UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 333-112528

Vought Aircraft Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware		75-2884072
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

(Address of principal executive offices including zip code)
(972) 946-2011

(Registrant’s telephone number and area code)
Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o     No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ     No o

     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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. þ

          Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Small reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o     No þ

     As of March 25, 2010, there were 24,818,900 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     None.

 

 

TABLE OF CONTENTS

				Page
		PART I
Item 1.		Business			1
Item 1A.		Risk Factors			13
Item 1B.		Unresolved Staff Comments			24
Item 2.		Properties			25
Item 3.		Legal Proceedings			25
Item 4.		[Reserved]
		PART II
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			27
Item 6.		Selected Financial Data			28
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 7A.		Quantitative and Qualitative Disclosures about Market Risk			43
Item 8.		Financial Statements and Supplementary Data			47
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			95
Item 9A.		Controls and Procedures			95
Item 9B.		Other Information			97
		PART III
Item 10.		Directors, Executive Officers and Corporate Governance			98
Item 11.		Executive Compensation			102
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			118
Item 13.		Certain Relationships, Related Transactions and Director Independence			120
Item 14.		Principal Accountant Fees and Services			122
		PART IV
Item 15.		Exhibits and Financial Statement Schedules			124
EX-2.5
EX-10.14
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Certain Definitions

     Unless the context requires otherwise, all references in this report to “Vought”, “Company”, “our company”, “we”, “our”, “us” and similar terms refer to Vought Aircraft Industries, Inc. and its wholly owned subsidiaries, VAC Industries, Inc., Vought Commercial Aircraft Company and Contour Aerospace Corporation.

Cautionary Statement Regarding Forward Looking Statements

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward looking statements are based upon our current expectations and projections about future events. When used in this annual report on Form 10-K, the words ‘‘believe,” ‘‘anticipate,” ‘‘intend,” ‘‘estimate,” ‘‘expect,” ‘‘should,” ‘‘may” and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this annual report are primarily located in the material set forth under the headings ‘‘Business,” ‘‘Risk Factors” and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations” but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this annual report completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations include, but are not limited to:

•

global and domestic financial market and economic conditions;

•

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.

PART I

Item 1. Business

Overview

     We are a leading global manufacturer of aerostructure products for commercial, military and business jet aircraft. We develop and manufacture a wide range of complex aerostructures such as fuselages, wing and tail assemblies, engine nacelles, flight control surfaces as well as helicopter cabins. Our diverse and long-standing customer base consists of the leading aerospace original equipment manufacturers, or OEMs, including Airbus, Boeing, Cessna, Gulfstream, Hawker Beechcraft, Lockheed Martin, Northrop Grumman and Sikorsky, as well as the U.S. Air Force. We believe that our new product and program development expertise, engineering and composite capabilities, the importance of the products we supply and the advanced manufacturing capabilities we offer make us a critical partner to our customers. We collaborate with our customers and use the latest technologies to address their needs for complex, highly engineered aerostructure components and subsystems. Our products are used on many of the largest and longest running programs in the aerospace industry, including the Airbus 330/340, Boeing 737, 767, 777 and C-17 Globemaster III, Lockheed Martin C-130, Sikorsky H-60, Gulfstream G350, G450, G500 and G550, as well as significant derivative aircraft programs such as the 747-8. We are also a key supplier to our customers on newer platforms, which we believe have high growth potential, such as the Northrop Grumman Global Hawk unmanned aerial vehicle, Boeing 787 and Boeing V-22 Osprey. We generated revenue of approximately $1.9 billion for the year ended December 31, 2009. See our consolidated statement of operations in Item 8 of this report.

     On March 23, 2010, we entered into a merger agreement with Triumph Group, Inc. (“Triumph”) pursuant to which we will be acquired by Triumph. It is anticipated that in connection with that transaction all of our currently outstanding material indebtedness will be repaid in full. Triumph is a public company listed on the NYSE under the ticker symbol “TGI,” and is a designer, engineer, manufacturer, repairer and over hauler of aircraft components and accessories. For more information regarding this transaction, see Item 9B of this Form 10-K.

Markets

     We operate within the aerospace industry as a manufacturer of aerostructures for commercial, military and business jet aircraft. Market and economic trends that impact the rates of growth of these markets affect the sales of our products. Demand for the aerostructures we produce is largely driven by aircraft build rates, which are, in turn, driven by demand for new aircraft. The competitive outlook and major growth drivers for each of our markets is discussed below.

     Commercial Aircraft Market. The commercial aircraft market can be categorized by aircraft size and seating as follows:

•

Large wide-body aircraft with twin aisles (more than 200 seats). This category includes the Boeing 747-8, 767, 777 and 787 and the Airbus A330/340 and A380, as well as the A350XWB, planned for entry into service in 2013.

•

Smaller narrow-body aircraft with single aisles (excluding regional aircraft) (100 to 200 seats). This category includes the Boeing 737, the Bombadier C series and the Airbus A320 family (A318/319/320/321).

•

Regional jets (approximately 40 to 110 seats). This category includes the Bombardier CRJ Series and the Embraer ERJ 135, 140 and 145 aircraft. Embraer also produces larger (70-108 seats) regional aircraft such as the ERJ 170/175 and ERJ 190/195.

     Demand for new commercial aircraft is driven by many factors, including general economic conditions, passenger and cargo air traffic, airline profitability, the introduction of new aircraft models, and the availability and profile of used aircraft. The primary manufacturers of large commercial aircraft are Airbus and Boeing, both of which have projected significant growth in the number of commercial and freighter aircraft in service over the next 20 years.

     While Boeing and Airbus generally agree on the magnitude of the growth in the commercial market, the manufacturers differ in their projections of numbers of aircraft and in their views of the size and type of aircraft that will be delivered over that timeframe. The long-term growth projections for the commercial aircraft market used in their latest market forecasts are:

		Annual Passenger Revenue Growth		Annual Cargo Revenue Growth
Airbus		4.7%		5.2%
Boeing		4.9%		5.4%

     However, forecasters have been unable to predict the peaks and troughs of the aviation cycle, including the significant downturn in production volumes post-2001, the dramatic increase in orders for commercial aircraft from 2005-2008 or the current downturn in production volumes. We believe that the current reductions in delivery rates will continue through at least the end of 2010. However, as economic conditions improve, we anticipate that delivery rates will increase in line with the long-term forecast for commercial aircraft.

     Military Aircraft Market. The military aircraft market can be categorized as follows:

•

Transport Aircraft or Cargo Aircraft —This aircraft category is characterized by the capability to transport troops, equipment and humanitarian aid including aircraft with the capability to operate from short and roughly prepared airfields or to perform airdrops of troops and equipment when landing is not an option. There are generally three classes of cargo aircraft: large cargo aircraft, such as the C-17 Globemaster III, C-5 Galaxy and AN124; medium cargo aircraft, such as the C-130J Hercules and the Airbus A400M, which is under development; and small cargo aircraft, such as the C-27J Spartan and EADS CASA C-295.

•

Unmanned Air Vehicles (“UAVs”) — Currently this class of aircraft is generally used for observation and command and control. Increasingly important in the U.S. military strategy, the use of this class of aircraft is broadening into weapons delivery and air combat. Examples include Global Hawk, the Predator and the Hunter.

•

Rotorcraft — The missions of the rotorcraft fleet are broad and varied and are critical to the war efforts in Iraq and Afghanistan. The critical missions that rotorcraft serve include intra-theatre cargo delivery, troop transport and rapid insertion, observation and patrol, ground attack and search and rescue and Special Operations. All models are seeing heavy use in Iraq and Afghanistan and, as a result, the delivery rates are increasing on most models due to the wear and damage the aircraft are experiencing. Examples include the H-60, sometimes referred to as Black Hawk, V-22 Osprey, CH-47 Chinook and the AH-64 Apache.

•

Fighter and Attack Aircraft — Fighter aircraft are used in air-to-air combat and provide air superiority over the battle space. This role enables other friendly aircraft to perform their missions. Attack aircraft are used to support ground troops in close air support roles and penetrating attacks. This category includes the F-22 Raptor, F-15E Eagle, A-10 Thunderbolt II, the F/A-18 Super Hornet and the F-35 Lightning II.

•

Aerial Tanker Aircraft — Tankers used to deliver fuel to other aircraft while airborne are essential to the effective use of combat and support aircraft. The Air Force issued a RFP to replace the KC-135 with the KC-X tanker. Boeing has indicated that it plans to base its entrant on a modified version of the 767 commercial airframe and we provide aerostructures for that aircraft.

     Demand for new military aircraft in the U.S. is driven by the national defense budget, procurement funding decisions, geopolitical conditions worldwide and current operational use of the existing fleet. We expect that demand for our military products should remain strong for the next several years due to the continuing and anticipated pace of military operations and the U.S. military’s need to more rapidly repair or replace its existing fleet of equipment.

     Business Jet Aircraft Market. The business jet market includes personal and business jet aircraft with a worldwide fleet today exceeding 14,000 aircraft. There are currently more than 40 different models of business jets in production or development, ranging from Very Light Jets (VLJ) seating four passengers to transcontinental business jets that carry up to 19 passengers. The business jet market is generally classified into three major segments: Light (which include VLJ, Entry and Light jets with sale prices ranging from approximately $1 million to $10 million per aircraft), Medium (which include Light-Mid, Medium and Super-Mid jets with sale prices ranging from approximately $10 million to $20 million per aircraft), and Heavy (which include Heavy, Long Range and Ultra Long Range jets with sale prices ranging from approximately $20 million to $45 million per aircraft). The primary business jet aircraft manufacturers are Bombardier, Cessna, Dassault Aviation, Embraer, Gulfstream and Hawker Beechcraft.

     The U.S. Air Force also operates a fleet of business jet aircraft for use by the executive and legislative branches of government as well as the U.S. joint command leadership. In addition, many foreign governments provide business jet aircraft to high-ranking officials.

     The business aviation market has been highly cyclical with general economic activity and corporate profitability driving the demand for new business jet aircraft. As a result of the economic downturn experienced during 2008 and 2009, the business aviation segment has suffered significantly. However, as the economy begins to rebound, it is anticipated that the business jet aircraft market will experience growth. Additionally, growth in the business jet segment is expected to occur in emerging markets such as Eastern Europe, Asia and the Middle East. As a major supplier to the top-selling Gulfstream G350, G450, G500 and G550 aircraft and the Citation X program, we believe we are well positioned in key segments of the business jet market.

     Products and Programs.

     We design, manufacture and supply both metal and composite aerospace structural assemblies including the following:

•

fuselage sections (including upper and lower ramp assemblies, skin panels, aft sections, and pressure bulkheads);

•

wings and wing assemblies (including skin panels, spars, and leading edges);

•

empennages (tail assemblies, including horizontal and vertical stabilizers, horizontal and vertical leading edge assemblies, elevators and rudders);

•

nacelles and nacelle components (the structures around engines, including fan cowls, inlet cowls, pylons and exhaust nozzles);

•

rotorcraft cabins and substructures;

•

detail parts (metallic and composite); and

•

control surfaces (including flaps, ailerons, rudders, spoilers and elevators).

     We have a diverse base of contracts in each of the significant aerospace markets described above. The following chart summarizes our revenue for the years ended December 31, 2009, 2008 and 2007. See our consolidated financial statements included in Item 8 of this report for a more detailed description of our historical results of operations.

		Year Ended								Year Ended								Year Ended
		December 31, 2009								December 31, 2008								December 31, 2007
						Percent								Percent								Percent
						of Total								of Total								of Total
		Revenue				Revenue				Revenue				Revenue				Revenue				Revenue
										($ in millions)
Revenue:
Commercial			946.7				50	%			848.1				48	%			782.1				48	%
Military			664.3				35	%			607.4				34	%			530.0				33	%
Business jets			266.8				15	%			319.5				18	%			301.0				19	%
Total revenue		$	1,877.8				100	%		$	1,775.0				100	%		$	1,613.1				100	%

     The tables in the following three categories summarize the major programs that we currently have under long-term contract by customer and product, indicating in each case whether we are a sole-source provider and the year of commencement of the program. For the purposes of the tables, we are considered a sole-source provider if we are currently the only provider of the structures we supply for that program. The year of commencement of a program is the year a contract was signed with the OEM.

     Commercial Aircraft Products. We produce a wide range of commercial aircraft products and participate in a number of major commercial programs for a variety of customers.

     We are one of the largest independent manufacturers of aerostructures for Boeing Commercial Airplanes (“Boeing Commercial”). We are also one of the largest U.S. manufacturers of aerostructures for Airbus and have more than 20 years of commercial aircraft experience with the various Airbus entities. Our major commercial programs are summarized as follows:

Commercial Aircraft						Year Program
Customer/Platform		Product		Sole-Source		Commenced
Airbus
A330/340		Upper skin panel assemblies, center spar and midrear spar, mid and outboard leading edge assemblies		ü			1988
A340-500/600		Upper skin panel, stringers, center spar and midrear spar, mid and outboard leading edge assemblies		ü			1998
Boeing
737		Inboard flaps					2009
747		Fuselage panels and empennage (vertical stabilizer, horizontal stabilizer and aft body section)		ü			1966
767		Wing center section, horizontal stabilizer and aft fuselage section		ü			1980
777		1993 — Inboard flaps, spoilers and spare requirements 2009 — outboard flaps and ailerons		ü			1993, 2009
787		Detail parts and frame assembly		ü			2005

     Military Aircraft Products. We produce a broad array of products for military organizations both in the United States and around the world. In the United States, we provide aerostructures for a variety of military platforms, including transport, rotorcraft and unmanned aircraft utilized by all four branches of the U.S. military. Our major military programs are summarized as follows:

Military Aircraft						Year Program
Customer/Platform		Product		Sole-Source		Commenced
Bell/Boeing
V-22 Osprey		Fuselage skin panels, empennage (sole-source) and ramp door assemblies					1993
Boeing
C-17 Globemaster III		Empennage and nacelle components		ü			1983
Lockheed Martin
C-130J Hercules		Empennage		ü			1953
Northrop Grumman
Global Hawk		Integrated composite wing		ü			1999
Sikorsky
H-60		Cabin structure					2004
U.S. Air Force
C-5 Galaxy		Flaps, slats, elevators, wing tips and panels					2002

     Business Jet Aircraft Products. Our customers in this market include primary business jet aircraft manufacturers such as Cessna, Gulfstream, and Hawker Beechcraft. We believe we are the largest aerostructures supplier to Gulfstream for their G350, G450, G500, and G550 models. Our major business jet programs are summarized as follows:

Business Jet Aircraft						Year Program
Customer/Platform		Product		Sole-Source		Commenced
Cessna
Citation X		Upper and lower wing skin assemblies		ü			1992
Gulfstream
G350 and G450		Nacelle components and wing boxes		ü			1983
G500 and G550		Integrated wings		ü			1993
Hawker Beechcraft
Hawker 800		Nacelle components		ü			1981

Competitive Strengths

     Leading, Diversified Position in the Aerostructures Market. We are a leading global manufacturer of aerostructures with a diverse mix of programs serving the commercial, military and business jet markets. Of our $1,877.8 million in total revenue for 2009, $946.7 million, $664.3 million and $266.8 million were derived from sales to the commercial, military and business jet markets, respectively. We manufacture aerostructures for Boeing and Airbus, the world’s leading commercial aircraft OEMs. We also provide aerostructures for a variety of military aircraft platforms utilized by all branches of the U.S. military, including transport, tanker, surveillance, rotor aircraft and UAVs. Our business jet customers include some of the largest business jet aircraft manufacturers worldwide such as Cessna and Gulfstream.

     Sole-Source Provider on High Volume, Long-Lived Commercial Platforms. We are a market leader on many long-lived commercial programs and are well positioned to capitalize on future growth in these established programs and other new program launches. We have a long history of new program development and have played a key role in the development of many of today’s most important commercial platforms including the 747, 767, 777, 787 and A330/340 since their inceptions. The success of these and other legacy programs provides a strong foundation for our business and positions us well for future growth on new programs and new derivatives. For example, we have extended our participation in the 747 program with the new 747-8 derivative.

     Strong Incumbent Position on Key Long-Lived Military Programs. We have a long history serving a diverse range of military aircraft programs, with particular strength in fixed-wing transport and rotor aircraft. We are the sole-source provider for several of the structures that we provide under our military programs. We have been a key supplier to the C-130 program since its inception in 1953 and the C-17 Globemaster III since its inception in 1983. We are also a key provider on newer military programs with high growth potential such as the V-22 Osprey and Global Hawk. Our key customers in the military market are Boeing, Lockheed Martin, Northrop Grumman, Sikorsky and the U.S. Air Force.

     Attractive Business Model. Our business model has several attractive features, including:

•

Strong, Stable Cash Flow From Legacy Programs. Revenue from legacy aircraft programs, such as the C-17, V-22, Global Hawk, 767, 777 and A330/340 which require only moderate capital expenditures to support current delivery rates, provides us with a source of strong, recurring cash flow.

•

Significant Revenue Visibility. Most of our 2009 revenues were generated under long-term contracts and from programs on which we are the sole-source provider. Our customers typically place orders well in advance of required deliveries, which gives us considerable visibility with respect to our future revenues. These advance orders also generally create a significant backlog for us, which was approximately $2.1 billion at December 31, 2009.

•

Opportunity to Participate on Next Generation Aircraft. Our long history with our customers and our engineering, design and technology expertise positions us to be a key aerostructures provider on future derivatives of existing programs, such as Boeing’s 747-8. We believe we are well positioned to compete for new business on next generation commercial wide body, narrow body, regional jet, business jet and military programs.

     Advanced Manufacturing and Technical Capabilities. We are a leading global manufacturer of some of the largest and most technologically advanced parts and assemblies for a diverse range of aircraft. Our capabilities include precision assembly techniques, automated assembly processes and large-bed machining and the fabrication of large composite fiber reinforced parts. As a key program partner on the 787 program, we have enhanced our industry-leading capability in the design, manufacturing and integration of complex composite structures. Our systems integration capabilities and ability to support challenging new aircraft schedules with cost-effective design and manufacturing solutions makes us a preferred partner for our OEM customers. These advanced capabilities are integral to our ability to continue to create innovative products and services for current and next generation aircraft programs.

     High Barriers to Entry with High Switching Costs for Customers. It would be challenging for new competitors to enter the aerostructures market due to the significant time and capital expenditures necessary to develop the capabilities to design, manufacture, test and certify aerostructure parts and assemblies. When competing for contract awards, new entrants would be required to make substantial up-front investment as well as develop and demonstrate sophisticated manufacturing expertise and experienced-based industry and aircraft program knowledge. Furthermore, aerostructure manufacturers must have extensive certifications and approvals from customers and government regulators, such as the Defense Contract Management Agency and the FAA. Additionally, due to the risk of serious production delays from switching suppliers and the high cost of additional testing and certification, we believe that OEMs are unlikely to change an aerostructure supplier after initial manufacturing contracts have been awarded.

     Well Positioned in the Military Aircraft Market. We serve a broad spectrum of the military aircraft market, with particular strength in fixed-wing transport and rotor aircraft. Currently, we provide aerostructures for key military transport programs, including the C-17 Globemaster III, as well as the important rotorcraft military segment, with V-22 Osprey tilt rotor transport and the H-60 helicopter. Additionally, we provide the integrated wing on the highly successful Global Hawk UAV.

     Strong and Experienced Management Team. We have an experienced and proven management team with an average of over 21 years of aerospace and defense industry experience. This management team has been responsible for the successful revenue growth and cost reduction initiatives that have driven our increased productivity and profitability over the past several years.

Business Strategy

     We intend to capitalize on our position as a leading global aerostructures manufacturer and on the expected long-term growth in the commercial, military and business jet markets. Specifically, we intend to:

     Enhance our Position as a Strategic and Valued Partner to our Customers. We will focus on strengthening our customer relationships and expanding our market opportunities by partnering with our OEM customers on their current and future aircraft platforms. We strive to be our customers’ most valued partner through excellence in our product and process technologies and by providing access to modern and efficient production facilities. We expect to continue to improve our manufacturing efficiencies, continually making operational and process upgrades to maintain the highest standards of quality and on-time delivery.

     Leverage Our Long History and Expertise Across Our Diverse Markets. We continue to pursue opportunities to increase our sales to new and existing customers across the commercial, military and business jet markets by capitalizing on opportunities both on existing platforms as well as on future derivative and next generation programs. We believe that we are well positioned to win additional business given the breadth of our customer relationships, capabilities and experience, and our quality of service and support.

•

Legacy Programs: We believe we are well positioned on our important legacy commercial and business jet programs. We have the ability to accommodate higher production rates from our customers on those legacy programs when the economy rebounds. We also believe we have the capability to meet the future production needs of our military OEM customers and the U.S. Air Force.

•

Derivative Programs: We intend to utilize our incumbent position on existing programs to provide aerostructures on derivative programs such as the Boeing 747-8.

•

Next Generation Programs: Next generation aircraft programs will rely to a greater extent on streamlined assembly methods and advances in composite materials. We believe we are well positioned to participate in these programs, which will include next generation versions of the U.S. military tanker, narrow and wide body commercial aircraft and business jets. We believe we have developed certain distinguishing capabilities through our historical and current programs, including the 787, C-17, Global Hawk and V-22, which we intend to leverage in our pursuit of future business.

     Continue to Provide Advanced Products and Technologies. We place a high priority on the ongoing technological development and application of our products and services. Our commitment to innovation is evidenced by the significant investment we have made in new program initiatives such as the investment in our composite fabrication and advanced manufacturing capabilities. We believe this important investment has made us an industry leader in technology and new product development, strengthened our customer relationships and positioned us to generate new business on existing and future programs.

     Continue Operational Improvements. We will continue to implement the best operational practices that have already resulted in significant operational improvements with respect to safety, quality, schedule performance and productivity, which have contributed to increased profitability over the last two years. These best operational practices are institutionalized as part of what we refer to as the Vought Operating System, which is now implemented in all of our facilities to drive operational improvements.

     Globalize Our Production Process. We intend to globalize our production process through initiatives such as global sourcing. We believe that our initiatives will allow us to reduce costs, expand our capabilities and provide strategic benefits to our customers.

     Selectively Pursue Acquisitions or Mergers. We intend to selectively pursue acquisition or merger opportunities that fit our business strategy, in particular opportunities that will further enhance and diversify our program portfolio as well as provide further technological differentiation.

Customers

     We generate a large proportion of our revenues from three large customers. The following table reports the total revenue from these customers relative to our total revenue.

		Year Ended								Year Ended								Year Ended
		December 31, 2009								December 31, 2008								December 31, 2007
						Percent								Percent								Percent
						of Total								of Total								of Total
Customers		Revenue				Revenue				Revenue				Revenue				Revenue				Revenue
										($ in millions)
Airbus		$	163.4				9	%		$	222.3				13	%		$	206.2				13	%
Boeing			1,188.8				63	%			976.4				55	%			919.0				57	%
Gulfstream			244.0				13	%			275.7				15	%			259.1				16	%
Total revenue to large customers			1,596.2				85	%			1,474.4				83	%			1,384.3				86	%
Total revenue		$	1,877.8				100	%		$	1,775.0				100	%		$	1,613.1				100	%

     Although the majority of our revenues are generated by sales into the U.S. market, as shown on the following table, a significant portion of our revenues are generated by sales to OEMs located outside of the United States.

		Year Ended								Year Ended								Year Ended
		December 31, 2009								December 31, 2008								December 31, 2007
						Percent								Percent								Percent
						of Total								of Total								of Total
Revenue Source		Revenue				Revenue				Revenue				Revenue				Revenue				Revenue
										($ in millions)
United States		$	1,713.9				91	%		$	1,552.7				87	%		$	1,406.9				87	%
International (1)
England			149.4				8	%			153.3				9	%			143.0				9	%
Other			14.5				1	%			69.0				4	%			63.2				4	%
Total International			163.9				9	%			222.3				13	%			206.2				13	%
Total revenue		$	1,877.8				100	%		$	1,775.0				100	%		$	1,613.1				100	%

Raw Materials, Purchased Parts and Suppliers

     We depend on the availability of raw materials, component parts and subassemblies from our suppliers and subcontractors. Our suppliers’ ability to provide timely and quality raw materials, components, kits and subassemblies affects our production schedules and contract profitability. We maintain an extensive qualification and performance surveillance system to control risk associated with this reliance on the supply chain. Additionally, while certain of our current suppliers of raw material and components are the only suppliers used by our company at this time, we believe we can obtain such raw materials and components from other sources of supply, if necessary. However, certain of our contracts require that our suppliers be approved by our customers, which could result in significant delays or expenses in switching suppliers.

     Our strategic sourcing initiatives seek to find ways of mitigating the inflationary pressures of the marketplace. In recent years, these inflationary pressures have affected the market for raw materials. However, we believe that raw material prices will remain stable through the remainder of 2010 and after that, experience increases that are in line with inflation. Additionally, we generally do not employ forward contracts or other financial instruments to hedge commodity price risk.

     These macro-economic pressures may increase our operating costs with consequential risk to our cash flow and profitability. We generally do not employ forward contracts or other financial instruments to hedge commodity price risk, although we continuously explore supply chain risk mitigation strategies.

     We also depend on third party suppliers for most of our information technology requirements necessary to run our business.

Research and Development and Specialized Engineering Services

     Our scientists, engineers and other personnel have capabilities and expertise in structural design, stress analysis, fatigue and damage tolerance, testing, systems engineering, factory support, product support, tool design, inspection and systems installation design. The costs incurred relating to independent research and development for the years ended December 31, 2009, 2008 and 2007, were $3.2 million, $5.5 million and $4.4 million, respectively, recorded in selling, general and administrative expenses in our income statement. We work jointly with our customers and the supply base to ensure that our investments complement the needs of our industry, rather than duplicate what our stakeholders are developing.

Intellectual Property

     We have a number of patents related to our processes and products. While in the aggregate our patents are of material importance to our business, we believe that no single patent or group of patents is of material importance to our business as a whole. We also rely on trade secrets, confidentiality agreements, unpatented knowledge, creative product development and continuing technological advancement to maintain our competitive position.

     Additionally, our business depends on using certain intellectual property and tooling that we have rights to use pursuant to license grants under our contracts with our OEM customers. These contracts contain restrictions on our use of the intellectual property and tooling and may be terminated if we violate certain of these restrictions. Our loss of a contract with an OEM customer and the related license rights to use an OEM’s intellectual property or tooling would materially adversely affect our business.

Competition

     In the production and sale of aerospace structural assemblies, we compete with numerous U.S. and international companies on a worldwide basis. Primary competition comes from internal work completed by the operating units of OEMs including Airbus, Boeing, Gulfstream, Lockheed Martin, Northrop Grumman, Sikorsky and Raytheon. We also face competition from independent aerostructures suppliers in the U.S. and overseas who, like us, provide services and products to the OEMs. Our principal competitors among independent aerostructures suppliers include: Alenia Aeronautica, Fuji Heavy Industries, GKN Westland Aerospace (U.K.), Goodrich Corp., Kawasaki Heavy Industries, Mitsubishi Heavy Industries, Spirit AeroSystems and Stork Aerospace.

     OEMs may choose not to outsource production of aerostructures due to, among other things, their own direct labor and overhead considerations, capacity utilization at their own facilities and desire to retain critical or core skills. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce a part in-house or to outsource.

     However, when OEMs choose to outsource, they typically do so for one or more of the following reasons:

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lower cost;

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capacity limitations;

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a business need or desire to utilize other’s unique engineering and design capabilities;

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a desire to share the required upfront investment;

•

risk sharing; and

•

strategic reasons in support of sales.

     Our ability to compete for large structural assembly contracts depends upon:

•

our underlying cost structure that enables a competitive price;

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the readiness and availability of our facilities, equipment and personnel to undertake and nimbly implement the programs;

•

our engineering and design capabilities;

•

our ability to manufacture or rapidly procure both metal and composite structures;

•

our ability to support our customer’s needs for strategic work placement; and

•

our ability to finance the upfront costs of new contracts

Government Regulation

     The commercial and business jet aerospace industry is highly regulated in the United States by the FAA and by similar organizations in other markets. As a producer of major aerostructures for commercial and business jet aircraft, our production activities are performed under the auspices of the applicable FAA type certificate held by the prime manufacturer for which we produce product. In addition to qualifying our production and quality systems to our customer’s requirements, we are also certified in Stuart, Florida by the FAA to repair and overhaul damaged parts for delivery and reinstallation on commercial and business jet aircraft.

     Our Quality Management System has been certified as compliant with AS9100 (which is the general system standard for aerospace manufacturers, based on and including the requirements of ISO 9001), and we hold an industry registration certificate to that standard through an accredited registrar. Our special production processes are certified in compliance to industry manufacturing, quality and processing requirements, as defined and controlled by the PRI/Nadcap accreditation program.

     The military aerospace industry is highly regulated by the U.S. Department of Defense. The Defense Contract Management Agency has certified us to provide products to the U.S. military. We are subject to review by the Defense Contract Management Agency whether we contract directly with the U.S. Government or provide aerostructures to an OEM that contracts directly with the U.S. Government. The U.S. Government contracts held by us and our customers are subject to unique procurement and administrative rules based on laws and regulations. U.S. Government contracts are, by their terms, subject to termination by the U.S. Government either for its convenience or default by the contractor. In addition, U.S. Government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a yearly basis, even though contract performance may take many years. Consequently, at the outset of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future years.

     In addition, use of foreign suppliers and sale to foreign customers, such as Airbus, and foreign governments may subject us to the requirements of the U.S. Export Administration Regulations and the International Trafficking in Arms Regulations.

Employees

     As of December 31, 2009, we employed approximately 5,900 people. Of those employed at year-end, approximately 2,800, or 47%, are represented by four separate unions.

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Local 848 of the United Automobile, Aerospace and Agricultural Implement Workers of America represents approximately 2,100 of the employees located in Dallas and Grand Prairie, Texas. This union contract, which covers the majority of our production and maintenance employees at our Dallas and Grand Prairie, Texas facilities, is in effect through October 3, 2010.

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Aero Lodge 735 of the International Association of Machinists and Aerospace Workers represents approximately 650 of the employees located in Nashville, Tennessee. This union contract is in effect through January 15, 2012.

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Local 220 of the International Brotherhood of Electrical Workers represents 40 employees located in Dallas, Texas. This union contract is in effect through May 3, 2010.

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Local 263 of the Security, Police and Fire Professionals of America (formerly United Plant Guard Workers of America) represents 20 employees located in Dallas, Texas. This union contract is in effect through February 19, 2012.

     We believe we have constructive working relationships with our unions and have generally been successful in negotiating collective bargaining agreements in the past. Before the 2008 strike at our Nashville facility by the employees represented by Local 735 of the IAM, we had not suffered an interruption of business as a result of a labor dispute since 1989. However, there can be no assurance that in the future we will reach an agreement on a timely basis or that we will not experience a work stoppage or labor disruption that could significantly adversely affect our operations.

     From time to time, unions have sought and may continue to seek to organize employees at some of our facilities. We cannot predict the impact of any additional unionization of our workforce.

Backlog

     A significant majority of our revenues are generated through long-term sole-source supply agreements with our OEM customers. Orders under these supply agreements are typically made well in advance of deliveries, which gives us considerable visibility with respect to our future revenues. These advance orders also generally create a significant backlog for us, which was $2.1 billion at December 31, 2009. Our calculation of backlog includes only firm orders for commercial and business jet programs and funded orders for government programs, which causes our backlog to be substantially lower than the estimated aggregate dollar value of our contracts and may not be comparable to others in the industry. Our backlog may fluctuate at any given time depending on whether we have received significant new firm orders, funded orders or authorizations to proceed before the date of measurement. For example, our military funded orders or authorizations to proceed generally are awarded when the Department of Defense budget for the relevant year has been approved, resulting in a significant increase in backlog at that time.

     Certain factors should be considered when evaluating our backlog. For our commercial and business jet aircraft programs, changes in the economic environment and the financial condition of airlines may cause our customers to increase or decrease deliveries, adjusting firm orders that would affect our backlog. For our military aircraft programs, the Department of Defense and other government agencies have the right to terminate both our contracts and/or our customers’ contracts either for default or, if the government deems it to be in its best interest, for convenience.

Environmental Matters

     Our manufacturing operations are subject to various federal, state and local environmental laws and regulations, including those related to pollution, air emissions and the protection of human health and the environment. We routinely assess compliance and continuously monitor our obligations with respect to these requirements. Based upon these assessments and other available information, we believe that our manufacturing facilities are in substantial compliance with all applicable existing federal, state and local environmental laws and regulations and we do not expect environmental costs to have a material adverse effect on us. The operation of manufacturing plants entails risk in these areas and there can be no assurance that we will not incur material costs or liabilities in the future that could adversely affect us. For example, such costs or liabilities could arise due to changes in the existing law or its interpretations, or newly discovered contamination.

     Under federal and state environmental laws, owners and operators of contaminated properties can be held responsible for up to 100% of the costs to remediate contamination, regardless of whether they caused such contamination. 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, California facility, the Stuart, Florida facility, the Milledgeville, Georgia facility and two Texas facilities. Of those facilities, remediation projects are underway in Hawthorne, Stuart, Milledgeville and Dallas.

     The acquisition agreement between Northrop Grumman Corporation and Vought transferred certain pre-existing (as of July 24, 2000) environmental liabilities to us. We are liable for the first $7.5 million and 20% of the amount between $7.5 million and $30 million for environmental costs incurred relating to pre-existing matters as of July 24, 2000. Pre-existing environmental liabilities at the formerly Northrop Grumman Corporation sites exceeding our $12 million liability limit remain the responsibility of Northrop Grumman Corporation under the terms of the acquisition agreement, to the extent they are identified within 10 years from the acquisition date. Thereafter, to the extent environmental remediation is required for hazardous materials including asbestos, urea formaldehyde foam insulation or lead-based paints, used as construction materials in, on, or otherwise affixed to structures or improvements on property acquired from Northrop Grumman Corporation, we would be responsible. We have no material outstanding or unasserted asbestos, urea formaldehyde foam insulation or lead-based paints liabilities including on property acquired from Northrop Grumman Corporation.

     As of December 31, 2009, our balance sheet included an accrued liability of $2.4 million for accrued environmental liabilities.

Company Information

     Our heritage as an aircraft manufacturer extends to the company founded in 1917 by aviation pioneer Chance Milton Vought. From 1994 to 2000, we operated as Northrop Grumman’s commercial aircraft division. We were formed in 2000 in connection with The Carlyle Group’s acquisition of Northrop Grumman’s aerostructures business. In July 2003, we purchased The Aerostructures Corporation, with manufacturing sites in Nashville, Tennessee; Brea, California; and Everett, Washington.

     We are a Delaware corporation with our principal executive offices located at 201 East John Carpenter Freeway, Tower 1, Suite 900, Irving, TX 75062, and we perform production work at sites throughout the United States, including California, Texas, Georgia, Tennessee, Florida and Washington. Our telephone number at our principal executive offices is (972) 946-2011. Our Internet website address is www.voughtaircraft.com. Information contained on our website is not part of this report and is not incorporated in this report by reference.

     Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings made pursuant to the Securities Exchange Act of 1934, as amended, are available free of charge through our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. You can also obtain these reports directly from the SEC at their website, www.sec.gov, or you may visit the SEC in person at the SEC’s Public Reference Room at Station Place, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Item 1A. Risk Factors

Risks Relating to Our Business and Our Industry

Our commercial business is cyclical and sensitive to the profitability of the commercial airline and cargo industries. Our business is, in turn, affected by general economic conditions and world safety considerations.

     We compete in the aerostructures sector of the aerospace industry. While our direct customers are aircraft manufacturers, such as Boeing and Airbus, our business is indirectly affected by the financial condition of the commercial airlines and airfreight companies and other economic factors that affect the demand for air transportation. Specifically, our commercial business is dependent on the demand from passenger airlines and airfreight companies for the production of new aircraft by our customers. This demand for aircraft is dependent on and influenced by a number of factors including:

	•		global economic growth, which is a primary factor that both Boeing and Airbus use to forecast future production requirements. In particular, we may face challenges due to the negative conditions in the financial markets. These factors could adversely impact overall demand for aircraft and air travel, which could have a negative effect on our revenues;
	•		the ability of the industry to finance new aircraft, which is generally tied to industry profitability and load factors, as well as the conditions of the credit market can adversely affect the cost and availability of financing of aircraft;
	•		air cargo requirements and airline load factors, which are driven by world economy and international trade volume;
	•		age and efficiency of the world fleet of active and stored aircraft;
	•		general public attitudes towards air travel, which have been adversely impacted by events such as the September 11, 2001 terrorist attacks and later, the SARS outbreak in Asia, and tend to dramatically and quickly influence the market;
	•		higher fuel prices, which may impact the airline and cargo industry’s short-term profitability and their ability to afford replacement aircraft which may drive more rapid fleet renewal to take advantage of newer, more efficient aircraft technologies; and
	•		increased global demand for air travel.

If the proposed acquisition of us by Triumph Group, Inc. is not completed, our business will be adversely affected.

On March 23, 2010, we entered into a merger agreement with Triumph Group, Inc. pursuant to which we will be acquired by Triumph. See Item 9B of this Form 10-K. It is anticipated that in connection with that transaction all of our currently outstanding material indebtedness will be repaid in full. The consummation of the acquisition is subject to, among other things, approval of Triumph’s stockholders and other customary closing conditions, which may not be satisfied. Our business will be adversely affected if the acquisition is not completed as a result of several factors, including, but not limited to, the following:

	•		the indebtedness that is expected to be extinguished in connection with the acquisition will remain outstanding and, we will be required to refinance our senior credit facility or our Senior Notes prior to the last business day of 2010.
	•		our customers, prospective customers and investors in general may view this failure as a poor reflection on our business or prospects,
	•		customers or prospective customers may have delayed their purchase commitments until the acquisition was complete or may have chosen not to purchase at all,
	•		certain of our suppliers and business partners may have sought to change or terminate their relationships with us as a result of the proposed acquisition,
	•		certain of our key employees may have sought other employment opportunities, and
	•		our management team may have been distracted from day-to-day operations as a result of the proposed acquisition.

We operate in a highly competitive business environment.

     Competition in the aerostructures segment of the aerospace industry is intense and concentrated. We face substantial competition from the operating units of some of our largest customers, including Airbus, Boeing, Gulfstream, Lockheed Martin, Northrop Grumman, Hawker Beechcraft and Sikorsky. These OEMs may choose not to outsource production of aerostructures due to, among other things, their own direct labor and overhead considerations, capacity utilization at their own facilities and desire to retain critical or core skills. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce a part in-house or to outsource.

     We also face competition from non-OEM suppliers in each of our product areas. Our principal competitors among aerostructures suppliers include Alenia Aeronautica, Fuji Heavy Industries, GKN Westland Aerospace (U.K.), Goodrich Corp., Kawasaki Heavy Industries, Mitsubishi Heavy Industries, Spirit AeroSystems and Stork Aerospace. Some of our competitors have greater resources than us, and therefore may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can.

     Providers of aerostructures have traditionally competed on the basis of cost, technology, quality and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply chain management and sales and marketing, and we may not have enough resources to make the necessary investments to do so. For these reasons, we may not be able to compete successfully in this market or against such competitors. See “Item 1. Business — Competition.”

Financial market conditions could impact our ability to access new capital to meet our liquidity needs and impact our results of operations.

     Our sources of capital include, but are not limited to, cash flows from operations, public and private issuances of debt and equity securities, and bank borrowings. Recently, the capital and credit markets have experienced volatility as a result of adverse conditions. If the capital and credit markets again experience volatility and the availability of funds becomes limited, we will incur increased costs associated with issuing commercial paper and/or other debt instruments. In addition, it is possible that our ability to access the capital and credit markets may be limited by these or other factors at a time when we attempt to do so, which could have an impact on our ability to refinance maturing debt and/or react to changing economic and business conditions. We may face this difficulty during 2010 as under the terms of the senior credit facility, we are required to prepay or refinance any amounts outstanding of our $270.0 million Senior Notes by the last business day of 2010 or repay the aggregate amount of loans outstanding under the senior credit facility at that time.

     The major rating agencies regularly evaluate us and their ratings of our long-term debt are based on a number of factors, including our financial strength, and factors outside our control. In light of the difficulties in the financial markets, there can be no assurance that we will maintain our current ratings at levels that are acceptable to investors. Our failure to maintain current credit ratings could adversely affect the cost and other terms upon which we are able to obtain financing, as well as our access to the capital markets.

     The impact of adverse market conditions on businesses and customers could lead to decreases in spending by aircraft manufacturers which, in turn, could cause our customers to delay delivery of orders or cancel existing orders. Periods of prolonged declines in business consumer spending may adversely affect our results of operations.

Large customer concentration may negatively impact revenue, results of operations and cash flows.

     For the years ended December 31, 2009, 2008 and 2007, approximately 85%, 83% and 86% of our revenue, respectively, resulted from sales to Airbus, Boeing and Gulfstream. Additionally, for the years ended December 31, 2009, 2008 and 2007, sales to these customers accounted for the approximate respective percentages of our revenues indicated: (1) Boeing (63%, 55% and 57%, respectively); (2) Airbus (9%, 13% and 13%, respectively) and (3) Gulfstream (13%, 15% and 16%, respectively). Accordingly, any significant reduction in purchases by Airbus, Boeing or Gulfstream would have a material adverse effect on our financial condition, results of operations and cash flows.

Our fixed-price contracts may commit us to unfavorable terms.

     For the year ended December 31, 2009, a significant portion of our revenues were derived from fixed-price contracts under which we have agreed to provide structures for a price determined on the date we entered into the contract. Several factors may cause the costs we incur in fulfilling these contracts to vary substantially from our original estimates, and we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on these contracts. In a fixed-price contract, we must fully absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these contracts. Because our ability to terminate contracts is generally limited, we may not be able to terminate our performance requirements under these contracts at all or without substantial liability and, therefore, in the event we are sustaining reduced profits or losses, we could continue to sustain these reduced profits or losses for the duration of the contract term. Our failure to anticipate technical problems, estimate delivery reductions, estimate costs accurately or control costs during performance of a fixed-price contract may reduce the profitability of a fixed-price contract or cause significant losses.

     Although we believe that we have recorded adequate provisions in our consolidated financial statements for losses on our fixed-price contracts, as required under accounting principles generally accepted in the United States, our contract loss provisions may not be adequate to cover all actual future losses, which may have a material adverse effect on our financial condition, results of operations and cash flows.

We incur risk associated with new programs that are critical to our future profitability.

     New programs typically carry risks associated with design responsibility, development of new production tools, hiring and training of qualified personnel, increased capital and funding commitments, delays in the program schedule, failure of other suppliers to our customer to perform and meet their obligations, ability to meet customer specifications, delivery schedules and unique contractual requirements, supplier performance, ability of the customer to meet its contractual obligations to us, delays in negotiations of certain contractual matters and our ability to accurately estimate costs associated with such programs, which may have a material adverse effect on our financial condition, results of operations and cash flows.

     The success of our business will depend, in large part, on the success of our new programs. We have made and will continue to make significant investments in new programs. However, insufficient demand for those new aircraft, or technological problems or significant delays in the regulatory certification process or manufacturing and delivery schedule for such aircraft, could have a material adverse effect on our financial condition, results of operations and cash flows.

Failure to, or delays in, negotiations of favorable contract terms with our customers for current and follow-on contract effort could materially impact our operations.

     Our level of success as an aerostructure supplier is largely dependent on our ability to negotiate favorable contract terms for current and future production with our customers. Typically, we enter fixed-price contracts with pricing that is determined based on an estimate of our costs and expected margin. However, the actual costs incurred for some projects exceed these estimates. If we are unable to successfully negotiate favorable contract terms for current and future production in a timely manner or at all, our level of profitability could be significantly impacted.

We may be subject to work stoppages at our facilities or those of our principal customers and suppliers, which could seriously impact the profitability of our business.

     Our unionized workforces and those of our customers and suppliers may experience work stoppages. For example, IAM represented employees at our Nashville, Tennessee plant engaged in a strike that continued for approximately 16 weeks during 2008 and 2009. We implemented our contingency plan that allowed us to continue production in Nashville during the course of that strike. Additionally, our union contract with Local 848 of UAW with employees at our Dallas and Grand Prairie, TX facilities expires on October 3, 2010. If we are unable to negotiate a new contract with that workforce, our operations may be adversely disrupted and we may be prevented from completing production and delivery of our aircraft structures which would negatively impact our results of operations.

     Many aircraft manufacturers, airlines and aerospace suppliers have unionized work forces. Strikes, work stoppages or slowdowns experienced by aircraft manufacturers, airlines or aerospace suppliers, such as the recent strike at the Boeing facilities, could reduce our customers’ demand for additional aircraft structures or prevent us from completing production of our aircraft structures. In turn, this may have a material adverse affect on our financial condition, results of operations and cash flows.

Financial market conditions may adversely affect our benefit plan assets, increase funding requirements and materially impact our statement of financial position.

     Our benefit plan assets are invested in a diversified portfolio of investments in both the equity and debt categories, as well as limited investments in real estate and other alternative investments. The current market values of all of these investments, as well as our benefit plan liabilities are impacted by the movements and volatility in the financial markets. In accordance with the Compensation — Retirement Benefits topic of the Accounting Standards Codification (ASC), we recognize the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in our balance sheet and we recognize changes in that funded status in the year in which the changes occur. The funded status is measured as the difference between the fair value of the plan’s assets and the projected benefit obligation. As of December 31, 2009, obligations under our pension plans exceeded the fair value of the assets of the plans by $615.7 million. See Note 14 to our consolidated financial statements in Item 8 of this report. A decrease in the fair value of our plan assets resulting from movements in the financial markets will increase the under-funded status of our plans recorded in our statement of financial position and result in additional cash funding requirements to meet the minimum required funding levels.

A decline in the U.S. defense budget or change of funding priorities may reduce demand for our customers’ military aircraft and reduce our sales of products used on military aircraft.

     The U.S. defense budget has fluctuated in recent years, at times resulting in reduced demand for new aircraft and, to a lesser extent, spare parts. In addition, foreign military sales are affected by U.S. Government regulations, foreign government regulations and political uncertainties in the United States and abroad. The U.S. defense budget may continue to fluctuate, and sales of defense related items to foreign governments may decrease. A decline in defense spending could reduce demand for our customers’ military aircraft, and thereby reduce sales of our products used on military aircraft.

     We face the risk that the C-17 program could be completed upon fulfillment of currently outstanding production orders. We currently have a contract from Boeing to support C-17 production through April 2011. The President’s proposed 2010 budget does not include funding for the procurement of new C-17 aircraft although Congress has proposed adding funding for additional aircraft. However, our business could be adversely impacted if the Government does not fund additional C-17 aircraft and Boeing decides not to fund beyond their current commitment. As a result, the loss of the C-17 program and the failure to win additional work to replace the C-17 program could materially reduce our cash flow and results of operations beginning in 2011.

Any significant disruption from key suppliers of raw materials and key components could delay production and decrease revenue.

     We are highly dependent on the availability of essential raw materials such as carbon fiber, aluminum and titanium, and purchased engineered component parts from our suppliers, many of which are available only from single customer-approved sources. Moreover, we are dependent upon the ability of our suppliers to provide raw materials and components that meet our specifications, quality standards and delivery schedules. Our suppliers’ failure to provide expected raw materials or component parts could require us to identify and enter into contracts with alternate suppliers that are acceptable to both us and our customers, which could result in significant delays, expenses, increased costs and management distraction and adversely affect production schedules and contract profitability.

     We have from time to time experienced limited interruptions of supply, and we may experience a significant interruption in the future. Our continued supply of raw materials and component parts are subject to a number of risks including:

	•		availability of capital to our suppliers;
	•		the destruction of our suppliers’ facilities or their distribution infrastructure;
	•		a work stoppage or strike by our suppliers’ employees;
	•		the failure of our suppliers to provide raw materials or component parts of the requisite quality;
	•		the failure of essential equipment at our suppliers’ plants;
	•		the failure or shortage of supply of raw materials to our suppliers;
	•		contractual amendments and disputes with our suppliers; and
	•		geopolitical conditions in the global supply base.

     In addition, some contracts with our suppliers for raw materials, component parts and other goods are short-term contracts, which are subject to termination on a relatively short-term basis. The prices of our raw materials and component parts fluctuate depending on market conditions, and substantial increases in prices could increase our operating costs, which, as a result of our fixed price contracts, we may not be able to recoup through increases in the prices of our products.

     Due to economic difficulty, we may face pressure to renegotiate agreements resulting in lower margins. Our suppliers may discontinue provision of products to us at attractive prices or at all, and we may not be able to obtain such products in the future from these or other providers on the scale and within the time periods we require. Furthermore, substitute raw materials or component parts may not meet the strict specifications and quality standards

we and our customers demand, or that the U.S. Government requires. If we are not able to obtain key products on a timely basis and at an affordable cost, or we experience significant delays or interruptions of their supply, revenues from sales of products that use these supplies will decrease.

     We are also dependent upon third party suppliers, such as Northrop Grumman Information Technology, to supply us with the majority of the information technology services used to operate our facilities. If these suppliers could no longer supply us with information technology services and we are required to secure another supplier, we might not be able to do so on comparable terms, or at all, which could adversely affect production schedules and contract profitability.

We are exposed to economic and geo-political risks in the countries in which our suppliers are located.

     Our contracted business with foreign suppliers subjects us to risks associated with fluctuations in foreign currency exchange rates and interest rates as well as geopolitical risks in the countries where our suppliers are located. While the purchase prices and payment terms under these contracts are denominated in U.S. dollars, decline in the relative strength of U.S. dollar may force us to renegotiate contract terms with our foreign suppliers to avoid losing these contracts, which could have a material adverse effect on our results of operations, financial position and cash flows.

The price volatility of energy costs may adversely affect our profitability.

     Our revenues depend on the margin above fixed and variable expenses, including energy costs, at which we are able to sell our products. We have exposure to utility price risks as a result of the volatility in costs of fuel, principally natural gas, and other utility services, principally electricity, which affect our operating costs. Fuel and utility prices have been, and will continue to be, affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets. We have entered into fixed price contracts at certain of our manufacturing locations for a portion of their energy usage for periods of up to three years, however, these contracts only reduce the risk to us during the contract period, and future volatility in the supply and pricing of energy and natural gas could have a material adverse effect on our results of operations, financial position and cash flows.

Commercial airlines have been and, as a result, we may be materially adversely affected by high fuel prices.

     Due to the competitive nature of the airline industry, airlines may be unable to pass on future increases in fuel prices to customers by increasing fares. Fluctuations in the global supply of crude oil and the possibility of changes in government policy on jet fuel production, transportation and marketing make it impossible to predict the future availability of jet fuel. In the event there is an outbreak or escalation of hostilities or other conflicts or significant disruptions in oil production or delivery in oil-producing areas or elsewhere, there could be reductions in the production or importation of crude oil and significant increases in the cost of fuel. If there were major reductions in the availability of jet fuel or significant increases in its cost, commercial airlines will face increased operating costs, which could result in decreases in net income from either lower margins or, if airlines increase ticket fares, less revenue from reduced airline travel.

     Decreases in airline profitability could decrease the demand for new commercial aircraft, resulting in delays of or decreases in deliveries of commercial aircraft utilizing our aerostructures and, as a result, our financial condition, results of operations and cash flows could be materially adversely affected.

We are subject to regulation of our technical data and goods exports.

     Use of foreign suppliers and sale to foreign customers may subject us to the requirements of the U.S. Export Administration Regulations and the International Trafficking in Arms Regulations. Failure to comply with these regulations may result in significant fines and loss of the right to export goods. In addition, restrictions may be placed on the export of technical data and goods in the future as a result of changing geo-political conditions, which could have a material adverse effect on our financial condition, results of operations and cash flows.

We are implementing a new Enterprise Resource Planning (ERP) system.

     In 2009, we began the planning and design phase of an ERP system which we plan to complete implementation of in 2011. If this implementation is not managed effectively we may be unable to provide accurate financial information in a timely manner or obtain information necessary to manage our business, which could have a material adverse effect on our financial condition and results of operations.

The construction of aircraft is heavily regulated and failure to comply with applicable laws could reduce our sales or require us to incur additional costs to achieve compliance, which could reduce our results of operations.

     The FAA prescribes standards and qualification requirements for aerostructures, including virtually all commercial airline and general aviation products, and licenses component repair stations within the U.S. Comparable agencies regulate these matters in other countries. We are subject to both the FAA regulations and the regulations of comparable agencies in the foreign countries in which we conduct business. If we fail to qualify for or obtain a required license for one of our products or services or lose a qualification or license previously granted, the sale of the subject product or service would be prohibited by law until such license is obtained or renewed. In addition, designing new products to meet existing regulatory requirements and retrofitting installed products to comply with new regulatory requirements can be expensive and time consuming.

     From time to time, the FAA or comparable agencies in other countries propose new regulations or changes to existing regulations. These new changes or regulations generally cause an increase in costs of compliance. To the extent the FAA, or comparable agencies in other countries implement regulatory changes, we may incur significant additional costs to achieve compliance.

Our operations depend on our manufacturing facilities throughout the U.S., which are subject to physical and other risks that could disrupt production.

     Our manufacturing facilities could be damaged or disrupted by a natural disaster, war, or terrorist activity. We maintain property damage and business interruption insurance at the levels typical in our industry, however, a major catastrophe, such as an earthquake, hurricane, flood, tornado or other natural disaster at any of our sites, or war or terrorist activities in any of the areas where we conduct operations could result in a prolonged interruption of our business. Any disruption resulting from these events could cause significant delays in shipments of products and the loss of sales and customers and we may not have insurance to adequately compensate us for any of these events.

The U.S. Government is a significant customer of our largest customers and we and they are subject to specific U.S. Government contracting rules and regulations.

     We are a significant provider of aerostructures to military aircraft manufacturers. The military aircraft manufacturers’ business, and by extension, our business, is affected by the U.S. Government’s continued commitment to programs under contract with our customers. The terms of defense contracts with the U.S. Government generally permit the government to terminate contracts partially or completely, either for its convenience or if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of unrecovered costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. On contracts where the price is based on cost, the U.S. Government may review our costs and performance, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. In addition, under U.S. Government purchasing regulations, some of our costs, including most financing costs, portions of research and development costs, and certain marketing expenses may not be subject to reimbursement.

     We bear the potential risk that the U.S. Government may unilaterally suspend our customers or us from new contracts pending the resolution of alleged violations of procurement laws or regulations. Sales to the U.S. Government are also subject to changes in the government’s procurement policies in advance of design completion. An unexpected termination of, or suspension from, a significant government contract, a reduction in expenditures by the U.S. Government for aircraft using our products, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts awarded to us, or substantial cost overruns could have a material adverse effect on our financial condition, results of operations and cash flows.

We depend on key personnel and may not be able to retain those employees or recruit additional qualified personnel.

     Our success depends in large part on continued employment of senior management and key personnel who can effectively operate our business, including our engineers and other skilled professionals. Competition for such employees has intensified in recent years and may become even more intense in the future. Our ability to implement our business plan is dependent on our ability to hire and retain technically skilled workers. If any of these employees leave us and we fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced professionals, our financial condition, results of operations and cash flows could be materially adversely affected.

We are subject to environmental regulation and our ongoing operations may expose us to environmental liabilities.

     Our operations, like those of other companies engaged in similar businesses, are subject to federal, state and local environmental, health and safety laws and regulations. We may be subject to potentially significant fines or penalties, including criminal sanctions, if we fail to comply with these requirements. We have made, and will continue to make, capital and other expenditures in order to comply with these laws and regulations. Although we believe that we are currently in substantial compliance with these laws and regulations, the aggregate amount of future clean-up costs and other environmental liabilities could become material.

     Pursuant to certain environmental laws, a current or previous owner or operator of a contaminated site may be held liable for the entire cost of investigation, removal or remediation of hazardous materials at such property, whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may also be held liable for such costs at a disposal or treatment site, regardless of whether the affected site is owned or operated by them. Contaminants have been detected at some of our present and former sites, principally in connection with historical operations, and investigations and/or clean-ups have been undertaken by us or by former owners of the sites. We also receive inquiries and notices of potential liability with respect to offsite disposal facilities from time to time. Although we are not aware of any sites for which material obligations exist, the discovery of additional contaminants or the imposition of additional clean-up obligations could result in significant liability. See “Item 1. Business — Environmental Matters.”

Any product liability claims in excess of insurance may require us to dedicate cash flow from operations to pay such claims and damage our reputation impacting our ability to obtain future business.

     Our operations expose us to potential liability for personal injury or death as a result of the failure of aerostructures designed or manufactured by us or our suppliers. While we believe that our liability insurance is adequate to protect us from these liabilities, our insurance may not cover all liabilities. Additionally, insurance coverage may not be available in the future at a cost acceptable to us. Any material liability not covered by insurance or for which third-party indemnification is not available could require us to dedicate a substantial portion of our cash flows to make payments on these liabilities. No such product liability claim is pending or has been threatened against us, however, there is a potential risk that product liability claims could be filed against us in the future.

     An accident caused by a component designed or manufactured by us or one of our suppliers could also damage our reputation for quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aerostructures. If an accident were caused by one of our components, or if our satisfactory record of safety and reliability were compromised, our ability to retain and attract customers our results of operations, financial position and cash flows could be materially adversely affected.

Significant consolidation by aerospace industry suppliers could adversely affect our business.

     The aerospace industry has recently experienced consolidation among suppliers. Suppliers have consolidated and formed alliances to broaden their product and integrated system offerings and achieve critical mass. This supplier consolidation is in part attributable to aircraft manufacturers more frequently awarding long-term sole-source or preferred supplier contracts to the most capable suppliers, thus reducing the total number of suppliers. When we act as suppliers to the aerospace industry, this consolidation has caused us to compete against certain competitors with greater financial resources, market penetration and purchasing power. When we purchase component parts and services from suppliers to manufacture our products, consolidation reduces price competition between our suppliers, which could diminish incentives for our suppliers to reduce prices. If this consolidation were to continue, our operating costs could increase and it may become more difficult for us to be successful in obtaining new customers.

High switching costs may substantially limit our ability to obtain business that is currently under contract with other suppliers.

     Once a contract is awarded by an OEM to an aerostructures supplier, the OEM and the supplier are typically required to spend significant amounts of time and capital on design, manufacture, testing and certification of tooling and other equipment. For an OEM to change suppliers during the life of an aircraft program, further testing and certification would be necessary, and the OEM would be required either to move the tooling and equipment used by the existing supplier for performance under the existing contract, which may be expensive and difficult or impossible, or to manufacture new tooling and equipment. Accordingly, any change of suppliers would likely result in production delays and additional costs to both the OEM and the new supplier. These high switching costs may make it more difficult for us to bid competitively against existing suppliers and less likely that an OEM will be willing to switch suppliers during the life of an aircraft program, which could materially adversely affect our ability to obtain new work on existing aircraft programs.

We are subject to the requirements of the National Industrial Security Program Operating Manual for our facility security clearance, which is a prerequisite for our ability to perform on classified contracts for the U.S. Government.

     A Department of Defense, or DoD, facility security clearance is required in order to be awarded and perform on classified contracts for the DoD and certain other agencies of the U.S. Government. We have obtained clearance at appropriate levels that require stringent qualifications, and we may be required to seek higher level clearances in the future. We cannot assure you that we will be able to maintain our security clearance. If for some reason our security clearance is invalidated or terminated, we may not be able to continue to perform our present classified contracts and we would not be able to enter into new classified contracts, which could affect our ability to compete for and capture new business.

We do not own most of the intellectual property and tooling used in our business.

     Our business depends on using certain intellectual property and tooling that we have rights to use pursuant to license grants under our contracts with our OEM customers. These contracts contain restrictions on our use of the intellectual property and tooling and may be terminated if we violate certain of these restrictions. Our loss of a contract with an OEM customer and the related license rights to use an OEMs’ intellectual property or tooling would materially adversely affect our business.

     In addition, we must honor our contractual commitments to our other customers related to intellectual property and comply with infringement laws in the use of intellectual property. In the event we obtain new business from new or existing customers, we will need to pay particular attention to these contractual commitments and any other restrictions on our use of intellectual property to make sure that we will not be using intellectual property improperly in the performance of such new business. In the event we use any such intellectual property improperly, we could be subject to an infringement claim by the owner or licensee of such intellectual property. In the future, our entry into new markets may require obtaining additional license grants from OEMs and/or from other third parties. If we are unable to negotiate additional license rights on acceptable terms (or at all) from OEMs and/or other third parties as the need arises, our ability to enter new markets may be materially restricted. In addition, we may be subject to restrictions in future licenses granted to us that may materially restrict our use of third party intellectual property.

Future terrorist attacks may have a material adverse impact on our commercial business.

     Future acts of terrorism and any allied military response to such acts could result in further acts of terrorism and additional hostilities, including possible retaliatory attacks on sovereign nations, as well as financial, economic and political instability. While the precise effects of any such terrorist attack, military response or instability on our industry and our business is difficult to determine, it could result in reductions in the use of commercial aircraft. For example, following the September 11, 2001 terrorist attacks, passenger traffic on commercial flights was significantly lower than prior to the attacks and many commercial airlines reduced their operating schedules. Overall, those terrorist attacks resulted in billions of dollars in losses to the airline industry. If demand for new aircraft and spare parts decreases, demand for certain of our products would also decrease.

We may be unable to satisfy commitments related to grants received.

     In March 2005 we were awarded a $35 million Texas Enterprise Fund grant to assist in increasing employment levels at our Texas facilities. This grant requires that we maintain certain employment levels at our Texas facilities. As a result of our failure to maintain the required employment levels, we repaid $0.9 million to the Texas Enterprise Fund in 2010. Our failure to satisfy these commitments in the future could result in the requirement to repay some or all of the remaining portion of $35 million grant over the next nine years.

Any future business combinations, acquisitions or mergers expose us to risks, including the risk that we may not be able to successfully integrate these businesses or achieve expected operating synergies.

     We periodically consider strategic transactions. We evaluate acquisitions, joint ventures, alliances or co-production programs as opportunities arise and we may be engaged in varying levels of negotiations with potential competitors at any time. We may not be able to effect transactions with strategic alliance, acquisition or co-production program candidates on commercially reasonable terms, or at all. If we enter into these transactions, we also may not realize the benefits we anticipate. In addition, we may not be able to obtain additional financing for these transactions. The integration of companies that have previously been operated separately involves a number of risks. Consummating any acquisitions, joint ventures, alliances or co-production programs could result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities.

Our financial statements are based on estimates required by GAAP, and actual results may differ materially from those estimated under different assumptions or conditions.

     Our financial statements are prepared in conformity with accounting principles generally accepted in the United States. These principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. For example, estimates are used when accounting for items such as asset valuations, allowances for doubtful accounts, depreciation and amortization, impairment assessments, employee benefits, aircraft product and general liability and contingencies. Additionally, contract accounting requires judgment relative to assessing risks, estimating contract sales and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total sales and cost at completion is complicated and subject to many variables. While we base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances at the time made, actual results may differ materially from those estimated.

While we believe our control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

     We continue to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls will prevent all possible errors or all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements resulting from error or fraud may occur and may not be detected.

Risks Relating to Our Indebtedness

Market conditions may make it difficult to refinance our indebtedness with favorable terms.

     Going concern is defined as an entity’s inability to meet obligations as they become due without substantial disposition of assets outside the ordinary course of business, restructuring of debt or equity, or operational improvements.

     Under the terms of the senior credit facility, we are required to prepay or refinance any amounts outstanding of our $270.0 million Senior Notes by the last business day of 2010 or we must repay the aggregate amount of loans outstanding at that time under the senior credit facility unless a lender waives such prepayment (so long as a majority of our lenders (voting on a class basis) agree to such waiver). Because of the requirement to refinance the Senior Notes, the amounts outstanding under our senior credit facility have been classified as a current liability as of December 31, 2009.

     As described in Item 9B of this Form 10-K, on March 23, 2010, we entered into a merger agreement with Triumph Group, Inc. pursuant to which we will be acquired by Triumph. It is anticipated that in connection with that transaction all of our currently outstanding material indebtedness will be repaid in full. The consummation of the acquisition is subject to, among other things, approval of Triumph’s stockholders and other customary closing conditions, which may not be satisfied. In the event that the anticipated acquisition is not completed and such indebtedness remains outstanding, we plan to refinance our senior credit facility or the Senior Notes prior to the last business day of 2010. There are no assurances that we will be able to refinance on commercially reasonable terms or at all. This creates an uncertainty about our ability to continue as a going concern. Notwithstanding this, the consolidated financial statements and related notes have been prepared assuming that we will continue as a going concern.

     We are progressing in our plans to refinance our senior credit facility or the Senior Notes and although no assurance can be given, we believe that we are well positioned to accomplish this prior to the last business day of 2010.

Our substantial indebtedness could prevent us from fulfilling our obligations under our outstanding senior notes and our senior credit facilities.

     We have a significant amount of indebtedness. As of December 31, 2009, our total outstanding indebtedness was $592.2 million.

     Our indebtedness could have important consequences for us and investors in our securities. For example, it could:

	•		make it more difficult for us to satisfy our obligations with respect to our outstanding debt;
	•		increase our vulnerability to general adverse economic and industry conditions;
	•		require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

	•		limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
	•		restrict us from making strategic acquisitions or exploiting business opportunities;
	•		place us at a competitive disadvantage compared to our competitors that have less debt; and
	•		limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds, dispose of assets or pay cash dividends.

     In addition, $322.2 million of our debt bears interest at variable rates. If market interest rates increase, variable-rate indebtedness will create higher debt service requirements and it may become necessary for us to dedicate a larger portion of our cash flow to service such indebtedness. To the extent we have not entered into hedging arrangements, we are exposed to cash flow risk due to changes in interest rates with respect to the entire $322.2 million of variable-rate term loan indebtedness under our senior credit facilities.

     A one-percentage point increase in interest rates on our variable-rate term loan indebtedness would decrease our annual income before income taxes by approximately $3.2 million.

We will require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.

     Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

     Our business may not generate sufficient cash flow from operations or future borrowings may not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our indebtedness will be driven by the prevailing market conditions at that time.

Restrictive covenants in our senior credit facilities and our outstanding senior notes may restrict our ability to pursue our business strategies.

     The indenture governing our senior notes and the credit agreement governing our senior credit facilities limit our ability, among other things, to:

	•		incur additional indebtedness or contingent obligations;
	•		pay dividends or make distributions to our stockholders;
	•		repurchase or redeem our stock;
	•		make investments;
	•		grant liens;
	•		make capital expenditures;
	•		enter into transactions with our stockholders and affiliates;
	•		engage in sale and leaseback transactions;
	•		sell assets; and
	•		acquire the assets of, or merge or consolidate with, other companies.

The restrictive covenants mentioned above may restrict our ability to pursue our business strategies.

Financial ratios and tests in our senior credit facilities may further increase the risks associated with the restrictive covenants described above.

     In addition to the covenants described above, our senior credit facilities require us to maintain certain financial ratios and tests. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” Events beyond our control can affect our ability to meet these financial ratios and tests. Our failure to comply with these obligations could cause an event of default under our senior credit facilities. If an event of default occurs, our lenders could elect to declare all amounts outstanding and accrued and unpaid interest under our senior credit facilities to be immediately due and the lenders thereafter could foreclose upon the assets securing the senior credit facilities. In that event, we may not have sufficient assets to repay all of our obligations, including our outstanding senior notes. We may incur additional indebtedness in the future that may contain financial or other covenants more restrictive than those applicable to our senior credit facilities or our outstanding senior notes.

Despite our current indebtedness levels, we may still be able to incur more debt, which would further increase the risks associated with our substantial leverage described above.

     We may incur additional indebtedness in the future. If new indebtedness is added to our current indebtedness levels, the related risks that we face could be magnified.

Item 1B. Unresolved Staff Comments

     None.

Item 2. Properties

     Our corporate offices and principal corporate support activities are located in Irving and Dallas, Texas. We own and lease manufacturing facilities located throughout the United States. We currently have manufacturing facilities in Texas, California, Tennessee, Georgia, Washington and Florida. General information about our principal manufacturing facilities is presented in the chart below.

Site		Square Footage				Ownership		Functions
Dallas, TX
Jefferson Street			28,878			Owned		High speed wind tunnel.
Jefferson Street			4,855,293			Leased		Design capabilities; test labs; fabrication of parts and structures; assembly and production of wings, horizontal and vertical tail sections, fuselage, empennage, and cabin structures.
Irving, TX			16,168			Leased		Vought Corporate Office
Grand Prairie, TX			804,456			Leased		Manufacturing of empennage assemblies, skin polishing, automated fastening.
Hawthorne, CA			1,348,659			Leased		Production of fuselage panels and main deck cargo doors; reconfigurable tooling, precision assembly and automated fastening.
Torrance, CA			84,654			Leased		Fuselage panel processing facility.
Nashville, TN			2,198,740			Owned		Design capabilities; wing, wing assembly and control surface manufacturing and assembly facilities.
Stuart, FL			519,690			Leased		Manufacturing of composite and metal aircraft assemblies and manufacturing of commercial aircraft doors.
Brea, CA			90,000			Leased		Manufacturing of wing skins, fuselage panels, bulkheads, floor beams, spars, stringers, landing gear and subassemblies.
Everett, WA			153,000			Leased		Manufacturing of wing skins, fuselage panels, bulkheads, floor beams, spars, stringers, landing gear and subassemblies.
Milledgeville, GA			566,168			Owned		Composite fabrication and component assembly.

Item 3. Legal Proceedings

     In the normal course of business, we are party to various lawsuits, legal proceedings and claims arising out of our business. We cannot predict the outcome of these lawsuits, legal proceedings and claims with certainty. Nevertheless, we believe that the outcome of these proceedings, even if determined adversely, would not have a material adverse effect on our business, financial condition or results of operations.

     We operate in a highly regulated industry that subjects us to various audits, reviews and investigations by several U.S. governmental entities. Currently, we are not aware of any significant on-going audits, reviews or investigations which we believe would materially impact our results of operations or financial condition.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     Our common equity consists of common stock, par value $0.01 per share. There is currently no established public trading market for our common stock.

     As of March 25, 2010, there were 87 stockholders of record of our common stock.

     We have not declared a dividend on shares of common stock since inception in our current corporate form in 2000. Any payment of cash dividends on our common stock in the future will be at the discretion of our board of directors and will also depend upon such factors as compliance with debt covenants, earnings levels, capital requirements, our financial condition and other factors deemed relevant by our board of directors.

     During 2008 and 2009, we issued an aggregate of 13,622 and 18,810 shares of our common stock, respectively, or less than 1% of the aggregate amount of common stock outstanding, to members of our board of directors in reliance on Section 4(2) of the Securities Act.

     During 2008, we issued an aggregate of (i) 9,470 shares of our common stock in connection with the exercise of stock appreciation rights (“SARs”) originally granted in accordance with Rule 701 of the Securities Act and (ii) 6,299 shares of our common stock in connection with the exercise of stock options originally granted in reliance on Section 4(2) of the Securities Act. The aggregate proceeds to us as a result of these transactions were less than $0.1 million.

     During 2009, we issued an aggregate of (i) 1,614 shares of our common stock in connection with the exercise of stock appreciation rights (“SARs”) originally granted in accordance with Rule 701 of the Securities Act. The aggregate proceeds to us as a result of these transactions were less than $0.1 million.

Item 6. Selected Financial Data

     The following selected consolidated financial data are derived from our consolidated financial statements. The information set forth below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and their related notes included elsewhere in this report. The historical results presented are not necessarily indicative of future results.

		Year Ended December 31,
		2009				2008				2007				2006				2005
		(in millions)
Statement of Operations:
Revenue		$	1,877.8			$	1,775.0			$	1,613.1			$	1,550.9			$	1,297.2
Cost of sales (1)			1,594.8				1,492.9				1,284.8				1,290.8				1,242.6
Selling, general & administrative expenses (1)			122.6				135.3				133.3				142.6				165.5
Impairment charge			—				—				—				9.0				5.9
Operating income (loss)			160.4				146.8				195.0				108.5				(116.8	)
Interest expense, net			56.3				62.8				59.0				63.1				51.3
Other (income) loss			(1.3	)			(48.7	)			0.1				0.5				0.3
Equity in loss of joint venture			—				0.6				4.0				6.7				3.4
Income (loss) before income taxes			105.4				132.1				131.9				38.2				(171.8	)
Income tax expense (benefit)			(9.3	)			0.2				0.1				(1.9	)			—
Income (loss) from continuing operations			114.7				131.9				131.8				40.1				(171.8	)
Income (loss) from discontinued operations, net of tax			213.6				(38.2	)			(85.5	)			(76.8	)			(57.9	)
Net income (loss) (2)		$	328.3			$	93.7			$	46.3			$	(36.7	)		$	(229.7	)
Other Financial Data:
Cash flow provided by (used in) operating activities		$	111.8			$	(154.5	)		$	34.2			$	172.8			$	(65.0	)
Cash flow provided by (used in) investing activities			247.2				(14.2	)			(49.6	)			(102.7	)			(152.1	)
Cash flow provided by (used in) financing activities			(329.7	)			179.8				(2.4	)			13.2				98.3
Capital expenditures			42.0				69.3				57.4				115.4				147.1
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	116.0			$	86.7			$	75.6			$	93.4			$	10.1
Trade and other receivables			127.9				138.5				81.4				82.1				90.8
Inventories			511.3				311.8				362.8				337.8				340.1
Property, plant and equipment, net			275.9				279.2				295.2				342.2				368.0
Total assets			1,509.9				1,727.6				1,620.9				1,658.7				1,561.8
Total debt (3)			589.8				869.9				683.0				688.3				693.0
Stockholders’ equity (deficit)		$	(503.5	)		$	(934.1	)		$	(665.8	)		$	(693.3	)		$	(773.0	)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     We are a leading global manufacturer and developer of aerostructures serving commercial, military and business jet aircraft. Our products are used on many of the largest and longest running programs in the aerospace industry. We are also a key supplier on newer platforms with high growth potential. We generate approximately 50% of our revenues from the commercial aircraft market but are also diversified across the military and business jet markets, which provide the balance of our revenues.

     Our customer base consists of leading aerospace original equipment manufacturers or OEMs, including Airbus, Boeing, Cessna, Gulfstream, Hawker Beechcraft, Lockheed Martin, Northrop Grumman and Sikorsky, as well as the U.S. Air Force. We generate over 80% of our revenues from our three largest customers, Airbus, Boeing and Gulfstream.

     Although the majority of our revenues are generated by sales in the U.S. market, we generate approximately 10% of our revenue from sales outside of the United States.

     Most of our revenues are generated under long-term contracts. Our customers typically place orders well in advance of required deliveries, which gives us considerable visibility with respect to our future revenues. These advance orders also generally create a significant backlog for us, which was approximately $2.1 billion at December 31, 2009. Our calculation of backlog includes only firm orders for commercial and business jet programs and funded orders for government programs, which causes our backlog to be substantially lower than the estimated aggregate dollar value of our contracts and may not be comparable to others in the industry.

     For our commercial and business jet programs, changes in the economic environment and the financial condition of airlines may cause our customers to increase or decrease deliveries, adjusting firm orders that would affect our backlog. Also, volatility in the financial markets may impact the overall demand for our commercial and business aircraft products. To the extent financial market conditions worsen, we could experience decline in the future on demand for our commercial and business aircraft products For our military aircraft programs, the Department of Defense and other government agencies have the right to terminate both our contracts and/or our customers’ contracts either for default or, if the government deems it to be in its best interest, for convenience.

     The market for our commercial, military and business jet programs has historically been cyclical. While the commercial, military and business jet markets experienced a period of increased production in recent years, the unprecedented global market and economic conditions along with tighter credit conditions resulted in reduced aircraft demand in 2009. These factors have led to a decrease in spending by businesses and consumers alike, and could continue to have an adverse affect on the demand for our aerostructures by both our commercial customers and the U.S. government for the next few years. Additionally, future volatility in the U.S. and international markets and economies and delayed recovery of business and consumer spending could adversely affect our liquidity and financial condition, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs and the liquidity and financial condition of our customers.

     Commercial Aircraft. Sales to the commercial aircraft market are affected by the financial health of the commercial airline industry, passenger and cargo air traffic, the introduction of new aircraft models, and the availability and profile of used aircraft. Production rates have slowed on many of our commercial aircraft in 2009. We expect those lower rates to continue through 2010 with a slow recovery thereafter.

     Military Aircraft. U.S. national defense spending and procurement funding decisions, global geopolitical conditions, and current operational use of the existing military aircraft fleet drive sales in the military aircraft market. We believe that the demand for our rotorcraft programs, which are some of the key equipment being used in military operations, will experience some pressure during the next several years. Historically, the majority of our military revenues and a significant portion of our total revenue have been generated from our C-17 program. We currently have a contract from Boeing that would support C-17 production through April 2011. However, our businesss could be adversely impacted if the Government does not fund additional C-17 aircraft and Boeing decides not to fund beyond their current commitment.

     Business Jet Aircraft. Sales to the business jet aircraft market are driven by long-term economic expansion, the increasing inconvenience of commercial airline travel, growing international acceptance and demand for business jet travel, fractional ownership of business jets and the introduction of new business jet models. Reflecting the pressures in the financial and business markets in 2009, we experienced reduced production rates on several of our programs and were notified of the suspension of the Cessna Citation Columbus — Model 850 program. We expect those reduced delivery rates to continue through the end of 2010 with slow recovery thereafter. In spite of these pressures, as a major supplier to the top-selling G350, G450, G500 and G550 and Citation X programs, we still believe we are well positioned to operate in key segments of the business jet market as macro-economic conditions continue to improve.

     On July 30, 2009, we sold the assets and operations of our 787 business conducted at North Charleston, South Carolina to a wholly owned subsidiary of The Boeing Company. Concurrent with the closing of the transaction, we entered into an agreement terminating and resolving rights and obligations under the existing 787 supply agreement. Going forward, under a newly negotiated contract, we will manufacture certain components for the 787 program as well as provide engineering services to Boeing pursuant to an engineering services agreement. We also will provide certain transition services to Boeing pursuant to a transition services agreement and perform new work scope on the Boeing 737 and 777 aircraft pursuant to a long-term supply agreement.

     Under the terms of the senior credit facility, we are required to prepay or refinance any amounts outstanding of our $270.0 million Senior Notes by the last business day of 2010 or we must repay the aggregate amount of loans outstanding at that time under the senior credit facility unless a lender waives such prepayment (so long as a majority of our lenders (voting on a class basis) agree to such waiver). Because of the requirement to refinance the Senior Notes, the amounts outstanding under our senior credit facility have been classified as a current liability as of December 31, 2009.

     As described in Item 9B of this Form 10-K, on March 23, 2010, we entered into a merger agreement with Triumph Group, Inc. pursuant to which we will be acquired by Triumph. It is anticipated that in connection with that transaction all of our currently outstanding material indebtedness will be repaid in full. The consummation of the acquisition is subject to, among other things, approval of Triumph’s stockholders and other customary closing conditions, which may not be satisfied. In the event that the anticipated acquisition is not completed and such indebtedness remains outstanding, we plan to refinance our senior credit facility or the Senior Notes prior to the last business day of 2010. There are no assurances that we will be able to refinance on commercially reasonable terms or at all. This creates an uncertainty about our ability to continue as a going concern. Notwithstanding this, the consolidated financial statements and related notes have been prepared assuming that we will continue as a going concern.

     We are progressing in our plans to refinance our senior credit facility or the Senior Notes and although no assurance can be given, we believe that we are well positioned to accomplish this prior to the last business day of 2010.

Basis of Presentation

     The following provides a brief description of some of the items that appear in our financial statements and general factors that impact these items.

     Revenue and Profit Recognition. We record revenue and profit for our long-term contracts using a percentage of completion method with, depending on the contract, either cost-to-cost or units-of-delivery as our basis to measure progress toward completing the contract.

	•		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.

     Amounts representing contract change orders or claims are only included in revenue when such change orders or claims have been settled with our customer and to the extent that units have been delivered. Additionally, some of our contracts may contain terms or provisions, such as price re-determination, requests for equitable adjustments or price escalation, which are included in our estimate of contract value when the amounts can be reliably estimated and their realization is reasonably assured.

     The impact of revisions in estimates is recognized on the cumulative catch-up basis in the period in which such revisions are made. Changes in our estimates of contract value or profit can impact revenue and/or cost of sales. For example, in the case of a customer settlement of a pending change order or claim, we may recognize additional revenue and/or margin depending on the production lot’s stage of completion. Provisions for anticipated losses on contracts are recorded in the period in which they become evident (“forward losses”).

     For a further discussion of our revenue recognition policy, see “— Critical Accounting Policies and Estimates — Revenue and Profit Recognition.”

     Cost of sales. Cost of sales includes direct production costs such as labor (including fringe benefits), material costs, manufacturing and engineering overhead and production tooling costs. Examples of costs included in overhead are costs related to quality assurance, information technology, indirect labor and fringe benefits, depreciation and amortization and other support costs such as supplies and utilities.

     Selling, general and administrative expenses. Selling, general and administrative expenses include expenses for executive management, program management, business management, human resources, accounting, treasury, and legal. The major cost elements of selling, general and administrative expenses include salary and wages, fringe benefits, stock compensation expense, travel and supplies. In addition, these expenses include period expenses for non-recurring program development, such as research and development and other non-recurring activities, as well as costs that are not reimbursed under U.S. Government contract terms.

     Interest expense, net. Interest expense, net reflects interest income and expense, and includes the amortization of capitalized debt origination costs and the amortization of the original issue discount on an additional $200.0 million of term loans we borrowed pursuant to our existing senior credit facilities (“Incremental Facility”).

     Other income (loss). Other income (loss) represents miscellaneous items unrelated to our core operations.

     Equity in loss of joint venture. Equity in loss of joint venture reflected our share of the loss from Global Aeronautica, a joint venture in which we formerly participated. As a result of the sale of our equity interest in Global Aeronautica in 2008, our results of operations are no longer impacted by this joint venture.

     Income tax benefit (expense). Income tax benefit (expense) represents federal income tax provided on our net book income from continuing operations. For a further discussion of our income tax provision, please see Note 15 — Income Taxes.

     Income (loss) from discontinued operations, net of tax. Income (loss) from discontinued operations, net of tax represents the revenue and expenses associated with our 787 business conducted at North Charleston, South Carolina that was sold to Boeing Commercial Airplanes Charleston South Carolina, Inc., a wholly owned subsidiary of The Boeing Company on July 30, 2009 (“Sale of the Charleston 787 business”). Our gain on the sale of this business is also reflected as income (loss) from discontinued operations, net of tax. See Note 3 — Discontinued Operations in the notes to the consolidated financial statements included in Item 8.

Results of Operations

		December 31,				December 31,				December 31,
		2009				2008				2007
		(in millions)
Revenue:
Commercial		$	946.7			$	848.1			$	782.1
Military			664.3				607.4				530.0
Business jets			266.8				319.5				301.0
Total revenue		$	1,877.8			$	1,775.0			$	1,613.1
Costs and expenses:
Cost of sales			1,594.8				1,492.9				1,284.8
Selling, general and administrative			122.6				135.3				133.3
Total costs and expenses		$	1,717.4			$	1,628.2			$	1,418.1
Operating income (loss)			160.4				146.8				195.0
Interest expense, net			(56.3	)			(62.8	)			(59.0	)
Other income (loss)			1.3				48.7				(0.1	)
Equity in loss of joint venture			—				(0.6	)			(4.0	)
Income tax benefit (expense)			9.3				(0.2	)			(0.1	)
Income from continuing operations		$	114.7			$	131.9			$	131.8
Income (loss) from discontinued operations, net of tax		$	213.6			$	(38.2	)		$	(85.5	)
Net Income		$	328.3			$	93.7			$	46.3
Total funded backlog		$	2,067.3			$	2,451.0			$	2,288.1

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

     Revenue. Revenue for the year ended December 31, 2009 was $1,877.8 million, an increase of $102.8 million, or 6%, compared with 2008. When comparing the current and the prior year:

	•		Commercial revenue increased $98.6 million, or 12%. Revenue for our Boeing programs increased $157.5 million primarily for the 747 program and the initial sales for the engineering and transition services agreements for the 787 program. Partially offsetting these increases was a $58.9 million decrease in revenue for our Airbus programs primarily due to the completion of an Airbus program in the second quarter of 2009.
	•		Military revenue increased $56.9 million, or 9%, primarily due to increased deliveries on the V-22 and, C-130 programs as well as increased spare part deliveries for the C-17 program.
	•		Business Jet revenue decreased $52.7 million, or 16%, primarily due to reduced delivery rates directed by our customers.

     Operating income (loss). Operating income (loss) for the year ended December 31, 2009 was $160.4 million, an increase of $13.6 million, or 9% compared to $146.8 million in 2008. There were several unusual items in 2008 contributing to the 2009 increase in operating income as compared to 2008. Our operating income for 2009 excluded two specific items that affected 2008. Those items were the $38.3 million of costs associated with the strike at our Nashville facility and the $17.3 million of higher future projected pension expenses applied to programs. These factors contributed to a reduction in operating income in 2008 as compared to 2009 were partially offset by the release of $22.6 million of purchase accounting reserves in 2008 reflecting the completion of the 747-400 model deliveries and non-recurring costs of $9.6 million in 2009 reflecting the impact of the pension and other post-retirement benefits curtailment resulting from the 2009 collective bargaining agreement with the International Association of Machinists at our Nashville, Tennessee facility.

     Interest expense, net. Interest expense, net for the year ended December 31, 2009 was $56.3 million, a decrease of $6.5 million compared with 2008. Interest expense decreased primarily due to the adjustment during 2009 to capitalize approximately $5.6 million of interest costs to appropriately reflect the book value of Property, Plant and Equipment included in our assets-under-construction balance in fiscal periods prior to 2009. The remainder of the decrease resulted from a reduction in the weighted average outstanding balance during 2009 partially offset by the acceleration of $7.1 million of debt origination costs from the pay down of $355.0 million of term loans outstanding.

     Other income (loss). Other income for the year ended December 31, 2008 primarily reflected the $47.1 million gain from the sale of our equity interest in our Global Aeronautica joint venture. We did not have a similar transaction during 2009.

     Income tax benefit (expense). Income tax benefit for the year ended December 31, 2009 primarily reflects a reversal of $9.1 million of income tax expense due to a change in tax legislation. During the fourth quarter, the President signed into law the Workers, Homeownership and Business Assistance Act of 2009. The Law provides for a suspension of certain limitations on Alternative Minimum Tax net operating losses. Prior to the Law being enacted, we had estimated a $9.1 million federal AMT liability incurred in connection with the sale of 787, and had allocated that expense to discontinued operations. The Law has enabled the Company to fully utilize net operating losses and therefore we will not owe AMT for the year. The Income Taxes topic of the ASC requires that tax law changes be allocated to continuing operations; therefore we recorded a $9.1 million benefit to offset the related expense in discontinued operations. We were also able to carryback our 2008 AMT net operating loss to recover $0.4 million of previously paid AMT taxes and recorded a tax benefit in the tax provision.

     Income (loss) from discontinued operations, net of tax. Income from discontinued operations, net of tax for the year ended December 31, 2009 was $213.6 million primarily due to the sale of the Charleston 787 business recorded during the period. This transaction included $275.0 million of income recognized for the resolution of 787 contractual matters as well as a $38.3 million loss on the sale of the Charleston 787 business.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

     Revenue. Revenue for the year ended December 31, 2008 was $1,775.0 million, an increase of $161.9 million, or 10%, compared with the same period in the prior year. When comparing the current and the prior year:

	•		Commercial revenue increased $66.0 million, or 8%. Revenue for our Boeing programs increased $49.9 million primarily due to increased non-recurring sales for the 747-8 program and initial deliveries on the 787 program. In addition, revenue for our Airbus programs increased $16.1 million primarily due to higher deliveries.
	•		Military revenue increased $77.4 million, or 15%, primarily due to higher delivery rates on the H-60 and the V-22 programs.
	•		Business Jet revenue increased $18.5 million, or 6%, primarily due to increased deliveries to Gulfstream and the initial non-recurring revenue on the Cessna Columbus — Model 850 program.

     Operating income (loss). Operating income (loss) for the year ended December 31, 2008 was $146.8 million, a decrease of $48.2 million or 25% compared to 2007. During 2008, overall program margins were lower than the prior year primarily due to a $38.3 million impact from costs associated with the strike at our Nashville facility and a $17.3 million impact related to higher future projected pension expenses applied to programs. The remaining difference in program margins was primarily due to the absence of favorable contract changes recorded in 2007, partially offset by the release of $22.6 million of purchase accounting reserves reflecting the completion of the 747-400 model deliveries.

     Interest expense, net. Interest expense, net for the year ended December 31, 2008 was $62.8 million, an increase of $3.8 million compared with the same period in the prior year. Interest expense increased primarily due to higher borrowings and related costs under the Incremental Facility partially offset by a reduction in the effective interest rate on our other variable rate indebtedness.

     Other income (loss). Other income (loss) for the year ended December 31, 2008 primarily reflects our $47.1 million gain from the sale of our entire equity interest in Global Aeronautica.

     Income (loss) from discontinued operations, net of tax. Loss from discontinued operations, net of tax for the year ended December 31, 2008 was $38.2 million, a decrease of $47.3 million compared with 2007. The decrease was due to a reduction in non-recurring 787 program expenses as the start-up phase of that program ended.

Liquidity and Capital Resources

     Liquidity is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. The primary sources of our liquidity include cash flow from operations, borrowing capacity through our credit facility and the long-term capital markets and negotiated advances and progress payments from our customers. Our liquidity requirements and working capital needs depend on a number of factors, including the level of delivery rates under our contracts, the level of developmental expenditures related to new programs, growth and contractions in the business cycles, contributions to our pension plans as well as interest and debt payments. Our liquidity requirements fluctuate from period to period as a result of changes in the rate and amount of our investments in our programs, changes in delivery rates under existing contracts and production associated with new contracts.

     For certain aircraft programs, milestone or advance payments from customers finance working capital, which helps to improve our liquidity. In addition, we may, in the ordinary course of business, settle outstanding claims or other contractual matters with customers or suppliers or we may receive payments for change orders not previously negotiated. Settlement of such matters can have a significant impact on our results of operations and cash flows.

     We believe that cash flow from operations, cash and cash equivalents on hand and funds that will be raised as part of a refinancing or restructuring of our senior credit facility and Senior Notes will provide adequate funding for our ongoing working capital expenditures, pension contributions and capital investments required to meet our current contractual and legal commitments for at least the next twelve months. However, there is no assurance that we can refinance the Senior Notes or the senior credit facility prior to the last business day of 2010.

     Our pension plan funding obligations also impact our liquidity and capital resources. Elsewhere in this report, we provide estimates of our pension plan contributions for 2010 through 2014. See “— Contractual Obligations.” Our future pension contributions are primarily driven by the funded level of our plans as of December 31 of each fiscal year. Two of the factors used in determining our liability under our plan are the discount rate and the market value of the plan assets.

     Macro-economic conditions, the corporate bond rates and the fluctuations in the fair value of our plan assets as a result of the volatility in global financial markets will continue to impact our required contributions in future periods.

     Our ability to refinance our indebtedness or obtain additional sources of financing will be affected by economic conditions and financial, business and other factors, some of which are beyond our control.

     As of December 31, 2009, our total outstanding long-term debt was approximately $589.8 million. This amount includes $270.0 million of 8% Senior Notes due 2011 (“Senior Notes”) and $322.2 million of term loans outstanding under our senior credit facilities. Additionally, we had $41.3 million in outstanding letters of credit.

     On July 30, 2009 we entered into an Amendment to our Credit Agreement (“Amendment”) which modified the Credit Agreement to allow the sale of the Charleston 787 business (discussed in Note 3 — Discontinued Operations) and provided for use of cash proceeds from the transaction to (i) pay down $355.0 million of term loans outstanding and (ii) repay outstanding amounts on our revolver of $135.0 million and to permanently reduce revolving commitments under the Credit Agreement to $100.0 million. The Amendment converted the synthetic letter of credit facility under the Credit Agreement into additional term loan of $50.0 million, a portion of which is used as cash collateral for letters of credit previously issued under the synthetic letter of credit facility. This term loan is repayable on December 22, 2010. As of December 31, 2009, the cash restricted as collateral for outstanding letters of credit was $43.8 million. The Amendment increased the interest rate on all loans to London Interbank Offering Rate (LIBOR) plus a margin of 4.00%, with a minimum LIBOR floor of 3.50%.

     Our outstanding term loans, including amounts under the Incremental Facility, are repayable in equal quarterly installments of approximately $1.5 million with the balance due on December 22, 2011. Our revolving commitments are scheduled to expire on December 22, 2010. The Amendment incorporated an extension provision that allows us to extend our revolving commitments with lenders who agree to such extension to a date to be agreed. We are also obligated to pay an annual commitment fee on the unused portion of our revolver of 0.5% or less, based on our leverage ratio.

     Under the terms of the senior credit facility, we are required to prepay or refinance any amounts outstanding of our $270.0 million Senior Notes by the last business day of 2010 or we must repay the aggregate amount of loans outstanding at that time under the senior credit facility unless a lender waives such prepayment (so long as a majority of our lenders (voting on a class basis) agree to such waiver). Because of the requirement to refinance the Senior Notes, the amounts outstanding under our senior credit facility have been classified as a current liability as of December 31, 2009. As described in Item 9B of this Form 10-K, on March 23, 2010, we entered into a merger agreement with Triumph Group, Inc. pursuant to which we will be acquired by Triumph. It is anticipated that in connection with that transaction all of our currently outstanding material indebtedness will be repaid in full. The consummation of the acquisition is subject to, among other things, approval of Triumph’s stockholders and other customary closing conditions, which may not be satisfied. In the event that the anticipated acquisition is not completed and such indebtedness remains outstanding, we plan to refinance our senior credit facility or the Senior Notes prior to the last business day of 2010. There are no assurances that we will be able to refinance on commercially reasonable terms or at all. This creates an uncertainty about our ability to continue as a going concern. Notwithstanding this, the consolidated financial statements and related notes have been prepared assuming that we will continue as a going concern.

     We are progressing in our plans to refinance our senior credit facility or the Senior Notes and although no assurance can be given, we believe that we are well positioned to accomplish this prior to the last business day of 2010.

     Credit Agreements and Debt Covenants. The indenture governing our Senior Notes and our credit agreement contain customary affirmative and negative covenants for facilities of this type, including limitations on our indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets, subordinated debt and transactions with affiliates. The credit agreement also requires that we maintain certain financial covenants including a leverage ratio, the requirement to maintain minimum interest coverage ratios, as defined in the agreement, and a limitation on our capital spending levels. The indenture governing our Senior Notes also contains various restrictive covenants, including the incurrence of additional indebtedness unless the debt is otherwise permitted under the indenture. As of December 31, 2009, we were in compliance with the covenants in the indenture and our credit agreement.

     Our senior credit facilities (including our Incremental Facility) are material to our financial condition and results of operations because those facilities are our primary source of liquidity for working capital. The indenture governing our outstanding Senior Notes is material to our financial condition because it governs a significant portion of our long-term capitalization while restricting our ability to conduct our business.

     Our senior credit facilities use Adjusted EBITDA to determine our compliance with two financial maintenance covenants. See “Non-GAAP Financial Measures” below for a discussion of Adjusted EBITDA and reconciliation of that non-GAAP financial measure to net cash provided by (used in) operating activities. We are required not to permit our consolidated total leverage ratio, or the ratio of funded indebtedness (net of cash) at the end of each quarter to Adjusted EBITDA for the twelve months ending on the last day of that quarter, to exceed 4.00:1.00 for fiscal periods ending during 2009, 3.75:1.00 for fiscal periods during 2010 and 3.50:1.00 for fiscal periods thereafter. We also are required not to permit our consolidated net interest coverage ratio, or the ratio of Adjusted EBITDA for the twelve months ending on the last day of a quarter to our consolidated net interest expense for the twelve months ending on the same day, to be less than 3.50:1.00 for fiscal periods ending during 2009 and for fiscal periods thereafter. Each of these covenants is tested quarterly, and our failure to comply could result in a default and, potentially, an event of default under our senior credit facilities. If not cured or waived, an event of default could result in acceleration of this indebtedness. Our credit facilities also use Adjusted EBITDA to determine the interest rates on our borrowings, which are based on the consolidated total leverage ratio described above. Changes in our leverage ratio may result in increases or decreases in the interest rate margin applicable to loans under our senior credit facilities. Accordingly, a change in our Adjusted EBITDA could increase or decrease our cost of funds. The actual results of the total leverage ratio and net interest coverage ratio for the years ended December 31, 2009 were 1.69:1.00 and 5.28:1.00, respectively.

          The indenture governing our outstanding Senior Notes contains a covenant that restricts our ability to incur additional indebtedness unless, among other things, we can comply with a fixed charge coverage ratio. We may incur additional indebtedness only if, after giving pro forma effect to that incurrence, our ratio of Adjusted EBITDA to total consolidated debt less cash on hand for the four fiscal quarters ending as of the most recent date for which internal financial statements are available meet certain levels or we have availability to incur such indebtedness under certain baskets in the indenture. Accordingly, Adjusted EBITDA is a key factor in determining how much additional indebtedness we may be able to incur from time to time to operate our business.

     Non-GAAP Financial Measures. Periodically we disclose to investors Adjusted EBITDA, which is a non-GAAP financial measure that our management uses to assess our compliance with the covenants in our senior credit agreement, our ongoing ability to meet our obligations and manage our levels of indebtedness. Adjusted EBITDA is calculated in accordance with our senior credit agreement and includes adjustments that are material to our operations but that our management does not consider reflective of our ongoing core operations. Pursuant to our senior credit agreement, Adjusted EBITDA is calculated by making adjustments to our net income (loss) to eliminate the effect of our (1) income tax expense, (2) net interest expense, (3) any amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with indebtedness, (4) depreciation and amortization expense, (5) any extraordinary, unusual or non-recurring expenses or gains/losses (including gains/losses on sales of assets outside of the ordinary course of business, non-recurring expenses associated with the 787 program and certain expenses associated with our facilities consolidation efforts) net of any extraordinary, unusual or non-recurring income or gains, (6) any other non-cash charges, expenses or losses, restructuring and integration costs, (7) stock-option based compensation expenses and (8) all fees and expenses paid pursuant to our Management Agreement with The Carlyle Group (“Carlyle”). See Note 20 to our consolidated financial statements in Item 8 of this report.

     Adjusted EBITDA for the years ended December 31, 2009, 2008 and 2007 was $254.7 million, $263.9 million and $277.4 million, respectively. The following table is a reconciliation of the non-GAAP measure from our cash flows from operations:

		For the Years Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
		(in millions)
Net cash provided by (used in) operating activities		$	111.8			$	(154.5	)		$	34.2
Interest expense, net			56.3				62.8				59.0
Income tax expense (benefit)			(9.3	)			0.2				0.1
Stock compensation expense			(2.5	)			(1.1	)			(5.2	)
Equity in losses of joint venture			—				(0.6	)			(4.0	)
Gain (loss) from asset sales and other losses			(41.2	)			49.8				(1.8	)
Non-cash interest expense			(13.1	)			(5.8	)			(3.1	)
787 tooling amortization			1.1				0.8				—
Changes in operating assets and liabilities			328.3				266.1				86.9
EBITDA		$	431.4			$	217.7			$	166.1
Investment in Boeing 787 and sale of the Charleston 787 business (1)			(213.6	)			33.3				95.9
Unusual charges & other non-recurring program costs (2)			19.3				56.7				6.1
(Gain) loss on disposal of property, plant and equipment and other assets (3)			2.9				(48.2	)			1.9
Pension & OPEB curtailment and non-cash expense (4)			10.3				—				—
Other (5)			4.4				4.4				7.4
Adjusted EBITDA		$	254.7			$	263.9			$	277.4

     We believe that each of the adjustments made in order to calculate Adjusted EBITDA is meaningful to investors because it gives them the ability to assess our compliance with the covenants in our senior credit agreement, our ongoing ability to meet our obligations and manage our levels of indebtedness.

     The use of Adjusted EBITDA as an analytical tool has limitations and you should not consider it in isolation, or as a substitute for analysis of our results of operations as reported in accordance with GAAP. Some of these limitations are:

	•		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.

     Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as an alternative to net income or cash flow from operations determined in accordance with GAAP. Management compensates for these limitations by not viewing Adjusted EBITDA in isolation, and specifically by using other GAAP measures, such as cash flow provided by (used in) operating activities and capital expenditures, to measure our liquidity. Our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.

Cash Flow Summary		Year Ended December 31,
		2009				2008				2007
		(in millions)
Net income (loss)		$	328.3			$	93.7			$	46.3
Non-cash items			111.8				17.9				74.8
Changes in working capital			(328.3	)			(266.1	)			(86.9	)
Net cash provided by (used in) operating activities			111.8				(154.5	)			34.2
Net cash provided by (used in) investing activities			247.2				(14.2	)			(49.6	)
Net cash provided by (used in) financing activities			(329.7	)			179.8				(2.4	)
Net increase (decrease) in cash and cash equivalents			29.3				11.1				(17.8	)
Cash and cash equivalents at beginning of year			86.7				75.6				93.4
Cash and cash equivalents at end of year		$	116.0			$	86.7			$	75.6

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

     Net cash provided by operating activities for the year ended December 31, 2009 was $111.8 million, an increase of $266.3 million compared to net cash used in operating activities of $154.5 million for the prior year. This change primarily resulted from the settlement of contractual matters related to the 787 program partially offset by increased cash requirements for the 747-8 program.

     Net cash provided by investing activities for the year ended December 31, 2009 was $247.2 million, an increase of $261.4 million compared to net cash used in investing activities of $14.2 million for the same period in 2008. The change was primarily due to the $289.2 million, net of fees, of proceeds received for the sale of the Charleston 787 business and a $27.3 million decrease in capital expenditures in 2009 offset by the $55.1 million of proceeds from the sale of assets in 2008 including the sale to Boeing of our equity interest in Global Aeronautica.

     Net cash used in financing activities for the year ended December 31, 2009 was $329.7 million, a change of $509.5 million compared with cash provided of $179.8 million for 2008. This change primarily resulted from the $184.6 million in net proceeds from the Incremental Facility in 2008, the use of $355.0 million of proceeds from the sale of the Charleston 787 business to pay down outstanding term loans in 2009 and the restriction of $43.8 million as collateral for outstanding letters of credit in 2009, partially offset by the conversion of the $75.0 million of the synthetic letter of credit facility to a term loan in 2009.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

     Net cash used in operating activities for year ended December 31, 2008 was $154.5 million, a change of $188.7 million compared to cash provided by operating activities of $34.2 million for the prior year. The change primarily resulted from the following items: increased cash funding requirements of $59.7 million for our defined benefit pension plans; lower cash from the timing of milestone and advance payments from customers of approximately $67.0 million; as well as $62.0 million of higher working capital requirements in 2008 related to the ramp-up of the 787 program.

     Net cash used in investing activities for the year ended December 31, 2008 was $14.2 million, a decrease of $35.4 million compared to net cash used in investing activities of $49.6 million for the prior year. This improvement is due to a $30.8 million increase in proceeds provided by the sale of assets and a $16.5 million decrease in contributions to Global Aeronautica partially offset by an $11.9 million increase in capital expenditures.

     Net cash provided by financing activities for the year ended December 31, 2008 was $179.8 million, a change of $182.2 million compared to net cash used in financing activities of $2.4 million for the prior year. The change primarily resulted from the $184.6 million in net proceeds provided by borrowings under the Incremental Facility.

Contractual Obligations

     The following table summarizes the scheduled maturities of financial obligations and expiration dates of commitments as of December 31, 2009:

		2010				2011				2012				2013				2014				Thereafter				Total
		($ in millions)
Senior credit facilities
Term loans		$	236.6			$	—			$	—			$	—			$	—			$	—			$	236.6
Incremental facility			85.6				—				—				—				—				—				85.6
Total senior credit facilities (1)		$	322.2			$	—			$	—			$	—			$	—			$	—			$	322.2
Operating leases			21.7				13.7				9.3				4.9				4.0				3.5				57.1
Senior notes			—				270.0				—				—				—				—				270.0
Purchase Obligations (2)			459.3				143.7				18.0				12.0				—				—				633.0
Total		$	803.2			$	427.4			$	27.3			$	16.9			$	4.0			$	3.5			$	1,282.3

     In addition to the financial obligations detailed in the table above, we also had obligations related to our benefit plans at December 31, 2009 as detailed in the following table. Our other post-retirement benefits are not required to be funded in advance, so benefit payments are paid as they are incurred. Our expected net contributions and payments are included in the table below:

						Other
		Pension Benefits				Post-retirement Benefits
		(in Millions)
Benefit obligation at December 31, 2009		$	1,958.3			$	402.3
Plan assets at December 31, 2009			1,342.6				—
Projected contributions
2010			102.7				38.4
2011			176.8				38.9
2012			142.1				38.5
2013			123.0				37.9
2014			108.3				37.5
Total 2010-2014		$	652.9			$	191.2

     Current plan documents reserve our right to amend or terminate the plans at any time, subject to applicable collective bargaining requirements for represented employees.

Off Balance Sheet Arrangements

     None.

Inflation

     A majority of our sales are conducted pursuant to long-term contracts that set fixed unit prices and some of which provide for price adjustment through escalation clauses. The effect of inflation on our sales and earnings is minimal because the selling prices of those contracts, established for deliveries in the future, generally reflect estimated costs to be incurred in these future periods. Our estimated costs take into account a projected rate of inflation for the duration of the relevant contract.

     Our supply base contracts are conducted on a fixed price basis in U.S. dollars. In some cases our supplier arrangements contain escalation adjustment provisions based on accepted industry indices, with appropriate forecasting incorporated in program financial estimates. Raw materials price escalation has been mitigated through existing long-term agreements, which remain in place for several more years. Our expectations are that in the long-term, the demand for these materials will continue to put additional pressures on pricing. Strategic cost reduction plans will continue to focus on mitigating the affects of this demand curve on our operations.

Critical Accounting Policies

     Our discussion and analysis of our financial position and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses. Although we evaluate our estimates, which are based on the most current and best available information and on various other assumptions that are believed to be reasonable under the circumstances, on an ongoing basis, actual results may differ from these estimates under different assumptions or conditions. We believe the following items are the critical accounting policies and most significant estimates and assumptions used in the preparation of our financial statements. These accounting policies conform to the accounting policies contained in the consolidated financial statements included in this annual report.

     Accounting Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes and, in particular, estimates of contract costs and revenues used in the earnings recognition process. We have recorded all estimated contract losses that are reasonably estimable and probable. To enhance reliability in our estimates, we employ a rigorous estimating process that is reviewed and updated at least on a quarterly basis. However, actual results could differ from those estimates.

     Revenue and Profit Recognition. The majority of our sales are made pursuant to written contractual arrangements or ‘‘contracts” to design, develop and manufacture aerostructures to the specifications of the customer under firm fixed price contracts. These contracts are within the scope of the Revenue — Construction-Type and Production-Type Contracts topic of the ASC and revenue and costs on contracts are recognized using percentage-of-completion methods of accounting. Accounting for the revenue and profit on a contract requires estimates of (1) the contract value or total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s scope of work and (3) the measurement of progress towards completion. Depending on the contract, we measure progress toward completion using either the cost-to-cost method or the units-of-delivery method.

	•		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.

     Adjustments to original estimates for a contract’s revenues, estimated costs at completion and estimated total profit are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. These estimates are also sensitive to the assumed rate of production. Generally, the longer it takes to complete the contract quantity, the more relative overhead that contract will absorb. The impact of revisions in cost estimates is recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident (‘‘forward losses”) and are first offset against costs that are included in inventory, with any remaining amount reflected in accrued contract liabilities in accordance with the Construction and Production-Type Contracts topic. Revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as our valuation of inventory. Furthermore, certain contracts are combined or segmented for revenue recognition in accordance with the Construction and Production-Type Contracts topic.

     Advance payments and progress payments received on contracts-in-process are first offset against related contract costs that are included in inventory, with any remaining amount reflected in current liabilities.

     Accrued contract liabilities consisted of the following:

		December 31,				December 31,
		2009				2008
		(in millions)
Advances and progress billings		$	59.4			$	126.8
Forward loss			1.7				6.4
Other			13.1				7.9
Total accrued contract liabilities		$	74.2			$	141.1

     Amounts representing contract change orders or claims are only included in revenue when such change orders or claims have been settled with our customer and to the extent that units have been delivered. Additionally, some contracts may contain provisions for revenue sharing, price re-determination, requests for equitable adjustments, change orders or cost and/or performance incentives. Such amounts or incentives are included in contract value when the amounts can be reliably estimated and their realization is reasonably assured.

     Although fixed-price contracts, which extend several years into the future, generally permit us to keep unexpected profits if costs are less than projected, we also bear the risk that increased or unexpected costs may reduce our profit or cause the Company to sustain losses on the contract. In a fixed-price contract, we must fully absorb cost overruns, not withstanding the difficulty of estimating all of the costs we will incur in performing these contracts and in projecting the ultimate level of revenue that may otherwise be achieved. Our failure to anticipate technical problems, estimate delivery reductions, estimate costs accurately or control costs during performance of a fixed price contract may reduce the profitability of a fixed price contract or cause a loss. We believe we have recorded adequate provisions in the financial statements for losses on fixed-price contracts, but we cannot be certain that the contract loss provisions will be adequate to cover all actual future losses.

     As mentioned above, the vast majority of our revenue is related to the sale of manufactured end item products and spare parts. Any revenue related to the provision of services is accounted for separately and is not material to our results of operations.

     Inventories. Inventoried costs primarily relate to work in process and represent accumulated contract costs less the portion of such costs allocated to delivered items. Accumulated contract costs include direct production costs, manufacturing and engineering overhead, production tooling costs, and certain general and administration expenses.

     In accordance with industry practice, inventoried costs are classified as a current asset and include amounts related to contracts having production cycles longer than one year; therefore, a portion thereof will not be realized within one year. See Note 5 to our consolidated financial statements in Item 8 of this report.

     Goodwill. Goodwill is tested for impairment, at least annually, in accordance with the provisions of the Intangibles – Goodwill and Other topic of the ASC. Under this topic, the first step of the goodwill impairment test used to identify potential impairment compares the fair value of a reporting unit with its carrying value. We have concluded that the Company is a single reporting unit. Accordingly, all assets and liabilities are used to determine our carrying value. Based on review of our annual impairment tests, we did not recognize impairment charges in 2009, 2008 or 2007.

     Additionally, in connection with the sale of the Charleston 787 business on July 30, 2009 (discussed in Note 3 – Discontinued Operations), $122.9 million of our goodwill balance was allocated to that business based on the relative fair value of its assets compared to the total value of the consolidated company. Subsequently, we performed an interim impairment test of our remaining Goodwill balance and determined the balance was not impaired.

     For this testing we use an independent valuation firm to assist in the estimation of enterprise fair value using standard valuation techniques such as discounted cash flow, market multiples and comparable transactions. The discounted cash flow fair value estimates are based on management’s projected future cash flows and the estimated weighted average cost of capital. The estimated weighted average cost of capital is based on a risk-free interest rate and other factors such as equity risk premiums and the ratio of total debt and equity capital.

     We must make assumptions regarding estimated future cash flows and other factors used by the independent valuation firm to determine the fair value. If these estimates or the related assumptions change, we may be required to record non-cash impairment charges for goodwill in the future.

     Post-retirement Plans. The liabilities and net periodic cost of our pension and other post-retirement plans are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate, the expected long-term rate of asset return, the assumed average rate of compensation increase and rate of growth for medical costs. The actuarial assumptions used to calculate these costs are reviewed annually or when a remeasurement is necessary. Assumptions are based upon management’s best estimates, after consulting with outside investment advisors and actuaries, as of the measurement date.

     The assumed discount rate utilized is based on a point in time estimate as of our December 31 annual measurement date or as of remeasurement dates as needed. This rate is determined based upon on a review of yield rates associated with long-term, high quality corporate bonds as of the measurement date and use of models that discount projected benefit payments using the spot rates developed from the yields on selected long-term, high quality corporate bonds.

     The assumed expected long-term rate of return on assets is the weighted average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the Projected Benefit Obligation (“PBO”). The expected average long-term rate of return on assets is based principally on the counsel of our outside investment advisors and has been projected at 8.5% in 2009, 2008 and, 2007. This rate is based on actual historical returns and anticipated long-term performance of individual asset classes with consideration given to the related investment strategy. This rate is utilized principally in calculating the expected return on plan assets component of the annual pension expense. To the extent the actual rate of return on assets realized over the course of a year differs from the assumed rate, that year’s annual pension expense is not affected. The gain or loss reduces or increases future pension expense over the average remaining service period of active plan participants expected to receive benefits.

     The assumed average rate of compensation increase represents the average annual compensation increase expected over the remaining employment periods for the participating employees. This rate is estimated to be 4% and is utilized principally in calculating the PBO and annual pension expense.

     In addition to our defined benefit pension plans, we provide certain healthcare and life insurance benefits for some retired employees. Such benefits are unfunded as of December 31, 2009. Employees achieve eligibility to participate in these contributory plans upon retirement from active service if they meet specified age and years of service requirements. Election to participate for eligible employees must be made at the date of retirement. Qualifying dependents at the date of retirement are also eligible for medical coverage. Current plan documents reserve our right to amend or terminate the plans at any time, subject to applicable collective bargaining requirements for represented employees. From time to time, we have made changes to the benefits provided to various groups of plan participants. Premiums charged to most retirees for medical coverage prior to age 65 are based on years of service and are adjusted annually for changes in the cost of the plans as determined by an independent actuary. In addition to this medical inflation cost-sharing feature, the plans also have provisions for deductibles, co-payments, coinsurance percentages, out-of-pocket limits, schedules of reasonable fees, preferred provider networks, coordination of benefits with other plans, and a Medicare carve-out. A one-percentage point shift in the medical trend rate would have the effect shown in Note 14 to the Consolidated Financial Statements in Item 8.

     In accordance with the Compensation – Retirement Benefits topic of the ASC we recognized the funded status of our benefit obligation in our statement of financial position as of December 31, 2008. This funded status was remeasured for some plans as of January 31, 2009 and September 27, 2009 due to plan amendments and for all plans as of December 31, 2009, our annual remeasurement date. The funded status is measured as the difference between the fair value of the plan’s assets and the PBO or accumulated postretirement benefit obligation of the plan. In order to recognize the funded status, we determined the fair value of the plan assets. The majority of our plan assets are publicly traded investments which were valued based on the market price as of the date of remeasurement. Investments that are not publicly traded were valued based on the estimated fair value of those investments as of December 31, 2009 based on our evaluation of data from fund managers and comparable market data.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     As a result of our operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include fluctuations in interest rates, which impacts the amount of interest we must pay on our variable-rate debt and our calculation of our liability for our defined benefit plans. Other than the interest rate swaps described below, financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments and trade accounts receivable.

     Trade accounts receivable include amounts billed and currently due from customers, amounts currently due but, not yet billed, certain estimated contract changes, claims in negotiation that are probable of recovery, and amounts retained by the customer pending contract completion. We continuously monitor collections and payments from customers. Based upon historical experience and any specific customer collection issues that have been identified, we record a provision for estimated credit losses, as deemed appropriate.

     While such credit losses have historically been within our expectations, we cannot guarantee that we will continue to experience the same credit loss rates in the future.

     We maintain cash and cash equivalents with various financial institutions and perform periodic evaluations of the relative credit standing of those financial institutions. We have not experienced any losses in such accounts and believe that we are not exposed to any significant credit risk on cash and cash equivalents.

     Some raw materials and operating supplies are subject to price and supply fluctuations caused by market dynamics. Our strategic sourcing initiatives seek to find ways of mitigating the inflationary pressures of the marketplace. In recent years, these inflationary pressures have affected the market for raw materials. However, we believe that raw material prices will remain stable through the remainder of 2010 and after that, experience increases that are in line with inflation. Additionally, we generally do not employ forward contracts or other financial instruments to hedge commodity price risk.

     Our suppliers’ failure to provide acceptable raw materials, components, kits and subassemblies would adversely affect our production schedules and contract profitability. We maintain an extensive qualification and performance surveillance system to control risk associated with such supply base reliance. We utilize a range of long-term agreements and strategic aggregated sourcing to optimize procurement expense and supply risk related to our raw materials.

Interest Rate Risks

     From time to time, we may enter into interest rate swap agreements or other financial instruments in the normal course of business for purposes other than trading. These financial instruments are used to mitigate interest rate or other risks, although to some extent they expose us to market risks and credit risks. We control the credit risks associated with these instruments through the evaluation of the creditworthiness of the counter parties. In the event that a counter party fails to meet the terms of a contract or agreement then our exposure is limited to the current value, at that time, of the interest rate differential, not the full notional or contract amount. We have no such agreements currently outstanding.

     In the past, we have entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. Under these agreements, we exchanged floating rate interest payments for fixed rate payments periodically over the term of the swap agreements. We currently have no such agreements outstanding; however, in the future we may choose to manage market risk with respect to interest rates by entering into new hedge agreements.

     Management performs a sensitivity analysis to determine how market interest rate changes will affect the fair value of any market risk sensitive hedge positions and all other debt that we will bear. Such an analysis is inherently limited in that it represents a singular, hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. Fair value sensitivity is not necessarily indicative of the ultimate cash flow or earnings effect we would recognize from the assumed market interest rate movements. We are exposed to cash flow risk due to changes in interest rates with respect to the entire $322.2 million of variable rate debt outstanding under our senior credit facilities. A one-percentage point increase in interest rates on our variable-rate indebtedness would decrease our annual income (loss) before income taxes by approximately $3.2 million. While there was no debt outstanding under our Revolver at December 31, 2009, any future borrowings would be subject to the same type of variable rate risks. All of our remaining debt is at fixed rates; therefore, changes in market interest rates under these instruments would not significantly impact our cash flows or results of operations.

Foreign Currency Risks

     We are subject to limited risks associated with foreign currency exchange rates due to our contracted business with foreign customers and suppliers. As purchase prices and payment terms under the relevant contracts are denominated in U.S. dollars, our exposure to losses directly associated with changes in foreign currency exchange rates is not material. However, if the value of the U.S. dollar declines in relation to foreign currencies, our foreign suppliers would experience exchange-rate related losses and seek to renegotiate the terms of their respective contracts, which could have a significant impact to our margins and results of operations.

Utility Price Risks

     We have exposure to utility price risks as a result of volatility in the cost and supply of energy including electricity and natural gas. To minimize this risk, we have entered into fixed price contracts at certain of our manufacturing locations for a portion of their energy usage for periods of up to three years. Although these contracts would reduce the risk to us during the contract period, future volatility in the supply and pricing of energy and natural gas could have an impact on our consolidated results of operations. A 1% increase (decrease) in our monthly average utility costs during 2009 would have increased (decreased) our cost of sales by approximately $0.3 million for the year ended December 31, 2009.

Accounting Changes and Pronouncements

     In December 2007, the FASB issued an accounting standard that provides revised guidance on how acquirors recognize and measure the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. This standard also expands required disclosures surrounding the nature and financial effects of business combinations. We adopted the guidance of this accounting standard, currently included in the Business Combinations Topic of the Accounting Standards Codification (ASC) on January 1, 2009. We considered the provisions of this accounting standard with respect to the sale of the Charleston 787 business (as discussed in Note 3 – Discontinued Operations).

     FASB issued an accounting standard that requires enhanced disclosures about the plan assets of a company’s defined benefit pension and other postretirement plans. The enhanced disclosures are intended to provide users of financial statements with a greater understanding of: (1) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; (2) the major categories of plan assets; (3) the inputs and valuation techniques used to measure the fair value of plan assets; (4) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and (5) significant concentrations of risk within plan assets. We adopted the provisions of this accounting standard on January 1, 2009 and provided the required enhanced disclosures for our pension plan assets in Note 14 – Pension and Other Post Retirement Benefits.

     In May 2009, the FASB issued an accounting standard that requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. For nonrecognized subsequent events that must be disclosed to keep the financial statements from being misleading, an entity is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. We adopted this accounting standard for our fiscal period ending June 28, 2009 and it has not had a material effect on our consolidated financial statements.

     In June 2009, the FASB issued an accounting standard that establishes the FASB Accounting Standards CodificationÔ (the Codification) as the source of authoritative U.S. generally accepted accounting principles (US GAAP). We adopted this accounting standard for our fiscal period ending September 27, 2009.

     Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (ASUs), which will serve to update the Codification, provide background information about the accounting guidance and provide the basis for conclusions on the changes to the Codification. GAAP is not intended to be changed as a result of the Codification, but it will change the way the accounting guidance is organized and presented. As a result, these changes have a significant impact on how we reference GAAP in our financial statements and in our accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009.

     In this annual report, the Company has begun the process of implementing the statement by removing references to FASB statement numbers in the footnotes that follow and explaining the adherence to authoritative accounting guidance in plain English, where appropriate.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firm			48
Consolidated Balance Sheets, December 31, 2009 and 2008			49
Consolidated Statements of Operations for the three years ended December 31, 2009			50
Consolidated Statements of Stockholders’ Equity (Deficit) for the three years ended December 31, 2009			51
Consolidated Statements of Cash Flows for the three years ended December 31, 2009			52
Notes to Consolidated Financial Statements			53

Report of Independent Registered Public Accounting Firm

The Board of Directors
Vought Aircraft Industries, Inc.

We have audited the accompanying consolidated balance sheets of Vought Aircraft Industries, Inc. and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 12 to the financial statements, the requirement, under the terms of the Company’s senior credit facility, that the Company either prepay or refinance its senior notes prior to the last business day of 2010 or repay the aggregate amount of loans outstanding under the senior credit facility at that time raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 12. The December 31, 2009 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 25, 2010 expressed an unqualified opinion thereon.

Dallas, Texas
March 25, 2010

Vought Aircraft Industries, Inc.

Consolidated Balance Sheets

(dollars in millions, except par value per share )

		December 31,				December 31,
		2009				2008
Assets
Current assets:
Cash and cash equivalents		$	116.0			$	86.7
Restricted cash			43.8				—
Trade and other receivables			127.9				138.5
Inventories			511.3				311.8
Assets related to discontinued operations			—				460.7
Other current assets			8.5				9.2
Total current assets			807.5				1,006.9
Property, plant and equipment, net			275.9				279.2
Goodwill			404.8				404.8
Identifiable intangible assets, net			20.4				27.2
Other non-current assets			1.3				9.5
Total assets		$	1,509.9			$	1,727.6
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable, trade		$	140.9			$	148.5
Accrued and other liabilities			68.3				57.5
Accrued payroll and employee benefits			46.9				48.1
Accrued post-retirement benefits-current			37.4				42.0
Accrued pension-current			3.5				0.3
Current portion of long-term bank debt			319.8				5.9
Liabilities related to discontinued operations			—				156.7
Accrued contract liabilities			74.2				141.1
Total current liabilities			691.0				600.1
Long-term liabilities:
Accrued post-retirement benefits			364.9				405.3
Accrued pension			612.2				710.7
Long-term bank debt, net of current portion			—				594.0
Long-term bond debt			270.0				270.0
Other non-current liabilities			75.3				81.6
Total liabilities			2,013.4				2,661.7
Stockholders’ 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 December 31, 2009 and 2008, respectively			0.3				0.3
Additional paid-in capital			422.8				420.5
Shares held in rabbi trust			(1.6	)			(1.6	)
Accumulated deficit			(173.0	)			(501.3	)
Accumulated other comprehensive loss			(752.0	)			(852.0	)
Total stockholders’ equity (deficit)		$	(503.5	)		$	(934.1	)
Total liabilities and stockholders’ equity (deficit)		$	1,509.9			$	1,727.6

See accompanying notes

Vought Aircraft Industries, Inc.

Consolidated Statements of Operations
($ in millions)

		Years Ended
		December 31,
		2009				2008				2007
Revenue		$	1,877.8			$	1,775.0			$	1,613.1
Costs and expenses
Cost of sales			1,594.8				1,492.9				1,284.8
Selling, general and administrative expenses			122.6				135.3				133.3
Total costs and expenses			1,717.4				1,628.2				1,418.1
Operating income (loss)			160.4				146.8				195.0
Other income (expense)
Interest income			0.7				4.4				3.6
Other income (loss)			1.3				48.7				(0.1	)
Equity in loss of joint venture			—				(0.6	)			(4.0	)
Interest expense			(57.0	)			(67.2	)			(62.6	)
Income (loss) before income taxes			105.4				132.1				131.9
Income tax expense (benefit)			(9.3	)			0.2				0.1
Income from continuing operations			114.7				131.9				131.8
Income (loss) from discontinued operations, net of tax			213.6				(38.2	)			(85.5	)
Net income		$	328.3			$	93.7			$	46.3

See accompanying notes

Vought Aircraft Industries, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)
($ in millions)

																						Accumulated				Total
						Additional				Rabbi Trust								Accumulated				Other				Stockholders’
		Common				Paid-In				& CMG				Stockholders’				Income				Comprehensive				Equity
		Stock				Capital				Escrow				Loans				(Deficit)				Income (Loss)				(Deficit)
Balance at December 31, 2006		$	0.3			$	414.8			$	(1.6	)		$	(1.0	)		$	(641.3	)		$	(464.5	)		$	(693.3	)
Net income		$	—			$	—			$	—			$	—			$	46.3			$	—			$	46.3
Minimum pension liability adjustment			—				—				—				—				—				83.0				83.0
Comprehensive income (loss)			—				—				—				—				46.3				83.0				129.3
Adjustment to accumulated other comprehensive income upon adoption of ASC 715 (Pension)			—				—				—				—				—				(90.8	)			(90.8	)
Adjustment to accumulated other comprehensive income upon adoption of ASC 715 (OPEB)			—				—				—				—				—				(14.6	)			(14.6	)
Compensation expense from stock awards			—				2.8				—				—				—				—				2.8
Repayment of stockholder loans							(0.2	)							1.0												0.8
Balance at December 31, 2007		$	0.3			$	417.4			$	(1.6	)		$	—			$	(595.0	)		$	(486.9	)		$	(665.8	)
Net income		$	—			$	—			$	—			$	—			$	93.7			$	—			$	93.7
Amortization of prior service cost			—				—				—				—				—				(8.5	)			(8.5	)
Amortization of actuarial (gain) loss			—				—				—				—				—				35.7				35.7
Increase in unamortized prior service cost			—				—				—				—				—				42.5				42.5
Increase in unrecognized actuarial loss			—				—				—				—				—				(434.8	)			(434.8	)
Comprehensive income (loss)			—				—				—				—				93.7				(365.1	)			(271.4	)
Sale of common stock			—				0.1				—				—				—				—				0.1
Compensation expense from stock awards			—				3.0				—				—				—				—				3.0
Balance at December 31, 2008		$	0.3			$	420.5			$	(1.6	)		$	—			$	(501.3	)		$	(852.0	)		$	(934.1	)
Net income		$	—			$	—			$	—			$	—			$	328.3			$	—			$	328.3
Amortization of prior service cost			—				—				—				—				—				(12.0	)			(12.0	)
Amortization of actuarial (gain) loss			—				—				—				—				—				44.8				44.8
Increase in unamortized prior service cost			—				—				—				—				—				21.9				21.9
Increase in unrecognized actuarial loss			—				—				—				—				—				45.3				45.3
Comprehensive income (loss)			—				—				—				—				328.3				100.0				428.3
Compensation expense from stock awards			—				2.3				—				—				—				—				2.3
Balance at December 31, 2009		$	0.3			$	422.8			$	(1.6	)		$	—			$	(173.0	)		$	(752.0	)		$	(503.5	)