##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 26, 2005
  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 333-112528
 Vought Aircraft Industries, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    75-2884072(State of Incorporation)
9314 West Jefferson Boulevard M/S 2-01
    
    (I.R.S. Employer Identification Number)Dallas, TX
    
    75211(Address of Principal executive offices)
    
    (Zip Code)
 (972)-946-2011
(Registrants telephone number, including area code)
 þ o
 o þ




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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of June 26, 2005 and December 31, 2004
(unaudited)
    
    
    1Consolidated Statements of Operations for the three months and six months ended
June 26, 2005 and June 27, 2004 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the six months ended June 26, 2005,
and June 27, 2004 (unaudited)
    
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    27PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Vought Aircraft Industries, Inc.
 
 Consolidated Balance Sheets
 ($ in millions) (Unaudited)
 June 26,
    
    December 31,2005
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    56.7
    
    
    $
    128.9Accounts receivable
    
    
    132.7
    
    
    
    123.2Inventories
    
    
    312.0
    
    
    
    279.3Other current assets
    
    
    5.9
    
    
    
    7.2Total current assets
    
    
    507.3
    
    
    
    538.6Property, plant and equipment, net
    
    
    414.4
    
    
    
    407.7Goodwill, net
    
    
    527.7
    
    
    
    527.7Identifiable intangible assets, net
    
    
    86.1
    
    
    
    91.5Debt origination costs, net and other assets
    
    
    23.7
    
    
    
    23.5Total assets
    
    $
    1,559.2
    
    
    $
    1,589.0Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable, trade
    
    $
    95.7
    
    
    $
    100.7Accrued and other liabilities
    
    
    78.9
    
    
    
    90.0Accrued payroll and employee benefits
    
    
    46.8
    
    
    
    51.4Accrued post-retirement benefits-current
    
    
    57.3
    
    
    
    57.3Accrued pension-current
    
    
    37.7
    
    
    
    27.2Current portion of long-term bank debt
    
    
    4.0
    
    
    
    4.0Capital lease obligation
    
    
    0.9
    
    
    
    0.9Accrued contract liabilities
    
    
    240.0
    
    
    
    142.0Total current liabilities
    
    
    561.3
    
    
    
    473.5Long-term liabilities:Accrued post-retirement benefits
    
    
    492.1
    
    
    
    486.9Accrued pension
    
    
    439.1
    
    
    
    420.7Long-term bank debt, net of current portion
    
    
    420.0
    
    
    
    421.0Long-term bond debt
    
    
    270.0
    
    
    
    270.0Long-term capital lease obligation
    
    
    1.5
    
    
    
    2.0Other non-current liabilities
    
    
    88.5
    
    
    
    69.4Total liabilities
    
    
    2,272.5
    
    
    
    2,143.5Stockholders equity (deficit):Common stock, par value $.01; 50,000,000 shares
authorized, 25,027,152 and 25,015,552 issued and
outstanding in 2005 and 2004, respectively
    
    
    0.3
    
    
    
    0.3Additional paid-in capital
    
    
    418.1
    
    
    
    418.0Shares held in rabbi trust
    
    
    (1.9
    )
    
    
    (1.9
    )Stockholders loans
    
    
    (2.3
    )
    
    
    (2.3
    )Accumulated deficit
    
    
    (533.3
    )
    
    
    (374.4
    )Accumulated other comprehensive loss
    
    
    (594.2
    )
    
    
    (594.2
    )Total stockholders equity (deficit)
    
    $
    (713.3
    )
    
    $
    (554.5
    )Total liabilities and stockholders equity (deficit)
    
    $
    1,559.2
    
    
    $
    1,589.0
 See accompanying notes
 1




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Vought Aircraft Industries, Inc.
 
 Consolidated Statements of Operations
 ($ in millions) (Unaudited)
 For the Three Months
    
    For the Six MonthsEnded
    
    EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004Net sales
    
    $
    357.0
    
    
    $
    294.2
    
    
    $
    626.8
    
    
    $
    589.1Costs and expensesCost of sales
    
    
    369.8
    
    
    
    236.5
    
    
    
    610.4
    
    
    
    483.2Selling, general and administrative expenses
    
    
    77.8
    
    
    
    63.0
    
    
    
    145.3
    
    
    
    125.7Asset impairment
    
    
    5.9
    
    
    
    
    
    
    
    5.9
    
    
    
    Total costs and expenses
    
    
    453.5
    
    
    
    299.5
    
    
    
    761.6
    
    
    
    608.9Operating loss
    
    
    (96.5
    )
    
    
    (5.3
    )
    
    
    (134.8
    )
    
    
    (19.8
    )Other income (expense)Interest income
    
    
    0.9
    
    
    
    0.6
    
    
    
    1.6
    
    
    
    1.1Other loss
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    Interest expense
    
    
    (12.7
    )
    
    
    (10.1
    )
    
    
    (24.8
    )
    
    
    (19.8
    )Loss before income taxes
    
    
    (109.1
    )
    
    
    (14.8
    )
    
    
    (158.9
    )
    
    
    (38.5
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (109.1
    )
    
    $
    (14.8
    )
    
    $
    (158.9
    )
    
    $
    (38.5
    )
 See accompanying notes
 2




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Vought Aircraft Industries, Inc.
 
 Consolidated Statements of Cash Flows
 ($ in millions) (Unaudited)
 For the Six Months EndedJune 26,
    
    June 27,2005
    
    2004Operating activitiesNet loss
    
    $
    (158.9
    )
    
    $
    (38.5
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    36.8
    
    
    
    43.6Asset impairment
    
    
    5.9
    
    
    
    Loss from asset sales
    
    
    4.3
    
    
    
    1.5Changes in current assets and liabilities:Accounts receivable
    
    
    (9.5
    )
    
    
    (4.7
    )Inventories, net of advances and progress billings
    
    
    (32.7
    )
    
    
    (12.2
    )Other current assets
    
    
    1.3
    
    
    
    0.7Accounts payable, trade
    
    
    (5.0
    )
    
    
    22.4Accrued payroll and employee benefits
    
    
    (4.6
    )
    
    
    (6.0
    )Accrued and other liabilities
    
    
    (0.6
    )
    
    
    (1.4
    )Accrued contract liabilities
    
    
    98.0
    
    
    
    1.4Other assets and liabilitieslong-term
    
    
    40.9
    
    
    
    66.8Net cash provided by (used in) operating activities
    
    
    (24.1
    )
    
    
    73.6Investing activitiesCapital expenditures
    
    
    (46.7
    )
    
    
    (16.3
    )Net cash used in investing activities
    
    
    (46.7
    )
    
    
    (16.3
    )Financing activitiesPayments on long-term bank debt
    
    
    (1.0
    )
    
    
    Payments on capital leases
    
    
    (0.5
    )
    
    
    (1.1
    )Proceeds from sale of common stock
    
    
    0.1
    
    
    
    Net cash used in financing activities
    
    
    (1.4
    )
    
    
    (1.1
    )Net increase (decrease) in cash and cash equivalents
    
    
    (72.2
    )
    
    
    56.2Cash and cash equivalents at beginning of period
    
    
    128.9
    
    
    
    106.4Cash and cash equivalents at end of period
    
    $
    56.7
    
    
    $
    162.6
 See accompanying notes
 3




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VOUGHT AIRCRAFT INDUSTRIES, INC.
 
 Notes to Consolidated Financial Statements
 (Unaudited)
 June 26, 2005
 Note 1  Organization and Basis of Presentation
    Note 2  New Accounting Pronouncements
 Inventory Costs
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees Statement of Cash Flows
 4




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Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in
Interim Financial Statements
 Note 3
 Stock-Based Compensation
 Accounting for Stock Based Compensation
 Three months ended
    
    Six months endedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,2005
    
    2004
    
    2005
    
    2004($ in millions)Reported net loss
    
    
    ($109.1
    )
    
    
    ($14.8
    )
    
    
    ($158.9
    )
    
    
    ($38.5
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109.1
    )
    
    
    (14.8
    )
    
    
    (158.9
    )
    
    
    (38.5
    )Compensation expense per SFAS No. 123
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (1.0
    )
    
    
    (0.3
    )Pro forma net loss for SFAS No. 123
    
    
    ($109.6
    )
    
    
    ($15.0
    )
    
    
    ($159.9
    )
    
    
    ($38.8
    )
  Note 4
 Restructuring
  5




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Accrued RestructuringReserve  Stuart andNashville Sites($ in millions)Balance December 31, 2003
    
    $
    Restructuring liabilities recognized
    
    
    7.7Expenditures
    
    
    (0.4
    )Balance December 31, 2004
    
    
    7.3Liabilities recognized for the six months ended June 26, 2005
    
    
    1.0Expenditures for the six months ended June 26, 2005
    
    
    (0.3
    )Balance June 26, 2005
    
    $
    8.0
 Pension and Other Post-retirement Benefits
   6




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Subsequent Events
    7




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Accrued RestructuringReserve Perry Site($ in millions)Balance December 31, 2003
    
    $
    9.5Cash expenditures
    
    
    (1.9
    )Balance December 31, 2004
    
    $
    7.6Cash expenditures for the six months ending June 26, 2005
    
    
    (0.8
    )Balance June 26, 2005
    
    $
    6.8
 Note 5  Inventories
  June 26,
    
    December 31,2005
    
    2004($ in millions)Production costs of contracts in process
    
    $
    488.4
    
    
    $
    434.9Finished goods
    
    
    23.3
    
    
    
    21.4Less: unliquidated progress payments
    
    
    (199.7
    )
    
    
    (177.0
    )Total inventories
    
    $
    312.0
    
    
    $
    279.3
  Note 6  Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets
  June 26,
    
    December 31,2005
    
    2004($ in millions)Programs and contracts
    
    $
    137.3
    
    
    $
    137.3Pension asset
    
    
    20.7
    
    
    
    20.7Less: accumulated amortization
    
    
    (71.9
    )
    
    
    (66.5
    )Identifiable intangible assets, net
    
    $
    86.1
    
    
    $
    91.5
 8




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($ in millions )2005
    
    $
    5.52006
    
    
    10.82007
    
    
    10.02008
    
    
    8.92009
    
    
    8.9Thereafter
    
    
    21.4$
    65.5
 Note 7  Pension and Other Post-retirement Benefits
  Three
    
    ThreeMonths
    
    Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,Pension Benefits
    
    2005
    
    2004
    
    2005
    
    2004($ in millions)Components of net periodic benefit
cost (income):Service cost
    
    $
    8.2
    
    
    $
    7.1
    
    
    $
    16.0
    
    
    $
    14.6Interest cost
    
    
    25.8
    
    
    
    25.0
    
    
    
    51.6
    
    
    
    50.3Expected return on plan assets
    
    
    (29.1
    )
    
    
    (29.8
    )
    
    
    (58.4
    )
    
    
    (60.2
    )Amortization of (gains) or losses
    
    
    13.2
    
    
    
    9.5
    
    
    
    27.0
    
    
    
    18.5Prior service cost recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.6Amortization of prior service cost
    
    
    0.9
    
    
    
    0.1
    
    
    
    1.6
    
    
    
    0.1Plan curtailment (gain)/loss
    
    
    
    
    
    
    (2.8
    )
    
    
    
    
    
    
    (12.7
    )Special termination benefits
    
    
    
    
    
    
    9.5
    
    
    
    
    
    
    
    10.7Net periodic benefit cost
    
    $
    19.0
    
    
    $
    18.6
    
    
    $
    37.8
    
    
    $
    30.9Defined contribution plan cost
    
    $
    1.8
    
    
    $
    1.8
    
    
    $
    3.5
    
    
    $
    3.6
 9




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Three
    
    ThreeMonths
    
    Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 26,
    
    June 27,
    
    June 26,
    
    June 27,Other Post-retirement Benefits
    
    2005
    
    2004
    
    2005
    
    2004($ in millions)Components of net periodic benefit
cost (income):Service cost
    
    $
    1.9
    
    
    $
    1.6
    
    
    $
    3.7
    
    
    $
    3.1Interest cost
    
    
    9.7
    
    
    
    9.7
    
    
    
    19.4
    
    
    
    19.1Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prior service cost recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Amortization of prior service cost
    
    
    0.6
    
    
    
    0.5
    
    
    
    1.2
    
    
    
    1.1Amortization of net (gain)/loss
    
    
    2.7
    
    
    
    0.5
    
    
    
    5.4
    
    
    
    0.9Plan curtailment (gain)/loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.7Special termination benefits
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    2.6Net periodic benefit cost
    
    $
    14.9
    
    
    $
    14.2
    
    
    $
    29.7
    
    
    $
    38.3
  Note 8  Commitments
 Warranty Reserves.
 WarrantyReserve($ in millions )Balance at December 31, 2003
    
    $
    10.6Warranty costs incurred
    
    
    (0.3
    )Additions charged to cost of sales:Warranties issued
    
    
    1.5Charges related to pre-existing warranties
    
    
    (1.6
    )Balance at December 31, 2004
    
    $
    10.2Warranty costs incurred
    
    
    (0.2
    )Additions charged to cost of sales:Warranties relieved
    
    
    (1.0
    )Charges related to pre-existing warranties
    
    
    0.1Balance at June 26, 2005
    
    $
    9.1
 10




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Note 9  Environmental Costs
    11




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##### Table of Contents



EnvironmentalLiability($ in millions)Balance at December 31, 2003
    
    $
    8.5Environmental costs incurred
    
    
    (2.7
    )Balance at December 31, 2004
    
    
    5.8Environmental costs incurred for the six months ending
June 26, 2005
    
    
    (1.2
    )Balance at June 26, 2005
    
    $
    4.6
 Note 10  Related Party Transactions
  Note 11  Guarantor Subsidiaries
  12




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Consolidating Balance Sheet
June 26, 2005
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    56.0
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    56.7Accounts receivable
    
    
    118.3
    
    
    
    14.4
    
    
    
    
    
    
    
    132.7Intercompany receivable
    
    
    17.2
    
    
    
    1.9
    
    
    
    (19.1
    )
    
    
    Inventories
    
    
    299.0
    
    
    
    13.0
    
    
    
    
    
    
    
    312.0Other current assets
    
    
    5.7
    
    
    
    0.2
    
    
    
    
    
    
    
    5.9Total current assets
    
    
    496.2
    
    
    
    30.2
    
    
    
    (19.1
    )
    
    
    507.3Property, plant and equipment, net
    
    
    404.1
    
    
    
    10.3
    
    
    
    
    
    
    
    414.4Goodwill, net
    
    
    464.0
    
    
    
    63.7
    
    
    
    
    
    
    
    527.7Identifiable intangible assets, net
    
    
    86.1
    
    
    
    
    
    
    
    
    
    
    
    86.1Investment in affiliated company
    
    
    78.6
    
    
    
    
    
    
    
    (78.6
    )
    
    
    Debt origination costs, net and other assets
    
    
    23.6
    
    
    
    0.1
    
    
    
    
    
    
    
    23.7Total assets
    
    $
    1,552.6
    
    
    $
    104.3
    
    
    $
    (97.7
    )
    
    $
    1,559.2Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable, trade
    
    $
    91.6
    
    
    $
    4.1
    
    
    $
    
    
    
    $
    95.7Accrued and other liabilities
    
    
    78.1
    
    
    
    0.8
    
    
    
    
    
    
    
    78.9Accrued payroll and employee benefits
    
    
    45.6
    
    
    
    1.2
    
    
    
    
    
    
    
    46.8Accrued
post-retirement benefits  current
    
    
    57.3
    
    
    
    
    
    
    
    
    
    
    
    57.3Accrued pension  current
    
    
    37.7
    
    
    
    
    
    
    
    
    
    
    
    37.7Current portion of long-term debt
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Intercompany payable
    
    
    1.9
    
    
    
    17.2
    
    
    
    (19.1
    )
    
    
    Capital lease obligations
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Accrued contract liabilities
    
    
    240.0
    
    
    
    
    
    
    
    
    
    
    
    240.0Total current liabilities
    
    
    556.2
    
    
    
    24.2
    
    
    
    (19.1
    )
    
    
    561.3Long-term liabilities:Accrued
post-retirement benefits
    
    
    492.1
    
    
    
    
    
    
    
    
    
    
    
    492.1Accrued pension
    
    
    439.1
    
    
    
    
    
    
    
    
    
    
    
    439.1Long-term bank debt, net of current portion
    
    
    420.0
    
    
    
    
    
    
    
    
    
    
    
    420.0Long-term bond debt
    
    
    270.0
    
    
    
    
    
    
    
    
    
    
    
    270.0Long-term capital lease obligations
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.5Other non-current liabilities
    
    
    88.5
    
    
    
    
    
    
    
    
    
    
    
    88.5Total liabilities
    
    
    2,265.9
    
    
    
    25.7
    
    
    
    (19.1
    )
    
    
    2,272.5Stockholders equity (deficit):Common stock, par value $0.01; 50,000,000 shares
authorized, 25,027,152 issued and outstanding
in 2005
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    418.1
    
    
    
    80.3
    
    
    
    (80.3
    )
    
    
    418.1Shares held in rabbi trust
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Stockholders loans
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    (2.3
    )Accumulated deficit
    
    
    (533.3
    )
    
    
    (1.7
    )
    
    
    1.7
    
    
    
    (533.3
    )Accumulated other comprehensive loss
    
    
    (594.2
    )
    
    
    
    
    
    
    
    
    
    
    (594.2
    )Total stockholders equity (deficit)
    
    
    (713.3
    )
    
    
    78.6
    
    
    
    (78.6
    )
    
    
    (713.3
    )Total liabilities and stockholders equity (deficit)
    
    $
    1,552.6
    
    
    $
    104.3
    
    
    $
    (97.7
    )
    
    $
    1,559.2
 13




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##### Table of Contents



Consolidating Balance Sheet
December 31, 2004
($ in millions)
 Guarantor
    
    IntercompanyVought (1)
    
    Subsidiary (1)
    
    Eliminations
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    128.6
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    128.9Accounts receivable
    
    
    112.1
    
    
    
    11.1
    
    
    
    
    
    
    
    123.2Intercompany receivable
    
    
    19.6
    
    
    
    3.2
    
    
    
    (22.8
    )
    
    
    Inventories
    
    
    266.6
    
    
    
    12.7
    
    
    
    
    
    
    
    279.3Other current assets
    
    
    6.8
    
    
    
    0.4
    
    
    
    
    
    
    
    7.2Total current assets
    
    
    533.7
    
    
    
    27.7
    
    
    
    (22.8
    )
    
    
    538.6Property, plant and equipment, net
    
    
    395.7
    
    
    
    12.0
    
    
    
    
    
    
    
    407.7Goodwill, net
    
    
    464.0
    
    
    
    63.7
    
    
    
    
    
    
    
    527.7Identifiable intangible assets, net
    
    
    91.5
    
    
    
    
    
    
    
    
    
    
    
    91.5Investment in affiliated company
    
    
    74.9
    
    
    
    
    
    
    
    (74.9
    )
    
    
    Debt origination costs, net and other assets
    
    
    23.4
    
    
    
    0.1
    
    
    
    
    
    
    
    23.5Total assets
    
    $
    1,583.2
    
    
    $
    103.5
    
    
    $
    (97.7
    )
    
    $
    1,589.0Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable, trade
    
    $
    97.4
    
    
    $
    3.3
    
    
    
    
    
    
    $
    100.7Accrued and other liabilities
    
    
    88.4
    
    
    
    1.6
    
    
    
    
    
    
    
    90.0Accrued payroll and employee benefits
    
    
    50.2
    
    
    
    1.2
    
    
    
    
    
    
    
    51.4Accrued
post-retirement benefits  current
    
    
    57.3
    
    
    
    
    
    
    
    
    
    
    
    57.3Accrued pension  current
    
    
    27.2
    
    
    
    
    
    
    
    
    
    
    
    27.2Current portion of long-term debt
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Intercompany payable
    
    
    3.2
    
    
    
    19.6
    
    
    
    (22.8
    )
    
    
    Capital lease obligations
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Accrued contract liabilities
    
    
    142.0
    
    
    
    
    
    
    
    
    
    
    
    142.0Total current liabilities
    
    
    469.7
    
    
    
    26.6
    
    
    
    (22.8
    )
    
    
    473.5Long-term liabilities:Accrued
post-retirement benefits
    
    
    486.9
    
    
    
    
    
    
    
    
    
    
    
    486.9Accrued pension
    
    
    420.7
    
    
    
    
    
    
    
    
    
    
    
    420.7Long-term bank debt, net of current portion
    
    
    421.0
    
    
    
    
    
    
    
    
    
    
    
    421.0Long-term bond debt
    
    
    270.0
    
    
    
    
    
    
    
    
    
    
    
    270.0Long-term capital lease obligations
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Other non-current liabilities
    
    
    69.4
    
    
    
    
    
    
    
    
    
    
    
    69.4Total liabilities
    
    
    2,137.7
    
    
    
    28.6
    
    
    
    (22.8
    )
    
    
    2,143.5Stockholders equity (deficit):Common stock, par value $0.01; 50,000,000 shares
authorized, 25,015,552 issued and outstanding
in 2004
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    418.0
    
    
    
    80.3
    
    
    
    (80.3
    )
    
    
    418.0Shares held in rabbi trust
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Stockholders loans
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    (2.3
    )Accumulated deficit
    
    
    (374.4
    )
    
    
    (5.4
    )
    
    
    5.4
    
    
    
    (374.4
    )Accumulated other comprehensive loss
    
    
    (594.2
    )
    
    
    
    
    
    
    
    
    
    
    (594.2
    )Total stockholders equity (deficit)
    
    
    (554.5
    )
    
    
    74.9
    
    
    
    (74.9
    )
    
    
    (554.5
    )Total liabilities and stockholders equity (deficit)
    
    $
    1,583.2
    
    
    $
    103.5
    
    
    $
    (97.7
    )
    
    $
    1,589.0
 
 (1)
    
    Effective January 1, 2004 the Company implemented a corporate reorganization of its
Aerostructures subsidiary. Pursuant to the reorganization, Aerostructures incorporated a new
subsidiary, entitled Contour Aerospace Corporation, a Delaware corporation (Contour). Then,
Aerostructures contributed its Everett, Washington facility and Brea, California facility to
Contour. Contemporaneous with the contribution of these assets and operations to Contour,
Aerostructures merged with and into Vought Aircraft Industries, Inc., so that the remaining
operating assets of Aerostructures are integrated with the ongoing operations of Vought. As a
result of the reorganization, beginning in 2004, Aerostructures does not exist as a separate
corporate entity and Contour is a direct subsidiary of Vought. Under the 8% Senior Notes due 2011,
Contour is a guarantor on a fully and unconditionally and jointly and severally on a senior
unsecured basis. 14




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##### Table of Contents



Consolidating Statement of Operations
Three Months Ended June 26, 2005
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalNet sales
    
    $
    340.3
    
    
    $
    19.4
    
    
    $
    (2.7
    )
    
    $
    357.0Costs and expensesCost of sales
    
    
    355.8
    
    
    
    16.7
    
    
    
    (2.7
    )
    
    
    369.8Selling, general and administrative expenses
    
    
    77.2
    
    
    
    0.6
    
    
    
    
    
    
    
    77.8Asset impairment
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Total costs and expenses
    
    
    438.9
    
    
    
    17.3
    
    
    
    (2.7
    )
    
    
    453.5Operating income (loss)
    
    
    (98.6
    )
    
    
    2.1
    
    
    
    
    
    
    
    (96.5
    )Other income (expense)Interest income
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Other income (loss)
    
    
    (0.7
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.8
    )Interest expense
    
    
    (12.6
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (12.7
    )Equity in income of consolidated subsidiaries
    
    
    1.9
    
    
    
    
    
    
    
    (1.9
    )
    
    
    Income (loss) before income taxes
    
    
    (109.1
    )
    
    
    1.9
    
    
    
    (1.9
    )
    
    
    (109.1
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (109.1
    )
    
    $
    1.9
    
    
    $
    (1.9
    )
    
    $
    (109.1
    )
 Consolidating Statement of Operations
Three Months Ended June 27, 2004
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalNet sales
    
    $
    278.8
    
    
    $
    17.4
    
    
    $
    (2.0
    )
    
    $
    294.2Costs and expensesCost of sales
    
    
    226.0
    
    
    
    12.5
    
    
    
    (2.0
    )
    
    
    236.5Selling, general and administrative expenses
    
    
    61.8
    
    
    
    1.2
    
    
    
    
    
    
    
    63.0Total costs and expenses
    
    
    287.8
    
    
    
    13.7
    
    
    
    (2.0
    )
    
    
    299.5Operating income (loss)
    
    
    (9.0
    )
    
    
    3.7
    
    
    
    
    
    
    
    (5.3
    )Other income (expense)Interest income
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.6Interest expense
    
    
    (10.0
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (10.1
    )Equity in income of consolidated subsidiaries
    
    
    3.6
    
    
    
    
    
    
    
    (3.6
    )
    
    
    Income (loss) before income taxes
    
    
    (14.8
    )
    
    
    3.6
    
    
    
    (3.6
    )
    
    
    (14.8
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (14.8
    )
    
    $
    3.6
    
    
    $
    (3.6
    )
    
    $
    (14.8
    )
 15




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##### Table of Contents



Consolidating Statement of Operations
Six Months Ended June 26, 2005
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalNet sales
    
    $
    593.2
    
    
    $
    38.7
    
    
    $
    (5.1
    )
    
    $
    626.8Costs and expensesCost of sales
    
    
    582.2
    
    
    
    33.3
    
    
    
    (5.1
    )
    
    
    610.4Selling, general and administrative expenses
    
    
    143.8
    
    
    
    1.5
    
    
    
    
    
    
    
    145.3Asset impairment
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Total costs and expenses
    
    
    731.9
    
    
    
    34.8
    
    
    
    (5.1
    )
    
    
    761.6Operating income (loss)
    
    
    (138.7
    )
    
    
    3.9
    
    
    
    
    
    
    
    (134.8
    )Other income (expense)Interest income
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    1.6Other income (loss)
    
    
    (0.8
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.9
    )Interest expense
    
    
    (24.7
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (24.8
    )Equity in income of consolidated subsidiaries
    
    
    3.7
    
    
    
    
    
    
    
    (3.7
    )
    
    
    Income (loss) before income taxes
    
    
    (158.9
    )
    
    
    3.7
    
    
    
    (3.7
    )
    
    
    (158.9
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (158.9
    )
    
    $
    3.7
    
    
    $
    (3.7
    )
    
    $
    (158.9
    )
 Consolidating Statement of Operations
Six Months Ended June 27, 2004
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalNet sales
    
    $
    560.3
    
    
    $
    32.5
    
    
    $
    (3.7
    )
    
    $
    589.1Costs and expensesCost of sales
    
    
    458.6
    
    
    
    28.3
    
    
    
    (3.7
    )
    
    
    483.2Selling, general and administrative expenses
    
    
    123.3
    
    
    
    2.4
    
    
    
    
    
    
    
    125.7Total costs and expenses
    
    
    581.9
    
    
    
    30.7
    
    
    
    (3.7
    )
    
    
    608.9Operating income (loss)
    
    
    (21.6
    )
    
    
    1.8
    
    
    
    
    
    
    
    (19.8
    )Other income (expense)Interest income
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    1.1Interest expense
    
    
    (19.6
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    (19.8
    )Equity in income of consolidated subsidiaries
    
    
    1.6
    
    
    
    
    
    
    
    (1.6
    )
    
    
    Income (loss) before income taxes
    
    
    (38.5
    )
    
    
    1.6
    
    
    
    (1.6
    )
    
    
    (38.5
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (38.5
    )
    
    $
    1.6
    
    
    $
    (1.6
    )
    
    $
    (38.5
    )
 16




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##### Table of Contents



Consolidating Statement of Cash Flows
Six Months Ended June 26, 2005
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalOperating activitiesNet income (loss)
    
    $
    (158.9
    )
    
    $
    3.7
    
    
    $
    (3.7
    )
    
    $
    (158.9
    )Adjustments
to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation & amortization
    
    
    34.8
    
    
    
    2.0
    
    
    
    
    
    
    
    36.8Asset impairment
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Loss from
asset sales
    
    
    4.2
    
    
    
    0.1
    
    
    
    
    
    
    
    4.3Income from investment in consolidated subsidiaries
    
    
    (3.7
    )
    
    
    
    
    
    
    3.7
    
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    (6.2
    )
    
    
    (3.3
    )
    
    
    
    
    
    
    (9.5
    )Intercompany accounts receivable
    
    
    2.4
    
    
    
    1.3
    
    
    
    (3.7
    )
    
    
    Inventories, net of advance and progress billings
    
    
    (32.4
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (32.7
    )Other current assets
    
    
    1.1
    
    
    
    0.2
    
    
    
    
    
    
    
    1.3Accounts payable, trade
    
    
    (5.8
    )
    
    
    0.8
    
    
    
    
    
    
    
    (5.0
    )Intercompany accounts payable
    
    
    (1.3
    )
    
    
    (2.4
    )
    
    
    3.7
    
    
    
    Accrued payroll and employee benefits
    
    
    (4.6
    )
    
    
    
    
    
    
    
    
    
    
    (4.6
    )Accrued and other liabilities
    
    
    0.2
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.6
    )Accrued contract liabilities
    
    
    98.0
    
    
    
    
    
    
    
    
    
    
    
    98.0Other assets and liabilities  long-term
    
    
    41.0
    
    
    
    (0.1
    )
    
    
    
    
    
    
    40.9Net cash provided by (used in) operating activities
    
    
    (25.3
    )
    
    
    1.2
    
    
    
    
    
    
    
    (24.1
    )Investing activitiesCapital expenditures
    
    
    (46.4
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (46.7
    )Net cash used in investing activities
    
    
    (46.4
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (46.7
    )Financing activitiesPayments on long-term bank debt
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (1.0
    )Payments on capital leases
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.5
    )Proceeds from sale of common stock
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Net cash used in financing activities
    
    
    (0.9
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    (1.4
    )Net increase (decrease) in cash and cash equivalents
    
    
    (72.6
    )
    
    
    0.4
    
    
    
    
    
    
    
    (72.2
    )Cash and cash equivalents at beginning of period
    
    
    128.6
    
    
    
    0.3
    
    
    
    
    
    
    
    128.9Cash and cash equivalents at end of period
    
    $
    56.0
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    56.7
 17




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##### Table of Contents



Consolidating Statement of Cash Flows
Six Months Ended June 27, 2004
($ in millions) (Unaudited)
 Guarantor
    
    IntercompanyVought
    
    Subsidiary
    
    Eliminations
    
    TotalOperating activitiesNet income (loss)
    
    $
    (38.5
    )
    
    $
    1.6
    
    
    $
    (1.6
    )
    
    $
    (38.5
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation & amortization
    
    
    41.5
    
    
    
    2.1
    
    
    
    
    
    
    
    43.6Loss from asset sales
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.5Income from investment in consolidated subsidiaries
    
    
    (1.6
    )
    
    
    
    
    
    
    1.6
    
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    2.2
    
    
    
    (6.9
    )
    
    
    
    
    
    
    (4.7
    )Intercompany accounts receivable
    
    
    (12.7
    )
    
    
    (1.4
    )
    
    
    14.1
    
    
    
    Inventories, net of advance and progress billings
    
    
    (11.5
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (12.2
    )Other current assets
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    0.7Accounts payable, trade
    
    
    23.9
    
    
    
    (1.5
    )
    
    
    
    
    
    
    22.4Intercompany accounts payable
    
    
    1.4
    
    
    
    12.7
    
    
    
    (14.1
    )
    
    
    Accrued payroll and employee benefits
    
    
    (6.1
    )
    
    
    0.1
    
    
    
    
    
    
    
    (6.0
    )Accrued and other liabilities
    
    
    (1.8
    )
    
    
    0.4
    
    
    
    
    
    
    
    (1.4
    )Accrued contract liabilities
    
    
    5.5
    
    
    
    (4.1
    )
    
    
    
    
    
    
    1.4Other assets and liabilities  long-term
    
    
    66.8
    
    
    
    
    
    
    
    
    
    
    
    66.8Net cash provided by operating activities
    
    
    71.3
    
    
    
    2.3
    
    
    
    
    
    
    
    73.6Investing activitiesCapital expenditures
    
    
    (15.2
    )
    
    
    (1.1
    )
    
    
    
    
    
    
    (16.3
    )Net cash used in investing activities
    
    
    (15.2
    )
    
    
    (1.1
    )
    
    
    
    
    
    
    (16.3
    )Financing activitiesPayments on capital leases
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    (1.1
    )Net cash used in financing activities
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    (1.1
    )Net increase in cash and cash equivalents
    
    
    56.1
    
    
    
    0.1
    
    
    
    
    
    
    
    56.2Cash and cash equivalents at beginning of period
    
    
    106.4
    
    
    
    
    
    
    
    
    
    
    
    106.4Cash and cash equivalents at end of period
    
    $
    162.5
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    162.6
 18




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Note 12  Subsequent Events
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following section may include forward-looking statements that involve inherent risks and
uncertainties. A number of important factors could cause actual results to differ materially from
those in the forward-looking statements. These factors include (i) reduced demand for new
commercial aircraft due to reduction in airline traffic, (ii) business risks inherent to the
airline industry including armed conflict, terrorism, global health warnings, government
regulation, rising fuel and labor costs, lower than expected profitability, and general economic
conditions and (iii) reduced demand for military aircraft due to reductions in defense spending,
cancellation or modification of military aircraft programs and changes to government export
controls. Managements discussion and analysis of financial condition and results of operations
should be read in conjunction with the financial statements of Vought and the accompanying notes
contained therein.
 Recent Events
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##### Table of Contents



Results of Operations
 Three
    

    
    
    
    
    Three
    
    
    Six
    
    
    
    
    
    SixMonths
    
    
    
    
    
    Months
    
    
    Months
    
    
    
    
    
    MonthsEnded
    
    Percentage
    
    Ended
    
    
    Ended
    
    Percentage
    
    EndedJune 26,
    
    Change to
    
    June 27,
    
    
    June 26,
    
    Change to
    
    June 27,2005
    
    Prior Year
    
    2004
    
    
    2005
    
    Prior Year
    
    2004(in millions)
    
    
    (in millions)Net sales:Commercial
    
    $
    183.9
    
    
    
    34.3
    %
    
    $
    136.9
    
    
    
    $
    318.0
    
    
    
    15.6
    %
    
    $
    275.0Military
    
    
    115.3
    
    
    
    9.2
    %
    
    
    105.6
    
    
    
    
    205.1
    
    
    
    (3.9
    )%
    
    
    213.4Business Jets
    
    
    57.8
    
    
    
    11.8
    %
    
    
    51.7
    
    
    
    
    103.7
    
    
    
    3.0
    %
    
    
    100.7Total net sales
    
    $
    357.0
    
    
    
    21.3
    %
    
    $
    294.2
    
    
    
    $
    626.8
    
    
    
    6.4
    %
    
    $
    589.1Costs and expenses:Cost of sales
    
    
    369.8
    
    
    
    56.4
    %
    
    
    236.5
    
    
    
    
    610.4
    
    
    
    26.3
    %
    
    
    483.2Selling, general and
administrative
    
    
    77.8
    
    
    
    23.5
    %
    
    
    63.0
    
    
    
    
    145.3
    
    
    
    15.6
    %
    
    
    125.7Asset impairment
    
    
    5.9
    
    
    
    100.0
    %
    
    
    
    
    
    
    
    5.9
    
    
    
    100.0
    %
    
    
    Total costs and expenses
    
    $
    453.5
    
    
    
    51.4
    %
    
    
    299.5
    
    
    
    $
    761.6
    
    
    
    25.1
    %
    
    $
    608.9Operating loss
    
    
    (96.5
    )
    
    
    1,720.8
    %
    
    
    (5.3
    )
    
    
    
    (134.8
    )
    
    
    580.8
    %
    
    
    (19.8
    )Other income (loss)
    
    
    (0.8
    )
    
    
    100.0
    %
    
    
    
    
    
    
    
    (0.9
    )
    
    
    100.0
    %
    
    
    Interest expense, net
    
    
    (11.8
    )
    
    
    24.2
    %
    
    
    (9.5
    )
    
    
    
    (23.2
    )
    
    
    24.1
    %
    
    
    (18.7
    )Net loss
    
    $
    (109.1
    )
    
    
    637.2
    %
    
    $
    (14.8
    )
    
    
    $
    (158.9
    )
    
    
    312.7
    %
    
    $
    (38.5
    )
 Comparison of Results of Operations for the Three Months Ended June 26, 2005 and June 27, 2004
 Net sales
 
    
    Commercial net sales increased by approximately $47.0 million or 34% as a result of
a increase in sales of $42.1 million from Boeing contracts due to higher aircraft
delivery rates, accompanied by an increase of $3.9 million on our Airbus contracts also
due to increased aircraft delivery rates.
    
    Military net sales increased approximately $9.7 million or 9% primarily due to
increased delivery rates for the V-22 Empennage Ramp program.
    
    Business Jet net sales increased by approximately $6.1 million or 12% primarily due
to increased delivery rates on the Gulfstream IV program.
 Cost of sales
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Selling, general and administrative expenses
 Operating income (loss)
 Interest expense, net
 Comparison of Results of Operations for the Six Months Ended June 26, 2005 and June 27, 2004
 Net sales
 
    
    Commercial net sales increased by approximately $43.0 million or 16% as a result of
a increase in sales of $25.0 million from Boeing contracts due to higher aircraft
delivery rates, accompanied by an increase of $14.8 million resulting from increased
delivery rates on our Airbus contracts and a $3.9 million increase from Embraer
contracts due to increased pricing.
    
    Military net sales decreased by approximately $8.3 million or (4%) primarily due to
lower selling prices for the C-17 program, partially offset by increased delivery rates
on the V-22 Empennage Ramp program.
    
    Business Jet net sales increased by approximately $3.0 million or 3% due to
increased delivery rates on the Gulfstream IV program.
 Cost of sales
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Selling, general and administrative expenses
 Operating income (loss)
 Interest expense, net
 Critical Accounting Policies
  Liquidity and Capital Resources
   23




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24




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Debt Covenants.
  25




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        Interest Rate Risks
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Utility Price Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
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FORWARD-LOOKING STATEMENTS
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 (a) Exhibits
 (31.1)*
    
    Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.(31.2)*
    
    Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.(32.1)*
    
    Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.(32.2)*
    
    Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 28




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SIGNATURES
  Vought Aircraft Industries, Inc.(Registrant)August 10, 2005
    
    /s/ Lloyd R. Sorenson(Date)
    
    Lloyd R. SorensonExecutive Vice President and Chief Financial Officer(Principal Financial Officer and Authorized Officer)
 29