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American Pacific's CEO Discusses F1Q12 Results - Earnings Call Transcript

The pharmaceutical using this chemical product, has already been approved by the regulatory agency and is on the market. Revenues from development product continues to be a significant portion of the Fine Chemical segment sales in this first quarter and will remain so throughout the entire year. This is important for a number of reasons. First, expansion of development products over the last two years will lead to two new products reaching markets this year.

Second, as total segment sales continue to grow, sustaining development sales in the range of 20% of total segment sales, translates to a growing new pipeline of products and diversification of the customer base. Orders for development product currently represent projects from 18 different customers.

And third, virtually all of the development products in our pipeline make use of our unique technologies. This provides a clear discriminator as the product moves in to production. While our first quarter margins in this segment have improved compared to fiscal ’11, they still lag behind where we expect them to be. We are continuing to restructure operations, to streamline production in this segment, and increase throughput through operational excellence tools. Margins in this segment are expected to improve in the second half of the year.

Moving on now to the Specialty Chemical segment. We see the demand for rocket-grade ammonium perchlorate evolving in fiscal 2012 to be about the same total volume as fiscal 2011. There is however, a difference in the product mix. Last year’s DoD program were the predominate users of the product. In fiscal 2012, we see the return of product directed to NASA, for the new space launch system, as part of the development of the heavy launch vehicle. The space launch system, also known as SLS, was announced in September. SLS included the five segment, solid rocket boaster, which was unveiled on Capitol Hill, by NASA and by the Congress. That was very good news for us and our customer, in terms of establishing an on-going long-term production base and capability for NASA. That architecture has been reaffirmed in meetings between the various contractors and NASA. Some of these meetings were as recent as last week.

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