American Pacific (APFC) 10-Q 2009 Q3 Quarterly report

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 June 30, 2009

or

o 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. YESx Noo

     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). Yeso Noo

      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. (Check one):

Large accelerated filero
Non-accelerated filero
(Do not check if a smaller reporting company) Accelerated filerx
Smaller reporting companyo 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox

     The number of shares of the registrant’s common stock outstanding as of July 31, 2009 was 7,504,591.

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 Balance Sheets (unaudited)	2
	Condensed Consolidated Statements of Cash Flows (unaudited)	3
	Notes to Condensed Consolidated Financial Statements (unaudited)	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	44
ITEM 4.	Controls and Procedures	44
PART II.  OTHER INFORMATION
ITEM 1.	Legal Proceedings	45
ITEM 1A.	Risk Factors	45
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
ITEM 3.	Defaults Upon Senior Securities	57
ITEM 4.	Submission of Matters to a Vote of Security Holders	57
ITEM 5.	Other Information	57
ITEM 6.	Exhibits	57
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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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					Nine Months Ended
	June 30,					June 30,
	2009			2008		2009			2008
Revenues	$	31,490		$	36,740	$	133,554		$	131,977
Cost of Revenues		24,227			23,990		94,260			85,188
Gross Profit		7,263			12,750		39,294			46,789
Operating Expenses		10,915			10,377		33,295			31,824
Operating Income (Loss)		(3,652	)		2,373		5,999			14,965
Interest and Other Income, Net		28			575		70			1,221
Interest Expense		2,683			2,682		8,061			8,073
Income (Loss) before Income Tax		(6,307	)		266		(1,992	)		8,113
Income Tax Expense (Benefit)		(2,752	)		138		(627	)		3,489
Net Income (Loss)	$	(3,555	)	$	128	$	(1,365	)	$	4,624
Earnings (Loss) per Share:
Basic	$	(0.48	)	$	0.02	$	(0.18	)	$	0.62
Diluted	$	(0.48	)	$	0.02	$	(0.18	)	$	0.61
Weighted Average Shares Outstanding:
Basic		7,483,000			7,452,000		7,482,000			7,442,000
Diluted		7,483,000			7,607,000		7,482,000			7,594,000

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)

	June 30,			September 30,
	2009			2008
ASSETS
Current Assets:
Cash and Cash Equivalents	$	24,968		$	26,893
Accounts Receivable, Net		27,495			27,445
Inventories		44,242			40,357
Prepaid Expenses and Other Assets		1,639			3,392
Income Taxes Receivable		1,967			1,804
Deferred Income Taxes		6,697			6,859
Total Current Assets		107,008			106,750
Property, Plant and Equipment, Net		115,242			118,608
Intangible Assets, Net		4,106			3,013
Goodwill		3,152			-
Deferred Income Taxes		14,026			13,849
Other Assets		10,292			9,193
TOTAL ASSETS	$	253,826		$	251,413
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	8,246		$	10,554
Accrued Liabilities		4,703			5,526
Accrued Interest		4,125			1,650
Employee Related Liabilities		5,737			6,917
Income Taxes Payable		12			111
Deferred Revenues and Customer Deposits		8,283			3,091
Current Portion of Environmental Remediation Reserves		1,412			996
Current Portion of Long-Term Debt		213			254
Total Current Liabilities		32,731			29,099
Long-Term Debt		110,105			110,120
Environmental Remediation Reserves		11,879			13,282
Pension Obligations		16,551			15,692
Other Long-Term Liabilities		589			258
Total Liabilities		171,855			168,451
Commitments and Contingencies
Shareholders’ Equity
Preferred Stock - $1.00 par value; 3,000,000 authorized; none outstanding		-			-
Common Stock - - $0.10 par value; 20,000,000 shares authorized,
9,550,541 and 9,523,541 issued		955			952
Capital in Excess of Par Value		88,999			88,496
Retained Earnings		14,591			15,956
Treasury Stock - 2,045,950 and 2,045,950 shares		(17,175	)		(17,175	)
Accumulated Other Comprehensive Loss		(5,399	)		(5,267	)
Total Shareholders’ Equity		81,971			82,962
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	253,826		$	251,413

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)

	Nine Months Ended
	June 30,
	2009			2008
Cash Flows from Operating Activities:
Net Income (Loss)	$	(1,365	)	$	4,624
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and amortization		11,971			12,472
Non-cash interest expense		473			478
Share-based compensation		474			90
Excess tax benefit from stock option exercises		-			(244	)
Deferred income taxes		(14	)		(447	)
Loss (gain) on sale of assets		52			(418	)
Changes in operating assets and liabilities:
Accounts receivable, net		2,284			3,800
Inventories		(4,847	)		(10,924	)
Prepaid expenses and other current assets		1,792			(1,766	)
Accounts payable		(2,780	)		(1,312	)
Income taxes		(262	)		1,158
Accrued liabilities		(1,034	)		(1,011	)
Accrued interest		2,475			2,438
Employee related liabilities		(1,298	)		(384	)
Deferred revenues and customer deposits		3,567			15,488
Environmental remediation reserves		(987	)		(757	)
Pension obligations, net		859			(199	)
Other		(8	)		(1,945	)
Net Cash Provided by Operating Activities		11,352			21,141
Cash Flows from Investing Activities:
Capital expenditures		(6,312	)		(10,027	)
Acquisition of business, net of cash acquired		(6,725	)		-
Net Cash Used by Investing Activities		(13,037	)		(10,027	)
Cash Flows from Financing Activities:
Payments of long-term debt		(272	)		(208	)
Issuances of common stock, net		32			387
Excess tax benefit from stock option exercises		-			244
Purchases of treasury stock		-			(193	)
Net Cash Provided (Used) by Financing Activities		(240	)		230
Net Change in Cash and Cash Equivalents		(1,925	)		11,344
Cash and Cash Equivalents, Beginning of Period		26,893			21,426
Cash and Cash Equivalents, End of Period	$	24,968		$	32,770
Cash Paid (Received) For:
Interest	$	5,113		$	5,156
Income taxes		(380	)		3,901
Non-Cash Investing and Financing Transactions:
Additions to Property, Plant and Equipment not yet paid		408			1,361

See accompanying notes to condensed consolidated financial statements

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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 our opinion, include all adjustments, which are of a normal recurring nature, necessary for the fair presentation of financial results for interim periods. 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, 2008. We have evaluated subsequent events through August 5, 2009, the date these condensed consolidated financial statements were issued. The operating results for the three-month and nine-month periods ended June 30, 2009 and cash flows for the nine-month period ended June 30, 2009, are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods.
	Accounting Policies.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, 2008.
	Principles of Consolidation.Our consolidated financial statements include the accounts of American Pacific Corporation and our wholly-owned subsidiaries. All intercompany accounts have been eliminated.
	Effective October 1, 2008, we completed the acquisition of Marotta Holdings Limited (subsequently renamed Ampac ISP Holdings Limited) and its wholly-owned subsidiaries (collectively “AMPAC ISP Holdings”). AMPAC ISP Holdings is included in our consolidated financial statements beginning on October 1, 2008 and is a component of our Aerospace Equipment segment. See Note 2.
	Fair Value Disclosure of Financial Instruments.We estimate the fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature. We estimate the fair value of our fixed-rate long-term debt to be approximately $96,800 based on the trade date closest to June 30, 2009, which was June 15, 2009.
	Depreciation and Amortization Expense.Depreciation expense of $3,446, $10,048, $3,168 and $9,608 was classified as cost of revenues in our consolidated statements of operations for the three-month and nine-month periods ended June 30, 2009 and 2008, respectively. Depreciation expense of $125, $383, $158 and $419 was classified as operating expenses in our consolidated statements of operations for the three-month and nine-month periods ended June 30, 2009 and 2008, respectively.
	Amortization expense of $1,517 was classified as cost of revenues in our consolidated statements of operations for the nine-month period ended June 30, 2008. Amortization expense of $530, $1,540, $309 and $928 was classified as operating expenses in our consolidated statements of operations for the three-month and nine-month periods ended June 30, 2009 and 2008, respectively.
	Bill and Hold Transactions.Some of our perchlorate and 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 $25,712 and $29,022 as of June 30, 2009 and September 30, 2008, respectively.

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1.	INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)
	Recently Issued or Adopted Accounting Standards.In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles in the United States of America, and expands disclosures about fair value measurements. In February 2008, the FASB deferred the adoption of SFAS No. 157 for one year as it applied to certain items, including assets and liabilities initially measured at fair value in a business combination, reporting units and certain assets and liabilities measured at fair value in connection with goodwill impairment tests in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, and long-lived assets measured at fair value for impairment assessments under SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.” SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. SFAS No. 157 was effective for us on October 1, 2008. We have not adopted all the provisions of SFAS No. 157 as the FASB delayed the effective date of the application of SFAS No. 157 to non-financial assets and liabilities. The remaining provisions of SFAS No. 157 become effective for us beginning October 1, 2009. The partial adoption of SFAS No. 157 did not have a material impact on our consolidated financial statements. The adoption of the remaining provisions of SFAS No. 157 is not expected to have a material impact on our results of operations, financial position or cash flows.
	In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The fair value option established by SFAS No. 159 permits all companies to choose to measure eligible items at fair value at specified election dates. At each subsequent reporting date, a company must report in earnings any unrealized gains and losses on items for which the fair value option has been elected. SFAS No. 159 was effective for us on October 1, 2008. We chose not to elect the fair value option for any of our financial instruments.
	In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R will significantly change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R also includes a substantial number of new disclosure requirements. SFAS No. 141R applies to us prospectively for business combinations with acquisition dates on or after October 1, 2009. We expect that SFAS No. 141R, once adopted, will have an impact on accounting for business combinations, but the effect is dependent upon acquisitions at that time.
	In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, SFAS No. 160 requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No.160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS

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1.	INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)
	No. 160 is effective for us beginning on October 1, 2009. We currently have no entities or arrangements that will be affected by the adoption of SFAS No. 160. However, determination of the ultimate effect of this pronouncement will depend on our structure at the date of adoption.
	In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. The guidance contained in this FSP for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. However, the disclosure requirements of FSP No. 142-3 must be applied prospectively to all intangible assets recognized in the Company’s financial statements as of the effective date. FSP No. 142-3 is effective for us beginning October 1, 2009.
	In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures include disclosure of investment allocation decisions, major categories of plan assets, inputs and valuation techniques used to measure the fair value of plan assets, the effect of certain fair value measurements, and significant concentrations of risk within plan assets. The expanded disclosure requirements are effective for our fiscal year ending September 30, 2010.
	In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on how to identify circumstances that indicate that a transaction is not orderly and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the objective of a fair value measurement remains the same. FSP FAS 157-4 was effective for us beginning with our interim period ended June 30, 2009. The adoption of this standard did not have a material impact on our results of operations, financial position or cash flows.
	In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amend SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments in interim reporting periods. Such disclosures were previously required only in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend Accounting Principles Board Opinion No. 28, “Interim Financial Reporting”(“APB 28”), to require the disclosures required by APB 28 in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 were effective for us beginning with our interim period ended June 30, 2009. The adoption of these standards did not have a material impact on our results of operations, financial position or cash flows.
	In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 provides authoritative accounting literature related to evaluating subsequent events that was previously addressed only in the auditing literature under Auditing Standard Section 560, “Subsequent Events”. SFAS No. 165 is similar to the current guidance with some exceptions that are not intended to result in significant change to current practice. SFAS No. 165 defines subsequent events and also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The Company adopted the disclosure provisions of SFAS No. 165 as of June 30, 2009. The adoption did not have an impact on our results of operations, financial position, or cash flows.

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1.

INTERIM BASIS OF PRESENTATION AND ACCOUNTING POLICIES (continued)

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS No. 168 establishes the FASB Standards Accounting Codification (“Codification”) as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied to nongovernmental entities, and rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) as authoritative GAAP for SEC registrants. The Codification will supersede all the existing non-SEC accounting and reporting standards upon its effective date and subsequently, the FASB will not issue new standards in the form of Statements of Financial Accounting Standards, FASB Staff Positions or Emerging Issues Task Force Abstracts. SFAS No. 168 also replaces FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” but is not intended to change or alter existing US GAAP. The Codification will change the references of financial standards in effect for the Company. Beginning with financial statements issued after September 15, 2009, all references made to U.S. GAAP will use the new Codification numbering system prescribed by the FASB. SFAS No. 168 will not have any impact on our results of operations, financial position, and cash flows.

2.	ACQUISITION
	Effective October 1, 2008, we completed the acquisition of AMPAC ISP Holdings for a cash purchase price, including direct expenses and net of cash acquired, of $6,725. AMPAC ISP Holdings designs, develops and manufactures high performance valves, pressure regulators, cold-gas propulsion systems, and precision structures for space applications, especially in the European space market. These products are used on various satellites and spacecraft, as well as on the Ariane 5 launch vehicle. The business has two locations, Dublin, Ireland and Cheltenham, U.K.
	The acquisition of AMPAC ISP Holdings enhances our opportunities to penetrate the European space market and provides us with the opportunity to further expand our Aerospace Equipment segment product offerings through the development and manufacture of additional space valves and space structures. These factors result in the recognition of intangible assets for customer relationships and goodwill.
	We are accounting for this acquisition using the purchase method of accounting, under which the total purchase price is allocated to the fair values of the assets acquired and liabilities assumed. We engaged outside consultants to assist in the valuation of property, plant and equipment and intangible assets. As of June 30, 2009, the allocation of the purchase price and the related determination of the useful lives of property, plant and equipment were preliminary and subject to change pending receipt and evaluation of the final valuation report. In addition, amounts allocated to deferred tax assets and liabilities are preliminary pending completion of AMPAC ISP Holdings’ tax filings for calendar 2008.
	The following table indicates the preliminary amounts assigned to each major asset and liability caption of AMPAC ISP Holdings as of the acquisition date:

Accounts Receivable	$	2,291
Inventory		552
Prepaid Expenses		39
Property, Plant and Equipment		912
Intangible Assets		2,840
Goodwill		3,158
Total Assets Acquired		9,792
Accounts Payable, Accrued Expenses and Other Current Liabilities		978
Customer Deposits		1,625
Long-Term Liabilities		464
Total Liabilities Assumed		3,067
Purchase Price	$	6,725

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2.	ACQUISITION (continued)
	Intangible assets, consisting of customer relationships (average life of 5 years) and existing customer backlog (average life of 1.5 years), have definite lives and are being amortized over their estimated useful lives using the straight-line method.

3.	SHARE-BASED COMPENSATION
	We account for our share-based compensation arrangements under the provisions of SFAS No. 123 (Revised 2004), “Share-Based Payment”, which requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The fair values of awards are recognized as additional compensation expense, which is classified as operating expenses, proportionately over the vesting period of the awards.
	Our share-based compensation arrangements are designed to advance the long-term interests of the Company, including by attracting and retaining employees and directors and aligning their interests with those of our stockholders. The amount, frequency, and terms of share-based awards may vary based on competitive practices, our operating results, government regulations and availability under our equity incentive plans. Depending on the form of the share-based award, new shares of our common stock may be issued upon grant, option exercise or vesting of the award. We maintain three share-based plans, each as discussed below.
	The American Pacific Corporation Amended and Restated 2001 Stock Option Plan (the “2001 Plan”) permits 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. As of June 30, 2009, there were 20,000 shares available for grant under the 2001 Plan. 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 vest 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. As of June 30, 2009, there were 3 shares available for grant under the 2002 Directors Plan. This plan was approved by our stockholders.
	The American Pacific Corporation 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 350,000 shares of common stock are authorized for issuance under the 2008 Plan, provided that no more than 200,000 shares of common stock may be granted pursuant to awards of restricted stock and restricted stock units. As of June 30, 2009, there were 177,000 shares available for grant under the 2008 plan. This plan was approved by our stockholders.

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3.	SHARE-BASED COMPENSATION (continued)
	A summary of our stock option and restricted stock activity for the nine months ended June 30, 2009 is as follows:

	Stock Options										Restricted Stock
	Outstanding					Non-Vested					Outstanding and Non-Vested
				Weighted					Weighted				Weighted
				Average					Average				Average
				Exercise					Fair				Fair
				Price					Value				Value
	Shares			Per Share		Shares			Per Share		Shares		Per Share
Balance, September 30, 2008		394,997		$	7.72		24,997		$	7.86		-	$	-
Granted		156,000			10.98		156,000			5.41		22,000		11.25
Vested		-			-		(14,287	)		7.88		-		-
Exercised		(5,000	)		6.34		-			-		-		-
Expired / Cancelled		(5,000	)		11.25		(5,000	)		5.55		-		-
Balance, June 30, 2009		540,997			8.64		161,710			5.57		22,000		11.25

A summary of our exercisable stock options as of June 30, 2009 is as follows:

Number of vested stock options		379,287
Weighted-average exercise price per share	$	7.48
Aggregate intrinsic value	$	73
Weighted-average remaining contractual term in years		4.8

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.

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3.     SHARE-BASED COMPENSATION (continued)

	Nine Months Ended,
	June 30,
	2009		2008
Weighted-average grant date fair value per share of options granted	$	5.41	$	7.86
Significant fair value assumptions:
Expected term in years		6.00		5.75
Expected volatility		48.7%		44.5%
Expected dividends		0.0%		0.0%
Risk-free interest rates		2.7%		3.4%
Total intrinsic value of options exercised	$	21	$	629
Aggregate cash received for option exercises	$	32	$	406
Compensation cost (included in operating expenses)
Stock options	$	375	$	90
Restricted stock		99		-
Total		474		90
Tax benefit recognized		105		37
Net compensation cost	$	369	$	53
As of period end date:
Total compensation cost for non-vested awards not yet recognized:
Stock options	$	512	$	107
Restricted stock	$	148		-
Weighted-average years to be recognized
Stock options		1.6		0.9
Restricted stock		1.6		-

4.     SELECTED BALANCE SHEET DATA

Inventories.Inventories consist of the following:

	June 30,			September 30,
	2009			2008
Finished goods	$	2,285		$	2,475
Work-in-process		27,171			22,698
Raw materials and supplies		12,345			14,469
Deferred cost of revenues		3,278			715
Under(over) applied manufacturing overhead costs		(837	)		-
Total	$	44,242		$	40,357

Our Specialty Chemicals segment accounts for its interim period inventory balances in accordance with APB 28 (As Amended). Purchase price variances or volume or capacity cost variances associated with indirect manufacturing costs and that are planned and expected to be absorbed by goods produced through the end of our fiscal year are deferred at interim reporting dates as under(over) applied manufacturing overhead costs. The effect of unplanned or unanticipated purchase price or volume variances are applied to goods produced in the period.

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4.	SELECTED BALANCE SHEET DATA (continued)
	Intangible Assets.We account for our intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Intangible assets consist of the following:

	June 30,			September 30,
	2009			2008
Perchlorate customer list	$	38,697		$	38,697
Less accumulated amortization		(38,697	)		(38,697	)
		-			-
Customer relationships		9,015			7,957
Less accumulated amortization		(5,873	)		(4,944	)
		3,142			3,013
Backlog		1,627			-
Less accumulated amortization		(663	)		-
		964			-
Total	$	4,106		$	3,013

The perchlorate customer list is an asset of our Specialty Chemicals segment and was fully amortized as of February 2008. Amortization expense was zero and $1,517 for the nine-month periods ended June 30, 2009 and 2008, respectively.

Customer relationships are assets of our Fine Chemicals and Aerospace Equipment segments and are subject to amortization. Amortization expense was $310 and $309 for the three-month periods ended June 30, 2009 and 2008, respectively, and $929 and $928 for the nine-month periods ended June 30, 2009 and 2008, respectively.

Backlog is an asset of our Aerospace Equipment segment and is subject to amortization. Amortization expense was $220 and zero for the three-month periods ended June 30, 2009 and 2008, respectively, and $611 and zero for the nine-month periods ended June 30, 2009 and 2008, respectively.

In connection with our acquisition of AMPAC ISP Holdings (See Note 2), as of October 1, 2008, we recorded customer relationships in the amount of $1,097 and backlog in the amount of $1,743, based on our preliminary allocation of the purchase price to the fair values of assets acquired and liabilities assumed.

Goodwill.In connection with our acquisition of AMPAC ISP Holdings (See Note 2), we recorded goodwill in the amount of $3,158, based on our preliminary allocation of the purchase price to the fair values of assets acquired and liabilities assumed. Goodwill is an asset of our Aerospace Equipment segment and is not expected to be deductible for tax purposes. As of June 30, 2009, the balance was $3,152, reflecting the changes in the foreign currency rates used to consolidate our foreign subsidiaries.

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5.	COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS
	Comprehensive income (loss) consists of the following:

		Three Months Ended					Nine Months Ended
		June 30,					June 30,
		2009			2008		2009			2008
	Net Income (Loss)	$	(3,555	)	$	128	$	(1,365	)	$	4,624
	Other Comprehensive Income (Loss) -
	Foreign currency translation adjustment		765			3		(132	)		(44	)
	SERP Amendment, net of tax		-			-					(2,110	)
	Comprehensive Income (Loss)	$	(2,790	)	$	131	$	(1,497	)	$	2,470
	The components of accumulated other comprehensive loss are as follows:
							June 30,			September 30,
							2009			2008
	Cumulative currency translation adjustment						$	(175	)	$	(43	)
	Unamortized benefit plan costs, net of tax of $3,482 and $3,482							(5,224	)		(5,224	)
	Total						$	(5,399	)	$	(5,267	)
6.    EARNINGS PER SHARE
	Shares used to compute earnings per share are as follows:
		Three Months Ended					Nine Months Ended
		June 30,					June 30,
		2009			2008		2009			2008
	Net income (loss)	$	(3,555	)	$	128	$	(1,365	)	$	4,624
	Basic weighted-average shares		7,483,000			7,452,000		7,482,000			7,442,000
	Diluted:
	Weighted-average shares, basic		7,483,000			7,452,000		7,482,000			7,442,000
	Dilutive effect of stock options		-			155,000		-			152,000
	Weighted-average shares, diluted		7,483,000			7,607,000		7,482,000			7,594,000
	Basic earnings (loss) per share	$	(0.48	)	$	0.02	$	(0.18	)	$	0.62
	Diluted earnings (loss) per share	$	(0.48	)	$	0.02	$	(0.18	)	$	0.61
	As of June 30, 2009, we had 340,161 antidilutive options outstanding. As of June 30, 2008, we had no antidilutive options outstanding.
7.    DEBT
	Our outstanding debt balances consist of the following:
							June 30,			September 30,
							2009			2008
	Senior Notes, 9%, due 2015						$	110,000		$	110,000
	Capital Leases, due through 2012							318			374
	Total Debt							110,318			110,374
	Less Current Portion							(213	)		(254	)
	Total Long-term Debt						$	110,105		$	110,120

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7.

DEBT (continued)

Senior Notes.In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0% Senior Notes due February 1, 2015 (collectively, with the exchange notes issued in August 2007 as referenced below, the “Senior Notes”). Proceeds from the issuance of the Senior Notes were used to repay our former credit facilities. The Senior Notes accrue interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes are guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries. The Senior Notes are:

• ranked equally in right of payment with all of our existing and future senior indebtedness;

• ranked senior in right of payment to all of our existing and future senior subordinated and subordinated indebtedness;

• effectively junior to our existing and future secured debt to the extent of the value of the assets securing such debt; and

• structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the Senior Notes.

The Senior Notes may be redeemed by the Company, in whole or in part, under the following circumstances:

• at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of the Senior Notes plus an applicable premium as defined in the related indenture;

• at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the principal amount to be redeemed and reducing to 100% by February 1, 2013;

• until February 1, 2010, up to 35% of the principal amount of the Senior Notes at a redemption price of 109% of the principal amount thereof, plus accrued and unpaid interest thereon, with the proceeds of certain sales of our equity securities; and

• under certain changes of control, we must offer to purchase the Senior Notes at 101% of their aggregate principal amount, plus accrued interest.

The Senior Notes were issued pursuant to an indenture which contains certain customary events of default, including cross default provisions if we default under our existing and future debt agreements having, individually or in the aggregate, a principal or similar amount outstanding of at least $10,000, and certain other covenants limiting, subject to exceptions, carve-outs and qualifications, our ability to:

• incur additional debt;

• pay dividends or make other restricted payments;

• create liens on assets to secure debt;

• incur dividend or other payment restrictions with regard to restricted subsidiaries;

• transfer or sell assets;

• enter into transactions with affiliates;

• enter into sale and leaseback transactions;

• create an unrestricted subsidiary;

• enter into certain business activities; or

• effect a consolidation, merger or sale of all or substantially all of our assets.

In connection with the closing of the sale of the Senior Notes, we entered into a registration rights agreement which required us to file a registration statement to offer to exchange the Senior Notes for notes that have substantially identical terms as the Senior Notes and are registered under the Securities Act of 1933, as amended. In July 2007, we filed a registration statement with the SEC with respect to an offer to exchange the Senior Notes as required by the registration rights agreement, which was declared effective by the SEC. In August 2007, we completed the exchange of 100% of the Senior Notes for substantially identical notes which are registered under the Securities Act of 1933, as amended.

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7.	DEBT (continued)
	Revolving Credit Facility.In February 2007, we entered into an Amended and Restated Credit Agreement, as amended as of July 7, 2009, (the “Revolving Credit Facility”) with Wachovia Bank, National Association, and certain other lenders, which provides a secured revolving credit facility in an aggregate principal amount of up to $20,000 with an initial maturity of 5 years. We may prepay and terminate the Revolving Credit Facility at any time. The annual interest rates applicable to loans under the Revolving Credit Facility are, at our option, either the Alternate Base Rate or LIBOR Rate (each as defined in the Revolving Credit Facility) plus, in each case, an applicable margin. The applicable margin is tied to our total leverage ratio (as defined in the Revolving Credit Facility). In addition, we pay commitment fees, other fees related to the issuance and maintenance of letters of credit, and certain agency fees.
	The Revolving Credit Facility is guaranteed by and secured by substantially all of the assets of our current and future domestic subsidiaries, subject to certain exceptions as set forth in the Revolving Credit Facility. The Revolving Credit Facility contains certain negative covenants restricting and limiting our ability to, among other things:

• incur debt, incur contingent obligations and issue certain types of preferred stock;

• create liens;

• pay dividends, distributions or make other specified restricted payments;

• make certain investments and acquisitions;

• enter into certain transactions with affiliates;

• enter into sale and leaseback transactions; and

• merge or consolidate with any other entity or sell, assign, transfer, lease, convey or otherwise dispose of assets.

Financial covenants under the Revolving Credit Facility include quarterly requirements for total leverage ratio of less than or equal to 5.25 to 1.00 (“Total Leverage Ratio”), and interest coverage ratio of at least 2.50 to 1.00 (“Interest Coverage Ratio”). The Revolving Credit Facility defines Total Leverage Ratio as the ratio of Consolidated Funded Debt to Consolidated EBITDA and Interest Coverage Ratio as the ratio of Consolidated EBITDA to Consolidated Interest Expense. With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the Revolving 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 Funded Debt generally includes principal amounts outstanding under our Senior Notes, Revolving Credit Facility, capital leases and notional amounts for outstanding letters of credit. Credit Facility EBITDA is generally computed as consolidated net income plus income tax expense, interest expense, depreciation and amortization, and stock-based compensation expense and less cash payments for environmental remediation and other non-recurring gains in excess of $50. In accordance with the definitions contained in the Revolving Credit Facility, as of June 30, 2009, our Total Leverage Ratio was 3.66 to 1.00 and our Interest Coverage Ratio was 3.04 to 1.00.

The Revolving Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods), including cross-default provisions that include our Senior Notes. If an event of default occurs and is continuing, we may be required to repay the obligations under the Revolving Credit Facility prior to its stated maturity and the related commitments may be terminated.

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7.	DEBT (continued)
	As of June 30, 2009, under our Revolving Credit Facility, we had no borrowings outstanding, availability of $17,968, and we were in compliance with its various financial covenants. Availability is computed as the total commitment of $20,000 less outstanding borrowings and outstanding letters of credit, if any.
	Letters of Credit.As of June 30, 2009, we had $2,032 in outstanding standby letters of credit which mature through July 2013. These letters of credit principally secure performance of certain water treatment equipment sold by us and payment of fees associated with the delivery of natural gas and power.

8.	COMMITMENTS AND CONTINGENCIES
	Environmental Matters.
	Regulatory Review of Perchlorates.Our Specialty Chemicals segment manufactures and sells products that contain perchlorates. Federal and state regulators continue to review the effects of perchlorate, if any, on human health and the related allowable maximum level of contaminant from perchlorate. While the presence of regulatory review presents general business risk to the Company, we are currently unaware of any regulatory proposal that 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 (“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. Kerr-McGee Chemical Corporation (“KMCC”) also operated a perchlorate production facility in Henderson, Nevada (the “KMCC Site”) from 1967 to 1998. In addition, between 1956 and 1967, American Potash operated a perchlorate production facility and, for many years prior to 1956, other entities also manufactured perchlorate chemicals at the KMCC Site. As a result of a longer production history in Henderson, KMCC and its predecessor operations manufactured significantly greater amounts of perchlorate over time than we did at the AMPAC Henderson Site.
	In 1997, the Southern Nevada Water Authority (“SNWA”) detected trace amounts of the perchlorate anion in Lake Mead and the Las Vegas Wash. Lake Mead is a source of drinking water for Southern Nevada and areas of Southern California. The Las Vegas Wash flows into Lake Mead from the Las Vegas valley.
	In response to this discovery by SNWA, and at the request of the Nevada Division of Environmental Protection (“NDEP”), we engaged in an investigation of groundwater near the AMPAC Henderson Site and down gradient toward the Las Vegas Wash. The investigation and related characterization, which lasted more than six years, employed experts in the field of hydrogeology. This investigation concluded that although there is perchlorate in the groundwater in the vicinity of the AMPAC Henderson Site up to 700 parts per million, perchlorate from this site does not materially impact, if at all, water flowing in the Las Vegas Wash toward Lake Mead. It has been well established, however, by data generated by SNWA and NDEP, that perchlorate from the KMCC Site did impact the Las Vegas Wash and Lake Mead. KMCC’s successor, Tronox LLC, operates an ex situ perchlorate groundwater remediation facility at their Henderson site. Recent measurements of perchlorate in Lake Mead made by SNWA have been less than 10 parts per billion.
	Notwithstanding these facts, and at the direction of NDEP and the U.S. Environmental Protection Agency (the “EPA”), we conducted an investigation of remediation technologies for perchlorate in groundwater with the intention of remediating groundwater near the AMPAC Henderson Site. The technology that was chosen as most efficient and appropriate is in situ bioremediation (“ISB”). ISB reduces perchlorate in the groundwater by precise addition of an appropriate carbon source to the

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8.	COMMITMENTS AND CONTINGENCIES (continued)
	groundwater itself while it is still in the ground (as opposed to an above ground, more conventional, ex situ process). This induces naturally occurring organisms in the groundwater to reduce the perchlorate among other oxygen containing compounds.
	In 2002, we conducted a pilot test in the field of the ISB technology and it was successful. On the basis of the successful test and other evaluations, 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.
	At the request of the NDEP, we recently renewed discussions to formalize our remediation efforts in a voluntary agreement that, if negotiated and executed, would provide more detailed regulatory guidance on environmental characterization and remedies at the AMPAC Henderson Site and vicinity. The agreement under discussion would be expected to be similar to others previously executed by the NDEP with other companies under similar circumstances. Typically, such agreements generally cover such matters as the scope of work plans, schedules, deliverables, remedies for non compliance, and reimbursement to the State of Nevada for past and future oversight.
	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 our fiscal 2005 third quarter, we recorded a charge for $22,400 representing our estimate of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the costs for capital equipment, operating and maintenance (“O&M”), and consultants. The project consists of two primary phases: the initial construction of the remediation equipment phase and the O&M phase.
	During fiscal 2006, we increased our total cost estimate of probable costs for the construction phase by $3,600 due primarily to changes in the engineering designs, delays in receiving permits and the resulting extension of construction time. In addition, certain remediation activities are conducted on public lands under operating permits. In general, these permits require us to return the land to its original condition at the end of the permit period. Estimated costs associated with removal of remediation equipment from the land are not material and are included in our range of estimated costs.
	ISB is a new technology on the scale being used at the AMPAC Henderson Site. Accordingly, as we gain ISB operational experience, we have been and are observing certain conditions, operating results and other data which we consider in updating the assumptions used to determine our costs estimates. The two most significant assumptions are the estimated speed of groundwater flowing to our remediation extraction wells and the estimated annual O&M costs.
	Groundwater speed is one key variable along with the required pore volumes of groundwater used to estimate the number of years that may be required to operate the facility. Groundwater speed is estimated by utilizing periodic data that measures, among other things, perchlorate concentrations upgradient from the treatment area, in addition to hydraulic conductivity and porosity. As time passes, and as we continue to add reference data and analysis, including computer modeling, our estimates of the total years of operation may change. Initially, data suggested that the total project life would extend for a period of 45 years. More recent data indicates that the total project life may be 23 years. We are unable to predict over the longer term the most probable life and accordingly have used an assumed range of 23 to 45 years of operation.

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8.	COMMITMENTS AND CONTINGENCIES (continued)
	O&M costs include primarily labor, utilities, repairs, maintenance supplies and professional service costs. Since the inception of operations of the new ISB technology operations in fiscal 2007, we have not consistently achieved the targeted levels of groundwater remediation. We have experienced annualized O&M cost levels of approximately $1,000, which is higher than our initial estimates. This higher level of cost reflects costs to evaluate methods to optimize operating performance and maintenance of reinjection wells. In addition, we anticipate incurring O&M cost levels in fiscal 2009 of approximately $1,800 as we continue our evaluation of methods to achieve targeted remediation results. Those evaluations include assessment of competing non-ISB technologies that might be more efficient. Our range of estimated costs assumes that we will be successful in optimizing the remediation plant performance and that average annual O&M costs beyond 2012 and for the duration of the project will be approximately $380.
	As of June 30, 2009, the aggregate range of anticipated environmental remediation costs was from approximately $12,700 to approximately $26,300, and the accrued amount was $13,291. These estimates are 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 nine months ended June 30, 2009 is shown below:

Balance, September 30, 2008	$	14,278
Additions or adjustments		-
Expenditures		(987	)
Balance, June 30, 2009	$	13,291

AFC Environmental Matters.Our Fine Chemicals segment, Ampac Fine Chemicals LLC (“AFC”), is located on land leased from Aerojet-General Corporation (“Aerojet”), a wholly-owned subsidiary of GenCorp Inc. (“GenCorp”). The leased land is part of a tract of land owned by Aerojet designated as a “Superfund site” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”). The tract of land had been used by Aerojet and affiliated companies to manufacture and test rockets and related equipment since the 1950s. Although the chemicals identified as contaminants on the leased land were not used by Aerojet Fine Chemicals LLC as part of its operations, CERCLA, among other things, provides for joint and severable liability for environmental liabilities including, for example, environmental remediation expenses.

As part of the agreement by which we acquired the business of AFC 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 AFC premises or Aerojet’s Sacramento site prior to the effective date of the sale.

On November 29, 2005, EPA Region IX provided us with a letter indicating that the EPA does not intend to pursue any clean up or enforcement actions under CERCLA against future lessees of the Aerojet property for existing contamination, provided that the lessees do not contribute to or do not exacerbate existing contamination on or under the Aerojet Superfund site.

Other Matters.Although we are not currently party to any material pending legal proceedings, we are from time to time subject to claims and lawsuits related to our business operations. We accrue for loss contingencies when a loss is probable and the amount can be reasonably estimated. Legal fees, which can be material in any given period, are expensed as incurred. We believe that current claims or lawsuits against us, individually and in the aggregate, will not result in loss contingencies that will have a material adverse effect on our financial condition, cash flows or results of operations.

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9.	SEGMENT INFORMATION
	We report our business in four operating segments: Fine Chemicals, Specialty Chemicals, Aerospace Equipment 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 subsidiary Ampac Fine Chemicals LLC or AFC. AFC is a custom manufacturer of active pharmaceutical ingredients and registered intermediates under current Good Manufacturing Practices (“cGMP”) guidelines for commercial customers in the pharmaceutical industry. AFC has distinctive competencies and specialized engineering capabilities in performing chiral separations, manufacturing highly potent (including cytotoxic) products, and performing energetic and nucleoside/nucleotide chemistries at a commercial scale.
	Specialty Chemicals.Our Specialty Chemicals segment manufactures and sells: (i) perchlorate chemicals, used principally in solid rocket propellants for the Space Shuttle and defense programs, (ii) sodium azide, a chemical used in pharmaceutical manufacturing, and (iii) Halotronâ, a series of clean fire extinguishing agents used in fire extinguishing products ranging from portable fire extinguishers to total flooding systems.
	Aerospace Equipment. Our Aerospace Equipment segment includes the operating results of our wholly-owned subsidiary Ampac-ISP Corp. (“ISP”). ISP manufactures monopropellant and bipropellant liquid propulsion systems and thrusters for satellites, launch vehicles, and interceptors.
	Effective October 1, 2008, we completed the acquisition of AMPAC ISP Holdings. AMPAC ISP Holdings is included in our consolidated financial statements beginning on October 1, 2008 and is a component of our Aerospace Equipment segment. AMPAC ISP Holdings designs, develops and manufactures high performance valves, pressure regulators, cold-gas propulsion systems, and precision structures for space applications, especially in the European space market. These products are used on various satellites and spacecraft, as well as on the Ariane 5 launch vehicle. See Note 2.
	Other Businesses.Our Other Businesses segment contains our water treatment equipment and real estate activities. Our water treatment equipment business designs, manufactures and markets systems for the control of noxious odors, the disinfection of water streams and the treatment of seawater. Our real estate activities are not material.
	Our revenues are characterized by individually significant orders and a relatively few customers. As a result, in any given reporting period, certain customers may account for more than ten percent of our consolidated revenues.

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9.	SEGMENT INFORMATION (continued)
	The following table provides disclosure of the percentage of our consolidated revenues attributed to customers that exceed ten percent of the total in each of the given periods.

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Fine chemicals customer		38	%					26	%		14	%
Fine chemicals customer					33	%		10	%		25	%
Fine chemicals customer					13	%					12	%
Specialty chemicals customer					23	%		17	%		20	%
Specialty chemicals customer		11	%
The following provides financial information about our segment operations:
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Revenues:
Fine Chemicals	$	15,644		$	19,654		$	67,766		$	76,920
Specialty Chemicals		6,299			11,942			40,940			40,278
Aerospace Equipment		9,085			3,380			21,977			11,350
Other Businesses		462			1,764			2,871			3,429
Total Revenues	$	31,490		$	36,740		$	133,554		$	131,977
Segment Operating Income (Loss):
Fine Chemicals	$	(752	)	$	621		$	(370	)	$	9,426
Specialty Chemicals		552			5,998			16,481			16,768
Aerospace Equipment		417			(330	)		1,571			248
Other Businesses		(215	)		341			164			340
Total Segment Operating Income		2			6,630			17,846			26,782
Corporate Expenses		(3,654	)		(4,257	)		(11,847	)		(11,817	)
Operating Income (Loss)	$	(3,652	)	$	2,373		$	5,999		$	14,965
Depreciation and Amortization:
Fine Chemicals	$	3,281		$	3,115		$	9,625		$	9,505
Specialty Chemicals		324			302			951			2,392
Aerospace Equipment		378			60			1,032			156
Other Businesses		3			3			9			9
Corporate		115			155			354			410
Total Depreciation and Amortization	$	4,101		$	3,635		$	11,971		$	12,472

10.

INCOME TAXES

FIN 48.We account for uncertain tax positions in accordance with FASB Interpretation No. FIN 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). Accordingly, we review our portfolio of uncertain tax positions and recorded liabilities based on the recognition standards established by FIN 48. 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.

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10.	INCOME TAXES (continued)
	As of June 30, 2009 and September 30, 2008, our recorded liability for unrecognized tax benefits was $347, of which $294 would impact our effective tax rate if we were to sustain the positions as filed, and $313, respectively. We expect that it is reasonably possible that our liability for unrecognized tax benefits will be reduced by $62 during the next twelve months due to the expiration of certain statutes of limitations.
	We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2009 and September 30, 2008, we had accrued $111 and $225, respectively, for the payment of tax-related interest and penalties. For the nine months ended June 30, 2009 and 2008, income tax expense includes a benefit of $1 and expense of $8 for interest and penalties.
	We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, Ireland and the U.K. With few exceptions, we are no longer subject to federal or state income tax examinations for years before 2006.

11.	DEFINED BENEFIT PLANS
	We maintain three defined benefit pension plans which cover substantially all of our U.S. employees, excluding employees of our Aerospace Equipment segment: 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 and restated, (collectively, the “Pension Plans”). In addition, we maintain the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and restated, (the “SERP”) which includes certain of our existing and prior executive officers.
	We maintain two 401(k) plans in which participating employees may make contributions. One covers substantially all U.S. employees except AFC bargaining unit employees and the other covers AFC bargaining unit employees. We make matching contributions for AFC and Aerospace Equipment U.S. employees. In addition, we make a profit sharing contribution for Aerospace Equipment U.S. employees.
	We provide healthcare and life insurance benefits to substantially all of our employees.
	Net periodic pension cost related to the Pension Plans consists of the following:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Pension Plans:
Service Cost	$	524		$	520		$	1,538		$	1,534
Interest Cost		832			758			2,172			1,884
Expected Return on Plan Assets		(448	)		(808	)		(1,650	)		(1,850	)
Recognized Actuarial Losses		169			(6	)		387			208
Amortization of Prior Service Costs		19			28			57			56
Net Periodic Pension Cost	$	1,096		$	492		$	2,504		$	1,832
Supplemental Executive Retirement Plan:
Service Cost	$	67		$	88		$	262		$	264
Interest Cost		73			87			277			264
Expected Return on Plan Assets		-			-			-			-
Recognized Actuarial Losses		-			-			-			-
Amortization of Prior Service Costs		116			108			326			323
Net Periodic Pension Cost	$	256		$	283		$	865		$	851

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11.	DEFINED BENEFIT PLANS (continued)
	For the nine months ended June 30, 2009, we contributed $2,415 to the Pension Plans to fund benefit payments and anticipate making approximately $527 in additional contributions through September 30, 2009. For the nine months ended June 30, 2009, we contributed $95 to the SERP to fund benefit payments and anticipate making approximately $32 in additional contributions through September 30, 2009.

12.

GUARANTOR SUBSIDIARIES

As discussed in Note 7, in February 2007, American Pacific Corporation, a Delaware corporation (“Parent”) issued and sold $110,000 aggregate principal amount of Senior Notes. In connection with the issuance of the Senior Notes, the Parent’s U.S. subsidiaries (“Guarantor Subsidiaries”) jointly, fully, severally, and unconditionally guaranteed the Senior Notes. The Parent’s foreign subsidiaries (“Non-Guarantor Subsidiaries”) are not guarantors of the Senior Notes. Each of the Parent’s subsidiaries is 100% owned. The Parent has no independent assets or operations. The following presents condensed consolidating financial information separately for the Parent, Guarantor Subsidiaries and Non-Guarantor Subsidiaries.

Condensed Consolidating Balance Sheet - June 30, 2009

			Guarantor		Non-Guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
Assets:
Cash and Cash Equivalents	$	-	$	22,994	$	1,974	$	-		$	24,968
Accounts Receivable, Net		-		25,530		2,111		(146	)		27,495
Inventories		-		42,326		1,916		-			44,242
Prepaid Expenses and Other Assets		-		1,468		171		-			1,639
Deferred Income Taxes		-		8,664		-		-			8,664
Total Current Assets		-		100,982		6,172		(146	)		107,008
Property, Plant and Equipment, Net		-		113,862		1,380		-			115,242
Intangible Assets, Net		-		2,084		2,022		-			4,106
Goodwill		-		-		3,152		-			3,152
Deferred Income Taxes		-		14,026		-		-			14,026
Other Assets		-		10,292		-		-			10,292
Intercompany Advances		79,918		3,316		-		(83,234	)		-
Investment in Subsidiaries, Net		112,053		5,262		-		(117,315	)		-
Total Assets	$	191,971	$	249,824	$	12,726	$	(200,695	)	$	253,826
Liabilities and Stockholders’ Equity:
Accounts Payable and Other Current Liabilities	$	-	$	21,344	$	1,625	$	(146	)	$	22,823
Environmental Remediation Reserves		-		1,412		-		-			1,412
Deferred Revenues and Customer Deposits		-		6,218		2,065		-			8,283
Current Portion of Long-Term Debt		-		162		51		-			213
Intercompany Advances		-		79,918		3,316		(83,234	)		-
Total Current Liabilities		-		109,054		7,057		(83,380	)		32,731
Long-Term Debt		110,000		-		105		-			110,105
Environmental Remediation Reserves		-		11,879		-		-			11,879
Pension Obligations and Other Long-Term Liabilities		-		16,838		302		-			17,140
Total Liabilities		110,000		137,771		7,464		(83,380	)		171,855
Total Shareholders’ Equity		81,971		112,053		5,262		(117,315	)		81,971
Total Liabilities and Shareholders’ Equity	$	191,971	$	249,824	$	12,726	$	(200,695	)	$	253,826

- 21 -

12. GUARANTOR SUBSIDIARIES (continued)

Condensed Consolidating Statement of Operations - Three Months Ended June 30, 2009

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	-		$	29,485		$	2,054		$	(49	)	$	31,490
Cost of Revenues		-			22,686			1,590			(49	)		24,227
Gross Profit		-			6,799			464			-			7,263
Operating Expenses		-			10,019			896			-			10,915
Operating Loss		-			(3,220	)		(432	)		-			(3,652	)
Interest and Other Income		2,666			30			5			(2,673	)		28
Interest Expense		2,666			2,682			8			(2,673	)		2,683
Loss before Income Tax and Equity Account for Subsidiaries		-			(5,872	)		(435	)		-			(6,307	)
Income Tax Benefit		-			(2,752	)		-			-			(2,752	)
Loss before Equity Account for Subsidiaries		-			(3,120	)		(435	)		-			(3,555	)
Equity Account for Subsidiaries		(3,555	)		(435	)		-			3,990			-
Net Loss	$	(3,555	)	$	(3,555	)	$	(435	)	$	3,990		$	(3,555	)

Condensed Consolidating Statement of Operations - Nine Months Ended June 30, 2009

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	-		$	128,098		$	5,622		$	(166	)	$	133,554
Cost of Revenues		-			90,431			3,995			(166	)		94,260
Gross Profit		-			37,667			1,627			-			39,294
Operating Expenses		-			31,213			2,082			-			33,295
Operating Income (Loss)		-			6,454			(455	)		-			5,999
Interest and Other Income (Expense)		7,999			152			(65	)		(8,016	)		70
Interest Expense		7,999			8,052			26			(8,016	)		8,061
Loss before Income Tax and Equity Account for Subsidiaries		-			(1,446	)		(546	)		-			(1,992	)
Income Tax Benefit		-			(627	)		-			-			(627	)
Loss before Equity Account for Subsidiaries		-			(819	)		(546	)		-			(1,365	)
Equity Account for Subsidiaries		(1,365	)		(546	)		-			1,911			-
Net Loss	$	(1,365	)	$	(1,365	)	$	(546	)	$	1,911		$	(1,365	)

Condensed Consolidating Statement of Cash Flows - Nine Months Ended June 30, 2009

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net Cash Provided by Operating Activities	$	-		$	10,055		$	1,297		$	-	$	11,352
Cash Flows from Investing Activities:
Capital expenditures		-			(5,810	)		(502	)		-		(6,312	)
Acquisition on business, net of cash acquired		-			(7,195	)		470			-		(6,725	)
Net Cash Used by Investing Activities		-			(13,005	)		(32	)		-		(13,037	)
Cash Flows from Financing Activities:
Payments of long-term debt		-			(211	)		(61	)		-		(272	)
Issuance of common stock		32			-			-			-		32
Excess tax benefit from exercise of stock options		-			-			-			-		-
Intercompany advances, net		(32	)		(509	)		541			-		-
Net Cash Provided (Used) by Financing Activities		-			(720	)		480			-		(240	)
Net Change in Cash and Cash Equivalents		-			(3,670	)		1,745			-		(1,925	)
Cash and Cash Equivalents, Beginning of Period		-			26,664			229			-		26,893
Cash and Cash Equivalents, End of Period	$	-		$	22,994		$	1,974		$	-	$	24,968

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12. GUARANTOR SUBSIDIARIES (continued)

Condensed Consolidating Balance Sheet - September 30, 2008

			Guarantor			Non-Guarantor
	Parent		Subsidiaries			Subsidiary			Eliminations			Consolidated
Assets:
Cash and Cash Equivalents	$	-	$	26,664		$	229		$	-		$	26,893
Accounts Receivable, Net		-		27,083			649			(287	)		27,445
Inventories		-		39,669			688			-			40,357
Prepaid Expenses and Other Assets		-		5,085			111			-			5,196
Deferred Income Taxes		-		6,859			-			-			6,859
Total Current Assets		-		105,360			1,677			(287	)		106,750
Property, Plant and Equipment, Net		-		118,437			171			-			118,608
Intangible Assets, Net		-		3,013			-			-			3,013
Deferred Income Taxes		-		13,849			-			-			13,849
Other Assets		-		9,193			-			-			9,193
Intercompany Advances		79,886		2,664			-			(82,550	)		-
Investment in Subsidiaries, Net		113,076		(1,143	)		-			(111,933	)		-
Total Assets	$	192,962	$	251,373		$	1,848		$	(194,770	)	$	251,413
Liabilities and Shareholders’ Equity:
Accounts Payable and Other Current Liabilities	$	-	$	24,718		$	327		$	(287	)	$	24,758
Environmental Remediation Reserves		-		996			-			-			996
Deferred Revenues and Customer Deposits		-		3,091			-			-			3,091
Current Portion of Long-Term Debt		-		254			-			-			254
Intercompany Advances		-		79,886			2,664			(82,550	)		-
Total Current Liabilities		-		108,945			2,991			(82,837	)		29,099
Long-Term Debt		110,000		120			-			-			110,120
Environmental Remediation Reserves		-		13,282			-			-			13,282
Pension Obligations and Other Long-Term Liabilities		-		15,950			-			-			15,950
Total Liabilities		110,000		138,297			2,991			(82,837	)		168,451
Total Shareholders’ Equity		82,962		113,076			(1,143	)		(111,933	)		82,962
Total Liabilities and Shareholders’ Equity	$	192,962	$	251,373		$	1,848		$	(194,770	)	$	251,413

Condensed Consolidating Statement of Operations - Three Months Ended June 30, 2008

			Guarantor			Non-Guarantor
	Parent		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	-	$	35,845		$	895					$	36,740
Cost of Revenues		-		23,122			868						23,990
Gross Profit		-		12,723			27			-			12,750
Operating Expenses		-		10,257			120			-			10,377
Operating Income (Loss)		-		2,466			(93	)		-			2,373
Interest and Other Income		2,658		575			-			(2,658	)		575
Interest Expense		2,658		2,682			-			(2,658	)		2,682
Income (Loss) before Income Tax and Equity Account for Subsidiaries		-		359			(93	)		-			266
Income Tax Expense		-		138			-			-			138
Income (Loss) before Equity Account for Subsidiaries		-		221			(93	)		-			128
Equity Account for Subsidiaries		128		(93	)		-			(35	)		-
Net Income (Loss)	$	128	$	128		$	(93	)	$	(35	)	$	128

- 23 -

12. GUARANTOR SUBSIDIARIES (continued)

Condensed Consolidating Statement of Operations - Nine Months Ended June 30, 2008

			Guarantor			Non-Guarantor
	Parent		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	-	$	129,978		$	2,010		$	(11	)	$	131,977
Cost of Revenues		-		83,242			1,957			(11	)		85,188
Gross Profit		-		46,736			53			-			46,789
Operating Expenses		-		31,390			434			-			31,824
Operating Income (Loss)		-		15,346			(381	)		-			14,965
Interest and Other Income		7,990		1,221			-			(7,990	)		1,221
Interest Expense		7,990		8,073			-			(7,990	)		8,073
Income (Loss) before Income Tax and Equity Account for Subsidiaries		-		8,494			(381	)		-			8,113
Income Tax Expense		-		3,489			-			-			3,489
Income (Loss) before Equity Account for Subsidiaries		-		5,005			(381	)		-			4,624
Equity Account for Subsidiaries		4,624		(381	)		-			(4,243	)		-
Net Income (Loss)	$	4,624	$	4,624		$	(381	)	$	(4,243	)	$	4,624

Condensed Consolidating Statement of Cash Flows - Nine Months Ended June 30, 2008

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net Cash Provided (Used) by Operating Activities	$	-		$	21,357		$	(216	)	$	-	$	21,141
Cash Flows from Investing Activities:
Capital expenditures		-			(10,010	)		(17	)		-		(10,027	)
Net Cash Used in Investing Activities		-			(10,010	)		(17	)		-		(10,027	)
Cash Flows from Financing Activities:
Payments of long-term debt		-			(208	)		-			-		(208	)
Issuance of common stock		387			-			-			-		387
Excess tax benefit from exercise of stock options		244			-			-			-		244
Purchases of treasury stock		(193	)		-			-			-		(193	)
Intercompany advances, net		(438	)		208			230			-		-
Net Cash Provided by Financing Activities		-			-			230			-		230
Net Change in Cash and Cash Equivalents		-			11,347			(3	)		-		11,344
Cash and Cash Equivalents, Beginning of Period		-			21,352			74			-		21,426
Cash and Cash Equivalents, End of Period	$	-		$	32,699		$	71		$	-	$	32,770

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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 our working capital may vary in the future, our potential incurrence of additional debt in the future, our belief that our cash flows will be adequate for the foreseeable future to satisfy the needs of our operations, our expectations regarding anticipated contributions to our defined benefit pension plans and supplemental executive retirement plan, our expectation regarding anticipated cash expenditures for environmental remediation at our former Henderson, Nevada site, our statement regarding anticipated spending for capital expenditures, our expectations regarding future compliance with material debt covenants, statements regarding our beliefs about future demand for, and related volume of and revenue from sales of, Grade I ammonium perchlorate and other forms of ammonium perchlorate, our statement regarding one of the significant factors that will affect our consolidated gross margins in the future, our expectations regarding revenues from our Fine Chemicals, Specialty Chemicals and Aerospace Equipment segments, and related discussions of anticipated business conditions, for the remainder of the current fiscal year and the following fiscal year, our expectations regarding anticipated federal income tax payments and related cash tax requirements, our expectations regarding fulfillment of existing backlog within the next twelve months, 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,” “should,” “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 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 these and other 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,” “AMPAC,” “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. 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 third fiscal quarter and nine-month period of the year ending September 30, 2009 (“fiscal 2009”) as compared to the third fiscal quarter and nine-month period of the year ended September 30, 2008 (“fiscal 2008”). The discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended September 30, 2008 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 the year ended September 30, 2008.

OUR COMPANY

We are a leading manufacturer of fine and specialty chemicals within our focused markets. Our fine chemicals products are used by our customers to make drugs, primarily those with anti-viral, oncology and central nervous system indications. Our specialty chemicals and aerospace equipment products are utilized in national defense programs and provide access to, and movement in, space, via solid and liquid propellant rockets and propulsion thrusters. 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

- 25 -

relationships. We work collaboratively with our customers to develop customized solutions that meet rigorous federal and other international regulatory standards. We generally sell our products through long-term contracts under which we are the sole-source or limited-source supplier.

OUR BUSINESS SEGMENTS

Our operations comprise four reportable business segments: (i) Fine Chemicals, (ii) Specialty Chemicals, (iii) Aerospace Equipment and (iv) Other Businesses. The following table reflects the revenue contribution percentage from our business segments and each of their major product lines:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Fine Chemicals		50	%		53	%		51	%		58	%
Specialty Chemicals:
Perchlorates		14	%		29	%		28	%		28	%
Sodium Azide		3	%		0	%*		1	%		0	%*
Halotron		3	%		4	%		2	%		3	%
Total Specialty Chemicals		20	%		33	%		31	%		31	%
Aerospace Equipment		29	%		9	%		16	%		9	%
Other Businesses:
Real Estate		0	%*		0	%*		0	%*		0	%*
Water Treatment Equipment		1	%		5	%		2	%		2	%
Total Other Businesses		1	%		5	%		2	%		2	%
Total Revenues		100	%		100	%		100	%		100	%

* less than 1%

FINE CHEMICALS.Our Fine Chemicals segment, acquired on November 30, 2005, reflects the operating results of our wholly-owned subsidiary Ampac Fine Chemicals LLC (“AFC”). AFC is a custom manufacturer of active pharmaceutical ingredients (“APIs”) and registered intermediates. The pharmaceutical ingredients that we manufacture are used by our customers in drugs with applications in three primary areas: anti-viral, oncology, and central nervous system. We generate nearly all of our Fine Chemicals sales from manufacturing chemical compounds that are proprietary to our customers. We operate in compliance with the U.S. Food and Drug Administration’s (the “FDA”) current Good Manufacturing Practices or “cGMP” and other regulatory agencies such as the European Union’s European Medicines Agency (“EMEA”). 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 high potency products (including cytotoxic products), and performing energetic and nucleoside/nucleotide chemistries at commercial scale. We have invested significant resources in our facilities and technology base. We believe we are the U.S. leader in performing chiral separations using commercial-scale simulated moving bed (“SMB”) technology and own and operate two large-scale SMB machines, both of which are among the largest in the world operating under cGMP. We have distinctive competency in handling highly toxic chemicals using our specialized high containment facilities in applications such as drugs used for oncology. We have significant experience and specially engineered facilities for energetic chemistry on a commercial-scale under cGMP. We use this capability in development and production of products such as those used in anti-viral drugs, including HIV-related and influenza-combating drugs.

We have established long-term, sole-source and limited-source contracts, which help provide us with earnings stability and visibility. In addition, the inherent nature of custom pharmaceutical fine chemicals manufacturing encourages stable, long-term customer relationships. We work collaboratively with our

- 26 -

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 method to an alternative supplier, including the following:

• Alternative Supply May Not Be Readily Available.We are currently the sole-source supplier on several of our fine chemicals products.

• Regulatory Approval.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 approval and could take as long as six months to two years.

• Significant Financial Costs. Switching contractors and amending various filings can result in significant costs associated with technology transfer, process validation and re-filing with the FDA and other regulatory authorities.

SPECIALTY CHEMICALS.Our Specialty Chemicals segment is principally engaged in the production of perchlorates, including ammonium perchlorate (“AP”). We are the only North American producer of 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. In addition, we produce and sell sodium azide, a chemical 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.

We have supplied AP for use in space and defense programs for over 50 years and we have been the only AP supplier in North America since 1998. A significant number of existing and planned space launch vehicles use solid propellant and thus depend, in part, upon our AP. Many of the rockets and missiles used in national defense programs are also powered by solid propellants.

Alliant Techsystems Inc. or “ATK” is our largest AP customer. We sell Grade I AP to ATK under a long-term contract that requires us to maintain a ready and qualified capacity for Grade I AP and that requires ATK to purchase its Grade I AP requirements from us, subject to certain terms and conditions. The contract, which expires in 2013, provides fixed pricing in the form of a price volume matrix for annual Grade I AP volumes ranging from 3 million to 20 million pounds. Pricing varies inversely to volume and includes annual escalations.

AEROSPACE EQUIPMENT.Our Aerospace Equipment segment reflects the operating results of our wholly-owned subsidiary Ampac-ISP Corp. (“ISP”) and its wholly-owned subsidiaries, which include the recently acquired AMPAC ISP Holdings beginning on October 1, 2008. Our Aerospace Equipment segment is one of two major North American manufacturers of monopropellant and bipropellant liquid propulsion systems and thrusters for satellites, launch vehicles, and interceptors. Our products are utilized on various satellite and launch vehicle programs such as Space Systems/Loral’s 1300 series geostationary satellites.

Effective October 1, 2008, our Aerospace Equipment segment completed the acquisition of Marotta Holdings Limited (subsequently renamed Ampac ISP Holdings Limited) and its wholly-owned subsidiaries (collectively “AMPAC ISP Holdings”) for a cash purchase price, including direct expenses and net of cash acquired, of $6,725. AMPAC ISP Holdings is included in our consolidated financial statements beginning on October 1, 2008. We are accounting for this acquisition using the purchase method of accounting. The allocation of the purchase price among the fair values of assets acquired and liabilities assumed is preliminary as of June 30, 2009.

AMPAC ISP Holdings designs, develops and manufactures high performance valves, pressure regulators, cold-gas propulsion systems, and precision structures for space applications, especially in the European space market. These products are used on various satellites and spacecraft, as well as on the Ariane 5 launch vehicle. Combined with our existing ISP operations in Westcott, U.K, these operations constitute AMPAC ISP Europe.

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OTHER BUSINESSES.Our Other Businesses segment contains our water treatment equipment and real estate activities. Our water treatment equipment business designs, manufactures and markets systems for the control of noxious odors, the disinfection of water streams and the treatment of seawater. Our real estate activities are not material.

RESULTS OF OPERATIONS

REVENUES

	June 30,				Increase			Percentage
	2009		2008		(Decrease)			Change
Three Months Ended:
Fine Chemicals	$	15,644	$	19,654	$	(4,010	)		(20	%)
Specialty Chemicals		6,299		11,942		(5,643	)		(47	%)
Aerospace Equipment		9,085		3,380		5,705			169	%
Other Businesses		462		1,764		(1,302	)		(74	%)
Total Revenues	$	31,490	$	36,740	$	(5,250	)		(14	%)
Nine Months Ended:
Fine Chemicals	$	67,766	$	76,920	$	(9,154	)		(12	%)
Specialty Chemicals		40,940		40,278		662			2	%
Aerospace Equipment		21,977		11,350		10,627			94	%
Other Businesses		2,871		3,429		(558	)		(16	%)
Total Revenues	$	133,554	$	131,977	$	1,577			1	%

Fine Chemicals. The decrease in Fine Chemicals segment revenues for the fiscal 2009 third quarter compared to the prior fiscal year third quarter is primarily due to a decrease in revenues from central nervous system products. The decrease results from a customer reducing its order for the product until calendar year 2010.

For the nine months ended June 30, 2009, the decrease in Fine Chemicals segment revenues, compared to the prior fiscal year nine-month period, primarily reflects a decline in revenues from oncology products of 22% due to timing between the interim periods, and a decline in revenues from central nervous system products of 41% related to the aforementioned production delay.

Fine Chemicals segment revenues are anticipated to decline by approximately 25% in fiscal 2009 as compared to fiscal 2008. In addition, because our customer orders are typically based on calendar year requirements, we anticipate that these AFC business conditions will continue into the first quarter of fiscal 2010.

Specialty Chemicals.Our Specialty Chemicals segment revenues include the operating results from our perchlorate, sodium azide and Halotron product lines, with perchlorates comprising 89% and 91% of Specialty Chemicals revenues in the fiscal 2009 and fiscal 2008 nine-month periods, respectively.

The variances in Specialty Chemicals revenues for the three and nine-month periods ended June 30, 2009 as compared to the prior fiscal year three and nine-month periods reflect the following factors:

• A 75% decrease in perchlorate volume and a 70% increase in the related average price per pound for the fiscal 2009 third quarter.

• A 25% decrease in perchlorate volume and a 32% increase in the related average price per pound for the nine months ended June 30, 2009.

• Sodium azide revenues increased $1,287 for the nine-month period ended June 30, 2009.

• Halotron revenues decreased $529 for the nine-month period ended June 30, 2009.

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The decreases in perchlorate volume for the fiscal 2009 third quarter and nine-month period reflect the timing of Grade I AP orders among the fiscal 2009 quarterly periods. The average price per pound increased for the fiscal 2009 third quarter and nine-month period because we sold more specialized blend product than in the comparable prior fiscal year periods.

For the fiscal 2009 nine-month period, the greatest contribution to segment revenue was product for the Space Shuttle Reusable Solid Rocket Motor (“RSRM”) program. We currently expect annual demand for Grade I AP in fiscal 2009 to be consistent with fiscal 2008, and as a result, our fiscal 2009 fourth quarter is anticipated to reflect a significant volume and revenue increase over our fiscal 2009 third quarter. Increases in demand in fiscal 2009 for the Space Shuttle RSRM program, the Atlas V Solid Rocket Booster (“SRB”) program and the Guided Multiple Launch Rocket System (“MLRS”) program should offset declines from the completion in fiscal 2008 of the three-year Minuteman III propulsion replacement program.

Specialty Chemicals segment revenues are expected to be consistent to up 5% in fiscal 2009 as compared to fiscal 2008. Over the longer term, we expect annual demand for Grade I AP to average within the range of 6 million to 9 million pounds based on current NASA and U.S. Department of Defense production programs. Grade I AP demand could vary outside this range for a twelve-month period depending on the scope and timing of the Space Shuttle and/or Ares programs.

Aerospace Equipment.Our Aerospace Equipment segment reflects the operating results of our wholly-owned subsidiary Ampac-ISP Corp. and its wholly-owned subsidiaries, which include the recently acquired AMPAC ISP Holdings beginning on October 1, 2008.

For the nine months ended June 30, 2009, Aerospace Equipment segment revenues increased $10,627 due to both organic growth and the AMPAC ISP Holdings acquisition. AMPAC ISP Holdings contributed $4,013 in revenues. The remainder of the revenue increase is primarily attributed to this segment’s U.S. operations which experienced success in the latter part of fiscal 2008 with new contract awards. This improvement in backlog resulted in revenue increases in the fiscal 2009 periods.

Aerospace Equipment segment revenues are expected to increase substantially in fiscal 2009 as compared to fiscal 2008, reflecting at least 40% organic revenue growth and revenue contributions from our fiscal 2009 acquisition of AMPAC ISP Holdings.

COST OF REVENUES AND GROSS MARGIN

	June 30,				Increase			Percentage
	2009		2008		(Decrease)			Change
Three Months Ended:
Revenues	$	31,490	$	36,740	$	(5,250	)		(14	%)
Cost of Revenues		24,227		23,990		237			1	%
Gross Margin		7,263		12,750		(5,487	)		(43	%)
Gross Margin Percentage		23%		35%
Nine Months Ended:
Revenues	$	133,554	$	131,977	$	1,577			1	%
Cost of Revenues		94,260		85,188		9,072			11	%
Gross Margin		39,294		46,789		(7,495	)		(16	%)
Gross Margin Percentage		29%		35%

For our fiscal 2009 third quarter, cost of revenues was $24,227 compared to $23,990 for the prior fiscal year third quarter. The consolidated gross margin percentage was 23% and 35% for our fiscal 2009 and fiscal 2008 third quarters, respectively. For the nine months ended June 30, 2009, cost of revenues was $94,260 compared to $85,188 for the prior fiscal year nine-month period. The consolidated gross margin percentage was 29% and 35% for our fiscal 2009 and fiscal 2008 nine-month periods, respectively.

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One of the most significant factors that affects, and should continue to affect, the comparison of our consolidated gross margins from period to period is the change in revenue mix between our segments. The revenue contribution by each of our segments is indicated in the table above under the heading “Our Business Segments”.

In addition, consolidated gross margins for our fiscal 2009 periods reflect:

Fine Chemicals.

• A decrease in the gross margin percentage of approximately six points for the fiscal 2009 third quarter due to lower production volume and the related impact on gross margin due to less absorption of fixed manufacturing costs.

• A decrease in gross margin percentage of approximately thirteen points for the nine months ended June 30, 2009. In addition to the factor that contributed to the gross margin decline in the fiscal 2009 third quarter, the fiscal 2009 year-to-date decline in gross margin percentage includes:

• During the fourth quarter of fiscal 2008, we implemented a new process for a large-volume anti-viral product and experienced start-up difficulties that negatively impacted margins for this product for the first half of fiscal 2009. These factors, combined with price reductions, account for approximately eight points in the gross margin decline for the fiscal 2009 nine-month period.

• A decrease in revenues for central nervous system products, including a price reduction for a large-volume product, account for approximately two points in the gross margin decline.

• The remaining decline is attributed primarily to product mix.

Specialty Chemicals.

• For the fiscal 2009 third quarter, perchlorates comprised 72% of Specialty Chemicals segment revenues compared to 89% in the prior year third quarter. The change in product mix to lower-margined azide and Halotron products was the primary contributor to a twenty-two point reduction in Specialty Chemicals segment gross margins.

• Gross margin as a percentage of revenues was consistent between the nine-month periods.

Aerospace Equipment.

For the fiscal 2009 third quarter, Aerospace Equipment segment gross margins improved 5 points, primarily due to improvement at our U.K. facility.

Aerospace Equipment segment gross margin as a percentage of revenue was consistent between the fiscal 2009 and 2008 nine-month periods.

OPERATING EXPENSES

	June 30,				Increase		Percentage
	2009		2008		(Decrease)		Change
Three Months Ended:
Operating Expenses	$	10,915	$	10,377	$	538		5	%
Percentage of Revenues		35%		28%
Nine Months Ended:
Operating Expenses	$	33,295	$	31,824	$	1,471		5	%
Percentage of Revenues		25%		24%

For our fiscal 2009 third quarter, operating expenses increased $538 to $10,915 from $10,377 in the third quarter of the prior fiscal year primarily as a result of:

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• A $415 decrease in Fine Chemicals segment incentive compensation, as a result of recording no incentive compensation in fiscal 2009.

• An increase in Aerospace Equipment segment operating expenses primarily due to additional operating expenses in the amount of $736 from the acquisition of AMPAC ISP Holdings.

• A decrease in corporate expenses, primarily due to a decrease of $321 in incentive compensation, as a result of recording no incentive compensation in fiscal 2009.

• Other increases of $538.

For the nine months ended June 30, 2009, operating expenses increased $1,471 to $33,295 from $31,824 for the nine months ended June 30, 2008 as a result of:

• A $1,218 decrease in Fine Chemicals segment incentive compensation, as a result of recording no incentive compensation in fiscal 2009.

• A $783 increase in Specialty Chemicals operating expenses primarily due to increases in employee benefit costs.

• An increase in Aerospace Equipment segment operating expenses primarily due to additional operating expenses in the amount of $1,673 from the acquisition of AMPAC ISP Holdings.

• Consistent corporate expenses, primarily including increases in rent of $546, and increases in stock-based compensation of $383, offset by a decrease of $1,034 in incentive compensation, as a result of recording no incentive compensation in fiscal 2009.

• Other increases of $338.

SEGMENT OPERATING INCOME (LOSS)

	June 30,						Increase			Percentage
	2009			2008			(Decrease)			Change
Three Months Ended:
Fine Chemicals	$	(752	)	$	621		$	(1,373	)		NM
Specialty Chemicals		552			5,998			(5,446	)		(91	%)
Aerospace Equipment		417			(330	)		747			NM
Other Businesses		(215	)		341			(556	)		NM
Segment Operating Income		2			6,630			(6,628	)		(100	%)
Corporate Expenses		(3,654	)		(4,257	)		603			14	%
Operating Income (Loss)	$	(3,652	)	$	2,373		$	(6,025	)		NM
Nine Months Ended:
Fine Chemicals	$	(370	)	$	9,426		$	(9,796	)		NM
Specialty Chemicals		16,481			16,768			(287	)		(2	%)
Aerospace Equipment		1,571			248			1,323			533%
Other Businesses		164			340			(176	)		(52	%)
Segment Operating Income		17,846			26,782			(8,936	)		(33	%)
Corporate Expenses		(11,847	)		(11,817	)		(30	)		0	%
Operating Income	$	5,999		$	14,965		$	(8,966	)		(60	%)

NM = Not Meaningful.

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. Fluctuations in segment operating income or loss are driven by changes in segment revenues, gross margins and operating expenses, each of which is discussed in greater detail above.

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

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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 $28,200 and $35,000 as of June 30, 2009 and September 30, 2008, respectively. We anticipate order backlog as of June 30, 2009 to be substantially filled during the next twelve months.

Our Aerospace Equipment segment is a government contractor, and accordingly, total backlog includes both funded backlog (contracts, or portions of contracts, for which funding is contractually obligated by the customer) and unfunded backlog (contracts, or portions of contracts, for which funding is not currently contractually obligated by the customer).

We compute backlog as the total contract value less revenues that have been recognized under the percentage-of-completion method of accounting. Aerospace Equipment segment total backlog and funded backlog were $42,981 and $30,246, respectively, as of June 30, 2009 compared to total backlog and funded backlog of $25,506 and $13,877 as of September 30, 2008. We anticipate funded backlog as of June 30, 2009 to be substantially completed during the next twelve months.

The acquisition of AMPAC ISP Holdings contributed approximately $13,223 to total and funded backlog as of June 30, 2009.

Backlog is not a meaningful measure for our other business lines.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

	Nine Months Ended June 30,									Percentage
	2009			2008			Change			Change
Cash Provided (Used) By:
Operating activities	$	11,352		$	21,141		$	(9,789	)		(46	%)
Investing activities		(13,037	)		(10,027	)		(3,010	)		(30	%)
Financing activities		(240	)		230			(470	)		NM
Net change in cash for period	$	(1,925	)	$	11,344		$	(13,269	)		(117	%)

NM = Not Meaningful.

Operating Activities.Operating activities provided cash of $11,352 for the fiscal 2009 nine-month period compared to $21,141 for the prior fiscal year nine-month period, resulting in a decrease of $9,789 from the prior fiscal year nine-month period.

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

• A decrease in cash due to less profit from our operations of $10,234.

• An increase in cash used for working capital accounts of $5,951, excluding the effects of interest and income taxes.

• A decrease in cash taxes paid of $4,281.

• A decrease in cash paid for interest of $43.

• An increase in cash used for environmental remediation of $230.

• Other increases in cash provided by operating activities of $2,302.

The increase in cash used for working capital accounts is primarily due to an increase in working capital requirements to support the revenue growth of our Aerospace Equipment segment.

We consider these working capital changes to be routine and within the normal production cycle of our products. The production of certain fine chemical products and performance under certain aerospace

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equipment contracts require lengths of time that exceeds one quarter. Therefore, in any given quarter, accounts receivable, work-in-progress inventory or deferred revenues can increase or decrease significantly. We expect that our working capital may vary normally by as much as $10,000 from quarter to quarter.

For fiscal 2009, the Company does not anticipate paying federal income taxes based on the anticipated reduction in income and the affects of timing difference in expense deductions. As a result, cash tax requirements are significantly reduced in fiscal 2009 compared to fiscal 2008.

Other increases in cash provided by operating activities primarily reflect the timing of contributions to our defined benefit pension plans.

Investing Activities.

• Capital expenditures decreased $3,715 to $6,312 in the fiscal 2009 nine-month period as compared to $10,027 for the prior fiscal year nine-month period.

For fiscal 2009, we anticipate spending approximately $10,000 for capital expenditures, most of which is related to maintenance capital.

• Cash used for acquisition of business reflects the purchase of AMPAC ISP Holdings for $7,196, net of cash acquired of $471.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2009, we had cash of $24,968. Our primary source of working capital is cash flows from operations. In addition, we have available funds under our committed revolving credit line, which matures in February 2012. Our revolving line of credit had availability of $17,968 as of June 30, 2009. Availability is computed as the total commitment of $20,000 less outstanding borrowings and outstanding letters of credit, if any. We believe that changes in cash flow from operations during the fiscal 2009 nine-month period reflect short-term timing and as such 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.

In addition, 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. If such costs are material, to the extent not covered by insurance, they would 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; and

• cash requirements related to our debt agreements, pension plans and remediation activities.

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We do not currently anticipate that the factors noted above will have material affects 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 REVOLVING 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 (collectively, with the exchange notes issued in August 2007 as referenced below, the “Senior Notes”). Proceeds from the issuance of the Senior Notes were used to repay our former credit facilities. The Senior Notes accrue interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes are guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries. The Senior Notes are:

• ranked equally in right of payment with all of our existing and future senior indebtedness;

• ranked senior in right of payment to all of our existing and future senior subordinated and subordinated indebtedness;

• effectively junior to our existing and future secured debt to the extent of the value of the assets securing such debt; and

• structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the Senior Notes.

The Senior Notes may be redeemed by the Company, in whole or in part, under the following circumstances:

• at any time prior to February 1, 2011 at a price equal to 100% of the purchase amount of the Senior Notes plus an applicable premium as defined in the related indenture;

• at any time on or after February 1, 2011 at redemption prices beginning at 104.5% of the principal amount to be redeemed and reducing to 100% by February 1, 2013;

• until February 1, 2010, up to 35% of the principal amount of the Senior Notes at a redemption price of 109% of the principal amount thereof, plus accrued and unpaid interest thereon, with the proceeds of certain sales of our equity securities; and

• under certain changes of control, we must offer to purchase the Senior Notes at 101% of their aggregate principal amount, plus accrued interest.

The Senior Notes were issued pursuant to an indenture which contains certain customary events of default, including cross default provisions if we default under our existing and future debt agreements having, individually or in the aggregate, a principal or similar amount outstanding of at least $10,000, and certain other covenants limiting, subject to exceptions, carve-outs and qualifications, our ability to:

• incur additional debt;

• pay dividends or make other restricted payments;

• create liens on assets to secure debt;

• incur dividend or other payment restrictions with regard to restricted subsidiaries;

• transfer or sell assets;

• enter into transactions with affiliates;

• enter into sale and leaseback transactions;

• create an unrestricted subsidiary;

• enter into certain business activities; or

• effect a consolidation, merger or sale of all or substantially all of our assets.

In connection with the closing of the sale of the Senior Notes, we entered into a registration rights agreement which required us to file a registration statement to offer to exchange the Senior Notes for notes that have substantially identical terms as the Senior Notes and are registered under the Securities

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Act of 1933, as amended. In July 2007, we filed a registration statement with the SEC with respect to an offer to exchange the Senior Notes as required by the registration rights agreement, which was declared effective by the SEC. In August 2007, we completed the exchange of 100% of the Senior Notes for substantially identical notes which are registered under the Securities Act of 1933, as amended.

Revolving Credit Facility.In February 2007, we entered into an Amended and Restated Credit Agreement, as amended as of July 7, 2009, (the “Revolving Credit Facility”) with Wachovia Bank, National Association, and certain other lenders, which provides a secured revolving credit facility in an aggregate principal amount of up to $20,000 with an initial maturity of 5 years. We may prepay and terminate the Revolving Credit Facility at any time. The annual interest rates applicable to loans under the Revolving Credit Facility are, at our option, either the Alternate Base Rate or LIBOR Rate (each as defined in the Revolving Credit Facility) plus, in each case, an applicable margin. The applicable margin is tied to our total leverage ratio (as defined in the Revolving Credit Facility). In addition, we pay commitment fees, other fees related to the issuance and maintenance of letters of credit, and certain agency fees.

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

• incur debt, incur contingent obligations and issue certain types of preferred stock;

• create liens;

• pay dividends, distributions or make other specified restricted payments;

• make certain investments and acquisitions;

• enter into certain transactions with affiliates;

• enter into sale and leaseback transactions; and

• merge or consolidate with any other entity or sell, assign, transfer, lease, convey or otherwise dispose of assets.

Financial covenants under the Revolving Credit Facility include quarterly requirements for total leverage ratio of less than or equal to 5.25 to 1.00 (“Total Leverage Ratio”), and interest coverage ratio of at least 2.50 to 1.00 (“Interest Coverage Ratio”). The Revolving Credit Facility defines Total Leverage Ratio as the ratio of Consolidated Funded Debt to Consolidated EBITDA and Interest Coverage Ratio as the ratio of Consolidated EBITDA to Consolidated Interest Expense. With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the Revolving 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 Funded Debt generally includes principal amounts outstanding under our Senior Notes, Revolving Credit Facility, capital leases and notional amounts for outstanding letters of credit. Credit Facility EBITDA is generally computed as consolidated net income plus income tax expense, interest expense, depreciation and amortization, and stock-based compensation expense and less cash payments for environmental remediation and other non-recurring gains in excess of $50. In accordance with the definitions contained in the Revolving Credit Facility, as of June 30, 2009, our Total Leverage Ratio was 3.66 to 1.00 and our Interest Coverage Ratio was 3.04 to 1.00.

The Revolving Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods), including cross-default provisions that include our Senior Notes. If an event of default occurs and is continuing, we may be required to repay the obligations under the Revolving Credit Facility prior to its stated maturity and the related commitments may be terminated. We do not believe that it is reasonably likely, in the near or long-term, that we will be in violation of our debt covenants.

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As of June 30, 2009, under our Revolving Credit Facility, we had no borrowings outstanding and availability of $17,968. Availability is computed as the total commitment of $20,000 less outstanding borrowings and outstanding letters of credit, if any.

PENSION BENEFITS.We maintain three defined benefit pension plans which cover substantially all of our U.S. employees, excluding employees of our Aerospace Equipment segment: the Amended and Restated American Pacific Corporation Defined Benefit Pension Plan, the Ampac Fine Chemicals LLC Pension Plan for Salaried Employees (the “AFC Salaried Plan”), and the Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees (the “AFC Bargaining Plan”), each as amended and restated. Collectively, these three plans are referred to as the “Pension Plans”. The AFC Salaried Plan and the AFC Bargaining Plan were established in connection with our acquisition of the AFC business and include the assumed liabilities for pension benefits to existing employees at the acquisition date. 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, 2008, the Pension Plans had an unfunded benefit obligation of $9,840. For the years ended September 30, 2008 and 2007, we made contributions to the Pension Plans in the amounts of $3,011 and $2,705, respectively. We anticipate making minimum Pension Plan contributions in the amount of $2,942 during the year ending September 30, 2009. 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 September 30. 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, 2008 would increase our minimum funding obligations for the year ending September 30, 2009 by approximately $500.

In addition, we have the American Pacific Corporation Supplemental Executive Retirement Plan, as amended and restated, (the “SERP”) that, as of September 30, 2008, included four executive officers and one former executive officer. The SERP is an unfunded plan and as of September 30, 2008, the SERP obligation was $5,979. For the years ended September 30, 2008 and 2007, we paid retirement benefits of $126 in each year. We anticipate paying retirement benefits in the amount of $127 during the year ending September 30, 2009. Payments for retirement benefits should increase in future years when each of the four active participants retires. The future increase in 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 – AMPAC HENDERSON SITE.During our fiscal 2005 third quarter, we recorded a charge for $22,400 representing our estimate of the probable costs of our remediation efforts at our former perchlorate chemicals manufacturing facility in Henderson, Nevada (the ”AMPAC Henderson Site”), including the costs for capital equipment, operating and maintenance (“O&M”), and consultants. The project consists of two primary phases: the initial construction of the remediation equipment phase and the O&M phase. During fiscal 2006, we increased our total cost estimate of probable costs for the construction phase by $3,600 due primarily to changes in the engineering designs, delays in receiving permits and the resulting extension of construction time. In addition, certain remediation activities are conducted on public lands under operating permits. In general, these permits require us to return the land to its original condition at the end of the permit period. Estimated costs associated with removal of remediation equipment from the land are not material and are included in our range of estimated costs.

As part of our efforts to remediate groundwater near the AMPAC Henderson Site, we chose to use in situ bioremediation (“ISB”), which is a new technology on the scale that we have employed it. Accordingly, as we gain ISB operational experience, we have been and are observing certain conditions, operating

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results and other data which we consider in updating the assumptions used to determine our costs estimates. The two most significant assumptions are the estimated speed of groundwater flowing to our remediation extraction wells and the estimated annual O&M costs.

Groundwater speed is one key variable along with the required pore volumes of groundwater used to estimate the number of years that may be required to operate the facility. Groundwater speed is estimated by utilizing periodic data that measures, among other things, perchlorate concentrations upgradient from the treatment area, in addition to hydraulic conductivity and porosity. As time passes, and as we continue to add reference data and analysis, including computer modeling, our estimates of the total years of operation may change. Initially, data suggested that the total project life would extend for a period of 45 years. More recent data indicates that the total project life may be 23 years. We are unable to predict over the longer term the most probable life and accordingly have used an assumed range of 23 to 45 years of operation.

O&M costs include primarily labor, utilities, repairs, maintenance supplies and professional service costs. Since the inception of operations of the new ISB technology operations in fiscal 2007, we have not consistently achieved the targeted levels of groundwater remediation. We have experienced annualized O&M cost levels of approximately $1,000, which is higher than our initial estimates. This higher level of cost reflects costs to evaluate methods to optimize operating performance and maintenance of reinjection wells. In addition, we anticipate incurring O&M cost levels in fiscal 2009 of approximately $1,800 as we continue our evaluation of methods to achieve targeted remediation results. Those evaluations include assessment of competing non-ISB technologies that might be more efficient. Our range of estimated costs assumes that we will be successful in optimizing the remediation plant performance and that average annual O&M costs beyond 2012 and for the duration of the project will be approximately $380.

As of June 30, 2009, the aggregate range of anticipated environmental remediation costs was from approximately $12,700 to approximately $26,300, and the accrued amount was $13,291. These estimates are 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.

CONTRACTUAL OBLIGATIONS

Our contractual obligations are summarized in our Annual Report on Form 10-K for the year ended September 30, 2008. We have contractual obligations related to our Senior Notes, interest on Senior Notes, capital leases, interest on capital leases, and operating leases. As of June 30, 2009, there have been no material changes to our contractual obligations from September 30, 2008.

In addition, at June 30, 2009:

• We have recorded an estimated liability for environmental remediation of $13,291 (see Note 8 to the condensed consolidated financial statements included in Item 1 of this report). We expect to spend approximately $1,800 for environmental remediation during fiscal 2009.

• We have recorded aggregate Pension Plans and SERP obligations of $16,677 (see Note 11 to the condensed consolidated financial statements included in Item 1 of this report). We expect to contribute $3,069 to our Pension Plans and SERP during fiscal 2009.

• We have uncertain tax positions totaling $464. We are unable to reasonably estimate the timing of the related payments, if any.

• We also maintain the Revolving Credit Facility, which provides revolving credit in an aggregate principal amount of up to $20,000 with an initial maturity in February 2012. At June 30, 2009, we had no balance outstanding under the Revolving Credit Facility. We may prepay and terminate the Revolving Credit Facility at any time.

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OFF-BALANCE SHEET ARRANGEMENTS

Letters of Credit.As of June 30, 2009, we had $2,032 in outstanding standby letters of credit which mature through July 2013. These letters of credit principally secure performance of certain water treatment equipment sold by us and payment of fees associated with the delivery of natural gas and power.

Employee Agreements.We have an employment agreement with our Chief Operating Officer, the term of which currently ends on September 30, 2011, unless amended or extended in accordance with the terms of the agreement or otherwise. Significant contract provisions include annual base salary, health care benefits, and non-compete provisions. The employment agreement is primarily an “at will” employment agreement, under which we may terminate the employment of our Chief Operating Officer for any or no reason. Generally, the agreement provides that a termination without cause obligates us to pay certain severance benefits specified in the contract.

We entered into severance agreements with each of our Vice President, Administration and our Chief Financial Officer, which, generally, provide that a termination of the executive without cause obligates us to pay certain severance benefits specified in the contract. In addition, certain other key divisional executives are eligible for severance benefits.

Estimated minimum aggregate severance benefits under all of these agreements and arrangements as of June 30, 2009 was approximately $4,200.

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

Some of our perchlorate and fine chemicals products customers have requested that we store materials purchased from us in our facilities (“Bill and Hold” transactions or arrangements). We recognize revenue prior to shipment of these Bill and Hold transactions when we have satisfied the criteria of Staff Accounting Bulletin No. 101, “Revenue Recognition in the Financial Statements”, as amended by Staff Accounting Bulletin No. 104, “Revenue Recognition”, 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

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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 $25,712 and $29,022 as of June 30, 2009 and September 30, 2008, respectively.

Revenues from our Aerospace Equipment segment are derived from contracts that are accounted for in conformity with the American Institute of Certified Public Accountants (“AICPA”) audit and accounting guide, “Audits of Federal Government Contracts” and the AICPA’s Statement of Position No. 81-1, “Accounting for Performance of Construction-Type and Certain Production Type Contracts.” We account for these contracts using the percentage-of-completion method and measure progress on a cost-to-cost basis. Contract revenues include change orders and claims when approved by the customer. The percentage-of-completion method recognizes revenue as work on a contract progresses. Revenues are calculated based on the percentage of total costs incurred in relation to total estimated costs at completion of the contract. For fixed-price and fixed-price-incentive contracts, if at any time expected costs exceed the value of the contract, the loss is recognized immediately. We do not incur material pre-contract costs.

DEPRECIABLE OR AMORTIZABLE LIVES OF LONG-LIVED ASSETS.Our depreciable or amortizable long-lived assets include property, plant and equipment and intangible assets, 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 and amortizable intangible assets 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 which

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differ from estimates could result in an impairment charge. We would 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 as required by Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3 (May 2005),” or the amortization period as required by SFAS No. 142, “Goodwill and Other Intangible Assets.” Any revision to the remaining useful life of a long-lived asset resulting from that review also is considered in developing estimates of future cash flows used to test the Asset Group for recoverability.

ENVIRONMENTAL COSTS.We are subject to environmental regulations that relate to our past and current operations. We record liabilities for environmental remediation costs when our assessments indicate that remediation efforts are probable and the costs can be reasonably estimated. On a quarterly basis, we review our estimates of future costs that could be incurred for remediation activities. In some cases, only a range of reasonably possible costs can be estimated. In establishing our reserves, the most probable estimate is used; otherwise, we accrue the minimum amount of the range. Estimates of liabilities are based on currently available facts, existing technologies and presently enacted laws and regulations. These estimates are subject to revision in future periods based on actual costs or new 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. 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. 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 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.

As of September 30, 2008, recovery of our U.S. jurisdiction deferred tax assets, net of applicable deferred tax liabilities, required that we generate approximately $49,000 in taxable income in periods ranging from one to 43 years in the future. To determine whether a valuation allowance is required, we project our future taxable income. The projections require us to make assumptions regarding our product revenues, gross margins and operating expenses.

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For our U.S. tax jurisdictions, the most significant positive evidence is our historical trend of profitable operations and our forecast that such trend will continue in future periods when temporary differences are anticipated to reverse. Positive evidence also includes the lack of reliance on success in implementing tax planning strategies, utilization of short carry-back periods or appreciated asset values. Further, we do not have a history of tax credits expiring unused. For foreign tax jurisdictions, the most compelling negative evidence is a history of unprofitable operations. Accordingly, we have fully reserved our foreign deferred tax assets.

We account for uncertain tax positions in accordance with the provisions of FASB Interpretation No. FIN 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”), 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. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our accounting policy is consistent with FASB Staff Position FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, that was issued in May 2007 that provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing unrecognized tax benefits.

Under FIN 48, the Company 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 the Company believes 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, which are accounted for in accordance with SFAS No. 87,“Employers’ Accounting for Pensions”and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132 (R).” These 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.

The discount rate is used to estimate the present value of projected future pension payments to all participants. The discount rate is generally based on the yield on AAA/AA-rated corporate long-term bonds. At September 30 of each year, the discount rate is determined using bond yield curve models matched with the timing of expected retirement plan payments. Our discount rate assumption was 7.25 percent as of September 30, 2008. 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 $300.

The expected long-term rate of return on plan assets represents the average rate of earnings expected on the plan funds invested in a specific target asset allocation. The expected long-term rate of return assumption on pension plan assets was 8.00 percent in 2008. 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 $100.

RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS.In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles in the United States of

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America, and expands disclosures about fair value measurements. In February 2008, the FASB deferred the adoption of SFAS No. 157 for one year as it applied to certain items, including assets and liabilities initially measured at fair value in a business combination, reporting units and certain assets and liabilities measured at fair value in connection with goodwill impairment tests in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, and long-lived assets measured at fair value for impairment assessments under SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.” SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. SFAS No. 157 was effective for us on October 1, 2008. We have not adopted all the provisions of SFAS No. 157 as the FASB delayed the effective date of the application of SFAS No. 157 to non-financial assets and liabilities. The remaining provisions of SFAS No. 157 become effective for us beginning October 1, 2009. The partial adoption of SFAS No. 157 did not have a material impact on our consolidated financial statements. The adoption of the remaining provisions of SFAS No. 157 is not expected to have a material impact on our results of operations, financial position or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The fair value option established by SFAS No. 159 permits all companies to choose to measure eligible items at fair value at specified election dates. At each subsequent reporting date, a company must report in earnings any unrealized gains and losses on items for which the fair value option has been elected. SFAS No. 159 was effective for us on October 1, 2008. We chose not to elect the fair value option for any of our financial instruments.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R will significantly change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R also includes a substantial number of new disclosure requirements. SFAS No. 141R applies to us prospectively for business combinations with acquisition dates on or after October 1, 2009. We expect that SFAS No. 141R, once adopted, will have an impact on accounting for business combinations, but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, SFAS No. 160 requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for us beginning on October 1, 2009. We currently have no entities or arrangements that will be affected by the adoption of SFAS No. 160. However, determination of the ultimate effect of this pronouncement will depend on our structure at the date of adoption.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”), which amends the factors that should be considered in

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developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. The guidance contained in this FSP for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. However, the disclosure requirements of FSP No. 142-3 must be applied prospectively to all intangible assets recognized in the Company’s financial statements as of the effective date. FSP No. 142-3 is effective for us beginning October 1, 2009.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures include disclosure of investment allocation decisions, major categories of plan assets, inputs and valuation techniques used to measure the fair value of plan assets, the effect of certain fair value measurements, and significant concentrations of risk within plan assets. The expanded disclosure requirements are effective for our fiscal year ending September 30, 2010.

In April 2009, the FASB issued FSP No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on how to identify circumstances that indicate that a transaction is not orderly and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation techniques used, the objective of a fair value measurement remains the same. FSP FAS 157-4 was effective for us beginning with our interim period ended June 30, 2009. The adoption of this standard did not have a material impact on our results of operations, financial position or cash flows.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amend SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments in interim reporting periods. Such disclosures were previously required only in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend Accounting Principles Board Opinion No. 28, “Interim Financial Reporting”(“APB 28”), to require the disclosures required by APB 28 in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 were effective for us beginning with our interim period ended June 30, 2009. The adoption of these standards did not have a material impact on our results of operations, financial position or cash flows.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 provides authoritative accounting literature related to evaluating subsequent events that was previously addressed only in the auditing literature under Auditing Standard Section 560, “Subsequent Events”. SFAS No. 165 is similar to the current guidance with some exceptions that are not intended to result in significant change to current practice. SFAS No. 165 defines subsequent events and also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The Company adopted the disclosure provisions of SFAS No. 165 as of June 30, 2009. The adoption did not have an impact on our results of operations, financial position, or cash flows.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS No. 168 establishes the FASB Standards Accounting Codification (“Codification”) as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied to nongovernmental entities, and rules and interpretive releases of the SEC as authoritative GAAP for SEC registrants. The Codification will supersede all the existing non-SEC accounting and reporting standards upon its effective date and subsequently, the FASB will not issue new standards in the form of Statements of Financial Accounting Standards, FASB Staff Positions or Emerging Issues Task Force Abstracts. SFAS No. 168 also replaces FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” but is not intended to change or alter existing

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US GAAP. The Codification will change the references of financial standards in effect for the Company. Beginning with financial statements issued after September 15, 2009, all references made to U.S. GAAP will use the new Codification numbering system prescribed by the FASB. SFAS No. 168 will not have any impact on our results of operations, financial position, and cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in Thousands)

As of June 30, 2009, there were no material changes to our market risk disclosures set forth in Item 7A of our Annual Report on Form 10-K for the year ended September 30, 2008. We are exposed to interest rate risk primarily due to changes in market interest rates as compared to the fixed rate for our long-term debt. As of June 30, 2009, our outstanding debt is comprised primarily of $110,000 aggregate principal of the Senior Notes. At June 30, 2009, we had no amount outstanding under our Revolving Credit Facility. Trading volume for our Senior Notes is limited. We estimate the fair value of the Senior Notes to be approximately $96,800 based on the trade date closest to June 30, 2009, which was June 15, 2009.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of June 30, 2009, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of such date to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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

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PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Although we are not currently party to any material pending legal proceedings, we are from time to time subject to claims and lawsuits related to our business operations. Any such claims and lawsuits could be costly and time consuming and could divert our management and key personnel from our business operations. In connection with any such claims and lawsuits, we may be subject to significant damages or equitable remedies relating to the operation of our business. Any such claims and lawsuits may materially harm our business, results of operations and financial condition.

ITEM 1A. RISK FACTORS (Dollars in Thousands)

There have been no material changes in our assessment of risk factors affecting our business since those presented in Item 1A of our Annual Report on Form 10-K for the year ended September 30, 2008. Our updated risk factors are included below in this Item 1A.

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.

We depend on a limited number of customers for most of our sales in our Specialty Chemicals, Aerospace Equipment and Fine Chemicals segments and the loss of one or more of these customers could have a material adverse effect on our financial position, results of operations and cash flows.

Most of the perchlorate chemicals we produce, which accounted for 91% of our total revenues in the Specialty Chemicals segment for fiscal 2008 and approximately 26% of our total revenues for fiscal 2008, are purchased by a small number of customers. For example, Alliant Techsystems Inc., one of our ammonium perchlorate, or AP, customers, accounted for 16% of our total revenues for fiscal 2008. In our Aerospace Equipment segment, 74% of our total revenues in this segment for fiscal 2008 was from three customers. Should our relationship with one or more of our major Specialty Chemicals or Aerospace Equipment 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 one or more of our major Specialty Chemicals or Aerospace Equipment customers substantially reduced their volume of purchases from us or otherwise delayed some or all of their purchase 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 or Aerospace Equipment 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 Ampac Fine Chemicals LLC (“AFC”) of a limited number of registered intermediates and active pharmaceutical ingredients (“APIs”) for a limited number of key customers. One customer of AFC accounted for 31% of our consolidated revenue and the top three customers of AFC accounted for approximately 89% of its revenues, and 54% of our consolidated revenues, in fiscal 2008. Negative development in these customer relationships or in 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, one or more of these customers might reduce their orders in the future, which could have a similar negative effect on the results of operations of AFC. In addition, if the pharmaceutical products that AFC’s customers produce using its compounds experience any problems, including problems related to their safety or efficacy, delays in filing with or approval by the U.S. Food and Drug Administration, or FDA, failures in achieving success in the market, expiration or loss of patent/regulatory protection, or

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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 pre-established price or prices for such product. For example, when AFC is initially engaged to manufacture a product, we often agree to set the price for such product, and any time-based increases to such price, at the beginning of the contracting period and prior to fully testing and beginning the customized manufacturing process. Depending on the fixed price negotiated, these contracts may provide us with an opportunity to achieve higher profits based on the relationship between our total estimated contract costs and the contract’s fixed price. However, we bear the risk that increased or unexpected costs may reduce our profit or cause us to incur a loss on the contract, which could reduce our net sales and net earnings. Ultimately, fixed-price contracts and similar types of contracts present the inherent risk of un-reimbursed cost overruns, 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 over time to produce 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 inspection by the FDA and other governmental agencies, and operations at these facilities could be interrupted or halted if such inspections are unsatisfactory. AFC’s customers face similarly high regulatory requirements. Before marketing most drug products, AFC’s customers generally are required to obtain approval from the FDA based upon pre-clinical testing, clinical trials showing safety and efficacy, chemistry and manufacturing control data, and other data and information. The generation of these required data is regulated by the FDA and can be time-consuming and expensive, and the results might not justify approval. Even if AFC’s customers are successful in obtaining all required pre-marketing approvals, post-marketing requirements and any failure on either AFC’s or its customer’s part to comply with other regulations could result in suspension or limitation of approvals or commercial activities pertaining to affected products.

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

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suspension 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 change and compliance is deficient in any significant way, 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 are, like other government and military contractors and subcontractors, subject directly or 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 contractors and 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 contractor or subcontractor would be impaired. Further, a portion of our business involves the sale of controlled products overseas, such as supplying 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.

In addition, we are subject to numerous federal laws and regulations due to our status as a publicly traded company, as well as rules and regulations of The Nasdaq Stock Market LLC. Any changes in these legal and regulatory requirements could increase our compliance costs and negatively affect our results of operations.

A significant portion of our business depends on contracts with the government or its prime contractors 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 the U.S. government and its prime contractors and subcontractors represent a significant portion of our business. In fiscal 2008, our Specialty Chemicals segment generated approximately 23% of consolidated revenues, primarily sales of Grade I AP, and our Aerospace Equipment segment generated approximately 2% of consolidated revenues, each from sales to the U.S. government, its prime contractors and subcontractors. One significant use of Grade I AP historically has been in NASA’s Space Shuttle program. Consequently, the long-term demand for Grade I AP may be driven by the timing of the retirement of the Space Shuttle fleet as well as by the development of next-generation space exploration vehicles, including the development and testing of a new heavy launch vehicle used to transport materials and supplies to the International Space Station, the Moon and Mars, and the number of space exploration launches. If the use of AP as the oxidizing agent for solid propellant rockets or the use of solid propellant rockets in NASA’s space exploration programs are discontinued or significantly reduced, it could have a material adverse effect on our operating results, financial condition, or cash flows.

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The 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. Recent credit and other economic crises, and the U.S. government’s corresponding actions, may result in cutbacks in major government programs. A decline in government expenditures or any failure by Congress to appropriate additional funds to any program in which we or our customers participate, or any contract modification as a result of funding changes, could materially delay or terminate the program for us or for our customers. Moreover, the U.S. government may terminate its contracts with its suppliers either for its convenience or in the event of a default by the supplier. Since a significant portion of our customer base is either the U.S. government or U.S. government contractors, 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 for convenience, recovery of costs typically would be limited to amounts already incurred or committed, and our profit would be limited to work completed prior to termination. Moreover, in such situations where we are a subcontractor, the U.S. government contractor may cease purchasing our products if its contracts are terminated. We may have resources applied to specific government-related contracts and, if any of those contracts were terminated, we may incur substantial costs redeploying these resources. Given the significance to our business of U.S. government contracts or 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 flow.

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

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

Review of Perchlorate Toxicity by the EPA.Perchlorate is not currently included in the list of hazardous substances compiled by the U.S. Environmental Protection Agency, or EPA, but it is on the EPA’s Contaminant Candidate List. The National Academy of Sciences, the EPA and certain states have set or discussed certain guidelines on the acceptable levels of perchlorate in water. 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. While the presence of regulatory review presents general business risk to the Company, we are currently unaware of any regulatory proposal that 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. It is possible that the 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, or the “AMPAC Henderson Site”, until May 1988. In 1997, the Southern Nevada Water Authority, or SNWA, detected trace amounts of the perchlorate anion in Lake Mead and the Las Vegas Wash. Lake Mead is a source of drinking water for Southern Nevada and areas

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of Southern California. The Las Vegas Wash flows into Lake Mead from the Las Vegas valley. In response to this discovery by SNWA, and at the request of the Nevada Division of Environmental Protection, or NDEP, we engaged in an investigation of groundwater near the AMPAC Henderson Site and down gradient toward the Las Vegas Wash. At the direction of 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 fiscal 2005, we submitted a work plan to NDEP for the construction of a remediation facility near the AMPAC Henderson Site. The permanent plant began operation in December 2006.

Henderson Site Environmental Remediation Reserve.During fiscal 2005 and 2006, we recorded charges totaling $26,000 representing our estimate of the probable costs of our remediation efforts at the AMPAC Henderson Site, including the costs for capital equipment, operating and maintenance (“O&M”), and consultants. The project consists of two primary phases: the initial construction of the remediation equipment phase and the O&M phase. We commenced the construction phase in late fiscal 2005, completed an interim system in June 2006, and completed the permanent facility in December 2006. In fiscal 2007, we began the O&M phase. Key factors in determining the total estimated cost of our remediation efforts at the AMPAC Henderson Site include an estimate of the speed of groundwater entering the treatment area and annual O&M costs. Groundwater speed is used to estimate the number of years that may be required to operate the facility. Initially, data suggested that the total project life would extend for a period of 45 years. More recent data indicates that the total project life may be 23 years. We are unable to predict over the longer term the most probable life and accordingly have used an assumed range of 23 to 45 years of operation. We have experienced annualized O&M cost levels of approximately $1,000, which is higher than our initial estimates. This higher level of cost reflects costs to evaluate methods to optimize operating performance and maintenance of reinjection wells. In addition, we anticipate incurring O&M cost levels in fiscal 2009 of approximately $1,800 as we continue our evaluation of methods to achieve targeted remediation results. Our range of estimated costs assumes that we will be successful in optimizing the remediation plant performance and that average annual O&M costs beyond 2012 and for the duration of the project will be approximately $380. These estimates are 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 approximately 240 acres of land on a Superfund site in Rancho Cordova, California, owned by Aerojet-General Corporation, a wholly-owned subsidiary of GenCorp Inc. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, has very strict joint and several liability provisions that make any “owner or operator” of a “Superfund site” a “potentially responsible party” for remediation activities. AFC could be considered an “operator” for purposes of CERCLA and, in theory, could be a potentially responsible party for purposes of contribution to the site remediation, although we received a letter from the EPA in November 2005 indicating that the EPA does not intend to pursue any clean up or enforcement actions under CERCLA against future lessees of the Aerojet property for existing contamination, provided that the lessees do not contribute to or do not exacerbate existing contamination on or under the Superfund site. Additionally, pursuant to the EPA consent order governing remediation for this site, AFC will have to 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 from time to time exceed any related reserves.

As of June 30, 2009, we had established reserves in connection with the AMPAC Henderson Site of approximately $13,291, which we believe to be sufficient to cover our estimated environmental liabilities for that site as of such time. However, as of such date, we had not established any other environmental-related reserves. Given the many uncertainties involved in assessing environmental liabilities, our environmental-related risks may, from time to time, exceed any related reserves, as we may not have

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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. In addition, reserves with respect to environmental matters are based only on known sites and the known contamination at those sites. It is possible that additional remediation sites will be identified in the future or that unknown contamination, or further contamination beyond that which is currently known, at previously identified sites will be discovered. The discovery of additional environmental exposures at sites that we currently own or operate or at which we formerly operated, or at sites to which we have sent hazardous substances or wastes for treatment, recycling or disposal, could lead us to have 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, Fine Chemicals and Aerospace Equipment segments, most 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.

Most of our Specialty Chemicals segment products are produced at our Iron County, Utah facility. Most of our Fine Chemicals segment products are produced at our Rancho Cordova, California facility and most of our Aerospace Equipment segment products are produced at our Niagara Falls, New York facility. Our Aerospace Equipment segment also has small manufacturing facilities in Ireland and the U.K. Any of these facilities could be disrupted or damaged by fire, floods, earthquakes, power loss, systems failures or similar events. A significant disruption at a particular facility, 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 liability.

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. 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 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.

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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 needed in our manufacturing processes are available. In addition, as a U.S. government contractor or subcontractor, we are frequently limited to procuring materials and components from sources of supply that can meet rigorous government and/or customer specifications. In addition, as business conditions, the U.S. defense budget, and congressional allocations change, suppliers of specialty chemicals and materials sometimes consider dropping 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. We are also 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 facilities.

AFC uses substantial amounts of raw materials in its production processes, including petroleum-based solvents. Increases in the prices of raw materials which AFC purchases from third party suppliers could adversely impact revenue and operating results. In certain cases, the customer provides some of the raw materials which are used by AFC to produce or manufacture the customer’s products. 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. Certain key raw materials are obtained from sources from outside the U.S. Factors that can cause delays in the arrival of raw materials include weather, 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. A delay in the arrival of the 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.

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, Fine Chemicals and Aerospace Equipment 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, Fine Chemicals and Aerospace Equipment segments produces products that are highly customized, require high levels of precision to manufacture and are subject to exacting customer and other requirements, including strict timing and delivery requirements.

For example, our Fine Chemicals segment produces chemical compounds that are difficult to manufacture, including highly energetic and highly toxic materials. These chemical compounds are manufactured to exacting specifications of our customers’ filings with the FDA and other regulatory authorities worldwide. The production of these chemicals requires a high degree of precision and strict adherence to safety and quality standards. Regulatory agencies, such as the FDA and the European Medicines Agency, or EMEA, have regulatory oversight over the production process for many of the products that AFC manufactures for its customers. AFC employs sophisticated and rigorous manufacturing and testing practices to ensure compliance with the FDA’s current Good Manufacturing Practices or “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 and Aerospace Equipment segments face similar production demands and requirements. In each case, 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, 2008, AFC had approximately 154 employees that were covered by collective bargaining or similar agreements, although since such date the aggregate number of these employees has been modestly reduced. In June 2007, AFC’s collective bargaining and similar agreements were renegotiated and extended to June 2010. If we are unable to negotiate acceptable new agreements with the unions representing these employees upon expiration of the existing contracts, we could experience strikes or work stoppages. Even if AFC is successful in negotiating new agreements, the new agreements could call for higher wages or benefits paid to union members, which would increase AFC’s operating costs and could adversely affect its profitability. If the unionized workers were to engage in a strike or other work stoppage, or other non-unionized operations were to become unionized, AFC could experience a significant disruption of operations at its facilities or higher ongoing labor costs. A strike or other work stoppage in the facilities of any of its major customers or suppliers could also have similar effects on AFC.

The pharmaceutical fine chemicals industry is a capital-intensive industry and if AFC does not have sufficient financial resources to finance the necessary capital expenditures, its business and results of operations may be harmed.

The pharmaceutical fine chemicals industry is a capital-intensive industry that consumes cash from our Fine Chemicals segment and our other operations and from borrowings. Increases in capital expenditures may result in low levels of working capital or require us to finance working capital deficits, which may be potentially costly or even unavailable in the current conditions of the credit markets in the U.S. These factors could substantially increase AFC’s costs and negatively impact its operating results.

We may be subject to potential liability claims for our products or services that could affect our earnings and financial condition and harm our reputation.

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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. Given the current economic environment, it is also possible that our insurers may not be able to pay on any claims we might bring. Unexpected results could cause us to have financial exposure in these matters in excess of insurance coverage and recorded reserves, requiring us to provide additional reserves to address these liabilities, impacting profits. Moreover, any claim brought against us, even if ultimately found to be insignificant or without merit, could damage our reputation, which, in turn, may impact our business prospects and future results.

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

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

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

Other than the sale of AP, for which we are the only North American provider, we face competition in all of the other industries in which we participate. Many of our competitors have financial, technical, production, marketing, research and development and other resources substantially greater than ours. As a result, they may be better able to withstand the effects of periodic economic or business segment downturns. Moreover, barriers to entry, other than capital availability, are low in some of the product segments of our business. Consequently, we may encounter intense bidding for contracts. Capacity

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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. Competition in the pharmaceutical fine chemicals market is based upon reputation, service, manufacturing capability and expertise, price and reliability of supply. 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 less. If AFC is unable to compete successfully, its results of operations may be materially adversely impacted. Furthermore, there is a worldwide over-capacity of the ability to produce sodium azide, which creates significant price competition for that product. Maintaining and improving our competitive position will require continued investment in our existing and potential future customer relationships as well as in our technical, production, and marketing operations. We may be unable to compete successfully with our competitors and our inability to do so could result in a decrease in revenues that we historically have generated from the sale of our products.

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

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

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

Our Specialty Chemicals and Fine Chemicals segments are subject to volatility that characterizes the chemical industry generally. Thus, the operating rates at our facilities will impact the comparison of period-to-period results. Different facilities may have differing operating rates from period to period depending on many factors, such as transportation costs and supply and demand for the product produced at the facility during that period. As a result, individual facilities may be operated below or above rated capacities in any period. We may idle a facility for an extended period of time because an oversupply of a certain product or a lack of demand for that product makes production uneconomical. The expenses of the shutdown and restart of facilities may adversely affect quarterly results when these events occur. In addition, a temporary shutdown may become permanent, resulting in a write-down or write-off of the related assets.

A loss of key personnel or highly skilled employees could disrupt our operations.

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 some of our executive officers and we may do so in the future, as competitive needs require. These agreements typically allow the officer to terminate employment with certain levels of severance under particular circumstances, such as a change of control affecting our company. In addition, these agreements generally provide an officer with severance benefits if we terminate the officer without cause. Although we believe that we will be able to attract and retain talented personnel and replace key personnel should the need arise, our inability to do so or to do so 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,

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customers often turn to AFC because very few companies have the specialized experience and capabilities and associated personnel required for energetic chemistries and projects that require high containment. Our operations could be disrupted by a shortage of available skilled employees or if we are unable to retain these highly skilled and experienced employees.

We may continue to expand our operations in part through acquisitions, which 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 includes 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. 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 attention to acquisitions that are never consummated. Integration of acquired operations may take longer, or be more costly or disruptive to our business, than originally anticipated. It is also possible that expected synergies from past or future acquisitions may not materialize.

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

We have a substantial amount of debt, and the cost of servicing that debt could adversely affect our ability to take actions, our liquidity or our financial condition.

As of June 30 2009, we had outstanding debt totaling $110,318, for which we are required to make 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.

If we are unable to generate sufficient cash flow to service our debt and fund our operating costs, our liquidity may be adversely affected.

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We are obligated to comply with financial and other covenants in our debt 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 restrictive covenants. These covenants include provisions restricting our ability to, among other things:

• incur additional debt;

• pay dividends or make other restricted payments;

• create liens on assets to secure debt;

• incur dividend or other payment restrictions with regard to restricted subsidiaries;

• transfer or sell assets;

• enter into transactions with affiliates;

• enter into sale and leaseback transactions;

• create an unrestricted subsidiary;

• enter into certain business activities; or

• effect a consolidation, merger or sale of all or substantially all of our assets.

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.

Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could affect our estimates of pension obligations, which in turn could affect future funding requirements and related costs and impact our future earnings.

Pension obligations, periodic pension expense, and funding requirements are determined using actuarial valuations that involve several assumptions. The most critical assumptions are the discount rate and the long-term expected return on assets. Other assumptions include salary increases and retirement age, mortality and turnover. Some of these assumptions, such as the discount rate and return on pension assets, are largely outside of our control. Changes in these assumptions could affect our estimates of pension obligations, which in turn could affect future funding requirements and related costs and impact our future earnings.

Our shareholder 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 shareholder rights plan that may have the effect of discouraging unsolicited takeover proposals. The rights issued under the shareholder 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 shareholder rights plan may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.

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

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES – None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS – None.

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: August 5, 2009	/S/ JOHN R. GIBSON
	John R. Gibson
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)
	/S/ DANA M. KELLEY
	Dana M. Kelley
	Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

EXHIBIT NO.	DOCUMENT DESCRIPTION
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	American Pacific Corporation Amended and Restated By-laws (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 September 15, 2008)
3.5	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)
3.6	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)
3.7	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)
10.1+	Amended and Restated American Pacific Corporation Defined Benefit Pension Plan, as Amended and Restated Effective October 1, 2008, executed by American Pacific Corporation on June 12, 2009
10.2+	Ampac Fine Chemicals LLC Pension Plan for Bargaining Unit Employees, as Amended and Restated Effective October 1, 2007, executed by American Pacific Corporation on June 12, 2009
10.3+	Ampac Fine Chemicals LLC Pension Plan for Salaried Employees, as Amended and Restated Effective October 1, 2007, executed by American Pacific Corporation on June 12, 2009
10.4	First Amendment to Credit Agreement, dated as of July 7, 2009, by and among American Pacific Corporation, certain subsidiaries thereof, the lenders party thereto, and Wachovia Bank, National Association and Bank of America, N.A.
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

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32.2* Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

+

Management contract or compensatory plan or arrangement.

*

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

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