The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. The Company makes forward-looking statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Quarterly Report on Form 10-Q, which represent the Company's expectations or beliefs about future events and financial performance. When used in this report, the words "expect," "believe," "anticipate," "goal," "plan," "intend," "estimate," "may," "will" or similar words are intended to identify forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events or results. Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to under "Risk Factors" in the Company's Annual Report on Form 10-K and otherwise described in the Company's periodic filings and current reports filed with the Securities and Exchange Commission.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. In addition, actual results could differ materially from those suggested by the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by the Company from time to time in its periodic filings with the Securities and Exchange Commission.

This Quarterly Report on Form 10-Q should be read completely and with the understanding that the Company's actual future results may be materially different from what the Company expects. All forward-looking statements made by the Company in this Form 10-Q and in the Company's other filings with the Securities and Exchange Commission are qualified by these cautionary statements.

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions. (See Note 1 of the Condensed Consolidated Financial Statements included as part of this Quarterly Report on Form 10-Q.)

The Company believes that certain significant accounting estimates have the potential to have a more significant impact on the financial statements either because of the significance of the financial statements to which they relate or because they involve a higher degree of judgment and complexity. A summary of such critical accounting estimates can be found in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Overview

We are a leading provider of design engineering services, structural components, assemblies and kits to the aerospace, defense and technology industries. We primarily sell our products and services to the large commercial aircraft, military, corporate and regional aircraft, and technology markets. Historically, our business was primarily dependent on the large commercial aircraft market, specifically with one principal customer. In order to diversify our product and customer base, we implemented an acquisition and marketing strategy in the late 1990s that has broadened the number of industries to which we sell our products and services and, within the aerospace industry, diversified our customer base to reduce our dependence on any one principal customer. Our acquisition of D3 Technologies in 2007 was in furtherance of our growth strategy of increasing the array of value-added services and solutions that we offer to our customers. We believe that OEM and Tier 1 aerospace companies will continue the trend of selecting their suppliers based upon the breadth of more complex and sophisticated design and manufacturing capabilities and value-added services as well as the ability of their suppliers to manage large production programs.

In January 2009, the Company acquired Intec, an Everett, Washington-based provider of advanced materials testing, manufacturing and design services to the aerospace, defense and transportation industries. Intec's primary business is designed to support composite testing, manufacturing and research, by analyzing new and existing materials, including organic matrix composites, ceramics, metal matrix composites and metal. We believe the acquisition of Intec, together with other initiatives, will provide significant composite assembly and component production capabilities, which will allow us to broaden our customer offerings and to use our skilled workforce in both the Aerostructures and Engineering Services segments to transition to production of non-metallic products.

Recent Development

We continue to monitor the performance of our Tempco reporting unit, which is part of our Aerostructures segment, whose performance in fiscal 2008 resulted in a $2.3 million goodwill impairment charge. Although Tempco's operating results for fiscal 2009 have been below budget, to date we have concluded that no significant changes constituting a triggering event have occurred through June 30, 2009. If market conditions of the Tempco reporting unit do not improve or if we are not successful in improving the Tempco reporting unit's operating results, the remaining goodwill of $3.4 million related to Tempco may be impaired and result in future impairment charges. Additionally, we are currently evaluating strategies to improve operating results including plant consolidations and workforce reductions which may result in future restructuring charges.

Results of Operations

Three months ended June 30, 2009 compared to June 30, 2008

The following table is a summary of our operating results for the three months
ended June 30, 2009 and 2008, respectively:

                                                           Three Months Ended
                                                             June 30, 2009
                                                            ($ in millions)
                                                         Engineering
                                    Aerostructures         Services         Eliminations        Total
Net sales                          $           40.2     $         22.6     $            -     $    62.8
Cost of sales                                  31.2               18.2                  -          49.4
Gross profit                                    9.0                4.4                  -          13.4
S,G & A                                         6.1                1.9                  -           8.0
Income from operations             $            2.9     $          2.5     $            -     $     5.4


                                                           Three Months Ended
                                                             June 30, 2008
                                                            ($ in millions)
                                                         Engineering
                                    Aerostructures         Services         Eliminations        Total
Net sales                          $           41.6     $         24.0     $         (0.7 )   $    64.9
Cost of sales                                  29.8               19.1               (0.7 )        48.2
Gross profit                                   11.8                4.9                  -          16.7
S,G & A                                         6.0                2.3                  -           8.3
Income from operations             $            5.8     $          2.6     $            -     $     8.4

Aerostructures Segment

Net Sales. The following table specifies the amount of the Aerostructures
segment's net sales by category for the second quarter of 2009 and 2008 and the
percentage of total net sales for each period represented by each category.

                                                  Three Months Ended June 30,
    Category                           2009       % of Total       2008       % of Total
                                                        ($ in millions)
    Corporate and regional aircraft   $ 11.8             29.4 %   $ 14.1             33.9 %
    Large commercial aircraft           18.2             45.3       12.4             29.8
    Military                             8.7             21.6       11.7             28.1
    Technology                           0.4              1.0        2.2              5.3
    Other (1)                            1.1              2.7        1.2              2.9
    Total                             $ 40.2            100.0 %   $ 41.6            100.0 %

(1) Primarily consists of testing and processing services in 2009 and consulting services and various aerospace products in 2008.

Net sales for the second quarter of 2009 were $40.2 million, down 3.4% from $41.6 million in the second quarter of 2008. A decrease in net sales occurred in the corporate and regional aircraft, military and technology sectors. This decrease was offset by an increase in the large commercial aircraft sector.

Net sales of components for corporate and regional aircraft were $11.8 million for the second quarter of 2009 compared to $14.1 million for the second quarter of 2008, a decrease of $2.3 million, or 16.3%. This decrease was primarily attributable to a decrease in sales of large cabin components for Gulfstream due to production rate cuts announced by Gulfstream in March 2009 and the resulting inventory adjustments implemented in connection with these production cuts. The decline in production was offset by $1.6 million in tooling sales.

Net sales of products used in large commercial aircraft were $18.2 million for the second quarter of 2009 compared to $12.4 million for the second quarter of 2008, an increase of $5.8 million, or 46.8%. The increase in net sales to this market was driven by support for the 767 wing modification and winglet program, which generated $7.6 million of sales. This increase was partially offset by a $1.0 million decrease in sales for the Boeing 737 from $7.1 million in the second quarter of 2008 to $6.1 million in the second quarter of 2009 due to inventory adjustments at a Tier 1 customer, and a $0.8 million decrease in sales for the 787 program primarily resulting from continued delay in the program.

Military products generated $8.7 million of net sales in the second quarter of 2009 compared to $11.7 million in the second quarter of 2008, a decrease of $3.0 million, or 25.6%. This decrease resulted from net sales for the Sikorsky Blackhawk program, which generated $6.2 million of net sales in the second quarter of 2009 compared to $9.0 million in the second quarter of 2008, primarily due to changes made in the customer's inventory management process.

Technology products net sales declined by $1.8 million, or 81.8%, in the second quarter of 2009 to $0.4 million from $2.2 million for the second quarter of 2008. This decrease was due to lower demand in semiconductor equipment.

Gross Profit. Gross profit for the second quarter of 2009 was $9.0 million (22.4% of net sales) compared to $11.8 million (28.4% of net sales) in the second quarter of 2008. An increase in obsolescence costs, start-up costs on the G250 and CRJ-1000, and continued operational issues at the Company's Sun Valley, California facility contributed to the decline in gross profit. Additionally, although operating above the Company's expectations, the 767 wing modification kit provides a lower gross profit margin.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $6.1 million (15.2% of net sales) for the second quarter of 2009 compared to $6.0 million (14.4% of net sales) for the second quarter of 2008. We experienced an increase in depreciation and amortization expense in the second quarter of 2009 as a result of the acquisition of Intec. This increase was offset by a decline in stock awards and travel expense.

Engineering Services Segment

Net Sales. The following table specifies the amount of the Engineering Services
segment's net sales by category for the second quarter of 2009 and 2008 and the
percentage of the segment's total net sales represented by each category.

                                                  Three Months Ended June 30,
    Category                           2009       % of Total       2008       % of Total
                                                        ($ in millions)
    Corporate and regional aircraft   $  4.6             20.4 %   $  8.4             35.0 %
    Large commercial aircraft           10.2             45.1       11.2             46.7
    Military                             7.1             31.4        3.0             12.5
    Tooling                              0.7              3.1        1.4              5.8
    Total                             $ 22.6            100.0 %   $ 24.0            100.0 %

Net sales for the Engineering Services segment were $22.6 million for the second quarter of 2009 compared to $24.0 million for the second quarter of 2008, a decrease of $1.4 million, or 5.8%. This decrease resulted from lower client overtime requirements in 2009 compared to 2008. Approximately $22.0 million, or 97.3% of the segment's revenues, were recorded under reimbursement type contracts for engineering services compared to $23.4 million, or 97.5% of the segment's revenues, for the second quarter of 2008, a decrease of $1.4 million or 6.0%. These revenues are generated from labor hours incurred at varying, pre-negotiated rates and other direct costs plus an administrative fee. Net sales under these reimbursement contracts are primarily for commercial, corporate and military markets.

Net sales for services supporting corporate and regional aircraft, the majority of which relate to the development of new and redesigned aircraft, were $4.6 million in the second quarter of 2009 compared to $8.4 million for the second quarter of 2008, a decrease of $3.8 million, or 45.2%. The majority of the 2008 revenue was due to the development of the Gulfstream G650. In 2009, the decrease in services required on the Gulfstream G650 was partially offset by our support on Bombardier's Learjet 85.

Net sales for services for large commercial aircraft were $10.2 million in the second quarter of 2009, down $1.0 million, or 8.9%, from $11.2 million in the second quarter of 2008. These revenues are primarily from design programs supporting Boeing's 747-8, 777-Freighter and 787 platforms. In addition to decreases in overtime requirements, large commercial aircraft revenue declined due to the completion of some of the related engineering tasks.

Net sales of services for military programs were $7.1 million in the second quarter of 2009, up $4.1 million, or 136.7%, from $3.0 million in the second quarter of 2008. These military revenues were derived from support provided on multiple Navy programs, as well as the F-35, the CH-53 helicopter and other programs. The increased sales of services for military programs are consistent with management's strategy for growth and have helped offset the decreases of sales experienced in other major categories.

Sales related to the design and delivery of tooling on various programs supporting commercial aircraft were $0.7 million for the second quarter of 2009 compared to $1.4 million in the second quarter of 2008. This $0.7 million, or 50.0%, decrease resulted from the lower demand for tooling design support.

Gross Profit. Gross profit for the second quarter of 2009 was $4.4 million (19.5% of net sales) compared to $4.9 million (20.4% of net sales) in the second quarter of 2008. The decrease in gross profit during the second quarter of 2009 is due to a number of factors, including higher overhead rates resulting from fewer work days, lower sales volume and an increase in non-billable hours.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the second quarter of 2009 were $1.9 million (8.4% of net sales) compared to $2.3 million (9.6% of net sales) in the second quarter of 2008. The decrease was primarily due to a reduction in personnel costs.

Non-segment Expenses

Interest Income (Expense), net. Net interest expense was $0.4 million for the second quarter of 2009 and 2008. The decreases in interest rates in the second quarter of 2009 compared to the second quarter of 2008 were offset by increased borrowings as a result of the purchase of Intec in January 2009.

Income Tax Expense. During the second quarter of 2009, we recorded income tax expense of $1.8 million compared to $2.9 million in the second quarter of 2008. We applied an effective tax rate of 36.4% for the second quarter of 2009 and 36.5% for the second quarter of 2008.

Six months ended June 30, 2009 compared to June 30, 2008

The following table is a summary of our operating results for the six months ended June 30, 2009 and 2008, respectively:

                                                            Six Months Ended
                                                             June 30, 2009
                                                            ($ in millions)
                                                         Engineering
                                    Aerostructures         Services         Eliminations        Total
Net sales                          $           83.5     $         43.4     $         (0.1 )   $   126.8
Cost of sales                                  63.5               35.5               (0.2 )        98.8
Gross profit                                   20.0                7.9                0.1          28.0
S,G & A                                        12.9                3.9                  -          16.8
Income from operations             $            7.1     $          4.0     $          0.1     $    11.2


                                                            Six Months Ended
                                                             June 30, 2008
                                                            ($ in millions)
                                                         Engineering
                                    Aerostructures         Services         Eliminations        Total
Net sales                          $           78.8     $         47.3     $         (0.8 )   $   125.3
Cost of sales                                  56.0               37.7               (0.7 )        93.0
Gross profit                                   22.8                9.6               (0.1 )        32.3
S,G & A                                        12.0                4.4                  -          16.4
Income from operations             $           10.8     $          5.2     $         (0.1 )   $    15.9

Aerostructures Segment

Net Sales. The following table specifies the amount of the Aerostructures
segment's net sales by category for the six months ended June 30, 2009 and 2008
and the percentage of total net sales for each period represented by each
category.

                                                   Six Months Ended June 30,
    Category                           2009       % of Total       2008       % of Total
                                                        ($ in millions)
    Corporate and regional aircraft   $ 27.6             33.1 %   $ 27.5             34.9 %
    Large commercial aircraft           32.8             39.3       23.1             29.3
    Military                            19.8             23.7       21.6             27.4
    Technology                           0.6              0.7        4.4              5.6
    Other (1)                            2.7              3.2        2.2              2.8
    Total                             $ 83.5            100.0 %   $ 78.8            100.0 %

(1) Primarily consists of testing and processing services in 2009 and consulting services and various aerospace products in 2008.

Net sales for the first six months of 2009 were $83.5 million, up 6.0% from $78.8 million in the first six months of 2008. The increase in net sales occurred primarily in the large commercial aircraft sector.

Net sales of components for corporate and regional aircraft were $27.6 million for the first six months of 2009 compared to $27.5 million for the first six months of 2008, an increase of $0.1 million, or 0.4%. This increase was primarily attributable to $6.3 million in tooling sales, which are not expected to be sustained at that rate through the remainder of the year, offset by a $6.4 million decrease in sales of large cabin components for Gulfstream. This reduction is primarily a result of production rate cuts announced by Gulfstream in March 2009 and the resulting inventory adjustments implemented in connection with these rate cuts.

Net sales of products used in large commercial aircraft were $32.8 million for the first six months of 2009 compared to $23.1 million for the first six months of 2008, an increase of $9.7 million, or 42.0%. The increase in net sales to this market was driven by support for the 767 wing modification and winglet program, which generated $12.6 million of sales in the first six months of 2009 compared to $1.2 million in the first six months of 2008. We also increased net sales for the Boeing 747 by $1.1 million to $5.1 million in the first six months of 2009 from $4.0 million in the first six months of 2008. These increases were partially offset by a $3.1 million decrease in sales for the Boeing 737 from $13.9 million in the first six months of 2008 to $10.8 million in the first six months of 2009 and a $1.0 million decrease in other large commercial aircraft products from $4.0 million in the first six months of 2008 to $3.0 million in the first six months of 2009, primarily as a residual impact of the Boeing strike in the fourth quarter of 2008.

Military products generated $19.8 million of net sales in the first six months of 2009 compared to $21.6 million in the first six months of 2008, a decrease of $1.8 million, or 8.3%. This decrease primarily resulted from net sales for the Sikorsky Blackhawk program, which generated $14.8 million of net sales in the first six months of 2009 compared to $16.0 million in the first six months of 2008.

Technology products net sales declined by $3.8 million, or 86.4%, in the first six months of 2009 to $0.6 million from $4.4 million for the first six months of 2008. This decrease was due to lower demand in semiconductor equipment.

The backlog was $238 million and $163 million at June 30, 2009 and 2008, respectively.

Gross Profit. Gross profit for the first six months of 2009 was $20.0 million (24.0% of net sales) compared to $22.8 million (28.9% of net sales) in the first six months of 2008. An increase in obsolescence costs, start-up costs on the G250 and CRJ-1000, and continued operational issues at the Company's Sun Valley, California facility contributed to the decline in gross profit. Additionally, although operating above the Company's expectations, the 767 wing modification kit provides a lower gross profit margin.

Selling, General and Administrative Expenses. Selling, general and administrative expenses, including $0.4 million of severance and restructuring costs were $12.9 million (15.4% of net sales) for the first six months of 2009 compared to $12.0 million (15.2% of net sales) for the first six months of 2008. In addition to the severance and restructuring costs during the first six months of 2009, we incurred $0.3 million of acquisition costs expensed under FAS No. 141(R) relating to the Intec acquisition. Intec also added $0.7 million of expense for the 2009 period subsequent to its acquisition.

Engineering Services Segment

Net Sales. The following table specifies the amount of the Engineering Services
segment's net sales by category for the six months ended June 30, 2009 and 2008
and the percentage of the segment's total net sales represented by each
category.

                                                   Six Months Ended June 30,
    Category                           2009       % of Total       2008       % of Total
                                                        ($ in millions)
    Corporate and regional aircraft   $  9.5             21.9 %   $ 15.6             33.0 %
    Large commercial aircraft           19.8             45.6       22.3             47.2
    Military                            12.9             29.7        6.5             13.7
    Tooling                              1.2              2.8        2.9              6.1
    Total                             $ 43.4            100.0 %   $ 47.3            100.0 %

Net sales for the Engineering Services segment were $43.4 million for the first six months of 2009 compared to $47.3 million for the first six months of 2008, a decrease of $3.9 million, or 8.2%. This decrease resulted from three fewer work days in the first six months of 2009 compared to the first six months of 2008 as well as lower client overtime requirements in 2009 compared to 2008. Approximately $42.6 million, or 98.1% of the segment's revenues, were recorded under reimbursement type contracts for engineering services compared to $45.6 million for the first six months of 2008, a decrease of $3.0 million, or 6.6%. These revenues are generated from labor hours incurred at varying, pre-negotiated rates and other direct costs plus an administrative fee. Net sales under these reimbursement contracts are primarily for commercial, corporate and military markets.

Net sales for services supporting corporate and regional aircraft, the majority of which relate to the development of new and redesigned aircraft, were $9.5 million in the first six months of 2009 compared to $15.6 million for the first six months of 2008, a decrease of $6.1 million, or 39.1%. The majority of the corporate aircraft revenues in 2008 were generated from the development of the Gulfstream G650. In 2009, the lowered demand for services on the development of the Gulfstream G650 was supplemented by support on Bombardier's Learjet 85.

Net sales for services for large commercial aircraft were $19.8 million in the first six months of 2009, down $2.5 million, or 11.2%, from $22.3 million in the first six months of 2008. These revenues are primarily from design programs supporting Boeing's 747-8, 777-Freighter and 787 platforms. In addition to the factors discussed above, these decreases resulted from the winding down of certain programs.

Net sales of services for military programs were $12.9 million in the first six months of 2009, up $6.4 million, or 98.5%, from $6.5 million in the first six months of 2008. These military revenues were derived from support provided on multiple Navy programs as well as the F-35, the CH-53 helicopter and other programs. The increased sales of services for military programs are consistent with management's strategy for growth and have helped offset the decreases of . . .