope of activities or cost estimates. Significant terms of the AOC include:

• formalizing the oversight of ongoing or modified remediation efforts required by NDEP;

• procedures for reimbursing NDEP for past and future oversight costs;

• providing NDEP with enforcement mechanisms to ensure compliance with the AOC, including stipulated penalties for failures to comply with certain requirements under the AOC;

• preservation of AMPAC’s right to make future cost recovery or contribution claims;

• providing a procedure for closing parts or all of the remediation efforts once goals are achieved; and

• resolving certain environmental liability claims that NDEP might have had without the AOC.

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 with planned start up activities completed in Fiscal 2013. System optimization will continue in Fiscal 2014. 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 rates and targeted perchlorate mass destruction rates, the life of the project could range from five to 18 years from the date that the Expansion Project was placed in service. Further, the data indicates that within that range, seven 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 future O&M costs, we consider, among other factors, the remaining 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 range from approximately $1,800 to $2,100. 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 December 31, 2013, the aggregate range of anticipated environmental remediation costs was from approximately $7,600 to approximately $31,300. 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 December 31, 2013, the accrued amount was $11,308, 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 three months ended December 31, 2013 is shown below:

Balance, September 30, 2013	$	11,947
Expenditures		(639)
Balance, December 31, 2013	$	11,308

AFC Environmental Matters. The primary operations of our Fine Chemicals segment are located on land leased from Aerojet Rocketdyne, Inc. (“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. Five putative class action lawsuits were filed regarding our proposed merger transaction with H.I.G. Capital LLC (See Note 14.) Although we are not currently party to any other 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 (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Change in fair value arising during period, tax	$ 3	$ 0
Reclassifications to net income, tax	33	0
Amortization of losses to net income, tax	$ 194	$ 444

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ACCUMULATED OTHER COMPREHENSIVE LOSS

3 Months Ended

Dec. 31, 2013

ACCUMULATED OTHER COMPREHENSIVE LOSS

5. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides changes in accumulated other comprehensive 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, 2013	$	(15,617)	$	158	$	(15,459)
Other comprehensive income before reclassifications		-		196		196
Amounts reclassified from accumulated other comprehensive loss		312		(53)		259
Net current period other comprehensive income		312		143		455
Balance, December 31, 2013	$	(15,305)	$	301	$	(15,004)

The following table provides details about reclassifications out of Accumulated Other Comprehensive Loss (“AOCI”):

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months Ended December 31,
	2013		2012
Gains and losses on cash flow hedges -	$	86	$	-	Interest expense
interest rate swap agreement		(33)		-	Income tax expense
	$	53	$	-	Net of tax
Amortization of defined benefit plan items	$	(186)	$	(512)	Cost of revenues
		(320)		(596)	Operating expenses
		(506)		(1,108)	Total before tax
		194		444	Income tax expense
	$	(312)	$	(664)	Net of tax

(a) amounts in parenthesis represent a decrease to income

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EARNINGS PER SHARE

3 Months Ended

Dec. 31, 2013

EARNINGS PER SHARE

4. EARNINGS PER SHARE

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

	Three Months Ended
	December 31,
	2013		2012
Income from continuing operations	$	4,344	$	1,151
Basic weighted-average shares		7,890,000		7,670,000
Diluted:
Weighted-average shares, basic		7,890,000		7,670,000
Dilutive effect of stock options		293,000		171,000
Dilutive effect of restricted stock		41,000		35,000
Weighted-average shares, diluted		8,224,000		7,876,000
Basic earnings per share from continuing operations	$	0.55	$	0.15
Diluted earnings per share from continuing operations	$	0.53	$	0.15

As of December 31, 2013, we had an aggregate of 51,622 antidilutive options and unvested restricted shares outstanding. As of December 31, 2012, we had an aggregate of 68,896 antidilutive options and unvested restricted shares outstanding.

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INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Tables)

3 Months Ended

Dec. 31, 2013

Depreciation and Amortization Expense

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

	Three Months Ended
	December 31,
	2013		2012
Depreciation classified as:
Cost of revenues	$	3,370	$	3,222
Operating expenses		51		88
Total		3,421		3,310

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GAIN CONTINGENCIES - OTHER OPERATING GAINS

3 Months Ended

Dec. 31, 2013

GAIN CONTINGENCIES - OTHER OPERATING GAINS

12. GAIN CONTINGENCIES – OTHER OPERATING GAINS

We recognize gain contingencies in our consolidated statement of operations when all contingencies have been resolved, which generally coincides with the receipt of cash, if applicable. During the Fiscal 2014 first quarter, our Fine Chemicals segment reported other operating gains of $713 that resulted from the resolution of a gain contingency.

Our Fine Chemicals segment is undertaking several mandatory capital projects. Most of the capital activities are complete and others are in progress or otherwise expected to be completed during Fiscal 2014. In connection with these projects, our Fine Chemicals segment held, and continues to hold, negotiations with the former owner of its facilities. During the Fiscal 2014 first quarter, we received from the former owner cash consideration in the amount of $713 for a limited release of liability of the former owner with respect to the recently completed project.

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SEGMENT INFORMATION

3 Months Ended

Dec. 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 commercial 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 large 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
	December 31,
	2013		2012
Fine chemicals customer		32%		36%
Specialty chemicals customer				30%
Specialty chemicals customer		21%

The following provides financial information about our segment operations:

	Three Months Ended
	December 31,
	2013		2012
Revenues:
Fine Chemicals	$	36,411	$	21,347
Specialty Chemicals		14,464		14,350
Other Businesses		638		621
Total Revenues	$	51,513	$	36,318
Segment Operating Income (Loss):
Fine Chemicals	$	5,676	$	1,277
Specialty Chemicals		6,216		7,917
Other Businesses		7		(160)
Total Segment Operating Income		11,899		9,034
Corporate Expenses		(4,581)		(4,086)
Operating Income	$	7,318	$	4,948
Depreciation and Amortization:
Fine Chemicals	$	3,061	$	3,015
Specialty Chemicals		307		207
Other Businesses		6		5
Corporate		47		83
Total Depreciation and Amortization	$	3,421	$	3,310

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Commitments and Contingencies - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended		12 Months Ended	24 Months Ended
	Jun. 30, 2011	Dec. 31, 2013 LegalMatter	Sep. 30, 2009	Sep. 30, 2012	Sep. 30, 2006	Sep. 30, 2013
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
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
Amount accrued through estimated life of the project		11,308				11,947
Number of putative class action lawsuits filed regarding proposed merger transaction with H.I.G. Capital LLC		5
Minimum
Commitment And Contingencies [Line Items]
Environmental Remediation Charges		7,600
Estimated project costs		1,800
Maximum
Commitment And Contingencies [Line Items]
Environmental Remediation Charges		31,300
Estimated project costs		$ 2,100

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DEBT

3 Months Ended

Dec. 31, 2013

DEBT

6. DEBT

Our outstanding debt balances consist of the following:

	December 31,		September 30,
	2013		2013
Term Loan, variable-rate interest, due through 2017	$	54,000	$	55,500
Capital Leases, due through 2014		1		2
Total Debt		54,001		55,502
Less Current Portion		(6,001)		(6,002)
Total Long-term Debt	$	48,000	$	49,500

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 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.

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 December 31, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $4,791 and availability for revolving loans of $20,209.

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 December 31, 2013, our Leverage Ratio was 0.97 to 1.00 and our Debt Service Coverage Ratio was 6.24 to 1.00, each of which are in compliance with the applicable covenant.

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 December 31, 2013, we had $4,791 in outstanding letters of credit, maturing through April 2017, which were issued under our Revolving Facility. In addition, as of December 31, 2013, we had $169 in outstanding standby letters of credit which mature through April 2016 that were not issued under our Revolving Facility. 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

3 Months Ended

Dec. 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 December 31, 2013, the fair value of the Swap Agreement was an asset of $369. 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 three months ended December 31, 2013, we had no hedge ineffectiveness.

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

	December 31,		September 30,
	2013		2013
Balance sheet location of fair value:
Other assets	$	657	$	554
Accrued liabilities	$	288	$	298

	Three Months Ended
	December 31,
	2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	199	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	(86)	$	-

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INCOME TAXES

3 Months Ended

Dec. 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 December 31, 2013 and September 30, 2013, our recorded liability for unrecognized tax benefits was $228 and $204, respectively, of which $225 and $201, respectively, 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 2014. Accordingly, it is reasonably possible that none of the gross liability for unrecognized tax benefits will be reversed during Fiscal 2014.

Unrecognized Tax Benefits - September 30, 2013	$	204
Additions for tax positions of prior years		24
Reductions for tax positions of prior years		-
Lapse of statute of limitations		-
Unrecognized Tax Benefits - December 31, 2013	$	228

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2013 and September 30, 2013, we had accrued $12 and $10, respectively, for the payment of tax-related interest and penalties. For the three months ended December 31, 2013 and 2012, income tax expense (benefit) includes an expense of $2 and a benefit of $671, 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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Subsequent Event - Additional Information (Detail) (Subsequent Event, Merger Agreement, USD $)	Jan. 24, 2014
Subsequent Event | Merger Agreement
Subsequent Event [Line Items]
Merger consideration price per share	$ 46.50

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Discontinued Operations - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended			1 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Oct. 31, 2013	Jun. 04, 2012	Jan. 31, 2014 Subsequent Event
Discontinued Operations [Line Items]
Total consideration for asset purchase agreement				$ 46,000
Purchase Price held in escrow account				4,000
Escrow amount released to settle liabilities	(177)	(650)
Escrow account maturity	15 months
Claim received for indemnification			6,800
Indemnification claims settled during the period					2,000
Escrow deposit receivable					$ 1,173

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Interim Basis of Presentation and Accounting Policies - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013
Schedule Of Significant Accounting Policies [Line Items]
Carrying value of floating-rate term loan	$ 54,000	$ 55,500
Fair value of floating-rate term loan	53,070
Sales value of Bill and Hold Inventory	11,898	9,517
Interest Rate Swap
Schedule Of Significant Accounting Policies [Line Items]
Fair value of the swap agreement	$ 369

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Quantitative Disclosures About the Swap Agreement Before Income Tax Effects (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Balance sheet location of fair value:
Other assets	$ 657	$ 554
Accrued liabilities	$ 288	$ 298

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SUBSEQUENT EVENT

3 Months Ended

Dec. 31, 2013

SUBSEQUENT EVENT

14 SUBSEQUENT EVENT

Moog Claim. In October 2013, we received a claim for indemnification from Moog under the Asset Purchase Agreement associated with the sale of our former Aerospace Equipment segment which was settled in January 2014 (see Note 13).

Pending Acquisition by H.I.G. Capital LLC. On January 9, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and with Flamingo Parent Corp., a Delaware corporation (“Parent”), and Flamingo Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), both of which are affiliates of and controlled by H.I.G. Capital, LLC, a Delaware limited liability company.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub commenced a tender offer (the “Offer”) on January 24, 2014 to acquire all of the outstanding shares of common stock of the Company (the “Shares”), at a purchase price of $46.50 per share, in cash (the “Offer Price”), payable without interest and less any applicable withholding taxes. The Offer is scheduled to expire at midnight, New York City time, on February 24, 2014, unless the Offer is extended or earlier terminated.

Following the consummation of the Offer and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into us, and we will continue as a wholly-owned subsidiary of Parent (the “Merger”). As of the effective time of the Merger, each outstanding Share (other than Shares owned by the Company as treasury stock, Shares owned by Parent, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent, Merger Sub or the Company or Shares held by stockholders that have properly exercised and perfected appraisal rights under Delaware law) will be converted automatically into the right to receive an amount in cash equal to the Offer Price, without interest.

On January 16, 2014, a putative class action lawsuit captioned Quick, et al. v. American Pacific Corp., et al., Case No. A-14-694633-C, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition and subsequently amended on January 30, 2014. The amended complaint (the “Quick Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub and H.I.G. The Quick Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by failing to maximize stockholder value in a proposed sale of the Company and by engaging in self-dealing. The Quick Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition and that the Company and H.I.G. aided and abetted the alleged breaches by the Company’s directors. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 29, 2014 and February 4, 2014, two putative class action lawsuits captioned Berger v. Campbell, et al., Case No. 9292, and Jeweltex Manufacturing Inc. Retirement Plan v. American Pacific Corporation, et al., Case No. 9308, were filed in the Court of Chancery in the State of Delaware regarding the proposed acquisition. The complaints (the “Berger Complaint” and “Jeweltex Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company, and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Berger Complaint and Jeweltex Complaint allege, among other things, that the Company’s directors breached their fiduciary duties by agreeing to deal protection devices designed to prevent unsolicited bids and by engaging in self-dealing. The Berger Complaint and the Jeweltex Complaint further allege that the Company’s directors failed to provide material information relating to the acquisition and that the Company’s directors effectuated a scheme to temporarily lower the Company’s share price through deliberate misleading acts, allowing a sale of the Company to take place and providing immediate liquidity for the stock holdings of the Company’s directors and management. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 30, 2014, two putative class action lawsuits captioned Norcini v. American Pacific Corporation, et al., Case No. A-14-695381-B, and Solak v. American Pacific Corporation, et al., Case No. A-14695365-C were filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaints (the “Norcini Complaint” and “Solak Complaint”, respectively) were purportedly filed on behalf of the public stockholders of the Company and name as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Norcini and Solak Complaints allege, among other things, that the Company’s directors breached their fiduciary duties by not maximizing stockholder value and not fully informing themselves about whether greater value could be achieved. The Norcini and Solak Complaints further allege that the Company’s directors agreed to onerous deal protection devices that assured consummation of the deal and collectively engaged in a scheme to unfairly sell the Company to H.I.G. at a bargain price. The Solak Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiffs seek, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

On January 31, 2014, a putative class action lawsuit captioned Pill v. Gibson, et al., Case No. A-14-695405, was filed in the Eighth Judicial District Court in Clark County, Nevada regarding the proposed acquisition. The complaint (the “Pill Complaint”) was purportedly filed on behalf of the public stockholders of the Company, and names as defendants the Company, each of the Company’s directors, Parent, Merger Sub, and H.I.G. The Pill Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by allowing allegedly conflicted directors and an allegedly conflicted financial advisor to negotiate, analyze, and approve the acquisition, which contained alleged deal protection devices. The Pill Complaint further alleges that the Company’s directors failed to provide material information relating to the acquisition. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the acquisition, monetary damages and the payment of attorneys’ fees and expenses.

We believe that the allegations in the complaints described above lack merit, and we intend to vigorously defend the actions.

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EARNINGS PER SHARE (Tables)

3 Months Ended

Dec. 31, 2013

Shares used to Compute Earnings Per Share

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

	Three Months Ended
	December 31,
	2013		2012
Income from continuing operations	$	4,344	$	1,151
Basic weighted-average shares		7,890,000		7,670,000
Diluted:
Weighted-average shares, basic		7,890,000		7,670,000
Dilutive effect of stock options		293,000		171,000
Dilutive effect of restricted stock		41,000		35,000
Weighted-average shares, diluted		8,224,000		7,876,000
Basic earnings per share from continuing operations	$	0.55	$	0.15
Diluted earnings per share from continuing operations	$	0.53	$	0.15

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Debt - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended													0 Months Ended	3 Months Ended		1 Months Ended	0 Months Ended	3 Months Ended		0 Months Ended		3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Year One	Dec. 31, 2013 Year Two	Dec. 31, 2013 There After	Dec. 31, 2013 Minimum Year One	Dec. 31, 2013 Maximum	Dec. 31, 2013 Maximum There After	Dec. 31, 2013 Average Year Two	Dec. 31, 2013 Base Rate Loans Minimum	Dec. 31, 2013 Base Rate Loans Maximum	Dec. 31, 2013 Eurodollar Loans Minimum	Dec. 31, 2013 Eurodollar Loans Maximum	Oct. 26, 2012 Credit Facility	Dec. 31, 2013 Credit Facility	Dec. 31, 2013 Term Loan	Feb. 28, 2007 Senior Notes	Oct. 26, 2012 Senior Notes Credit Agreement	Dec. 31, 2013 Senior Notes Credit Agreement	Oct. 26, 2012 Senior Notes Credit Facility	Oct. 26, 2012 Revolving Loans Credit Facility	Dec. 31, 2013 Revolving Loans Credit Facility	Dec. 31, 2013 Standby Letters of Credit	Dec. 31, 2013 Letter of Credit
Debt Instrument [Line Items]
Aggregate principal amount																	$ 110,000
Annual interest rate										0.75%	1.50%	1.75%	2.50%				9.00%
Line of credit facility, expiration date																	Feb. 01, 2015						Apr. 01, 2016	Apr. 01, 2017
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
Line of credit facility maximum borrowing capacity																				85,000	25,000
Principal amount under the credit facility														60,000
Maturity period for the credit facility														5 years
Outstanding amount in connection with the issuance of letter of credit																					5,000
Letter of credit outstanding	4,791																					4,791	169
Letter of credit available																						20,209
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	0.97						3.00
Debt Service Coverage Ratio	6.24					2.00		2.50	2.25
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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Estimated Compensation Expenses For RSU Award (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost (included in operating expenses)	$ 373	$ 253
Tax expense (benefit) recognized	80	64
Net compensation cost	293	189
Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Tax expense (benefit) recognized	(76)	14
Net compensation cost	(123)	22
Total compensation cost for non-vested awards not yet recognized	1,194	1,156
Weighted-average years to be recognized	9 months 18 days	1 year 9 months 18 days
Restricted Stock Units | Operating Expenses
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost (included in operating expenses)	$ (199)	$ 36

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Current Assets:
Cash and Cash Equivalents	$ 52,797	$ 60,864
Accounts Receivable, Net	37,006	21,309
Inventories	64,690	59,572
Prepaid Expenses and Other Assets	2,035	1,541
Income Taxes Receivable	1,699	1,567
Deferred Income Taxes	16,690	16,214
Total Current Assets	174,917	161,067
Property, Plant and Equipment, Net	102,377	103,847
Deferred Income Taxes	6,178	6,446
Other Assets	6,148	5,947
TOTAL ASSETS	289,620	277,307
Current Liabilities:
Accounts Payable	13,933	13,501
Accrued Liabilities	8,203	5,453
Accrued Interest	6	7
Employee Related Liabilities	9,424	11,325
Income Taxes Payable	2,386	629
Customer Deposits	37,007	26,936
Deferred Revenues	6,812	8,677
Current Portion of Environmental Remediation Reserves	2,091	2,244
Current Portion of Long-Term Debt	6,001	6,002
Total Current Liabilities	85,863	74,774
Long-Term Debt	48,000	49,500
Environmental Remediation Reserves	9,217	9,703
Pension Obligations	29,379	29,899
Other Long-Term Liabilities	237	2,094
Total Liabilities	172,696	165,970
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, 7,997,913 and 7,949,000 issued and outstanding	800	795
Capital in Excess of Par Value	78,770	77,966
Retained Earnings	52,358	48,035
Accumulated Other Comprehensive Loss	(15,004)	(15,459)
Total Stockholders' Equity	116,924	111,337
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 289,620	$ 277,307

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INVENTORIES

3 Months Ended

Dec. 31, 2013

INVENTORIES

3. INVENTORIES

Inventories consist of the following:

	December 31,		September 30,
	2013		2013
Finished goods	$	5,442	$	9,020
Work-in-process		40,180		36,032
Raw materials and supplies		16,249		14,520
Under(over) applied manufacturing overhead costs		2,819		-
Total	$	64,690	$	59,572

Finished goods include final product that has shipped to our customers but remains subject to a specified customer acceptance period before revenues and the related costs of revenues are recognized.

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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Defined Benefit Plans - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit pension plans	3
Number of 401K Plans	2
Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Contribution and benefit payments	$ 1,161
Additional Contribution to plans	1,321
SERP
Defined Benefit Plan Disclosure [Line Items]
Number of executive officers	3
Number of former executive officers	2
Contribution and benefit payments	134
Additional Contribution to plans	$ 542

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

3 Months Ended

Dec. 31, 2013

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

The following table provides changes in accumulated other comprehensive 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, 2013	$	(15,617)	$	158	$	(15,459)
Other comprehensive income before reclassifications		-		196		196
Amounts reclassified from accumulated other comprehensive loss		312		(53)		259
Net current period other comprehensive income		312		143		455
Balance, December 31, 2013	$	(15,305)	$	301	$	(15,004)

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

The following table provides details about reclassifications out of Accumulated Other Comprehensive Loss (“AOCI”):

AOCI Component	Amount Reclassified from AOCI (a)				Statement of Operations Line Item
	Three Months Ended December 31,
	2013		2012
Gains and losses on cash flow hedges -	$	86	$	-	Interest expense
interest rate swap agreement		(33)		-	Income tax expense
	$	53	$	-	Net of tax
Amortization of defined benefit plan items	$	(186)	$	(512)	Cost of revenues
		(320)		(596)	Operating expenses
		(506)		(1,108)	Total before tax
		194		444	Income tax expense
	$	(312)	$	(664)	Net of tax

(a) amounts in parenthesis represent a decrease to income

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Summary of Exercisable Stock Options (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of vested stock options	364,801
Weighted-average exercise price per share	$ 8.56
Aggregate intrinsic value	$ 10,471
Weighted-average remaining contractual term in years	4 years 8 months 12 days

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DISCONTINUED OPERATIONS

3 Months Ended

Dec. 31, 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 was comprised of Ampac-ISP Corp. and its wholly-owned foreign subsidiaries (“AMPAC-ISP”). The divestiture was 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 the Fiscal 2014 first quarter and Fiscal 2013, respectively, $177 and $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 demanded 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.

In January 2014, the Moog Claim was fully settled in the amount of $2,000. The settlement includes a release, covenant not to sue, and a waiver from Moog of all current and future claims for indemnification pursuant to the Asset Purchase Agreement, with certain limited exceptions. As a result, the escrow account will be distributed and closed. On or before February 14, 2014, we anticipate that Moog will receive $2,000 and we will receive approximately $1,173. 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. When we receive our final distribution from the escrow account, we will report that amount as additional gain in the period in which the funds are received.

Revenues and expenses associated with the operations of AMPAC-ISP are not material and are presented as discontinued operations for all periods presented.