##### 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 28, 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 333-112528
 Vought Aircraft Industries, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    75-2884072(State of Incorporation)
    
    (I.R.S. Employer Identification Number)
 201 East John Carpenter Freeway, Tower 1, Suite 900
Irving, Texas
    
    75062(Address of Principal Executive Offices)
    
    (Zip Code)
 (972) 946-2011
 (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated
filer þ
(Do not check if a smaller reporting company)
Smaller Reporting Company o o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1
    
    Interim Unaudited Condensed Consolidated Financial Statements
    
    
    4Consolidated Balance Sheets
    
    
    4Consolidated Statements of Operations
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to the Interim Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Managements Discussion And Analysis Of Financial Condition And Results Of Operations
    
    
    30Item 3
    
    Quantitative And Qualitative Disclosures About Market Risk
    
    
    45Item 4
    
    Controls And Procedures
    
    
    47PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    48Item 1A
    
    Risk Factors
    
    
    48Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3
    
    Defaults Upon Senior Securities
    
    
    48Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    48Item 5
    
    Other Information
    
    
    48Item 6
    
    Exhibits
    
    
    49Signatures
    
    
    50EX-31.1EX-31.2EX-32.1EX-32.2
  2




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Cautionary Statement Regarding Forward Looking Statements
   
    
    global and domestic financial market conditions and the results of financing efforts;
    
    market risks related to the refinancing of our indebtedness;
    
    competition;
    
    operating risks and the amounts and timing of revenues and expenses;
    
    project delays or cancellations;
    
    product liability claims;
    
    global and domestic market or business conditions and fluctuations in demand for our
products and services;
    
    the impact of recent and future federal and state regulatory proceedings and changes,
including changes in environmental and other laws and regulations to which we are subject,
as well as changes in the application of existing laws and regulations;
    
    political, legal, regulatory, governmental, administrative and economic conditions and
developments in the United States and internationally;
    
    the effect of and changes in economic conditions in the areas in which we operate;
    
    returns on pension assets and impacts of future discount rate changes on pension
obligations;
    
    environmental constraints on operations and environmental liabilities arising out of
past or present operations;
    
    current and future litigation;
    
    the direct or indirect impact on our companys business resulting from terrorist
incidents or responses to such incidents, including the effect on the availability of and
premiums on insurance; and
    
    weather and other natural phenomena.
 3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 Vought Aircraft Industries, Inc.
Consolidated Balance Sheets
(dollars in millions, except par value per share )
 June 28,2009
    
    
    December 31,(unaudited)
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    124.8
    
    
    $
    86.7Trade and other receivables
    
    
    160.0
    
    
    
    138.6Inventories
    
    
    544.9
    
    
    
    444.4Other current assets
    
    
    6.5
    
    
    
    4.7Total current assets
    
    
    836.2
    
    
    
    674.4Property, plant and equipment, net
    
    
    477.7
    
    
    
    484.3Goodwill
    
    
    527.7
    
    
    
    527.7Identifiable intangible assets, net
    
    
    23.8
    
    
    
    27.2Debt origination costs, net and other assets
    
    
    10.5
    
    
    
    14.0Total assets
    
    $
    1,875.9
    
    
    $
    1,727.6Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable, trade
    
    $
    156.0
    
    
    $
    177.0Accrued and other liabilities
    
    
    78.8
    
    
    
    63.7Accrued payroll and employee benefits
    
    
    46.2
    
    
    
    48.7Accrued post-retirement benefits-current
    
    
    42.2
    
    
    
    42.0Accrued pension-current
    
    
    0.6
    
    
    
    0.3Current portion of long-term bank debt
    
    
    140.9
    
    
    
    5.9Accrued contract liabilities
    
    
    176.1
    
    
    
    201.4Total current liabilities
    
    
    640.8
    
    
    
    539.0Long-term liabilities:Accrued post-retirement benefits
    
    
    371.2
    
    
    
    405.3Accrued pension
    
    
    682.4
    
    
    
    710.7Long-term bank debt, net of current portion
    
    
    618.9
    
    
    
    594.0Long-term bond debt
    
    
    270.0
    
    
    
    270.0Other non-current liabilities
    
    
    136.7
    
    
    
    142.7Total liabilities
    
    
    2,720.0
    
    
    
    2,661.7Stockholders equity (deficit):Common stock, par value $.01 per share;
50,000,000 shares authorized, 24,818,806 and
24,798,382 issued and outstanding at June 28,
2009 and December 31, 2008, respectively
    
    
    0.3
    
    
    
    0.3Additional paid-in capital
    
    
    421.7
    
    
    
    420.5Shares held in rabbi trust
    
    
    (1.6
    )
    
    
    (1.6
    )Accumulated deficit
    
    
    (459.3
    )
    
    
    (501.3
    )Accumulated other comprehensive loss
    
    
    (805.2
    )
    
    
    (852.0
    )Total stockholders equity (deficit)
    
    $
    (844.1
    )
    
    $
    (934.1
    )Total liabilities and stockholders equity (deficit)
    
    $
    1,875.9
    
    
    $
    1,727.6
 See accompanying notes
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Vought Aircraft Industries, Inc.
Consolidated Statements of Operations
(unaudited, in millions)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    491.5
    
    
    $
    480.7
    
    
    $
    894.1
    
    
    $
    906.1Costs and expensesCost of sales
    
    
    422.2
    
    
    
    377.1
    
    
    
    754.6
    
    
    
    703.4Selling, general and
administrative expenses
    
    
    36.6
    
    
    
    55.7
    
    
    
    74.1
    
    
    
    110.0Total costs and expenses
    
    
    458.8
    
    
    
    432.8
    
    
    
    828.7
    
    
    
    813.4Operating income
    
    
    32.7
    
    
    
    47.9
    
    
    
    65.4
    
    
    
    92.7Other income (expense)Interest income
    
    
    0.2
    
    
    
    0.9
    
    
    
    0.4
    
    
    
    1.0Other gain (loss)
    
    
    
    
    
    
    47.1
    
    
    
    
    
    
    
    47.1Equity in loss of joint venture
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.6
    )Interest expense
    
    
    (8.8
    )
    
    
    (16.4
    )
    
    
    (23.8
    )
    
    
    (32.2
    )Income before income taxes
    
    
    24.1
    
    
    
    79.3
    
    
    
    42.0
    
    
    
    108.0Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    24.1
    
    
    $
    79.3
    
    
    $
    42.0
    
    
    $
    108.0
 See accompanying notes
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Vought Aircraft Industries, Inc.
Consolidated Statements of Cash Flows
(unaudited, in millions)
 Six Months EndedJune 28,
    
    
    June 29,2009
    
    
    2008Operating activitiesNet income
    
    $
    42.0
    
    
    $
    108.0Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    35.5
    
    
    
    32.8Stock compensation expense
    
    
    0.7
    
    
    
    1.4Equity in losses of joint venture
    
    
    
    
    
    
    0.6(Gain) Loss from asset disposals
    
    
    1.9
    
    
    
    (48.5
    )Changes in current assets and liabilities:Trade and other receivables
    
    
    (21.4
    )
    
    
    (39.8
    )Inventories
    
    
    (100.5
    )
    
    
    26.4Other current assets
    
    
    (1.8
    )
    
    
    (3.1
    )Accounts payable, trade
    
    
    (21.0
    )
    
    
    (38.1
    )Accrued payroll and employee benefits
    
    
    (2.5
    )
    
    
    (3.3
    )Accrued and other liabilities
    
    
    16.1
    
    
    
    (5.6
    )Accrued contract liabilities
    
    
    (25.3
    )
    
    
    (45.2
    )Other assets and liabilitieslong-term
    
    
    (18.8
    )
    
    
    (23.3
    )Net cash provided by (used in) operating activities
    
    
    (95.1
    )
    
    
    (37.7
    )Investing activitiesCapital expenditures
    
    
    (25.3
    )
    
    
    (32.8
    )Proceeds from sale of joint venture
    
    
    
    
    
    
    55.0Net cash provided by (used in) investing activities
    
    
    (25.3
    )
    
    
    22.2Financing activitiesProceeds from short-term bank debt
    
    
    135.0
    
    
    
    153.0Payments on short-term bank debt
    
    
    
    
    
    
    (153.0
    )Proceeds from long-term bank debt
    
    
    25.0
    
    
    
    184.6Payments on long-term bank debt
    
    
    (1.5
    )
    
    
    (1.0
    )Proceeds from sale of common stock
    
    
    
    
    
    
    0.1Net cash provided by (used in) financing activities
    
    
    158.5
    
    
    
    183.7Net increase (decrease) in cash and cash equivalents
    
    
    38.1
    
    
    
    168.2Cash and cash equivalents at beginning of period
    
    
    86.7
    
    
    
    75.6Cash and cash equivalents at end of period
    
    $
    124.8
    
    
    $
    243.8
 See accompanying notes
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Vought Aircraft Industries, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statemen  Period Ending June 28, 2009
 Note 1  Organization and Basis of Presentation
      7




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Note 2
 Recent Accounting Pronouncements
 Business Combinations
 Employers Disclosures about Postretirement
Benefit Plan Assets
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
 8




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Note 3  Inventories
   June 28,
    
    
    December 31,2009
    
    
    2008(in millions)Production costs of contracts in process
    
    $
    1,179.3
    
    
    $
    998.1Finished goods
    
    
    2.8
    
    
    
    2.9Less: unliquidated progress payments
    
    
    (637.2
    )
    
    
    (556.6
    )Total inventories
    
    $
    544.9
    
    
    $
    444.4
  Note 4  Goodwill and Intangible Assets
 Note 4  Goodwill and Intangible Assets
 SFAS 142 Goodwill and Other Intangible Assets
   9




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June 28,
    
    
    December 31,2009
    
    
    2008(in millions)Programs and contracts
    
    $
    137.3
    
    
    $
    137.3Less: accumulated amortization
    
    
    (113.5
    )
    
    
    (110.1
    )Identifiable intangible assets, net
    
    $
    23.8
    
    
    $
    27.2
  (in millions)2009
    
    $
    3.42010
    
    
    4.82011
    
    
    2.12012
    
    
    2.12013
    
    
    2.1Thereafter
    
    
    9.3Total remaining amortization of identifiable
intangible assets
    
    $
    23.8
 10




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Note 5  Pension and Other Post-retirement Benefits
  Pension Benefits
    
    
    Other Post-retirement BenefitsThree Months Ended
    
    
    Six Months Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)Components of
net periodic
benefit cost
(income):Service cost
    
    $
    4.7
    
    
    $
    4.7
    
    
    $
    8.7
    
    
    $
    9.5
    
    
    $
    0.9
    
    
    $
    1.2
    
    
    $
    1.9
    
    
    $
    2.5Interest cost
    
    
    29.2
    
    
    
    27.5
    
    
    
    57.4
    
    
    
    54.8
    
    
    
    6.3
    
    
    
    7.2
    
    
    
    12.7
    
    
    
    14.9Expected
return on
plan assets
    
    
    (31.3
    )
    
    
    (31.0
    )
    
    
    (62.7
    )
    
    
    (62.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization
of net
(gain) loss
    
    
    11.4
    
    
    
    6.9
    
    
    
    21.2
    
    
    
    13.8
    
    
    
    0.3
    
    
    
    1.4
    
    
    
    0.7
    
    
    
    2.7Amortization
of prior
service cost
    
    
    3.1
    
    
    
    2.9
    
    
    
    6.2
    
    
    
    5.9
    
    
    
    (6.4
    )
    
    
    (5.4
    )
    
    
    (12.5
    )
    
    
    (9.2
    )Prior
service
costs
recognized 
curtailment
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    Plan
settlement
or
curtailment
(gain) loss
(a)
    
    
    
    
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.4
    
    
    
    Net periodic
benefit cost
    
    $
    17.1
    
    
    $
    11.0
    
    
    $
    37.2
    
    
    $
    21.9
    
    
    $
    1.1
    
    
    $
    4.4
    
    
    $
    6.0
    
    
    $
    10.9Defined
contribution
plans cost
    
    $
    5.0
    
    
    $
    4.6
    
    
    $
    9.6
    
    
    $
    9.3
  
    
    During February and April of 2008, two of our union represented groups ratified new
collective bargaining agreements. Those agreements each provide for a freeze in pension
benefit accruals, effective December 31, 2008, for bargaining unit employees who, as of
December 31, 2007, had less than 16 years of bargaining unit seniority. Employees subject
to the pension freeze, and any employees hired on or after March 1, 2008 for the first
group and April 1, 2008 for the second group, receive a defined contribution benefit. The
agreements provided for a one-time retirement incentive program offered to eligible
employees during 2008. The agreements also provide for certain modifications to the
retiree medical benefits for bargaining unit retirees and eliminated retiree medical
coverage for any bargaining unit employees hired on or after January 1, 2008.
    
    Also, during the six months ended June 29, 2008, we announced amendments to medical
plans for two groups of non-represented, current retirees. Effective January 1, 2008,
medical coverage for participants in those two groups is eliminated at age 65 and replaced
with a fixed monthly stipend.
    
    The aforementioned changes in 2008 led to remeasurement of affected plans assets and
obligations as of March 31, 2008, which resulted in a $14.9 million increase in unfunded
liability for the affected pension plans and a $44.1 million decrease in liability for the
affected OPEB plans. These impacts were recorded in the three month period ended June 29,
2008.
 11




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
    
    During January of 2009, the IAM-represented employees at our Nashville facility
ratified a new collective bargaining agreement. That agreement provides for certain
benefit changes, including a freeze in pension benefit accruals, effective June 30, 2009,
for bargaining unit employees who, as of that date, have less than 16 years of bargaining
unit seniority. Employees subject to the pension freeze, and any bargaining unit
employees hired on or after September 29, 2008, will receive a defined contribution
benefit. The agreement provides for a one-time company paid retirement incentive program
offered to eligible employees during 2009 and certain modifications to retiree medical
benefits for bargaining unit retirees. These changes led to a remeasurement of the
affected plans assets and obligations as of January 31, 2009, which increased our
unfunded liability for the pension plan by $1.5 million, decreased our liability for the
OPEB plan by $32.7 million and led to the immediate recognition of $9.6 million of net
non-recurring charges due to a curtailment.
  Note 6
 Commitments
 Warranty Reserve.
 :
 WarrantyReserve($ in millions)Balance at December 31, 2007
    
    $
    7.2Warranty costs incurred
    
    
    (0.6
    )Provisions for warranties
    
    
    9.5Balance at December 31, 2008
    
    $
    16.1Warranty costs incurred
    
    
    (1.2
    )Provisions for warranties
    
    
    0.3Balance at June 28, 2009
    
    $
    15.2Consolidated Balance Sheet classificationAccrued and other liabilities
    
    
    1.5Other non-current liabilities
    
    
    13.7
 Note 7
 Environmental Contingencies
  12




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EnvironmentalLiability($ in millions)Balance at December 31, 2007
    
    $
    3.8Environmental costs incurred
    
    
    (0.6
    )Balance at December 31, 2008
    
    
    3.2Environmental costs incurred
    
    
    (0.3
    )Balance at June 28, 2009
    
    $
    2.9Consolidated Balance Sheet
classificationAccrued and other liabilities
    
    
    0.6Other non-current liabilities
    
    
    2.3
 13




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Note 8
 Other Non-Current Liabilities
  June 28,
    
    
    December 31,2009
    
    
    2008(in millions)Deferred income from the sale of
Hawthorne facility (a)
    
    $
    11.6
    
    
    $
    11.6State of South Carolina grant monies (b)
    
    
    59.5
    
    
    
    61.0State of Texas grant monies ( c)
    
    
    32.9
    
    
    
    35.0Accrued workers compensation
    
    
    14.6
    
    
    
    14.9Accrued warranties
    
    
    13.7
    
    
    
    15.6Other
    
    
    4.4
    
    
    
    4.6Total other non-current liabilities
    
    $
    136.7
    
    
    $
    142.7
 
 (a)
    
    In July 2005, we sold our Hawthorne facility and concurrently signed an agreement
to lease back a certain portion of the facility from July 2005 to December 2010, with
two additional five-year renewal options. Due to certain contractual obligations, which
required our continuing involvement in the facility, this transaction was initially
recorded as a financing transaction and not as a sale. The cash received in July 2005 of
$52.6 million was recorded as a deferred liability on our balance sheet in other
non-current liabilities.During the fiscal year ended December 31, 2008, we increased the deferred liability
balance for a $3.0 million refund from escrow. Additionally, we determined that certain
contractual obligations related to the portion of the facility which we have vacated were
completed and we recognized $44.0 million of the deferred income balance. We also wrote
off the fixed assets related to this portion of the facility resulting in a $1.6 million
gain that was recorded in our
Consolidated Statement of Operations for the three month period ended September 28, 2008.
The $11.6 million liability related to the portion of the Hawthorne facility that we
continue to lease will remain on our balance sheet until the related contractual
obligations are fulfilled or the obligations expire.(b)
    
    With the activation of the South Carolina plant in June 2006, we began
recognizing a portion of the State of South Carolina grant monies as a reduction of
depreciation expense, which amounted to $1.6 million and $1.7 million for the six months
ended June 28, 2009 and June 29, 2008, respectively. Additionally, during the six month
period ended June 29, 2008, we made a required distribution of state grant proceeds of
$2.4 million to our former joint venture, Global Aeronautica. See Note 12  Investment
in Joint Venture. Our liability under this grant was assumed by a subsidiary of Boeing
in connection with the agreement to sell our 787 business (discussed in Note 19  Subsequent Events) entered into on July 6, 2009.(c)
    
    We reclassified $2.1 million related to the Texas grant to the Accrued and Other
Liabilities caption in our Consolidated Balance Sheet due to a potential repayment of
grant funds in 2010 based on the agreement. The liability reclass is an estimate as no
payments are due as of June 28, 2009. 14




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Note 9
  Income Taxes
 Accounting for Uncertainty in Income Taxes
  Note 10  Stockholders Equity
  2001 Stock Option Plan
   WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    TermOptions
    
    
    Price
    
    
    (in Years)Outstanding at December 31, 2008
    
    
    547,100
    
    
    $
    15.35Granted
    
    
    
    
    
    
    Forfeited or expired
    
    
    (9,200
    )
    
    
    10.00Exercised
    
    
    
    
    
    
    Outstanding at June 28, 2009
    
    
    537,900
    
    
    $
    15.44
    
    
    
    3.1Vested or expected to vest (a)
    
    
    537,900
    
    
    $
    15.44
    
    
    
    3.1Exercisable at June 28, 2009
    
    
    472,030
    
    
    $
    14.79
    
    
    
    3.1
 
 (a)
    
    Represents outstanding options reduced by expected forfeitures. Expected forfeitures
assumed under SFAS 123 were zero. 15




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Shares Held in Rabbi Trust
  2006 Incentive Plan
  Stock Appreciation Rights (SARs)
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    TermSARs
    
    
    Price
    
    
    (in Years)Outstanding at December 31, 2008
    
    
    908,450
    
    
    $
    10.00
    
    
    
    7.9Granted
    
    
    
    
    
    
    Forfeited or expired
    
    
    (7,687
    )
    
    
    10.00Exercised
    
    
    (15,563
    )
    
    
    10.00Outstanding at June 28, 2009
    
    
    885,200
    
    
    $
    10.00
    
    
    
    7.5Vested or expected to vest (a)
    
    
    764,706
    
    
    
    10.00Exercisable at June 28, 2009
    
    
    613,582
    
    
    
    10.00
    
    
    
    7.4
 
 (a)
    
    Represents outstanding SARs reduced by expected forfeitures.  Restricted Stock Units (RSUs)
  16




---



##### Table of Contents



Grant-dateRSUs
    
    
    Fair-ValueOutstanding at December 31, 2008
    
    
    622,925
    
    
    $
    10.65Granted
    
    
    7,500
    
    
    
    9.76Forfeited or expired
    
    
    (10,937
    )
    
    
    14.38Exercised
    
    
    
    
    
    
    Outstanding at June 28, 2009
    
    
    619,488
    
    
    $
    10.57Vested or expected to vest (a)
    
    
    557,729Vested at June 28, 2009
    
    
    176,384
    
    
    $
    10.65
 
 (a)
    
    Represents outstanding RSUs reduced by expected forfeitures. Restricted Shares
  Note 11  Stock-Based Compensation
  Stock Compensation ExpenseThree Months Ended
    
    
    Six Months EndedJune 28, 2009
    
    
    June 29, 2008
    
    
    June 28, 2009
    
    
    June 29, 2008(in millions)Stock Options
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Rabbi Trust
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.5
    )
    
    
    Stock appreciation rights (SARs)
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.4Restricted stock units (RSUs)
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.9Restricted shares
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Stock compensation expense, gross
    
    
    (0.1
    )
    
    
    0.8
    
    
    
    0.4
    
    
    
    1.4Change in forfeiture estimate
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    Stock compensation expense, net
    
    $
    0.2
    
    
    $
    0.8
    
    
    $
    0.7
    
    
    $
    1.4
  17




---



##### Table of Contents



Stock Options
 SFAS 123(R) Share-based Payment
 Shares Held in Rabbi Trust
  SARs
   RSUs
  Restricted Shares
  18




---



##### Table of Contents



Note 12  Investment in Joint Venture
   Note 13  Long-Term Debt
       19




---



##### Table of Contents



Note
14  Related Party Transactions
      20




---



##### Table of Contents



Note
15  Guarantor Subsidiaries
  21




---



##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Balance Sheet
June 28, 2009
(dollars in millions, except par value per share) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    124.5
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    124.8Trade and other receivables
    
    
    152.7
    
    
    
    7.3
    
    
    
    
    
    
    
    160.0Intercompany receivable
    
    
    19.9
    
    
    
    8.3
    
    
    
    (28.2
    )
    
    
    Inventories
    
    
    528.8
    
    
    
    16.1
    
    
    
    
    
    
    
    544.9Other current assets
    
    
    6.0
    
    
    
    0.5
    
    
    
    
    
    
    
    6.5Total current assets
    
    
    831.9
    
    
    
    32.5
    
    
    
    (28.2
    )
    
    
    836.2Property, plant and equipment, net
    
    
    468.4
    
    
    
    9.3
    
    
    
    
    
    
    
    477.7Goodwill
    
    
    464.0
    
    
    
    63.7
    
    
    
    
    
    
    
    527.7Identifiable intangible assets, net
    
    
    23.8
    
    
    
    
    
    
    
    
    
    
    
    23.8Debt origination costs, net and other
assets
    
    
    10.5
    
    
    
    
    
    
    
    
    
    
    
    10.5Investment in affiliated company
    
    
    77.3
    
    
    
    
    
    
    
    (77.3
    )
    
    
    Total assets
    
    $
    1,875.9
    
    
    $
    105.5
    
    
    $
    (105.5
    )
    
    $
    1,875.9Liabilities and stockholders equity
(deficit)Current liabilities:Accounts payable, trade
    
    $
    149.9
    
    
    $
    6.1
    
    
    $
    
    
    
    $
    156.0Intercompany payable
    
    
    8.3
    
    
    
    19.9
    
    
    
    (28.2
    )
    
    
    Accrued and other liabilities
    
    
    77.8
    
    
    
    1.0
    
    
    
    
    
    
    
    78.8Accrued payroll and employee benefits
    
    
    45.0
    
    
    
    1.2
    
    
    
    
    
    
    
    46.2Accrued post-retirement benefits-current
    
    
    42.2
    
    
    
    
    
    
    
    
    
    
    
    42.2Accrued pension-current
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.6Current portion of long-term bank debt
    
    
    140.9
    
    
    
    
    
    
    
    
    
    
    
    140.9Accrued contract liabilities
    
    
    176.1
    
    
    
    
    
    
    
    
    
    
    
    176.1Total current liabilities
    
    
    640.8
    
    
    
    28.2
    
    
    
    (28.2
    )
    
    
    640.8Long-term liabilities:Accrued post-retirement benefits
    
    
    371.2
    
    
    
    
    
    
    
    
    
    
    
    371.2Accrued pension
    
    
    682.4
    
    
    
    
    
    
    
    
    
    
    
    682.4Long-term bank debt, net of current
portion
    
    
    618.9
    
    
    
    
    
    
    
    
    
    
    
    618.9Long-term bond debt
    
    
    270.0
    
    
    
    
    
    
    
    
    
    
    
    270.0Other non-current liabilities
    
    
    136.7
    
    
    
    
    
    
    
    
    
    
    
    136.7Total liabilities
    
    
    2,720.0
    
    
    
    28.2
    
    
    
    (28.2
    )
    
    
    2,720.0Stockholders equity (deficit):Common stock, par value $.01 per share;
50,000,000 shares authorized,
24,818,806 issued and outstanding at
June 28, 2009
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    421.7
    
    
    
    80.3
    
    
    
    (80.3
    )
    
    
    421.7Shares held in rabbi trust
    
    
    (1.6
    )
    
    
    
    
    
    
    
    
    
    
    (1.6
    )Accumulated deficit
    
    
    (459.3
    )
    
    
    (3.0
    )
    
    
    3.0
    
    
    
    (459.3
    )Accumulated other comprehensive loss
    
    
    (805.2
    )
    
    
    
    
    
    
    
    
    
    
    (805.2
    )Total stockholders equity (deficit)
    
    $
    (844.1
    )
    
    $
    77.3
    
    
    $
    (77.3
    )
    
    $
    (844.1
    )Total liabilities and stockholders equity
(deficit)
    
    $
    1,875.9
    
    
    $
    105.5
    
    
    $
    (105.5
    )
    
    $
    1,875.9
 22




---



##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Balance Sheet
December 31, 2008
($ in millions, except share amounts)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    86.6
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    86.7Trade and other receivables
    
    
    131.2
    
    
    
    7.4
    
    
    
    
    
    
    
    138.6Intercompany receivable
    
    
    21.1
    
    
    
    8.3
    
    
    
    (29.4
    )
    
    
    Inventories
    
    
    430.3
    
    
    
    14.1
    
    
    
    
    
    
    
    444.4Other current assets
    
    
    4.2
    
    
    
    0.5
    
    
    
    
    
    
    
    4.7Total current assets
    
    
    673.4
    
    
    
    30.4
    
    
    
    (29.4
    )
    
    
    674.4Property, plant and equipment, net
    
    
    476.3
    
    
    
    8.0
    
    
    
    
    
    
    
    484.3Goodwill
    
    
    464.0
    
    
    
    63.7
    
    
    
    
    
    
    
    527.7Identifiable intangible assets, net
    
    
    27.2
    
    
    
    
    
    
    
    
    
    
    
    27.2Debt origination costs, net and other
assets
    
    
    12.9
    
    
    
    1.1
    
    
    
    
    
    
    
    14.0Investment in affiliated company
    
    
    76.4
    
    
    
    
    
    
    
    (76.4
    )
    
    
    Total assets
    
    $
    1,730.2
    
    
    $
    103.2
    
    
    $
    (105.8
    )
    
    $
    1,727.6Liabilities and stockholders equity
(deficit)Current liabilities:Accounts payable, trade
    
    $
    173.0
    
    
    $
    4.0
    
    
    $
    
    
    
    $
    177.0Intercompany payable
    
    
    8.3
    
    
    
    21.1
    
    
    
    (29.4
    )
    
    
    Accrued and other liabilities
    
    
    63.6
    
    
    
    0.1
    
    
    
    
    
    
    
    63.7Accrued payroll and employee benefits
    
    
    47.1
    
    
    
    1.6
    
    
    
    
    
    
    
    48.7Accrued post-retirement benefits-current
    
    
    42.0
    
    
    
    
    
    
    
    
    
    
    
    42.0Accrued pension-current
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Current portion of long-term bank debt
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Accrued contract liabilities
    
    
    201.4
    
    
    
    
    
    
    
    
    
    
    
    201.4Total current liabilities
    
    
    541.6
    
    
    
    26.8
    
    
    
    (29.4
    )
    
    
    539.0Long-term liabilities:Accrued post-retirement benefits
    
    
    405.3
    
    
    
    
    
    
    
    
    
    
    
    405.3Accrued pension
    
    
    710.7
    
    
    
    
    
    
    
    
    
    
    
    710.7Long-term bank debt, net of current
portion
    
    
    594.0
    
    
    
    
    
    
    
    
    
    
    
    594.0Long-term bond debt
    
    
    270.0
    
    
    
    
    
    
    
    
    
    
    
    270.0Other non-current liabilities
    
    
    142.7
    
    
    
    
    
    
    
    
    
    
    
    142.7Total liabilities
    
    
    2,664.3
    
    
    
    26.8
    
    
    
    (29.4
    )
    
    
    2,661.7Stockholders equity (deficit):Common stock, par value $.01 per share;
50,000,000 shares authorized,
24,798,382 issued and outstanding at
December 31, 2008
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    420.5
    
    
    
    80.3
    
    
    
    (80.3
    )
    
    
    420.5Shares held in rabbi trust
    
    
    (1.6
    )
    
    
    
    
    
    
    
    
    
    
    (1.6
    )Accumulated deficit
    
    
    (501.3
    )
    
    
    (3.9
    )
    
    
    3.9
    
    
    
    (501.3
    )Accumulated other comprehensive loss
    
    
    (852.0
    )
    
    
    
    
    
    
    
    
    
    
    (852.0
    )Total stockholders equity (deficit)
    
    $
    (934.1
    )
    
    $
    76.4
    
    
    $
    (76.4
    )
    
    $
    (934.1
    )Total liabilities and stockholders equity
(deficit)
    
    $
    1,730.2
    
    
    $
    103.2
    
    
    $
    (105.8
    )
    
    $
    1,727.6
 23




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##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Statement of Operations
Three Months Ended June 28, 2009
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    476.7
    
    
    $
    18.6
    
    
    $
    (3.8
    )
    
    $
    491.5Costs and expensesCost of sales
    
    
    409.0
    
    
    
    17.0
    
    
    
    (3.8
    )
    
    
    422.2Selling, general and
administrative expenses
    
    
    35.3
    
    
    
    1.3
    
    
    
    
    
    
    
    36.6Total costs and expenses
    
    
    444.3
    
    
    
    18.3
    
    
    
    (3.8
    )
    
    
    458.8Operating income
    
    
    32.4
    
    
    
    0.3
    
    
    
    
    
    
    
    32.7Other income (expense)Interest income
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Other gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (8.8
    )
    
    
    
    
    
    
    
    
    
    
    (8.8
    )Equity in income (loss) of
consolidated subsidiaries
    
    
    0.3
    
    
    
    
    
    
    
    (0.3
    )
    
    
    Income (loss) before income taxes
    
    
    24.1
    
    
    
    0.3
    
    
    
    (0.3
    )
    
    
    24.1Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    24.1
    
    
    $
    0.3
    
    
    $
    (0.3
    )
    
    $
    24.1
 Vought Aircraft Industries, Inc.
Consolidating Statement of Operations
Three Months Ended June 29, 2008
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    467.1
    
    
    $
    19.6
    
    
    $
    (6.0
    )
    
    $
    480.7Costs and expensesCost of sales
    
    
    366.6
    
    
    
    16.5
    
    
    
    (6.0
    )
    
    
    377.1Selling, general and
administrative expenses
    
    
    54.0
    
    
    
    1.7
    
    
    
    
    
    
    
    55.7Total costs and expenses
    
    
    420.6
    
    
    
    18.2
    
    
    
    (6.0
    )
    
    
    432.8Operating income (loss)
    
    
    46.5
    
    
    
    1.4
    
    
    
    
    
    
    
    47.9Other income (expense)Interest income
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Other gain (loss)
    
    
    47.1
    
    
    
    
    
    
    
    
    
    
    
    47.1Equity in loss of joint venture
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Interest expense
    
    
    (16.4
    )
    
    
    
    
    
    
    
    
    
    
    (16.4
    )Equity in income (loss) of
consolidated subsidiaries
    
    
    1.4
    
    
    
    
    
    
    
    (1.4
    )
    
    
    Income (loss) before income taxes
    
    
    79.3
    
    
    
    1.4
    
    
    
    (1.4
    )
    
    
    79.3Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    79.3
    
    
    $
    1.4
    
    
    $
    (1.4
    )
    
    $
    79.3
 24




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##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Statement of Operations
Six Months Ended June 28, 2009
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    866.0
    
    
    $
    35.6
    
    
    $
    (7.5
    )
    
    $
    894.1Costs and expensesCost of sales
    
    
    729.9
    
    
    
    32.2
    
    
    
    (7.5
    )
    
    
    754.6Selling, general and
administrative expenses
    
    
    71.6
    
    
    
    2.5
    
    
    
    
    
    
    
    74.1Total costs and expenses
    
    
    801.5
    
    
    
    34.7
    
    
    
    (7.5
    )
    
    
    828.7Operating income
    
    
    64.5
    
    
    
    0.9
    
    
    
    
    
    
    
    65.4Other income (expense)Interest income
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Other gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (23.8
    )
    
    
    
    
    
    
    
    
    
    
    (23.8
    )Equity in income (loss) of
consolidated subsidiaries
    
    
    0.9
    
    
    
    
    
    
    
    (0.9
    )
    
    
    Income (loss) before income taxes
    
    
    42.0
    
    
    
    0.9
    
    
    
    (0.9
    )
    
    
    42.0Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    42.0
    
    
    $
    0.9
    
    
    $
    (0.9
    )
    
    $
    42.0
 Vought Aircraft Industries, Inc.
Consolidating Statement of Operations
Six Months Ended June 29, 2008
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalsRevenue
    
    $
    880.1
    
    
    $
    37.1
    
    
    $
    (11.1
    )
    
    $
    906.1Costs and expensesCost of sales
    
    
    682.2
    
    
    
    32.3
    
    
    
    (11.1
    )
    
    
    703.4Selling, general and
administrative expenses
    
    
    107.1
    
    
    
    2.9
    
    
    
    
    
    
    
    110.0Total costs and expenses
    
    
    789.3
    
    
    
    35.2
    
    
    
    (11.1
    )
    
    
    813.4Operating income (loss)
    
    
    90.8
    
    
    
    1.9
    
    
    
    
    
    
    
    92.7Other income (expense)Interest income
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    1.0Other loss
    
    
    47.1
    
    
    
    
    
    
    
    
    
    
    
    47.1Equity in loss of joint venture
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Interest expense
    
    
    (32.2
    )
    
    
    
    
    
    
    
    
    
    
    (32.2
    )Equity in income (loss) of
consolidated subsidiaries
    
    
    1.9
    
    
    
    
    
    
    
    (1.9
    )
    
    
    Income (loss) before income taxes
    
    
    108.0
    
    
    
    1.9
    
    
    
    (1.9
    )
    
    
    108.0Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    108.0
    
    
    $
    1.9
    
    
    $
    (1.9
    )
    
    $
    108.0
 25




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##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Cash Flow Statement
Six Months Ended June 28, 2009
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalOperating activitiesNet income (loss)
    
    $
    42.0
    
    
    $
    0.9
    
    
    $
    (0.9
    )
    
    $
    42.0Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    34.8
    
    
    
    0.7
    
    
    
    
    
    
    
    35.5Stock compensation expense
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    0.7(Gain)/Loss from asset disposals
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Income from investments in consolidated
subsidiaries
    
    
    (0.9
    )
    
    
    
    
    
    
    0.9
    
    
    
    Changes in current assets and liabilities:Trade and other receivables
    
    
    (21.5
    )
    
    
    0.1
    
    
    
    
    
    
    
    (21.4
    )Intercompany accounts receivable
    
    
    1.2
    
    
    
    
    
    
    
    (1.2
    )
    
    
    Inventories
    
    
    (98.5
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    (100.5
    )Other current assets
    
    
    (1.8
    )
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Accounts payable, trade
    
    
    (23.1
    )
    
    
    2.1
    
    
    
    
    
    
    
    (21.0
    )Intercompany accounts payable
    
    
    
    
    
    
    (1.2
    )
    
    
    1.2
    
    
    
    Accrued payroll and employee benefits
    
    
    (2.1
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (2.5
    )Accrued and other liabilities
    
    
    15.2
    
    
    
    0.9
    
    
    
    
    
    
    
    16.1Accrued contract liabilities
    
    
    (25.3
    )
    
    
    
    
    
    
    
    
    
    
    (25.3
    )Other assets and liabilitieslong-term
    
    
    (19.9
    )
    
    
    1.1
    
    
    
    
    
    
    
    (18.8
    )Net cash provided by (used in) operating activities
    
    
    (97.3
    )
    
    
    2.2
    
    
    
    
    
    
    
    (95.1
    )Investing activitiesCapital expenditures
    
    
    (23.3
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    (25.3
    )Net cash provided by (used in) investing activities
    
    
    (23.3
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    (25.3
    )Financing activitiesProceeds from short-term bank debt
    
    
    135.0
    
    
    
    
    
    
    
    
    
    
    
    135.0Proceeds from long-term bank debt
    
    
    25.0
    
    
    
    
    
    
    
    
    
    
    
    25.0Payments on long-term bank debt
    
    
    (1.5
    )
    
    
    
    
    
    
    
    
    
    
    (1.5
    )Net cash provided by (used in) financing activities
    
    
    158.5
    
    
    
    
    
    
    
    
    
    
    
    158.5Net decrease in cash and cash equivalents
    
    
    37.9
    
    
    
    0.2
    
    
    
    
    
    
    
    38.1Cash and cash equivalents at beginning of period
    
    
    86.6
    
    
    
    0.1
    
    
    
    
    
    
    
    86.7Cash and cash equivalents at end of period
    
    $
    124.5
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    124.8
 26




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##### Table of Contents



Vought Aircraft Industries, Inc.
Consolidating Cash Flow Statement
Six Months Ended June 29, 2008
(in millions) (Unaudited)
 Guarantor
    
    
    IntercompanyVought
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalOperating activitiesNet income (loss)
    
    $
    108.0
    
    
    $
    1.9
    
    
    $
    (1.9
    )
    
    $
    108.0Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    32.1
    
    
    
    0.7
    
    
    
    
    
    
    
    32.8Stock compensation expense
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    1.4Equity in losses of joint venture
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.6(Gain)/Loss from asset disposals
    
    
    (48.5
    )
    
    
    
    
    
    
    
    
    
    
    (48.5
    )Income from investments in
consolidated subsidiaries
    
    
    (1.9
    )
    
    
    
    
    
    
    1.9
    
    
    
    Changes in current assets and liabilities:Trade and other receivables
    
    
    (39.3
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    (39.8
    )Intercompany accounts receivable
    
    
    1.3
    
    
    
    (1.7
    )
    
    
    0.4
    
    
    
    Inventories
    
    
    25.5
    
    
    
    0.9
    
    
    
    
    
    
    
    26.4Other current assets
    
    
    (3.3
    )
    
    
    0.2
    
    
    
    
    
    
    
    (3.1
    )Accounts payable, trade
    
    
    (38.4
    )
    
    
    0.3
    
    
    
    
    
    
    
    (38.1
    )Intercompany accounts payable
    
    
    1.7
    
    
    
    (1.3
    )
    
    
    (0.4
    )
    
    
    Accrued payroll and employee benefits
    
    
    (3.6
    )
    
    
    0.3
    
    
    
    
    
    
    
    (3.3
    )Accrued and other liabilities
    
    
    (5.5
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (5.6
    )Accrued contract liabilities
    
    
    (45.2
    )
    
    
    
    
    
    
    
    
    
    
    (45.2
    )Other assets and liabilitieslong-term
    
    
    (23.3
    )
    
    
    
    
    
    
    
    
    
    
    (23.3
    )Net cash provided by (used in) operating
activities
    
    
    (38.4
    )
    
    
    0.7
    
    
    
    
    
    
    
    (37.7
    )Investing activitiesCapital expenditures
    
    
    (31.8
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    (32.8
    )Proceeds from sale of joint venture
    
    
    55.0
    
    
    
    
    
    
    
    
    
    
    
    55.0Net cash provided by (used in) investing
activities
    
    
    23.2
    
    
    
    (1.0
    )
    
    
    
    
    
    
    22.2Financing activitiesProceeds from short-term bank debt
    
    
    153.0
    
    
    
    
    
    
    
    
    
    
    
    153.0Payments on short-term bank debt
    
    
    (153.0
    )
    
    
    
    
    
    
    
    
    
    
    (153.0
    )Proceeds from Incremental Facility
    
    
    184.6
    
    
    
    
    
    
    
    
    
    
    
    184.6Payments on long-term bank debt
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (1.0
    )Proceeds from sale of common stock
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Net cash provided by (used in) financing
activities
    
    
    183.7
    
    
    
    
    
    
    
    
    
    
    
    183.7Net decrease in cash and cash equivalents
    
    
    168.5
    
    
    
    (0.3
    )
    
    
    
    
    
    
    168.2Cash and cash equivalents at beginning of
period
    
    
    75.1
    
    
    
    0.5
    
    
    
    
    
    
    
    75.6Cash and cash equivalents at end of period
    
    $
    243.6
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    243.8
 27




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##### Table of Contents



Note
16  Fair Value Measurements
  
    
    Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for
identical assets or liabilities.
    
    Level 2: Inputs, other than quoted prices that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active.
    
    Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
   Note
17   Comprehensive Income (Loss)
  For the Three Months Ended
    
    
    For the Six Months EndedJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008(in millions)Net income
    
    $
    24.1
    
    
    $
    79.3
    
    
    $
    42.0
    
    
    $
    108.0Comprehensive income (loss), net of taxPension
    
    
    14.5
    
    
    
    (5.1
    )
    
    
    25.9
    
    
    
    4.8OPEB
    
    
    (6.1
    )
    
    
    40.1
    
    
    
    20.9
    
    
    
    37.6Total comprehensive income
    
    $
    32.5
    
    
    $
    114.3
    
    
    $
    88.8
    
    
    $
    150.4
 Note
18  Fixed Assets
  28




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##### Table of Contents



Note
19  Subsequent Events
    29




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion and analysis of our results of operations, financial
condition and liquidity in conjunction with our interim unaudited condensed consolidated financial
statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Some of
the information contained in this discussion and analysis including information with respect to our
plans and strategies for our business, statements regarding the industry outlook, our expectations
regarding the future performance of our business, and the other non-historical statements contained
herein are forward-looking statements. See Cautionary Statement Regarding Forward-Looking
Statements. You should also review the Risk Factors section of this Quarterly Report on Form
10-Q and our Annual Report on Form 10-K for the year ended December 31, 2008 for a discussion of
important factors that could cause actual results to differ materially from the results described
herein or implied by such forward-looking statements.
 Overview
      30




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##### Table of Contents



Commercial Aircraft.
 Military Aircraft.
 Business Jet Aircraft.
 Recent Developments
  31




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##### Table of Contents



Basis of Presentation
  Revenue and Profit Recognition.
 
    
    Under the cost-to-cost method, progress toward completion is measured as the ratio of
total costs incurred to our estimate of total costs at completion. We recognize costs as
incurred. Profit is determined based on our estimated profit margin on the contract
multiplied by our progress toward completion. Revenue represents the sum of our costs and
profit on the contract for the period.
    
    Under the units-of-delivery method, revenue on a contract is recorded as the units are
delivered and accepted during the period at an amount equal to the contractual selling
price of those units. The costs recorded on a contract under the units-of-delivery method
are equal to the total costs at completion divided by the total units to be delivered. As
our contracts can span multiple years, we often segment the contracts into production lots
for the purposes of accumulating and allocating cost. Profit is recognized as the
difference between revenue for the units delivered and the estimated costs for the units
delivered.
  32




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##### Table of Contents



Cost of sales.
 Selling, general and administrative expenses.
 Interest expense, net.
 Other income (loss).
 Equity in loss of joint venture.
 Income tax benefit (expense).
 33




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##### Table of Contents



Results of Operations
 Three Months
    
    
    Three Months
    
    
    
    
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    
    
    
    
    Ended
    
    
    EndedJune 28, 2009
    
    
    June 29, 2008
    
    
    $ Change
    
    
    June 28, 2009
    
    
    June 29, 2008
    
    
    $ Change(in millions)Revenue:Commercial
    
    $
    253.9
    
    
    $
    237.4
    
    
    $
    16.5
    
    
    $
    434.7
    
    
    $
    452.6
    
    
    $
    (17.9
    )Military
    
    
    161.6
    
    
    
    157.5
    
    
    
    4.1
    
    
    
    307.8
    
    
    
    295.4
    
    
    
    12.4Business Jet
    
    
    76.0
    
    
    
    85.8
    
    
    
    (9.8
    )
    
    
    151.6
    
    
    
    158.1
    
    
    
    (6.5
    )Total revenue
    
    $
    491.5
    
    
    $
    480.7
    
    
    $
    10.8
    
    
    $
    894.1
    
    
    $
    906.1
    
    
    $
    (12.0
    )Costs and expenses:Cost of sales
    
    
    422.2
    
    
    
    377.1
    
    
    
    45.1
    
    
    
    754.6
    
    
    
    703.4
    
    
    
    51.2Selling, general and
administrative
    
    
    36.6
    
    
    
    55.7
    
    
    
    (19.1
    )
    
    
    74.1
    
    
    
    110.0
    
    
    
    (35.9
    )Total costs and expenses
    
    $
    458.8
    
    
    $
    432.8
    
    
    $
    26.0
    
    
    $
    828.7
    
    
    $
    813.4
    
    
    $
    15.3Operating income
    
    
    32.7
    
    
    
    47.9
    
    
    
    (15.2
    )
    
    
    65.4
    
    
    
    92.7
    
    
    
    (27.3
    )Interest expense, net
    
    
    (8.6
    )
    
    
    (15.5
    )
    
    
    6.9
    
    
    
    (23.4
    )
    
    
    (31.2
    )
    
    
    7.8Other gain/(loss)
    
    
    
    
    
    
    47.1
    
    
    
    (47.1
    )
    
    
    
    
    
    
    47.1
    
    
    
    (47.1
    )Equity in loss of joint venture
    
    
    
    
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    
    
    
    
    (0.6
    )
    
    
    0.6Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    24.1
    
    
    $
    79.3
    
    
    $
    (55.2
    )
    
    $
    42.0
    
    
    $
    108.0
    
    
    $
    (66.0
    )
 Comparison of Results of Operations for the Three Months Ended June 28, 2009 and June 29, 2008
 Revenues
 
    
    Commercial revenue increased $16.5 million, or 7%, due to a $37.8 million increase
in sales on Boeing programs largely due to increased non-recurring sales associated
with the transition to the new 747-8 model. Offsetting this increase was a $21.3
million decrease in sales on Airbus programs primarily due to the completion of one of
their contracts during the period.
    
    Military revenue was consistent with the comparable period in the prior year.
    
    Business Jet revenue decreased $9.8 million, or 11%, primarily due to reduced
delivery rates directed by our customers.
 Operating income
 34




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##### Table of Contents



Interest expense, net
 Other gain (loss)
 Comparison of Results of Operations for the Six Months Ended June 28, 2009 and June 29, 2008
 Revenues
 
    
    Commercial revenue decreased $17.9 million, or 4%, primarily due to a $25.1 million
decrease in sales for Airbus programs reflecting the completion of one of their
contracts during the period. This decrease was partially offset by a $7.2 million
increase in sales for Boeing programs resulting from increased non-recurring sales
associated with the transition to the new 747-8 model.
    
    Military revenue increased $12.4 million, or 4%, primarily due to increased
deliveries on the V-22 program and spares deliveries for the C-17 program.
    
    Business Jet revenue decreased $6.5 million, or 4%, primarily due to reduced
delivery rates directed by our customers.
 Operating income
 Interest expense, net
 Other gain (loss)
 35




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##### Table of Contents



Critical Accounting Policies
  Revenue Recognition
 Accounting for Performance of
Construction-Type and Certain Production-Type Contracts
 
    
    Under the cost-to-cost method, progress toward completion is measured as the ratio of
total costs incurred to our estimate of total costs at completion. We recognize costs as
incurred. Profit is determined based on our estimated profit margin on the contract
multiplied by our progress toward completion. Revenue represents the sum of our costs and
profit on the contract for the period.
    
    Under the units-of-delivery method, revenue on a contract is recorded as the units are
delivered and accepted during the period at an amount equal to the contractual selling
price of those units. The costs recorded on a contract under the units-of-delivery method
are equal to the total costs at completion divided by the total units to be delivered. As
our contracts can span multiple years, we often segment the contracts into production lots
for the purposes of accumulating and allocating cost. Profit is recognized as the
difference between revenue for the units delivered and the estimated costs for the units
delivered.
   36




---



##### Table of Contents



June 28,
    
    
    December 31,2009
    
    
    2008(in millions)Advances and progress billings
    
    $
    150.7
    
    
    $
    187.1Forward loss
    
    
    10.2
    
    
    
    6.4Other
    
    
    15.2
    
    
    
    7.9Total accrued contract
liabilities
    
    $
    176.1
    
    
    $
    201.4
 Goodwill
 SFAS 142 SFAS 142
   Post-Retirement Plans
   37




---



##### Table of Contents



Employers Accounting for Defined Benefit Pension and Other
Postretirement Plansan Amendment of FASB Statements No. 87, 88, 106 and 132(R)
 Recent Accounting Pronouncements
 Business Combinations
 38




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##### Table of Contents



Employers Disclosures about Postretirement
Benefit Plan Assets
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
 Liquidity and Capital Resources
    39




---



##### Table of Contents



Updated toAs previously
    
    
    reflect Treasuryreported in the
    
    
    Department10-K
    
    
    changes(in Millions)Projected contributions2009
    
    
    84.7
    
    
    
    82.22010
    
    
    165.8
    
    
    
    98.12011
    
    
    191.7
    
    
    
    217.12012
    
    
    174.7
    
    
    
    166.82013
    
    
    151.6
    
    
    
    153.8Total 2009-2013
    
    $
    768.5
    
    
    $
    718.0
     40




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##### Table of Contents



Credit Agreements and Debt Covenants
   41




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##### Table of Contents



Non-GAAP Financial Measures.
 42




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##### Table of Contents



Reconciliation of Non-GAAP Measure  Adjusted EBITDA
  For the Three Months Ended
    
    
    For the Six Months EndedJune 28,
    
    
    June 29,
    
    
    June 28,
    
    
    June 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    (22.1
    )
    
    $
    (22.5
    )
    
    $
    (95.1
    )
    
    $
    (37.7
    )Interest expense, net
    
    
    8.6
    
    
    
    15.5
    
    
    
    23.4
    
    
    
    31.2Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    (0.2
    )
    
    
    (0.8
    )
    
    
    (0.7
    )
    
    
    (1.4
    )Equity in losses of joint venture
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.6
    )(Gain) Loss from asset sales and other losses
    
    
    (1.9
    )
    
    
    48.8
    
    
    
    (1.9
    )
    
    
    48.5Non-cash interest expense
    
    
    (1.9
    )
    
    
    (1.5
    )
    
    
    (3.7
    )
    
    
    (2.3
    )787 tooling amortization
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.8Changes in operating assets and liabilities
    
    
    67.9
    
    
    
    70.8
    
    
    
    175.2
    
    
    
    132.0EBITDA
    
    $
    50.7
    
    
    $
    110.9
    
    
    $
    98.0
    
    
    $
    170.5Non-recurring investment in Boeing 787 (1)
    
    
    
    
    
    
    5.5
    
    
    
    3.1
    
    
    
    22.0Unusual charges & other non-recurring program costs (2)
    
    
    3.4
    
    
    
    2.1
    
    
    
    10.6
    
    
    
    4.0(Gain) Loss on disposal of property, plant and equipment (3)
    
    
    1.9
    
    
    
    (48.9
    )
    
    
    1.9
    
    
    
    (48.6
    )Pension & OPEB curtailment and non-cash expense (4)
    
    
    
    
    
    
    
    
    
    
    9.6
    
    
    
    Other (5)
    
    
    2.3
    
    
    
    1.4
    
    
    
    3.3
    
    
    
    2.4Adjusted EBITDA
    
    $
    58.3
    
    
    $
    71.0
    
    
    $
    126.5
    
    
    $
    150.3
 
 (1)
    
    Non recurring investment in Boeing 787The Boeing 787 program, described elsewhere in
this quarterly report, required substantial start-up costs in prior periods as we built a new
facility in South Carolina and invested in new manufacturing technologies dedicated to the
program. These start-up investment costs were expensed in our financial statements over
several periods due to their magnitude and timing. As a result of the conclusion of start-up
activities for the Boeing 787 program and the sale of this business to Boeing on July 6,
2009, these costs will no longer impact our results of operations. Our credit agreement
excludes our significant start-up investment in the Boeing 787 program because in the past,
it represented an unusual significant investment in a major new program that was not
indicative of ongoing core operations, and accordingly the investment that was been expensed
during the period was added back to Adjusted EBITDA. Also included is our loss in our joint
venture with Global Aeronautica. Our share of Global Aeronauticas net loss was $0.2 million
and $0.6 million for the three and six month periods ended June 29, 2008, respectively. On
June 10, 2008, we sold our entire equity interest in Global Aeronautica to Boeing and as a
result our adjusted EBITDA calculation for the three and six month periods ended June 28,
2009 was not impacted by this joint venture. For more information, please refer to Note 12
 Investment in Joint Venture to our interim unaudited condensed consolidated financial
statements.(2)
    
    Unusual charges and other non-recurring program costsOur senior credit agreement
excludes our expenses for unusual events in our operations and non-recurring costs that are
not indicative of ongoing core operating performance, and accordingly the charges that have
been expensed during the period are added back to Adjusted EBITDA.For the three month periods ended June 28, 2009 and June 29, 2008, we incurred $3.8 million
and $2.1 million, respectively, of non-recurring costs primarily related to a facilities
rationalization initiative. For the six month periods ended June 28, 2009 and June 29, 2008,
we incurred $6.9 million and $4.0 million, respectively, of non-recurring costs primarily
related to a facilities rationalization initiative. 43




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Additionally, for the three and six month periods ended June 28, 2009, we reversed $(4.3)
million and $(0.5) million, respectively, in non-recurring program costs related to the
strike at our Nashville, Tennessee facility because the actual strike-related costs incurred
on those programs were lower than the original estimates. We also recognized $2.1 million
and $2.4 million, respectively related to Information Systems implementation costs.Also, during the three and six month periods ended June 28, 2009, we recognized $1.8 million
of costs related to the suspension of the Cessna Citation Columbus  Model 850 business jet
program.(3)
    
    (Gain) Loss on disposal of property, plant and equipment (PP&E) and other assets  On
occasion, where the asset is no longer needed for our business and ceases to offer sufficient
value or utility to justify our retention of the asset, we choose to sell PP&E at a loss.
These losses reduce our results of operations for the period in which the asset was sold.
Similarly, in some cases, we sell assets at an amount in excess of book value. Our credit
agreement provides that those gains and losses are reflected as an adjustment in calculating
Adjusted EBITDA.(4)
    
    Pension and other post-retirement benefits curtailment and non-cash expense related to
FAS 87 and FAS 106The credit agreement allows us to remove non-cash benefit expenses, so to
the extent that the recorded expense exceeds the cash contributions to the plan it is
reflected as an adjustment in calculating Adjusted EBITDA. During the six month period ended
June 28, 2009, we recognized $9.6 million curtailment resulting from the new IAM collective
bargaining agreement. For more information, please refer to Note 5  Pension and Other
Post-Retirement Benefits to our interim unaudited condensed consolidated financial
statements.(5)
    
    OtherIncludes non-cash stock expense and related party management fees. Our credit
agreement provides that these expenses are reflected as an adjustment in calculating Adjusted
EBITDA.   
    
    it does not reflect our cash expenditures, or future requirements, for all contractual
commitments;
    
    it does not reflect our significant interest expense, or the cash requirements
necessary to service our indebtedness;
    
    it does not reflect cash requirements for the payment of income taxes when due;
    
    it does not reflect working capital requirements;
    
    although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future and Adjusted
EBITDA does not reflect any cash requirements for such replacements; and
    
    it does not reflect the impact of earnings or charges resulting from matters we
consider not to be indicative of our ongoing operations, but may nonetheless have a
material impact on our results of operations.
 44




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Cash Flow Summary
 For the Six Months EndedJune 28,
    
    
    June 29,2009
    
    
    2008
    
    
    Change(in millions)Net income (loss)
    
    $
    42.0
    
    
    $
    108.0
    
    
    $
    (66.0
    )Non-cash items
    
    
    38.1
    
    
    
    (13.7
    )
    
    
    51.8Changes in working capital
    
    
    (175.2
    )
    
    
    (132.0
    )
    
    
    (43.2
    )Net cash provided by (used in) operating activities
    
    
    (95.1
    )
    
    
    (37.7
    )
    
    
    (57.4
    )Net cash provided by (used in) investing activities
    
    
    (25.3
    )
    
    
    22.2
    
    
    
    (47.5
    )Net cash provided by (used in) financing activities
    
    
    158.5
    
    
    
    183.7
    
    
    
    (25.2
    )Net increase (decrease) in cash and cash equivalents
    
    
    38.1
    
    
    
    168.2
    
    
    
    (130.1
    )Cash and cash equivalents at beginning of period
    
    
    86.7
    
    
    
    75.6
    
    
    
    11.1Cash and cash equivalents at end of period
    
    $
    124.8
    
    
    $
    243.8
    
    
    $
    (119.0
    )
    Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  45




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Interest Rate Risks
   46




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Foreign Currency Risks
  Utility Price Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Our Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  47




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 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
  48




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##### Table of Contents



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 49




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SIGNATURES
  Vought Aircraft Industries, Inc.(Registrant)August 11, 2009
    
    /s/ KEITH HOWE(Date)
    
    Vice President and Chief Financial OfficerAugust 11, 2009
    
    /s/ MARK JOLLY(Date)
    
    Principal Accounting Officer
 50