350832--12/15/2008--AMERICAN_PACIFIC

related topics

{cost, regulation, environmental}

{customer, product, revenue}

{competitive, industry, competition}

{debt, indebtedness, cash}

{regulation, government, change}

{product, liability, claim}

{loss, insurance, financial}

{gas, price, oil}

{cost, operation, labor}

{acquisition, growth, future}

{product, market, service}

{personnel, key, retain}

{stock, price, operating}

{financial, litigation, operation}

The inherent limitations of our fixed-price or similar contracts may impact our profitability. 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. 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. We may be subject to potentially material costs and liabilities in connection with environmental liabilities. Although we have established an environmental reserve for remediation activities in Henderson, Nevada, given the many uncertainties involved in assessing such liabilities, our environmental-related risks may from time to time exceed any related reserves. 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. The release or explosion of dangerous materials used in our business could disrupt our operations and cause us to incur additional costs and liability. 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. 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. 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. 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. 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. 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. Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales. We are subject to strong competition in certain industries in which we participate and therefore may not be able to compete successfully. Due to the nature of our business, our sales levels may fluctuate causing our quarterly operating results to fluctuate. The inherent volatility of the chemical industry affects our capacity utilization and causes fluctuations in our results of operations. A loss of key personnel or highly skilled employees could disrupt our operations. 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. 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. 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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350832--12/15/2008--AMERICAN_PACIFIC_CORP