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.