UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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 March 27, 2005

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.

(972)-946-2011
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, at May 9, 2005 was 25,015,552.

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Vought Aircraft Industries, Inc.

See accompanying notes

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Vought Aircraft Industries, Inc.

See accompanying notes

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Vought Aircraft Industries, Inc.

See accompanying notes

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VOUGHT AIRCRAFT INDUSTRIES, INC.

(Unaudited)

March 27, 2005

Note 1 – Organization and Basis of Presentation

     Vought Aircraft Industries, Inc. and its wholly owned subsidiaries are herein referred to as the “Company” or “Vought.” The Company is one of the world’s largest independent providers of commercial and military aerostructures. The majority of the Company’s products are sold to The Boeing Company, and for military contracts, ultimately to the U.S. Government. The Corporate office is in Dallas, Texas and production work is performed at sites in Hawthorne and Brea, California; Everett, Washington; Dallas and Grand Prairie, Texas; Milledgeville, Georgia; Nashville, Tennessee; and Stuart, Florida. We broke ground on our Charleston, South Carolina site on February 7, 2005.

     The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the three months ended March 27, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

     The consolidated balance sheet at December 31, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in our 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2005.

Note 2 – New Accounting Pronouncements

     On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123 Accounting for Stock-Based Compensation. Statement 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123R requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements. This statement is effective for most public companies for annual periods beginning after June 15, 2005. The Company is currently evaluating the impact of the adoption of Statement 123R; however it is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

     In November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 151 “Inventory Costs.” This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing”, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The

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provisions of this Statement will be effective for the Company in fiscal 2006. We are currently evaluating the impact of this new Standard.

Note 3 – Stock-Based Compensation

     The Company grants stock options for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants using the intrinsic value method. The following schedule reflects the impact on net loss if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock Based Compensation, to stock based employee compensation:

     The effects of applying SFAS No. 123 in the pro forma disclosure may not be indicative of future amounts as options vest over several years and additional option grants are expected.

Note 4 – Restructuring

     On February 26, 2004, we announced plans to consolidate portions of our manufacturing operations to Dallas and Grand Prairie, Texas. The plans include renovating and modernizing the Dallas facilities, closing the facilities in Nashville and Stuart and moving their operations to Dallas and reducing the size of the Hawthorne facility. We received a $35 million grant from the Texas Enterprise Fund in April 2004 and are in the process of working with the Texas General Land Office and several other state and local agencies to help us accomplish the consolidation. By accepting this grant, the Company is obligated to add 3,000 jobs in Texas over the next 6 years with a prorated penalty (based on any shortfall in our ability to maintain a total of 6,000 jobs in Texas with the total penalty amount not to exceed the amount of the grant) assessed beginning in 2010 if that goal is not reached. When completed, this project is expected to reduce the Company’s occupied square footage by more than three million square feet, reduce operating costs and increase productivity. As part of this plan, the Company will incur charges at Nashville and Stuart for employee termination benefits and relocation costs, certain pension costs, consolidation of excess facilities and various other closure costs. The final planned completion dates of closing the Stuart and Nashville facilities are December 31, 2005 and December 31, 2006, respectively. Management is continually evaluating various options relating to these projects as market dynamics change our outlook for future production needs. This evaluation may lead to changes in the timing of these projects and the total amount invested.

     As a result of the pending closure of the Stuart and Nashville facilities, the Company offered relocation or termination benefits (voluntary and involuntary) to the approximately 1,300 employees at these facilities. The Company has recorded a liability in the amount of $5.0 million associated with the severance termination benefits of which $0.3 million has been paid as of March 27, 2005. Additionally, the Company estimates total costs of approximately $2.6 million associated with the non-union employee retention termination benefits and is recognizing this liability ratably over the employees’ retention period. At March 27, 2005, a liability for the retention termination benefits has been recorded in the amount of approximately $1.3 million.

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     As part of the restructuring plan, the Company negotiated termination benefit agreements with union employees at the Nashville location. As a result of the union negotiations, certain retention termination benefits were agreed to which are estimated to be approximately $4.7 million. In April 2004, the Company began recognizing this liability ratably over the employee retention period. A liability for retention termination benefits for union employees has been recorded in the amount of approximately $1.7 million. As of March 27, 2005, $0.2 million has been paid for both union and non-union retention termination benefits.

     The following table is a roll-forward of the amounts accrued for the restructuring liabilities discussed above as of March 27, 2005.

     See Note 7 - Pension and Other Post-retirement Benefits for further discussion of the effects of the restructuring on the pension and other post-employment benefits at the Nashville and Stuart facilities.

     Approximately 460 out of the 1,300 employees at these locations have elected to relocate to Dallas. The Company currently estimates that the relocation costs associated with these transfers will be approximately $11.5 million and will be recognized as incurred over 34 months. During the first quarter of 2005, the Company incurred approximately $0.6 million of the relocation expense and a total of $2.2 million since restructuring activities began in fiscal 2004.

     Since the announcement for the closures of the Stuart and Nashville facilities, the Company has been evaluating the fixed assets associated with these facilities and developing a plan for moving these assets to Dallas or for selling or abandoning the assets once the facilities are vacated. For the Nashville facility, the Company has performed an initial assessment of the recoverability for those assets that will not be moved and has determined that, at present, no impairment has taken place. Nonetheless, an impairment charge for these assets could be necessary in future periods. Related to the shutdown of the Nashville facility, the Company has accelerated depreciation over the remaining periods of those assets that will not be transferred to Dallas. The Company estimates that approximately $21.6 million of depreciation will be accelerated over the remaining life of these assets so that they will be fully depreciated by the end of fiscal 2006 when production has ceased at this facility. As of March 27, 2005, the Company has recognized accumulated accelerated depreciation for these assets of $16.7 million. Substantially all of the fixed assets from the Stuart facility are expected to be moved and utilized after the plant closes. The Company is in the process of evaluating the lease for the Stuart facility and a potential buyout of the remaining lease term after the facility has been exited. If an agreement is reached, the Company will record any liability associated with the buyout at the time an agreement is reached and the liability becomes measurable. The Company currently has $1.4 million in net book value of leasehold improvements at Stuart, before taking into consideration accelerated depreciation. As a result of the closure, the Company has accelerated the depreciation on these items so they will be fully depreciated by the end of 2005. The increased depreciation for these assets totals $1.3 million as of March 27, 2005.

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     The Company is negotiating with a third party regarding the potential sale of the Hawthorne facility which the Company would lease back through 2005, after which, the Company plans to significantly reduce the total square footage under the lease, with the lease extending to approximately 2010.

     The Dallas facility is currently a Naval Weapons Industrial Reserve Plant, which is owned by the Navy. As part of the restructure plan, options are being considered that could change the ownership structure of the plant.

     The restructuring and other related charges are or will be recorded to contract costs. In accordance with SOP 81-1, the total additional costs associated with the planned facility closures for relocation, termination and retention benefits, and pension and other post-employment benefits (“OPEB”) were considered in the Company’s estimated costs at completion for contracts at each site. As a result of including the estimated restructuring costs in each facility’s contracts, the Company recorded a charge to cost of sales in the amount of $2.5 million for the three months ended March 27, 2005 and a total charge to cost of sales of $56.4 million since restructuring activities began in fiscal 2004.

     During 2001, the Company finalized and approved a restructuring plan designed to reduce the Company’s infrastructure costs by closing its Perry, Georgia facility and relocating the facility’s production effort to the Stuart, Florida site. At December 31, 2001, the Company had accrued $12.6 million related to costs on non-cancelable lease payments and maintenance, after the anticipated closure date for the Perry facility. The closure of Perry was completed at the beginning of the third quarter of 2002. Subsequent to the closure, the Company recorded $5.4 million of lease payments and maintenance against the accrual. The remaining non-cancelable lease payments and maintenance, extend to 2007. The following is a rollforward of amounts accrued for restructuring at the Perry site and are included in accrued and other liabilities:

Note 5 – Inventories

     Inventories consisted of the following:

     As of March 27, 2005 and December 31, 2004, we classified $120.6 million and $42.0 million, respectively, of advances and progress payments as accrued contract liabilities on our balance sheet.

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Note 6 – Goodwill and Intangible Assets

     With the adoption of SFAS No. 142, amortization of goodwill ceased effective January 1, 2002 and is now subject to annual impairment tests in accordance with the standard. The Company completed its annual impairment analysis based on the discounted future cash flow method and determined that there was no impairment to goodwill as of December 31, 2004 and nothing came to the Company’s attention in the first quarter of fiscal 2005 that would cause the Company to change its assessment of goodwill.

     Intangible assets consisted of the following:

     Scheduled remaining amortization of identifiable intangible assets is as follows as of March 27, 2005:

Note 7 – Pension and Other Post-retirement Benefits

     The components of net periodic benefit cost for the Company’s pension plans and other post-retirement benefit plans were as follows:

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     As a result of the Company’s announcement on February 26, 2004 of its plans to consolidate much of its manufacturing operations in Dallas, the Company recorded liabilities for pension and postretirement benefit plan curtailments and recognition of prior service cost of $11.2 million and special termination benefits of $1.9 million in the first quarter of 2004. The special termination benefits related to its affected nonrepresented employees that received and accepted transfer or completion opportunities in March 2004. Represented employees accepted similar offers through a certified vote on April 20, 2004. As a result of that vote, the Company recorded an additional liability of $8.6 million in the second quarter of 2004.

Note 8 – Commitments

     Warranty Reserves. A reserve has been established to provide for the estimated future cost of warranties on the Company’s delivered products. Management periodically reviews the reserves and adjustments are made accordingly. A provision for warranty on products delivered is made on the basis of the Company’s historical experience and identified warranty issues. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. The following is a rollforward of amounts accrued for warranty reserves:

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Note 9 – Environmental Costs

     Environmental liabilities are accrued when the Company determines it is responsible for remediation costs and such amounts are reasonably estimable. When only a range of amounts is established and no amount within the range is more accurate than another, the minimum amount in the range is recorded.

     Our facilities have been previously owned and operated by other entities and remediation is currently taking place at several facilities in connection with contamination that occurred prior to our ownership. In particular, we acquired several of our facilities from Northrop Grumman in July of 2000, including the Hawthorne and Torrance, California facilities, the Stuart, Florida facility, the Milledgeville and Perry, Georgia facilities and two Dallas, Texas facilities. Of those facilities, remediation projects are underway in Hawthorne, Stuart, Milledgeville and Dallas. Under our asset purchase agreement with Northrop Grumman, we obtained from Northrop Grumman an indemnity relating to contamination at all sites occurring prior to our ownership (so-called ‘‘pre-closing liabilities’’). The indemnity effectively caps our exposure to such cleanup liabilities at $12 million, with Northrop Grumman assuming responsibility for all such costs in excess of $12 million. In accordance with the terms of the environmental indemnity, Northrop Grumman is managing all environmental remedial projects at the various sites, except with respect to most of the remediation activities now underway at the Dallas facility. The Dallas facility is a Naval Weapons Industrial Reserve Plant, which the Navy leases to us. The Navy manages and finances most of the remediation activities at this site (although Northrop Grumman does manage other remediation activities at the site). Should the Navy cease to finance and perform remediation activities at the Dallas site, we would look to Northrop Grumman to manage those activities in accordance with its indemnity obligations. Although we have no reason to believe that Northrop Grumman will not satisfy its indemnity obligations, if Northrop Grumman failed to do so, we could be exposed to environmental cleanup liabilities that could be material. As of March 27, 2005, our balance sheet included an accrued liability of $5.1 million for accrued environmental liabilities which is included in accrued and other liabilities and other non-current liabilities.

     The Nashville, Tennessee facility was acquired by the Aerostructures Corporation from Textron Inc. in 1996. In connection with that acquisition, Textron agreed to indemnify up to $60 million against any pre-closing environmental liabilities with regard to claims made within ten years of the date on which the facility was acquired, including with respect to a solid waste landfill located onsite that was closed pursuant to a plan approved by the Tennessee Division of Solid Waste Management. While there are no pending environmental claims relating to the Nashville facility, there is no assurance that environmental claims will not arise after the expiration of the Textron indemnity in 2006, or that Textron will satisfy its indemnity obligations with respect to any environmental claims that are made before the indemnity expires.

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     The following is a rollforward of amounts accrued for environmental liabilities:

Note 10 – Related Party Transactions

     In accordance with the management agreement between Vought Aircraft Industries, Inc. and the Company’s principal stockholder, The Carlyle Group (“Carlyle”), the Company incurred a fee of $0.5 million for various management services provided by Carlyle for each of the three month periods ended March 27, 2005 and March 28, 2004, respectively.

Note 11 – Guarantor Subsidiaries

     The 8% Senior Notes due 2011 are fully and unconditionally and jointly and severally guaranteed, on a senior unsecured basis, by the Company’s 100% owned subsidiaries. Summarized financial information of the Company and its subsidiaries is presented below:

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Consolidating Balance Sheet
March 27, 2005
($ in millions)

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Consolidating Balance Sheet
December 31, 2004
($ in millions)

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Consolidating Statement of Operations
Three Months Ended March 27, 2005
($ in millions)

Consolidating Statement of Operations
Three Months Ended March 28, 2004
($ in millions)

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Consolidating Statement of Cash Flows
Three Months Ended March 27, 2005
($ in millions)

15

Consolidating Statement of Cash Flows
Three Months Ended March 28, 2004
($ in millions)

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Note 12 – Subsequent Events

     On April 13, 2005, Vought finalized an operating agreement for a joint venture called Global Aeronautica, LLC Operating. Vought and Alenia North America (“Alenia”), a subsidiary of Finmeccanica SpA, will each have a 50% stake in the joint venture, which will combine the two companies’ respective 787 program fuselage products to deliver an integrated product to Boeing. Vought will be the sole-source supplier of the aft fuselage for Boeing’s 787 program under a contract that currently is under negotiation.

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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.

Financial Business Trends

     We believe there have been no significant changes in our financial and business trends during the three months ended March 27, 2005, as compared to those we discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2005.

Results of Operations