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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2011

For the transition period from            to            

Commission File Number 333-150749

AGY HOLDING CORP.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

20-0420637

(IRS Employer Identification Number)

2556 Wagener Road

Aiken, South Carolina 29801

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (888) 434-0945

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  ¨    No  x

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

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  x    No  ¨

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 or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

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

The registrant is privately held. There is no trading in its common equity, and therefore an aggregate market value of common stock of the registrant based on sales or bid and asked prices is not determinable.

The total number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of March 30, 2012 was 100.

Documents incorporated by reference: None

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AGY HOLDING CORP.

INDEX

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Forward-Looking Statements

This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this Annual Report, includes or may include “forward-looking statements.” All statements included herein, other than statements of historical fact, may constitute forward-looking statements. In some cases you can identify forward-looking statements by terminology such as “may,” “should” or “could.” Generally, the words “anticipates,” “believes,” “expects,” “intends,” “estimates,” “projects,” “plans” and similar expressions identify forward-looking statements. Although AGY Holding Corp. believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among others, the items discussed in “Risk Factors” in Item 1A of Part I of this Annual Report, and that are otherwise described from time to time in AGY’s Securities and Exchange Commission filings after this Annual Report. AGY assumes no obligation and does not intend to update these forward-looking statements.

PART I

Overview

AGY Holding Corp. is a Delaware corporation, incorporated in 2004 following emergence from Chapter 11 bankruptcy protection, with its headquarters in South Carolina. The core business has been in existence for over 50 years. AGY Holding Corp. and its subsidiaries are referred to herein as “AGY” or the “Company”. AGY is a leading manufacturer of advanced glass fibers that are used as reinforcing materials in numerous diverse, high-value applications, including aircraft laminates, ballistic armor, pressure vessels, roofing membranes, mattress protection and architectural fabrics, and specialty electronics. AGY is focused on serving end-markets that require glass fibers for applications with demanding performance criteria, such as the aerospace, defense, construction, electronics, automotive, and industrial end-markets. We are able to leverage our flexible manufacturing capabilities to target new specialty end-use applications and to shift production rapidly to meet changing market demand.

Our Company was acquired by KAGY Holding Company, Inc. (“Holdings”) on April 7, 2006 pursuant to the terms of an agreement of merger dated February 23, 2006. In October 2006, we repaid all outstanding borrowings under our then-existing senior secured credit facilities as part of the refinancing of our indebtedness through our new $40 million credit facility, the issuance of $175 million in aggregate principal amount of 11% senior second lien notes due 2014 (the “Notes”) and our cash on hand.

We have three manufacturing facilities, two located in the United States and one located in China that we acquired a 70% interest in on June 10, 2009. This acquisition, which is described more fully in Note 3 to the Consolidated Financial Statements, expanded AGY’s manufacturing and servicing capabilities in the Asia-Pacific region relative to the electronics and industrial markets.

The following table summarizes our net sales by geographic region. Customer sales are attributed to geographic region based upon the location to which the product is shipped to the external customer.

Our Products

Glass Fiber Products. We are a leader in the design, development, manufacturing, and marketing of precision glass fibers used in diverse, high value applications. We produce high-quality fine filament glass fibers, which provide customers with enhanced strength-to-weight ratios and improved fabric quality and flexibility properties. Glass fibers are differentiated from one another in three ways: (i) glass chemistry, (ii) diameter of the filaments and (iii) sizing chemistry (a coating applied to the filament). Glass fiber is produced by passing molten glass through bushings, producing thin glass filaments, which are spooled and then twisted into fibers or bundled into untwisted heavy weight fibers called rovings. We produce hundreds of different glass fiber types. Glass fiber types are broadly segmented into two categories: E Glass and advanced materials, including S-2 Glass.

E Glass is a natural, lustrous, white continuous fiber made of highly stable and durable glass filaments. Within E Glass, we focus on both “semi-technical” and “technical” fibers. We differentiate between semi-technical and technical E Glass fibers based on their technical complexity and difficulty in manufacturing, and our technical fibers include filaments with a diameter of eight microns or less and fibers with specialized and proprietary sizing compositions. As a result of their complexity, technical fibers are manufactured by only a few suppliers. We generally compete with one or two alternative suppliers for the vast majority of our

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technical products. Where our technical fibers are specified-in and offer significant value to our customers, we are able to command a price and margin premium compared to most semi-technical E Glass fibers. We plan to continue to produce semi-technical E Glass fibers to enable us to offer our customers a full suite of products.

S-2 Glass is a proprietary product that is technically more complex than conventional E Glass fibers, providing it with advanced performance characteristics. Compared to other alternatives such as carbon fiber, aramid fibers and steel, S-2 Glass delivers a better ratio of performance to cost in many applications. S-2 Glass has more than three times the percentage strain to failure of carbon fiber and performs three times better than aramid fibers in fire tests. S-2 Glass is also approximately one-third the weight of steel.

We differentiate our S-2 Glass advanced materials from E Glass by its different glass chemistry, which yields a proprietary product with superior performance characteristics making it suitable for applications with demanding performance criteria, such as ballistic armor, aircraft flooring and exterior skins, helicopter blades, firefighter oxygen tanks, automotive timing belts and ceramic appliance insulation. Historically, we have demonstrated our ability to increase S-2 Glass capacity significantly due to the nature of our manufacturing platform. In addition, we have introduced other unique advanced material product line extensions to targeted applications that have different performance characteristics and price points within multiple end markets, including wind energy, electronics and thermoplastics.

CFM Products. Continuous Filament Mat, or CFM, is a unique glass fiber reinforcement product used as an input in the production of flat sheet laminates, marine parts and accessories, and other products where its strength and durability make it the most cost-effective material to use. CFM increases the mechanical performance of products, such as stiffness and strength, as well as improves their resistance to chemicals. In CFM, AGY has a capacity of 12,000 metric tons over three manufacturing lines in Huntingdon, Pennsylvania, capable of producing many differentiated products from 0.6 oz. to 3.0 oz. weight serving a wide variety of markets and applications, such as ladder rails, electrical insulation, heavy truck bodies and oil rig decking.

All of our manufacturing processes require the use of bushings made of platinum-rhodium alloy. As a result, our ability to fully utilize or increase our production capacity for glass fiber and CFM products is subject to our ability to obtain and maintain sufficient amounts of alloy metals to support our operations through outright purchase, leasing or through technology improvements that reduce the alloy intensity of our manufacturing processes.

Segment Information

Since the acquisition of a 70% controlling interest in Main Union Industrial Ltd. and its subsidiary (which are collectively referred to herein as “AGY Asia”) on June 10, 2009, the Company operates its business as two reportable units, each a separate operating segment: AGY US and AGY Asia. The Company’s operating segments are managed separately based on differences in their manufacturing and technology capabilities, products and services and their end-markets as well as their distinct financing agreements. For financial information with respect to our business segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 23 to our Consolidated Financial Statements.

AGY US

The AGY US segment includes our US manufacturing operations and sale of advanced glass fibers that are used worldwide as reinforcing materials in numerous high-value applications through AGY and its wholly-owned domestic and French subsidiaries. The AGY US segment manufactures and sells the full suite of the products described above but is heavily focused on serving end-markets that require glass fibers for applications with demanding performance criteria. The respective share of end-market sales for the year ended December 31, 2011 for this segment are as follows:

The AGY US segment serves over 250 direct customers worldwide, including most major global weavers and a diverse group of other domestic and international commercial and industrial users of fibers. While supply chains vary by product, application and end-user, there are generally multiple links in the value chain between our fibers and corresponding end-products. Direct customers weave our fibers into glass fiber fabric. Through our working relationships with downstream contacts, we are often able to have our fibers specified-in end-products and, therefore, influence end-user demand and increase leverage with our direct customers.

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Our direct customer relationships generally are stable and long-term. In order to qualify a new supplier, a customer may need to modify its own weaving loom set-ups and fabric specifications and also qualify the new fiber suppliers with downstream manufacturers and original equipment manufacturers, or OEM’s. Although glass fibers are only a portion of the final end-product’s overall manufacturing cost, defects can be costly and can have a major impact throughout the value chain. Consequently, customers demand high-quality, reliable fibers from their suppliers, and we have established a reputation with our customers for meeting these demands. We believe these factors have allowed us to maintain strong relationships with each of our key customers. The average length of the relationships with our top ten customers is more than 20 years.

Depending on the end-application, we compete with glass yarn manufacturers or other composite fiber producers worldwide. We compete in the areas of technology innovation, quality, ratio of performance to cost and customer service for our specialty advanced glass fibers and technical fibers. For our semi-technical E Glass fibers we compete primarily on the basis of cost, quality and price.

AGY Asia

The AGY Asia segment includes the manufacturing operations of the Company’s 70% controlling ownership of AGY Asia and its sale of E Glass fibers that at present are used primarily in the Asian electronics market. AGY Asia serves a smaller base of less than 20 customers, who are primarily weavers for the Asia Pacific electronics markets. Significant competitors include other global glass yarn producers primarily based in China, but such competitors are usually vertically integrated and therefore also compete within the weaver segment of the industry supply chain. AGY Asia is one of a limited number of independent non-integrated yarn producers in Asia, and we stress this independence in our efforts to secure supply positions with our weaving customers.

Our AGY US and AGY Asia segments accounted for approximately 85% and 15% of our total net sales, respectively, in 2011.

Our AGY US and AGY Asia segments accounted for approximately 74% and 26% of our total assets, respectively, in 2011.

Summary of our End-Markets and Key Applications by Segment

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Industry Overview

We supply glass fibers (i) to the global composites industry and (ii) to other applications where glass fibers, sometimes coated, largely constitute a complete fabric system. Examples of composites applications include thermoplastic-glass fiber reinforced composites for ballistic armor, aluminum-glass fiber reinforced composites for aircraft interior and exterior panels and specialty electronics printed circuit boards. Sales into other applications, principally in the construction and selected industrial end-markets, represented the remainder of our sales for the year ended December 31, 2011. Examples of these applications include architectural roofing and mattress protection fabrics.

Customers

We sell to a majority of our customers on open account after an extensive credit review and approval process. For those customers that do not qualify for credit terms, we require cash in advance or a letter of credit. We provide consigned inventory at the customer’s location on a limited basis.

Due to the proximity of our manufacturing plants in relation to many of our top customers, we are able to provide strong customer service. This proximity allows same-day trucking and responsive technical service which enables our customers to manage their inventory more efficiently. Our three largest customers, Porcher Industries Group, Glotech Industrial Corp. and JPS Glass accounted for approximately 17%, 8% and 6%, respectively, of our consolidated net sales for 2011. AGY Asia’s customer concentration is high. Approximately 69% of the AGY Asia segment’s net sales in 2011 were generated from two customers, Glotech Industrial Corp. and Grace Fabric, a subsidiary of AGY Asia’s predecessor owner; however, customer concentration is expected to decrease in future years as we diversify the product lines and geographic sales of AGY Asia.

Backlog

Contracted backlog is not material to the Company’s business taken as a whole and, on average, is less than one month of sales.

Intellectual Property

As part of the transaction when we were spun out of Owens Corning in 1998, Owens Corning assigned to us various patents, know-how, trademarks and other business information. Owens Corning also licensed additional intellectual property assets and rights to us. Under this agreement, Owens Corning granted us a worldwide, paid-up and royalty-free license to make, have made, use, sell, offer to sell and import glass yarn fiber products and S-2 Glass. The agreement covers the life of the licensed patents and is perpetual for know-how. In connection with our purchase of Owens Corning’s CFM business in October 2007, Owens Corning assigned and licensed to us additional intellectual property and rights related to the CFM business.

AGY aggressively manages its patent portfolio, both in terms of seeking patent protection for new technologies and also in pruning patents that no longer have business value. We have a valuable portfolio of U.S. patents and related foreign patents as well as pending U.S. and foreign applications. This portfolio covers a wide spectrum from glass composition to fiber and mat process technology to sizing and binder chemistry to product design. Management does not believe the expiration of any of our patents will have a material impact on our operations or financial performance. In addition to patents, we also have know-how, in particular related to manufacturing extra fine denier filaments, S-2 Glass fiber products and CFM products, which we protect as trade secrets.

Science and Technology

Our science and technology (“S&T”) organization is responsible for creating new products and new applications for existing products. The team is composed of 15 glass technology professionals who have over 200 years of combined experience in translating customer requirements into specifications for new products and tailoring existing products to more rigorous end-user specifications. Our scientists collaborate with our sales, marketing and new business development people to drive growth through new application development and partnership with key customers and end-users.

Through this collaboration, over the last three years we have successfully introduced new products into existing as well as new applications and end-markets. In addition, we have identified a number of additional growth opportunities in applications such as ballistic protection against new threats, high-output wind-turbines, high-speed and high performance circuit boards, and thermoplastic composite reinforcement.

Environmental Matters

We are subject to a wide range of federal, state and local and general and industry-specific environmental, health and safety laws and regulations, including those relating to air emissions, wastewater discharges, solid and hazardous waste management and disposal and site remediation. Certain of our operations require environmental permits or other approvals from governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation or modification under various circumstances. We are also subject to inspections and monitoring by government enforcement authorities.

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As part of the transaction when we were spun out of Owens Corning, Owens Corning agreed to retain all liability, if any, resulting from the presence of potentially hazardous substances at or migrating from our then-existing sites as well as all liabilities resulting from the transportation or arrangements made by Owens Corning for the treatment, storage or disposal of hazardous substances to any off-site location prior to September 30, 1998. In addition, Owens Corning agreed to indemnify us against any losses and damages, if any, arising out of the environmental liabilities retained by Owens Corning.

There may be insignificant levels of asbestos in certain manufacturing facilities, however, we do not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos.

Suppliers

The major raw materials used in the production of glass fibers are pre-melted glass marbles or a range of minerals including silica and borates. We utilize our own marble making process in the Aiken, SC facility to supply a significant portion of the raw material marbles necessary to satisfy our indirect melting processes for yarn and CFM production. In addition, we have developed a secure supply agreement with an outside supplier to fulfill additional marble demand as required. We believe that the cost of producing marbles in Aiken is not materially different from the cost of sourcing marbles from other sources we have identified. Silica is readily available and is provided by a number of local suppliers. Borates are sourced from a supplier in Turkey.

We use bushings, heat-resistant trays made of platinum-rhodium alloy with holes through which molten glass is extruded into filaments, as part of our manufacturing process. We have bushing fabrication capabilities in our alloy shop facility located in Aiken, SC. In addition, AGY US continues to use a single external supplier to fabricate bushings in order to protect confidentiality due to the proprietary nature of our bushing designs (although other sources of supply are available).

Natural gas and electricity are a significant portion of our cost of production due to the amount of energy needed to melt raw materials for manufacturing into glass fibers. Energy costs represented approximately 14.5% of total cost of goods sold for each of the years ended December 31, 2011 and 2010.

In addition, we purchase bobbins, forming tubes and other packaging materials. These materials are reusable and are replaced if damaged during manufacturing or shipping.

Employees

As of December 31, 2011, we employed approximately 1,148 people throughout our operations, all of which are full-time employees and of which 741 are subject to collective bargaining agreements.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website at http://www.agy.com/investor/index.htm, as soon as reasonably practicable after AGY electronically files such reports with, or furnishes those reports to, the Securities and Exchange Commission. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Set forth below and elsewhere in this Annual Report and in other documents we have filed and will file with the SEC are risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this Annual Report. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. Any of the following risks could materially and adversely affect our business, financial condition or results of operations.

Risks Related to Our Business

We face competition from other suppliers of glass fibers, as well as from suppliers of competing products that have resources far in excess of ours, which may harm our financial performance and growth prospects.

In the semi-technical fiber segment, we generally compete with two or more alternate suppliers for each application. For technical fibers and continuous filament mat products, we generally compete with one to two alternate suppliers for each application. Although we are the sole supplier of S-2 Glass, we compete with companies that produce alternative products including other high strength glasses, carbon fiber and aramid fiber products that we do not offer. In addition, today other competitors are manufacturing or developing high strength glasses in an effort to compete with S-2 Glass. We compete principally on the basis of fiber performance, breadth of product offering, product quality, product innovation, customer service, price and availability. Many of our competitors are large, well-established companies with financial and other resources far in excess of ours. As a result of the foregoing factors, there can be no assurance that we will be able to compete successfully against our competitors and we may lose customers or be forced to reduce prices, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

Most of our major competitors focus on high-volume commodity or semi-technical products. We focus on the supply of highly technical glass fibers to specialty niche markets. Only one of our major competitors currently targets some of the same niche markets. Additional competitors may shift their focus to the highly technical products required by these niche markets. Also, our competitors may elect to produce and supply a competing product to S-2 Glass, as the process for producing this product has been off patent since the mid-1990’s. There can be no assurance that we will be able to compete successfully against competitors that elect to move into the end-markets we currently supply and, as a result, we may lose customers or be forced to reduce prices, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

We face pricing pressures from competitors, creating potentially substantial price fluctuations for our products, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

Although a significant amount of our business is specified at the end-user, especially in the Aerospace industry, we participate in some highly competitive markets and applications that can be subject to the risk of declining average selling prices (“ASPs”), and shifts in market share, both of which could impact our pricing leverage. The prices for our products may fluctuate substantially in the future, and any competitive pressures or downturns in market conditions could have a material adverse effect on our business, financial condition, operating results and cash flows.

Adverse macroeconomic and business conditions, as well as continued disruption in credit markets and government policy changes may significantly and negatively affect our revenues, profitability and financial condition.

Deterioration in economic conditions in the United States and in foreign markets in which we operate could substantially affect our sales and profitability. Volatility and disruption in credit and capital markets may impede access to business credit and tighten liquidity.

Changes in governmental banking, monetary and fiscal policies to restore liquidity and increase credit availability may not be effective. It is difficult to determine the extent of the economic and financial market problems and the many ways in which they may affect our suppliers, customers and our business in general. Continuation or further deterioration of these financial and macroeconomic conditions could have a significant adverse effect on our business, financial condition, operating results and cash flows including as follows:

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The cyclical and uncertain nature of the end-use markets for our products could have a material adverse effect on our business, financial condition, operating results and cash flows.

Many of the end-markets for our products, including aerospace, defense, electronics and construction, are cyclical and sensitive to changes in general business conditions, industry capacity, consumer preferences, technology advances and other factors and have historically experienced downturns. We have no control over these factors and they can heavily influence our financial performance. For example, the global economic downturn that began in 2009 prompted many customers in our supply chain to move to leaner inventory holdings, which contributed to weaker demand for our products.

In addition, the demand for new commercial aircraft and aerospace refurbishment activity is cyclical and any reduction could result in reduced sales for our commercial aerospace products and could reduce our profit margins. Approximately 25% of our AGY US sales for the year ended December 31, 2011 were derived from sales to the aerospace end-market. Reductions in demand for commercial aircraft, or a delay in deliveries could result from many factors, including a terrorist attack similar to that which occurred on September 11, 2001 and any subsequent military response, changes in the propensity for the general public to travel by air, the rise in the cost of aviation fuel, consolidation and liquidation of airlines and slower macroeconomic growth. A downturn in the aerospace end-market could occur at any time, and in the event of a downturn, we have no way of knowing if, when and to what extent there might be a recovery.

Further, the production level of military equipment and vehicles that has occurred in recent years has not been sustained due to reduced military budgets and spending. The production level of military equipment and vehicles depends upon the U.S. and other non-U.S. defense budgets and the related demand for defense and related equipment. Advanced glass fibers are not always the preferred reinforcement material for certain defense applications depending on threat levels and cost performance criteria. We have not been awarded certain defense contracts we had sought to obtain in 2009 and as a result the defense end-market contribution to the AGY US sales declined materially between 2008 and 2010. The U.S. government prepares its budget on an annual basis under significant cost pressures and budgetary approval can be subject to the unpredictability of the political process.

Also, delays in the initiation of construction projects and in the roll out of new or modified products by our customers may result in reductions in sales or delays in the receipt of revenue, contributing to volatility in our quarter-to-quarter financial results.

If we are unable to develop product innovations and improve our production technology and expertise, we could lose customers or market share.

The end-markets for our products are subject to technological change and our success may depend on our ability to adapt to such technological changes and to continue to introduce new products and applications. In some of the end-markets to which we sell our glass fiber, such as electronics, products become obsolete rapidly. In addition, our customers may pursue alternative technology that could eliminate the need for our products. If we are unable to timely develop and introduce new products, or enhance existing products, in response to changing market conditions or customer requirements or demands then we could lose customers or market share, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

We are dependent upon continued demand from our large customers.

Sales to our three largest customers represented approximately 17%, 8% and 6%, respectively, of our consolidated net sales for the year ended December 31, 2011. Approximately 69% of the AGY Asia segment’s net sales in 2011 were generated from two customers, including Glotech Industrial Corp. and Grace Fabric, a subsidiary of AGY Asia’s predecessor owner; however, customer concentration is expected to decrease in future years as we diversify the product lines and geographic sales of AGY Asia. The level of purchases by our customers is often affected by events beyond their control, including general economic conditions, demand for their products, business disruptions, disruptions in deliveries, strikes and other factors. The loss or significant reduction of orders from any of our large customers could result in us having excess capacity and reduced sales if we are unable to replace that customer. As a result, our business, financial condition, operating results and cash flow could suffer.

The decision by an end-user to modify or discontinue the production of an end-product that has our product specified-in could have a material adverse effect on our business, financial condition, operating results and cash flows.

A significant portion of our sales and gross profit is related to end-products in which our products are specified-in by the end-users. The majority of these sales were to applications in the aerospace and defense end-markets. For example, E Glass and S-2 Glass are specified-in to most Boeing commercial aircraft. However, changing market conditions and related changes to end-products may result in our products no longer being specified-in the applicable end-product. Such decisions by end-users to modify or terminate the production of certain end-products that have our products specified-in could have a material adverse effect on our business, financial condition, operating results and cash flows.

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Our intellectual property rights may not provide meaningful commercial protection for our products or brands, which could adversely impact our business.

We rely upon a combination of trade secrets and contractual arrangements, and, to a lesser extent, patent and trademark laws to protect our intellectual property rights. The steps we take in this regard may not be adequate to prevent or deter the duplication of our technology, and we may not be able to detect unauthorized use of our technology or take appropriate and timely steps to enforce our intellectual property rights. In addition, we cannot be certain that our processes and products do not or will not infringe or otherwise violate the intellectual property rights of others. Infringement or other violation of intellectual property rights could cause us to incur significant costs and prevent us from selling our products and could have a material adverse effect on our business, financial condition, operating results and cash flows.

We may be liable for damages based on product liability claims brought against us and our customers.

The sale of our products involves the risk of product liability claims. Certain of our products provide critical performance functions to our customers’ end-products. Some of our products are used in and around aerospace applications, construction sites and industrial locations, among others, where personal injury or property damage may occur. There can be no assurance that our products will not be the subject of product liability claims or suits. In addition, if a person brings a product liability claim or suit against one of our customers, this customer may attempt to seek a contribution from us. A successful product liability claim or series of claims against us in excess of our insurance coverage for payments for which we are not otherwise indemnified could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our business and financial performance may be harmed by future increases in the cost of certain alloy metals or our inability to access these metals.

Our business requires the use of bushings as part of the manufacturing process. Bushings are trays made with a heat-resistant platinum-rhodium alloy. As of December 31, 2011, platinum and rhodium together represented the largest asset on our balance sheet. Additionally, we are currently leasing a significant portion of the alloy metals needed to support our manufacturing operations in the United States under a master lease three-year agreement that we entered into with DB Energy Trading LLC in October 2009. The agreement allows AGY to enter into leases for up to 51,057 ounces of platinum and up to 3,308 ounces of rhodium, with terms of one to twelve months. At December 31, 2011, we leased approximately 49,800 ounces of platinum and 3,300 ounces of rhodium under the lease. Lease costs are determined by the quantity of metal leased, multiplied by a benchmark value of the applicable precious metal and a margin above the lease rate index.

The costs of the precious metals and the related alloy lease costs are subject to market fluctuations that are beyond our control. Although increases in platinum and rhodium prices favorably impact the Company’s ability to borrow money, pursuant to the Amended Credit Facility, which is tied to a borrowing base calculation supported in part by the market price of our owned alloy metals, it also unfavorably impacts our alloy lease costs reported in our financial results. We generally seek to offset the impact of rising material costs through selling price increases; however future market conditions and the terms of our contracts with customers may prevent us from passing material cost increases to our customers. In addition, we may not be able to achieve manufacturing productivity gains or other cost reductions to offset the impact of cost increases. As a result, higher platinum and rhodium alloy costs may have a material adverse effect on our business, financial condition, operating results and cash flows.

Based on the mix of products that we produced and the alloy metals consumed during the year ended December 31, 2011, approximately 3.8% of total alloy metals in use were depleted in the manufacturing process during that period. As a result of these on-going metal losses and of our historical alloy sales, our owned metal in ounces has declined as a percentage of our total metal pool. If we are unable to replenish depleted metal in the future through outright purchase, leasing or improvements in overall metal usage, we may have insufficient alloy metals for our manufacturing operation which could adversely affect our business, financial performance and operating results.

Our inability to obtain certain necessary raw materials and key components or an increase in cost of raw materials could disrupt the manufacture of our products and result in a material decline in our profitability.

Certain raw materials, including glass marbles and a range of minerals including silica and borates, and other key components necessary for the manufacture of our products, are obtained from a limited group of, or occasionally single, suppliers. Any restrictions on the supply, or an increase in the cost, of our raw materials could significantly reduce our profit margins. If we are unable to procure necessary raw materials and key components from our suppliers, we may not have readily available alternatives. As a result, our ability to manufacture products could be disrupted, and our business, financial condition, operating results and cash flows may be materially adversely affected. Efforts to mitigate restrictions on the supply or price increases of these raw materials by long-term purchase agreements, productivity improvements or by passing cost increases to our customers may not be successful.

Our energy costs may be higher than we anticipated.

Energy costs, including electricity and natural gas, represented approximately 14.5% of our total cost of goods sold for the years ended December 31, 2011 and 2010. Accurately predicting trends in energy costs is difficult to achieve as energy costs are, to a large extent, subject to factors beyond our control, such as political conditions in oil producing regions. If future energy costs are greater than anticipated, and we are unable to offset these cost increases with higher prices to our customers, our business, financial condition, operating results and cash flows may be materially adversely affected.

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Our hedging activities to address energy price fluctuations may not be successful in offsetting increases in those costs or may reduce or eliminate the benefits of any decreases in those costs.

In order to mitigate short-term variation in our operating results due to commodity price fluctuations, we hedge a portion of our near-term exposure to the cost of natural gas and electricity. The results of our hedging practices could be positive, neutral or negative in any period depending on price changes of the hedged exposures.

Our hedging activities are not designed to mitigate long-term commodity price fluctuations and will not protect us from long-term commodity price increases. In addition, in the future our hedging positions may not correlate to our actual energy costs, which would cause acceleration in the recognition of unrealized gains and losses on our hedging positions in our operating results.

We are required to file tax returns on which we may be challenged in the future for tax calculations, valuations or positions taken.

We are subject to income, sales and property taxes in the U.S. and foreign jurisdictions. In the ordinary course of our business, there may be transactions, calculations or valuations where the ultimate tax determination is uncertain. It is possible that a taxing authority may not agree with our calculation, valuation or position taken. The results of an audit or litigation could have an adverse effect on our cash flow or on our financial statements in the period or periods for which that determination is made.

Labor disputes or increased labor costs could have a material adverse effect on our business, financial condition, operating results and cash flows.

Production, maintenance, warehouse and shipping employees at our Aiken, South Carolina manufacturing facility are represented by the Teamsters union. Our manufacturing footprint optimization program has resulted in all US manufacturing, except for continuous filament mat production, to be concentrated in our Aiken location. We renegotiated the current labor agreement with the Teamsters union in the second quarter of 2010, reaching a three-year agreement with a one-year optional extension with our Aiken employees, which expires on May 1, 2013. The production, maintenance, warehouse and shipping employees at our Huntingdon, Pennsylvania manufacturing facility, where we manufacture our continuous filament mat product, are represented by the Workers Unite union. We negotiated a three-year labor agreement with our Huntingdon employees in 2011, which expires in October 2014.

If we experience a work stoppage at the Aiken facility, we have no alternative production capability for our technical and advanced materials product lines. Our failure to offset increases in labor costs with continued efficiency gains and cost reduction, or any significant work stoppage in the future could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our operations could expose us to significant regulations and compliance expenditures as a result of environmental, health and safety laws.

Our business is subject to a wide range of federal, state and local and general and industry-specific environmental, health and safety laws and regulations, including those relating to air emissions, wastewater discharges, solid and hazardous waste management and disposal and site remediation. Certain of our operations require environmental permits or other approvals from governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation or modification under various circumstances. We are also subject to inspections and monitoring by government enforcement authorities. Our failure to comply with applicable environmental laws and regulations or permit or approval requirements could result in substantial civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

In addition, as an owner and operator of real estate, we may be responsible under environmental laws and regulations for the investigation, remediation and monitoring, as well as associated costs, expenses and third-party damages, including tort liability and natural resource damages, relating to past or present releases of hazardous substances on or from our properties. Liability under these laws may be imposed without regard to whether we knew of or were responsible for the presence of those substances on our property, may be joint and several, meaning that the entire liability may be imposed on each party without regard to contribution, and retroactive and may not be limited to the value of the property. In addition, we or others may discover new material environmental liabilities, including liabilities related to third-party owned properties that we or our predecessors formerly owned or operated, or at which we or our predecessors have disposed of, or arranged for the disposal of, certain materials. We may be involved in administrative or judicial proceedings and inquiries in the future relating to such environmental matters, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

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New environmental laws or regulations (or changes in existing laws or regulations or their enforcement) may be enacted that require significant expenditures by us. If the resulting expenses significantly exceed our expectations, our business, financial condition, operating results and cash flows could be materially adversely affected.

There may be asbestos in certain manufacturing facilities; however, we do not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos, which may be present in the facilities.

We are also subject to various federal, state and local requirements concerning safety and health conditions at our manufacturing facilities. We may also be subject to material financial penalties or liabilities for noncompliance with those safety and health requirements, as well as potential business disruption, if any of our manufacturing facilities or a portion of any manufacturing facility is required to be temporarily closed as a result of any noncompliance with those requirements.

Owens Corning may fail to comply with its indemnification and other obligations related to our spin off from Owens Corning.

As part of the transaction in which we were spun out of Owens Corning, Owens Corning agreed to retain all liability, if any, resulting from the potential presence of hazardous substances at or migrating from our sites as well as all liabilities resulting from the transportation or arrangements made by Owens Corning for the treatment, storage or disposal of hazardous substances to any off-site location prior to September 30, 1998. In addition, Owens Corning agreed to indemnify us against any losses and damages, if any, arising out of the environmental liabilities retained by Owens Corning.

If the potential matters for which we are entitled to receive indemnification from Owens Corning result in significant liabilities for us, and for any reason Owens Corning and/or its affiliates are unable or unwilling to honor these indemnification obligations, we could be required to pay for these liabilities ourselves, which could have a material adverse effect on our business, financial condition, operating results and cash flows, our ability to fund or expand our operations and our ability to repay our existing and future indebtedness.

We rely on Owens Corning for the provision of certain products and services.

We have an agreement with Owens Corning regarding bushings fabrication that expires in December 2013. If for any reason Owens Corning is unable or unwilling to renew the bushing fabrication agreement, is unable or unwilling to honor its obligations under this agreement (or its renewal), or this agreement (or its renewal) is terminated, we may not be able to enter into a new agreement on comparable terms, if at all. Although we believe this risk has been partially mitigated by the establishment of our own alloy shop facilities, our business, financial condition, operating results and cash flows may be materially adversely affected if we are not able to enter into a new agreement on comparable terms with Owens Corning.

We have incurred net losses and filed for Chapter 11 protection under prior ownership in the past, have a limited history of profitability and may incur net losses in the future.

Beginning in 2000, a global economic downturn and inventory correction in the electronics end-market, a migration of commodity heavy yarn production for the electronics end-market to Asia, a key customer loss in the construction end-market and a number of other factors culminated in our filing for Chapter 11 protection on December 10, 2002. Since our emergence from Chapter 11 protection on April 2, 2004, we repositioned ourselves as a supplier of highly technical fibers to specialty high-margin applications.

As a result of a global economic downturn, which was prevalent through 2009, lower inventory levels held by several of our customers, and the conclusion of some defense programs, we experienced in 2009 a sharp decline in sales and in profitability resulting in the write off of the goodwill associated with our AGY US segment.

We cannot assure you that we will operate profitably in the future. In addition, we may experience significant quarter-to-quarter variations in operating results and cash flows.

If we are unable to successfully implement our cost reduction initiatives, our business, financial condition, operating results and cash flows could be materially adversely affected.

We are focused on cost reduction initiatives that relate to the optimization of our manufacturing footprint, as well as efficiency, throughput and process technology developments. Efficiency initiatives include managing assets to reduce lost machine time and focusing on quality assurance. Throughput initiatives involve reducing the frequency and duration of filament breaks, minimizing retooling duration and optimizing fiber manufacturing performance. Process technology developments involve lowering energy costs and capital intensity, reducing the need for platinum and rhodium alloy and developing the ability to quickly change glass compositions. We may be unable to successfully implement our cost reduction initiatives within expected time frames, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

If Selling, general and administrative costs rise significantly from their current level, our business, financial condition, operating results and cash flows could be materially adversely affected.

We are actively managing our Selling, general and administrative expense by offsetting increasing costs, including restructuring costs, with a reduction in discretionary and other administrative expenses. If we are unable to continue managing Selling, general and administrative costs to their current level and Selling, general and administrative costs increase significantly, it could have a material adverse effect on our business, financial condition, operating results and cash flows.

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Our business operates with a high degree of operating leverage, resulting from substantial capital requirements in our manufacturing operations, leading to high levels of fixed costs that will be incurred regardless of our level of business activity.

Our business is capital intensive, and regularly requires capital expenditures to maintain equipment, expand operations, increase operating efficiency and comply with environmental laws. A substantial capital requirement in our business is related to the fundamental nature of our manufacturing process which utilizes glass melting furnaces, which have a finite useful life, and which require regularly scheduled rebuilding and refurbishment.

Our capital intensity leads to high fixed costs, including depreciation expense, and results in a high degree of operating leverage, which magnifies the financial impact of volume changes in our business. In response to reduced demand for our products, we may experience negative leverage effects in that we are limited in our ability to reduce fixed costs quickly and these fixed costs may not be fully absorbed, resulting in higher average unit costs and lower gross margins if we are not able to offset this higher unit cost with price increases. Alternatively, in response to increased demand for our products, provided that we have readily available capacity to produce, we may experience positive operating leverage effects in that our fixed cost levels may not increase significantly, thus lowering our unit costs. However, in response to unanticipated increased demand for our products, for which we do not have readily available capacity to produce, we may be limited in our ability to quickly respond due to longer lead times for capital equipment, alloy, and labor requirements to increase output, which could result in an inability to satisfy demand for our products and loss of market share.

The useful life of the furnace at our AGY Asia subsidiary expires in 2012, requiring a rebuild. The rebuild is expected to require an investment of approximately $10 million. If we are unable to fund the furnace rebuild through operating cash flow and external financing, our Asian operations could be materially adversely affected. In addition, if AGY Asia is unable to meet the terms of the Asia credit facility and experience a default, it could result in a loss of the furnace, which secures the credit facility as collateral. Please refer to “Risk Factors – Risks Related to our Indebtedness” for discussion regarding our ability to remain in compliance.

A significant disruption or disaster at one of our three manufacturing facilities could have a material adverse effect on our business, financial condition, operating results and cash flows.

We own and operate three manufacturing facilities located in Aiken, South Carolina, Huntingdon, Pennsylvania and Shanghai, China. Each facility contains complex and sophisticated machines that are used in the respective manufacturing processes. Each manufacturing process could be affected by operational problems that could impair our production capability. Disruptions or shut downs at our facilities could be caused by:

We are dependent upon the continued safe operation of these manufacturing facilities. Physical damage at any facility, such as damage caused by fires, floods, earthquakes or other catastrophic disasters, may also disrupt the manufacturing process and/or cause a facility shut down. Such damage may not be covered by, or may be in excess of, our industry standard insurance coverage. Any prolonged or permanent disruption in operations at our facilities could cause significant lost production, which would have a material adverse effect on our business, financial condition, operating results and cash flows.

Exposure to foreign currency exchange rate volatility could affect our operating results.

Fluctuations in foreign currency exchange rates may influence the profitability and cash flows of our business. For example, the sales of our AGY Asia subsidiary are denominated primarily in the U.S. dollar, while its costs are primarily denominated in local currency, the Chinese renminbi (“RMB”). As a result, the local currency margins of goods manufactured with costs denominated in local currency, yet sold in U.S. dollars, will vary with fluctuations in currency exchange rates, reducing when the U.S. dollar weakens against the RMB. In addition, the reported U.S. dollar value of the local currency financial statements of our AGY Asia subsidiary will vary with fluctuations in currency exchange rates. In addition, a significant percentage, approximately 38% for the year ended December 31, 2011, of the sales of AGY US are to customers in foreign countries. Accordingly, we may be adversely affected by unfavorable fluctuations in foreign currency exchange rates. As of December 31, 2011, we did not have any foreign currency hedging agreements in place. While we may enter hedging agreements from time to time to mitigate these types of fluctuations, we cannot remove all fluctuations or hedge all exposures, and our earnings may be impacted by changes in currency exchange rates.

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An adverse change in the interest rates for our borrowings could adversely affect our financial condition.

We pay interest on outstanding borrowings under our revolving credit facilities and certain other long term debt obligations at interest rates that fluctuate based upon changes in various base interest rates. An adverse change in the base rates upon which our interest rates are determined could have a material adverse effect on our financial position, results of operations and cash flows.

We conduct a significant amount of our sales activities outside of the U.S., which subjects us to additional business risks that may cause our profitability to decline.

Because we operate and sell our products in a number of foreign countries, we are subject to risks associated with doing business internationally. Sales outside of the United States accounted for approximately 48% of our total consolidated sales for the year ended December 31, 2011, and will continue to account for a material portion of our sales for the foreseeable future. We may continue to pursue international growth opportunities, which could increase our exposure to risks associated with international sales and operations.

Our international operations are, and will continue to be subject to numerous risks, including:

Any one of the above could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our business may suffer if we are unable to attract and retain key personnel.

We depend on the members of our senior management team and other key personnel. These employees have industry experience and relationships that we rely on to successfully implement our business plan. The loss of the services of our senior management team and other key personnel or the lack of success in attracting and retaining new and/or replacement management personnel could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our Sponsor controls us and may have conflicts of interest with other holders of our securities.

On April 7, 2006, all of the outstanding stock of AGY was acquired by Holdings, which we refer to in this Annual Report as the Acquisition. Investment funds associated with Kohlberg & Company, L.L.C. (our “Sponsor”), control us through their ownership of substantially all of the equity of Holdings. As a result, our Sponsor, which controls substantially all of the voting power of Holdings, is able to control the voting power with respect to all matters and has significant influence on our overall operations and strategy. The interests of Holdings, our Sponsor or any of their affiliates may not in all cases coincide with the interests of other holders of our securities, including our “Notes”. To the extent that conflicts of interest arise, Holdings, our Sponsor or any of their affiliates may resolve those conflicts in a manner adverse to us or to other holders of our securities. For example, our Sponsor and its affiliates could cause us to make acquisitions that increase the amount of the indebtedness that is secured or sell revenue-generating assets, impairing our ability to make payments under our securities. Additionally, our Sponsor and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Accordingly, our Sponsor and its affiliates may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. In addition, our Sponsor and its affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to other holders of our securities.

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Risks Related to Our Indebtedness

Our significant indebtedness and the restrictive covenants under the indenture governing our Notes could affect our financial health and may limit our ability to expand or pursue our business strategy.

We have a significant amount of debt. At December 31, 2011, excluding the indebtedness related to AGY Asia, which is non-recourse to AGY or any other domestic subsidiary of AGY, our total debt was $197.0 million (consisting of $25.0 million of senior secured borrowings and $172.0 million of the Notes) and we had approximately $12.8 million of additional secured borrowing capacity under our senior secured revolving credit facility for our North America operations. Our level of indebtedness could:

In addition, the indenture governing our Notes contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our debts. The covenants restrict our ability to take certain actions to some extent, including our ability to:

There can be no assurance that our leverage and such restrictions will not adversely affect our ability to finance our future operations or capital needs or to engage in other business activities. In 2012, interest payments of $19.0 million will be due under the Notes. We may be unable to make the interest payments without one or more of the following occurrences: an amendment to our Amended Credit Facility, sale of assets, or other financing arrangements. Our ability to pay principal and interest on our indebtedness and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond our control.

We may be unable to pay the AGY Asia 2012 mandatory term loan payments or to refinance the working capital loan.

AGY Asia has mandatory term loan repayment obligations of $11.0 million in 2012, of which $5.1 million is due in April, and $5.9 million is due in October. We have an agreement in principle with the AGY Asia lender to defer the April 2012 required principal payment for three months, to July 2012; however, such deferral is subject to execution of definitive documents which we expect to complete shortly. Notwithstanding the expected deferral, AGY Asia may be unable to make the mandatory $5.1 million principal payment in July 2012. Furthermore, if AGY Asia is unable to reach agreement with its lender to modify the term loan amortization schedule beyond July 2012, then AGY Asia may default under its loan agreement and the total outstanding debt of $27.6 million may be accelerated. As a result, all the outstanding borrowings under the term loan were classified as current liabilities as of December 31, 2011.

In addition, the working capital loan of AGY Asia in the aggregate amount of approximately $12.5 million matures in June 2012. If AGY Asia is unable to obtain an extension of the commitment or refinance the working capital loan prior to maturity, or if the commitment amount of any refinancing should be decreased, AGY Asia’s ability to finance its current operations and meet its short-term obligations could be adversely affected.

While the loans to AGY Asia are non-recourse to AGY US, any default by AGY Asia could impact our ability to raise additional capital or refinance our indebtedness at AGY US or operate with a global footprint, any of which could have an adverse effect on our business, financial condition, operating results and cash flows.

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We may be unable to finance the consideration to be paid pursuant to the put/call agreement for the 30% noncontrolling interest in AGY Asia, which would trigger an event of default under our financing agreements.

In connection with the acquisition of a 70% controlling interest in AGY Asia, we entered into an option agreement with Grace, which expires in December 2013, pursuant to which Grace granted us a call option, and we granted Grace a put option, in respect of the 30% interest held by Grace in AGY Asia. Grace can exercise the put option after the one-year anniversary of the execution of the AGY Asia acquisition on June 10, 2009 at a stipulated multiple of earnings before interest, taxes, depreciation and amortization.

As of December 31, 2011, the redemption amount of the put option was nil compared to an initial carrying value of $12.4 million. Based on these provisions, we believe that neither the call option nor the put option will be exercised in 2012. If the acquisition of the noncontrolling interest is consummated, we intend, but cannot guarantee that we will be able, to finance the consideration to be paid pursuant to this agreement through our revolving credit agreement financing, the sale of additional equity to our Sponsor or through other sources of capital.

If AGY were to default in satisfying the put obligation it would be an event of default under AGY’s senior secured revolving credit agreement. Further, if the option is exercised on or before June 30, 2012, or after June 30, 2012, we are required pursuant to the revolving credit agreement to have excess availability under the revolver of at least $10.0 million and $8.75 million, respectively, for 60 days prior to consummation of the put option and to meet a fixed charge coverage ratio of 0.5:1.0 and of 1.0:1.0, respectively, in order to fund the option purchase price. Failure to consummate the put obligation as required, or failure to have sufficient excess availability or meet the fixed charge coverage ratio at consummation of the put option would trigger an event of default under the revolving credit agreement. An event of default, if not cured or waived, under our revolving credit facility could result in the acceleration of all of our debt thereunder. Additionally, since there are cross-default provisions in our Notes indenture and our Deutsche Bank alloy lease agreement, such failure could trigger defaults under those agreements, as well. There can be no assurance that we will meet the revolving credit agreement requirements to finance the obligation or that our Sponsor will contribute additional equity, or that we will be able to raise additional capital to enable us to consummate the put obligation.

We may be unable to refinance our alloy metals lease facility, which may result in default under our other loan agreements and an inability to access critical precious metals for our manufacturing requirements.

Our alloy metals lease facility expires in October 2012. Although we are currently in discussions with our metals lessor to extend the facility, there is no assurance that we will be able to obtain replacement financing on terms acceptable to us or at all. If we are unable to refinance the facility by June 15, 2012, in a manner acceptable to our senior secured revolving lenders, then we will be in default under that agreement and the lenders may accelerate amounts due under that facility, which could then trigger a default under our senior second lien notes.

Our borrowing capacity is directly tied, in part, to fluctuations in the market price of alloy metals that secure the Amended Credit Facility. Declines in these asset values could significantly reduce our borrowing base, further impair our liquidity, and could have a material adverse effect on our business and financial condition.

The Company’s ability to borrow money, under to the Amended Credit Facility is tied to a borrowing base calculation which is supported by the market price of our owned alloy metals, the book value of eligible accounts receivable, and the book value of eligible inventory. Fluctuations in the market prices of these alloy metals causes borrowing base volatility, which could adversely affect our borrowing capacity. At December 31, 2011, the market price per ounce of Platinum and Rhodium was $1,400. For every $100 reduction in the market price per ounce of Platinum and Rhodium, our ability to borrow under the Amended Credit Facility would be reduced by approximately $2.0 million. In addition, deterioration in our operating performance could reduce the amount of our eligible accounts receivable and inventory, which would reduce our ability to borrow. Further, our lender has the right, using its permitted discretion, to increase the required reserves specified in the borrowing base formula. Any such reserve modifications would have an adverse effect on our borrowing base and liquidity, and secondarily, may result in the application of the springing financial maintenance covenant under the Amended Credit Facility, either of which could materially and adversely affect our business and financial condition.

If our available borrowing capacity declines below $6.25 million, a springing financial covenant would be triggered under our Amended Credit Facility which would result in an event of default under the Amended Credit Facility and, if the amounts due under the Amended Credit Facility are accelerated as a result, could trigger defaults under our Notes and our alloy metals lease agreement, which would have a material adverse effect on our business and financial condition.

Pursuant to the Amended Credit Facility, the Company is required to maintain an available borrowing capacity of greater than $6.25 million. Although our undrawn availability as of December 31, 2011 was approximately $12.8 million, declines in the market price of the alloy metals securing the Amended Credit Facility or reductions in our eligible accounts receivable or inventory, or an increase in the required borrowing base reserves (as determined by the lender in its permitted discretion) could cause our available borrowing capacity to fall below $6.25 million. While we do not currently expect to borrow additional amounts under the Amended Credit Facility that would result in our available borrowing capacity falling below $6.25 million, we cannot be certain that these and other factors will not result in a reduction in our available borrowing capacity below $6.25 million.

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If our available borrowing capacity falls below $6.25 million, we would become subject to the springing financial maintenance covenant, which requires a minimum fixed charge coverage ratio of 1.0 to 1.0. Based on our current financial condition, we would not satisfy this covenant as this ratio, as of December 31, 2011, was 0.4 to 1.0. Our inability to satisfy this covenant would result in an event of default under the Amended Credit Facility, which could result in all of the amounts coming due under the Amended Credit Facility. Any acceleration actions taken by our lenders as a result of this or any other event of default could result in cross-acceleration default triggers under the Notes and the Master Lease Agreement, ultimately causing both to immediately become due and payable. If the acceleration of any of our Amended Credit Facility, Notes, or the New Master Lease Agreement were to occur, we would not be able to repay such amounts when due, which would have a material adverse effect on our business, liquidity and financial condition, and there is no assurance that we would be able to obtain replacement financing on terms acceptable to us or at all.

If our available borrowing capacity under the Amended Credit Facility falls below $10 million, we will be required to calculate our borrowing base on a weekly, rather than monthly, basis, which could subject us to increased exposure to short term swings in our borrowing base and adversely affect our liquidity as well as our business and financial condition.

If our available borrowing capacity under the Amended Credit Facility falls below $10 million, we will be required to calculate our borrowing base on a weekly, rather than monthly, basis. If this occurs, we could be subject to increased exposure caused by short term fluctuations in the market price of the alloy metals securing the Amended Credit Facility and used to calculate our borrowing base. We could similarly be subject to increased risks associated with short term fluctuations in our eligible accounts receivable and eligible inventory. Any short term reduction in any of these amounts would reduce our borrowing base, which would adversely affect our liquidity and could result in the application of the springing financial maintenance covenant if our available borrowing capacity was reduced below $6.25 million. See the risk factor entitled “If our available borrowing capacity declines below $6.25 million, a springing financial covenant would be triggered under our Amended Credit Facility which could result in an event of default under both the Amended Credit Facility and our alloy metals lease agreement, either of which would have a material adverse effect on our business and financial condition.”

Not applicable.

We are headquartered in Aiken, South Carolina and have three primary manufacturing facilities in two states within the U.S. and one in China. The following table outlines the location, type of facility and business segment of our administrative and manufacturing facilities, along with whether we own or lease each, as of December 31, 2011:

All owned property in the U.S. is subject to a security interest under our AGY US senior secured revolving credit agreement and our Notes. The owned property in Shanghai is subject to a security interest under our AGY Asia term loan agreement. We believe that our existing properties are in good condition and are suitable for the conduct of our business.

We are subject to various claims and legal actions that arise in the ordinary course of our business. We do not believe that we are currently party to any proceeding that, if determined adversely, would have a material adverse effect on our financial condition, results of operations or cash flows.

Not applicable.

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PART II

Not applicable.

The following table sets forth certain selected historical condensed consolidated financial information derived from our audited financial statements for the five-year period ended December 31, 2011 at the dates and for the periods indicated.

The selected historical financial information 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 the accompanying notes thereto included in Item 8, “Financial Statements and Supplementary Data,” which are included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results to be expected for future periods. All amounts are presented in thousands.

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You should read the following discussion of our financial condition and results of operations with “Selected Financial Data” and the audited historical Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this Annual Report. Those sections expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. We do not have any intention or obligation to update forward-looking statements included in this Annual Report.

OVERVIEW

We are a leading manufacturer of advanced glass fibers that are used as reinforcing materials in numerous diverse high-value applications, including aircraft laminates, ballistic armor, pressure vessels, roofing membranes, mattress protection and architectural fabrics, and specialty electronics. We are focused on serving end-markets that require glass fibers for applications with demanding performance criteria, such as the aerospace, defense, construction, electronics, automotive and industrial end-markets.

Since the acquisition of AGY Asia on June 10, 2009 as discussed further below, the Company has two reportable segments, each a separate operating segment. The AGY US segment includes the U.S. manufacturing operations and its sale of advanced glass fibers that are used worldwide as reinforcing materials in numerous high-value applications and end-markets through AGY, its wholly owned domestic and French subsidiaries. The AGY Asia segment includes the manufacturing operations of the Company’s 70% controlling ownership interest of AGY Hong Kong Limited and its sale of advanced glass fibers that are used primarily in the Asian electronics markets. The Company’s operating segments are managed separately based on differences in their manufacturing and technology capabilities, products and services and their end-markets as well as their distinct financing agreements.

We believe we are making progress to improve operating efficiency, to expand our product offerings, our markets, and our customer base and to effectively manage our liquidity. We believe that the acquisition of AGY Asia contributes to the geographic expansion of our key businesses and the optimization of our manufacturing footprint. However, in the current economic environment, we have seen modest increases in demand in some of our key end markets but we do not anticipate a rapid return to pre-recession demand levels. Demand recovery in certain end markets has been offset by restrictions on defense-related demand due to general reductions of US and foreign government military vehicle and equipment procurements. In the midst of slower growth markets we continue to focus on new application development, as well as further optimization of our manufacturing footprint, efficiency and cost reduction initiatives, free cash flow generation and maintaining adequate liquidity necessary for our operations.

AGY Holding Corp. is a Delaware corporation and is a wholly owned subsidiary of KAGY Holding Company, Inc. (“Holdings”). Holdings acquired all of our outstanding stock in April 2006 (the “Acquisition”). Our principal executive office is located at 2556 Wagener Road, Aiken, South Carolina 29801 and our telephone number is (888) 434-0945. Our website address is http://www.agy.com.

Basis of Presentation

The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and is in conformity with U.S. generally accepted accounting principles (“GAAP”). Our fiscal year end is December 31. Unless otherwise stated, all years and dates refer to our fiscal year.

Management is responsible for the fair presentation of the accompanying Consolidated Financial Statements, prepared in accordance with GAAP, and has full responsibility for their integrity and accuracy. In the opinion of management, the accompanying Consolidated Financial Statements contain all adjustments necessary to present fairly our consolidated balance sheet, statement of operations, statement of cash flows and statement of changes in shareholder’s equity for all periods presented.

The Acquisition

On April 7, 2006, our Company was acquired by Holdings pursuant to the terms of an agreement of merger dated February 23, 2006 (the “Acquisition”). In the Acquisition, all issued and outstanding shares of our common stock were converted into the right to receive cash. Total merger consideration was approximately $271 million (approximately $275.5 million including acquisition related costs and adjustments).

2007 Continuous Filament Mat Business Combination

In October 2007, the Company acquired the North American Continuous Filament Mat business (“CFM”) of Owens Corning North America (“OC”) for an initial price of approximately $7.3 million (including acquisition-related costs of $0.8 million). The acquired assets included certain inventories and equipment located in AGY’s Huntingdon, PA facility and marble furnace assets located in Anderson, SC. Subsequently, under the terms of the acquisition agreement, OC paid AGY $2.3 million in July 2008 as a

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result of the termination of the Anderson, SC land and building lease and of AGY vacating the premises in June 2008. The amount paid to the Company by OC reduced the CFM acquisition cost, first eliminating the goodwill and then reducing the value of the acquired property, plant, and equipment.

The CFM business is operated and managed as part of the AGY US segment.

2009 Chinese Business Combination

On June 10, 2009, pursuant to the terms of the Sale and Purchase Agreement dated March 12, 2009, by and among AGY Cayman, Grace Technology Investment Co., Ltd., and Grace THW Holding Limited (together, “Grace”), AGY Cayman, a company incorporated in the Cayman Islands and a wholly-owned subsidiary of the Company, completed its acquisition of 70% of the outstanding shares of Main Union Industrial Ltd. (renamed AGY Hong Kong Ltd.), a company incorporated in the People’s Republic of China (“PRC” or “China”) and previously a wholly-owned subsidiary of Grace Technology Investment Co., Ltd., a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of Grace THW Holding Limited. AGY Hong Kong Ltd. owns 100% controlling interest in Shanghai Grace Technology Co., Ltd. (renamed AGY Shanghai Technology Co., Ltd.), a company incorporated in China, which is also a glassfiber yarns manufacturer. The acquired business is operated and managed as part of the AGY Asia segment and expands AGY’s geographic, manufacturing, and servicing capabilities in the Asia-Pacific region relative to the electronics and industrial end-markets.

The Company paid $20 million in cash for a 70% controlling interest in Main Union Industrial Ltd. and its subsidiaries (“AGY Asia”) and financed this consideration through the investment of additional equity by the Company’s private equity sponsors.

The details of this business combination, accounted for under the purchase method of accounting, the allocation of the purchase price that resulted in the recognition of a $20.4 million of gain on bargain purchase and the impact of AGY Asia, which has been included in our Consolidated Financial Statements since its June 10, 2009 acquisition, and the related put/call option agreement in respect of the 30% noncontrolling interest are presented in Note 3 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011.

2011 AGY Asia Long-lived assets impairment

As a result of various factors in the AGY Asia reporting segment, including (a) continued losses due to operational performance challenges, (b) decreased liquidity, (c) pending debt service requirements, and (d) significant capital needs for the rebuilding of the furnace during 2012, the Company believes that a triggering event for evaluating the possible impairment of the long-lived assets in the AGY Asia segment occurred. With assistance of independent valuation experts, the Company initially determined that the carrying amounts of long-lived assets of AGY Asia were not recoverable as they exceeded the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. Next, the Company determined the fair value of the AGY Asia long-lived assets and recognized an impairment loss of $37.9 million for the amount by which the carrying amounts of certain long-lived assets exceeded their fair values at December 31, 2011. Please refer to Note 5 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011 for additional discussion on the calculation of the impairment loss, and the adjustments by major category of long-lived assets.

CRITICAL ACCOUNTING POLICIES

Our Consolidated Financial Statements have been prepared in accordance with GAAP. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements. Estimates are based on historical experience and other information then currently available, the results of which form the basis of such estimates. While we believe our estimation processes are reasonable, actual results could differ from our estimates. The following describes the estimates considered most critical to our operating performance and involve the most subjective and complex assumptions and assessments.

Revenue recognition. We recognize revenue when title and risk of loss pass to the customer. Most of our revenues are recognized upon shipment to customers or upon usage notification for customers on consignment. Provisions for discounts and rebates to customers, returns and other adjustments are provided in the same period that the related sales are recorded and are based on historical experience, current conditions and contractual obligations, as applicable. We perform ongoing credit evaluations of our customers’ financial condition and establish an allowance for losses on trade receivables based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Alloy metals. Alloy metals are the primary component of the heat-resistant, glass-forming bushings in our glass-melting furnaces. Molten glass is passed through the bushings to form glass filaments. In addition, alloy metals are an integral part of our installed glass-melting furnaces and therefore are classified as property, plant and equipment on the balance sheet. During the manufacturing process, a small portion of the alloy metal is physically consumed. The portion of the alloy metal physically consumed is measured at the time a bushing is reconditioned and is charged to income. This expense is recorded net of the metal that is recovered periodically after some special treatment. The amount of metal loss and the service life of the bushings are dependent upon a number of factors, including the type of furnace and the product being produced. Our alloy depletion expense net of the recoveries is disclosed in “Selected Financial Data” and as a component of “Cost of Good Sold” in the Consolidated Financial Statements.

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Use of Estimates. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most significant estimates include assessment of intangible and long-lived assets for impairment, estimates used in determining pension and postretirement medical obligations, estimates used in determining stock-based compensation, determination of the allowance for sales discounts and rebates and establishing the valuation allowance on deferred tax assets. Actual results could differ from those estimates.

Goodwill and intangible assets with indefinite lives. We account for goodwill and other intangible assets in accordance with the provisions of ASC 350, Intangibles – Goodwill and Others. Goodwill and intangible assets with indefinite lives are not amortized, but instead are subject to annual impairment testing conducted each year as of October 31. The goodwill asset impairment test involves comparing the fair value of a reporting unit to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step comparing the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill is required to measure the potential goodwill impairment loss. Interim tests may be required if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. As defined in ASC 350-20-35, a reporting unit is an operating segment, or one level below an operating segment. Until our Chinese business combination in June 2009, we determined that we operated as one operating segment and one reporting unit. Since our Chinese business combination in June 2009, we determined that our Company operates as two reportable units consisting of AGY US and AGY Asia, each a separate operating segment, as discussed in the Segment Information footnote to the Consolidated Financial Statements. As there are no reporting units below the operating segment level, the reportable units are the level at which the Company tests for goodwill impairment.

All of our goodwill and other intangible assets with indefinite lives relate to AGY US, and accordingly, the test for impairment is based on the fair value of the AGY US reporting unit. To determine the estimated fair value of the reportable segment, the Company, with the assistance of a third-party specialist, uses both a market valuation and income valuation approach. The market valuation approach uses prices and other relevant information generated by market transactions involving comparable businesses. The income valuation approach uses valuation techniques such as discounted future cash flows analysis. Specific assumptions are updated at the date of each test to consider current industry and Company-specific performance and risk factors from the perspective of a market participant. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of the reporting unit, it is possible a material change could occur.

As discussed in Note 7 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011, the Company performed its impairment testing of goodwill during 2009. The Company concluded with the assistance of independent third-party valuation specialists that the goodwill associated with the AGY US segment was fully impaired as of October 31, 2009. As a result, we recognized a non-cash, pre-tax goodwill impairment charge of approximately $85.0 million, classified as a “loss from operations” for the year ended December 31, 2009.

Our intangibles with indefinite lives (trademarks) are subject to at least annual impairment testing, which compares their fair value with their carrying amount. The results of these assessments did not indicate any impairment to these intangible assets for the years presented. As of December 31, 2011 the fair value of the trademarks exceeded their carrying value of $5.6 million by 4%.

We continually monitor and evaluate current business performance and our business outlook in determining whether there are events or circumstances requiring us to re-evaluate intangible assets with indefinite lives for impairment. Significant changes in demand levels within the Company’s respective markets, changes in production costs including raw materials, metal alloy, energy and direct labor, may have a material impact on the results of future valuations, and if adverse, could cause us to recognize additional impairment.

Impairment of long-lived assets, including definite-lived intangible assets. Pursuant to ASC 360-10, we evaluate our long-lived assets, including our tangible assets consisting of property plant, and equipment, and alloy metals (which are an integral part of our installed glass-melting furnaces) and our definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. A significant decrease in the spot market price of alloy precious metals is one of the factors we consider in determining the need to test this asset group for recoverability. However, we also take into account that the market price of the precious metals may be volatile over short periods of time. Accordingly, changes in the market price of alloy precious metals may not trigger impairment assessment because such changes may not significantly impact future cash flows expected from the use of the alloy metals on an ongoing basis.

An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset, plus net proceeds expected from the disposition of the asset (if any), are less than the related asset’s carrying amount. Estimating future cash flows requires us to make judgments regarding future economic conditions, product demand, and pricing. Although we believe our estimates are appropriate, significant differences in the actual performance of the asset or group of assets may materially affect the Company’s asset values and results of operations.

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As a result of the first step of the annual goodwill impairment evaluation on October 31, 2009 for the AGY US reporting segment, we tested for impairment the remaining long-lived assets of this reporting segment. Based on our analysis, the total estimated cash flows of the long-lived assets group exceeded substantially its carrying value, and no impairment charge was recognized in 2009.

During the fourth quarter of 2011, our US reporting segment continued to incur losses due to operational performance challenges, experienced a decrease in liquidity and there was a significant decline in precious metal market prices. Accordingly, management evaluated for impairment the long-lived assets of this reporting segment at December 31, 2011. Based on the analysis performed by management, the total recoverable cash flows of the long-lived assets group substantially exceeded its carrying value. No impairment charge was recognized for the US reporting segment.

As discussed in the Impairment Disclosure on page 19 and further discussed in Note 5 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011, the Company performed a similar evaluation on the AGY Asia reporting segment, and recorded an impairment of $37.9 million as of December 31, 2011.

Income taxes. We account for income taxes under the asset and liability method approach established by ASC 740, Income Taxes. Deferred income tax assets and liabilities reflect tax net operating loss and credit carry-forwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some portion of the deferred tax assets may not be realized. When events and circumstances so dictate, we evaluate whether our deferred tax assets are realizable and the need for a valuation allowance considering objective evidence such as reversal of our existing deferred tax liabilities, and forecasts of future taxable income. Accounting standards require that uncertain tax positions be sustainable under regulatory review by tax authorities assumed to have all relevant information. We recognize the largest amount of benefit that is more likely than not realizable upon settlement with tax authorities.

We consider our foreign earnings in AGY Europe SARL and in AGY Asia to be permanently invested and, accordingly, we did not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiaries.

Pension and Other Postretirement benefits. As discussed in Note 13 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011, we have a reimbursement obligation to OC under OC’s defined benefit pension plan covering certain of our employees. We also have a postretirement benefit plan that covers substantially all of our domestic employees. Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, we make extensive use of assumptions about discount rates, inflation, mortality, turnover and medical costs.

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RESULTS OF OPERATIONS

The following tables illustrate our results of operations in dollars and as a percentage of net sales for the years ended December 31, 2011, 2010 and 2009 (dollars in thousands):

As further discussed below, we use EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, to measure our financial performance.

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EBITDA and Adjusted EBITDA (which are defined below) are reconciled from net income (loss) determined under GAAP as follows (dollars in thousands):

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EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a measure used by management to measure operating performance. EBITDA is not a recognized term under GAAP and does not purport to be an alternative (a) to net income as a measure of operating performance or (b) to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, management believes that EBITDA provides more comparability between our historical results and our recent results that reflect purchase accounting and changes in our capital structure. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, these presentations of EBITDA may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is a non-GAAP financial measure which is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance and calculated in the same manner as “Consolidated Cash Flow” under the indenture governing our Notes, which is used by management in calculating our fixed charge coverage ratio under the indenture governing our Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors.

Year ended December 31, 2011 compared to year ended December 31, 2010

Net sales. Net sales remained flat at $183.7 million for the years ended December 31, 2010 and 2011. AGY Asia contributed $3.2 million of additional revenue (after accounting for the elimination of $1.3 million and $3.0 million of intercompany sales in 2011 and 2010, respectively) due primarily to the stronger Asian electronics market and pricing momentum through the first half of 2011. The $3.2 million, or 2.0%, net decrease in sales generated by AGY US for the year ended December 31, 2011, compared to the same period of 2010 was primarily due to $22.8 million of lower sales volumes, while a favorable product mix and pricing increases accounted for an increase in sales of $19.6 million. Aerospace and defense revenues were $49.9 million, or globally up 10% when compared to the prior year. This increase reflects a record sales level for aerospace, which increased by 18% compared to the year ended December 31, 2010 as a result of continued robust demand for aircraft retrofit, new build activity and pricing actions, while defense sales were negatively impacted by delays in certain major international programs. The electronics market revenues increased to $31.5 million, or 12%, compared to the same period in 2010 reflecting pricing actions, plus increased demand for specialty electronics fibers, which also drove mix enrichment within this market during the year. The G&I market revenues decreased globally to $73.9 million, or 13%. This $11.0 decrease was largely caused by our CFM business, which decreased $6.9 million, or 30%, to $16.4 million, when compared to the prior year as a result of market share loss at key accounts following late 2010 pricing actions. In addition, G&I revenues were negatively impacted by lower construction market revenues, which decreased $7.1 million, or 34%, to $14.0 million for the year ended December 31, 2011, reflecting some capacity-constrained sales only in part offset by 2011 pricing actions. These decreases were partly offset by a $3.1 million increase in other industrial and automotive market revenues driven by pricing actions and mix enrichment compared to the prior year.

Gross profit/ loss. We reported a consolidated gross profit of $12.0 million, or 7% of net sales for the year ended December 31, 2011, compared to $14.7 million, or 8% of net sales for the year ended December 31, 2010. AGY Asia segment profitability contribution decreased $1.6 million as increased margin from sales was more than offset by increased production costs due primarily to inflation in raw material, labor and energy costs and the appreciation of the Chinese currency compared to the U.S. dollar. AGY US’s contribution to the total gross profit decreased $1.1 million during the year, when compared to 2010. The profitability of our AGY US segment benefited from $20.4 million of margin from a more favorable product mix and pricing actions executed over the last five quarters, but was negatively impacted by $8.8 million of lower shipments due to constrained sales and reduced demand in certain markets. The $11.6 million net gain resulting from sales, however, was offset by increased manufacturing costs and challenges

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we faced in operations where we experienced larger than expected manufacturing efficiency losses from the destabilizing effect of major capacity scale up in our Aiken, SC plant during the first half of 2011. In 2010, the AGY US segment results were also negatively impacted by $4.1 million of accelerated depreciation expenses related to the 2010 restructuring initiatives to optimize the U.S. manufacturing footprint, which totaled only $0.2 million in 2011.

Selling, general and administrative expenses. Selling, general and administrative costs remained flat at $15.8 million, or 8.6% of net sales for the year ended December 31, 2011 and 2010.The AGY US segment offset the negative impact of merit increases and payroll tax adjustments by reducing discretionary expenses and headcount, primarily during the fourth quarter of 2011.

Restructuring charges. In conjunction with the restructuring actions we initiated in our AGY US segment to improve our cost structure and mitigate the adverse impact of the decline in precious metals markets on our borrowings availability, we recorded $1.4 million in restructuring charges in the year ended December 31, 2011 that related primarily to severance and professional fees. For the year ended December 31, 2010, we recorded $2.7 million in restructuring charges in the AGY US segment, primarily related to the relocation of manufacturing equipment in conjunction with the structural cost reduction initiative to optimize the AGY US manufacturing footprint. See further disclosures in Note 8 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011.

Long-lived assets impairment charge. Various factors in the AGY Asia reporting segment including (a) lower than expected operating profit and cash flows, (b) pending debt service requirements and (c) significant capital needs for the rebuilding of the furnace during 2012, triggered management to evaluate the potential impairment of the long-lived assets of this reporting segment at December 31, 2011. Accordingly, the Company concluded that certain of the long-lived assets were impaired and recorded an impairment charge of $37.9 million, classified in “loss from operations” in 2011. See further disclosures in Note 5 to the accompanying Consolidated Financial Statements for the year ended December 31, 2011.

Other operating income. During the year ended December 31, 2011, other operating income of $1.1 million consisted primarily of a $1.3 million gain recognized on sale of some precious metals. During the year ended December 31, 2010, other operating income of $6.4 million consisted primarily of a $6.3 million gain from the termination by AGY Asia, for breaches of covenants, of a supply agreement entered into in 2009 at the time of the acquisition.

Other non-operating income. During the years ended December 31, 2010 and 2011, other non-operating income of $0.19 million and $0.08 million, respectively, was not significant.

Interest expense. Interest expense increased $0.9 million from $22.8 million for the year ended December 31, 2010 to $23.7 million for the year ended December 31, 2011. The increase was primarily due to incremental interest expense associated with higher borrowings by AGY US and to the increase of the weighted average interest rate for AGY Asia.

Income tax benefit (expense). Income tax benefit/(expense) changed from $6.3 million tax benefit for the year ended December 31, 2010 to a $0.1 million tax expense for the year ended December 31, 2011 due to the limitation on recording tax benefits from net operating losses. During the year ended December 31, 2011, our effective tax rate was an expense of (0.14%). This rate varied from the statutory rate of 34% due primarily to the change in the valuation allowance for domestic deferred tax assets, which are not more-likely-than-not to be realized, change in foreign valuation allowance, losses on domestic and foreign subsidiaries with no tax benefit, and foreign rate differential, which benefits were partially offset by state taxes. Generally, the Company can recognize deferred tax assets for the losses incurred until such time that the aggregate deferred tax assets exceed aggregate deferred tax liabilities that do not relate to assets with an indefinite useful life. During the year ended December 31, 2010, our effective tax rate was a benefit of 30.3%. This rate varied from the statutory rate of 34% due primarily to establishment of valuation allowance during 2010 for domestic deferred tax assets, which are not more-likely-than-not to be realized, change in foreign valuation allowance, losses on domestic and foreign subsidiaries with no tax benefit, and foreign rate differential, which benefits were partially offset by state taxes.

Net income (loss). As a result of the aforementioned factors including primarily (a) higher than expected manufacturing efficiency losses in AGY US, (b) higher production costs in AGY Asia and additional restructuring and impairment charges in 2011, (c) accelerated depreciation and restructuring charges for the AGY US segment and (d) gain on contract termination related to AGY Asia in 2010, we reported a net loss attributable to AGY of $54.5 million for the year ended December 31, 2011, compared to a net loss of $16.1 million for the year ended December 31, 2010. The net loss attributable to the 30% noncontrolling interest in AGY Asia for the year ended December 31, 2011 was $12.2 million compared to net income of $1.5 million for the year ended December 31, 2010.

Year ended December 31, 2010 compared to year ended December 31, 2009

Net sales. Net sales increased $29.8 million, or 19.3%, to $183.7 million for the year ended December 31, 2010, compared to $153.9 million during the comparable period of 2009. AGY Asia, which was acquired in June 2009, contributed $12.4 million of additional revenue (after accounting for the elimination of $2.8 million of increased intercompany sales) of which approximately $3.6 million is due to the stronger Asian electronics demand and favorable pricing in 2010. The remaining $17.4 million, or 12.4%, net increase in sales generated by AGY US for the year ended December 31, 2010, compared to the same period of 2009 was primarily due to $22.9 million of higher sales volumes, while an unfavorable product mix and competitive pricing pressures accounted for a decrease in sales of $5.5 million. We experienced increased demand in all the markets that we serve except defense. These increases resulted primarily

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from the return to more normal historical inventory levels for several of our customers. Market and global economic conditions stabilized and steadily improved over the bottom experienced during the second quarter of 2009. Aerospace sales increased by $8.6 million compared to the year ended December 31, 2009 and returned to 2008 average demand levels, reflecting increases in both aircraft retrofit and new build activity and some inventory restocking in the supply chain in early 2010. The electronics, industrial and construction market revenues of the U.S operating segment increased approximately $0.8 million, $14.3 million and $3.5 million, respectively, compared to the same period in 2009. Defense revenue decreased $9.8 million during the year ended December 31, 2010, compared to the same period of 2009 as the result of the conclusion of the Mine Resistant Ambush Protected (“MRAP”) program during the first quarter of 2009 and competitive pricing pressures.

Gross profit/ loss. We reported a consolidated gross profit of $14.7 million, or 8% of net sales for the year ended December 31, 2010, compared to a negative gross margin of $2.7 million for the year ended December 31, 2009. While AGY Asia contributed $4.6 million of the improvement, our AGY US segment drove the remaining increase in profitability of $12.8 million for the year ended December 31, 2010. The profitability of our AGY US segment benefited from $9.1 million of margin on increased sales but was negatively impacted $4.0 million from competitive pricing pressure in certain markets. Additionally, the AGY US segment results were positively impacted in 2010 by improved manufacturing efficiencies, cost reduction initiatives and higher absorption of overhead costs, partially offset by $4.1 million of accelerated depreciation related to the optimization of our U.S. manufacturing footprint. In 2009, the AGY US segment results were negatively impacted by expenses associated with management’s decision to curtail production capacity and lower inventory levels in order to improve liquidity.

Selling, general and administrative expenses. Selling, general and administrative costs decreased $0.2 million from $16.0 million for the year ended December 31, 2009 to $15.8 million for the year ended December 31, 2010. The $1.0 million of incremental expenses associated with the AGY Asia acquisition in 2010 compared to 2009 were offset by $1.2 million of lower expenses for our AGY US operating segment including a reduction in salaried workforce during 2009 and lower stock compensation charges during 2010. Selling, general and administrative costs decreased from 10.4% of net sales for the year ended December 31, 2009 to 8.6% of net sales for the year ended December 31, 2010.

Restructuring charges. In conjunction with additional actions taken in 2010 to further optimize the AGY US manufacturing footprint and improve profitability, we recorded $2.7 million in restructuring charges in the year ended December 31, 2010 that related primarily to the relocation of manufacturing equipment. For the year ended December 31, 2009, we recorded $0.8 million in restructuring charges in the AGY US segment, primarily related to severance and outplacement costs for headcount reductions in connection with our structural cost-reduction initiatives. See further disclosures in Note 8 to the accompanying Consolidated Financial Statements for the year ended December 31, 2010.

Other operating income. During the year ended December 31, 2010, other operating income of $6.4 million consisted primarily of a $6.3 million gain from the termination by AGY Asia, for breaches of covenants, of a supply agreement entered into in 2009 at the time of the acquisition. During the year ended December 31, 2009, other operating expense of $0.8 million was primarily due to $2.6 million of AGY Asia acquisition-related costs, including $1.1 million of costs incurred and deferred at December 31, 2008 that were subsequently expensed on January 1, 2009 as a result of adopting ASC 805. These costs were partially offset by a $1.2 million gain recognized on the sale of alloy metals in 2009.

Goodwill impairment charge. During 2009,the Company concluded that all goodwill was fully impaired and recognized non-cash, pre-tax goodwill impairment charges of $85.0 million, classified in “loss from operations”. See further disclosures in Note 7 to the Consolidated Financial Statements for the year ended December 31, 2009 in our Annual Report on Form 10-K for the year ended December 31, 2009 (our “2009 Form 10-K”).

Gain on bargain purchase. Management concluded, with the assistance of an independent third-party valuation specialist, that the fair value of the acquired assets exceeded the liabilities assumed associated with the AGY Asia acquisition, and that a bargain purchase of approximately $20.4 million resulted at the June 10, 2009 acquisition date. See further disclosures in Note 3 to the accompanying Consolidated Financial Statements for the year ended December 31, 2010.

Other non-operating income. During the year ended December 31, 2010, other non-operating income of $0.15 million was not significant. During the year ended December 31, 2009, other non-operating income of $1.5 million consisted primarily of the net $1.1 million gain on the early extinguishment of debt associated with the purchase of $3 million (face value) of our Notes.

Interest expense. Interest expense increased $0.6 million from $22.2 million for the year ended December 31, 2009 to $22.8 million for the year ended December 31, 2010. The increase was primarily due to incremental interest expense associated with the AGY Asia acquisition.

Income tax benefit (expense). Income tax benefit decreased $6.8 million from $13.1 million tax benefit for the year ended December 31, 2009 to a $6.3 million tax benefit for the year ended December 31, 2010. During the year ended December 31, 2010, our effective tax rate was a benefit of 30.3%. This rate varied from the statutory rate of 34% due primarily to establishment of valuation allowance during 2010 for domestic deferred tax assets, which are not more-likely-than-not to be realized. Other notable effects were the change in foreign valuation allowance, losses on domestic and foreign subsidiaries with no tax benefit, and foreign rate differential, which benefits were partially offset by state taxes. Generally, the Company can recognize deferred tax assets for the losses incurred until such time that the aggregate deferred tax assets exceed aggregate deferred tax liabilities that do not relate to assets with an indefinite

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useful life. During the year ended December 31, 2009, our effective tax rate was a benefit of 12.3%. This rate varied from the statutory rate of 34% due primarily to the goodwill impairment charge not deductible for tax, a nontaxable gain in connection with the bargain purchase related to the AGY Asia acquisition, and transactional costs associated with the AGY Asia acquisition that were expensed during 2009 but not deductible for tax, which benefits were partially offset by state taxes.

Net income (loss). As a result of the aforementioned factors including primarily restructuring and accelerated depreciation charges for the AGY US segment and a gain on contract termination related to AGY Asia in 2010 and significant non-recurring non cash net charges (goodwill impairment charge; gain on bargain purchase) in 2009, we reported a net loss attributable to AGY of $16.1 million for the year ended December 31, 2010, compared to a net loss of $92.4 million for the year ended December 31, 2009. The net loss attributable to the 30% noncontrolling interest in AGY Asia from the acquisition date in June 2009 to December 31, 2009 was $1.1 million compared to net income of $1.5 million for the year ended December 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES

AGY Holding Corp. and its Domestic Subsidiaries’ Liquidity

Cash requirements for, but not limited to, interest payments, working capital, capital expenditures, strategic initiatives, and normal recurring operating expenses have been funded from cash balances on hand, revolver borrowings, and sales of alloy metals.

As of December 31, 2011, AGY US had total liquidity of $13.3 million, consisting of $0.5 million in unrestricted cash and approximately $12.8 million of borrowing availability under the Amended Credit Facility. If our borrowing availability under the Amended Credit Facility falls below $6.25 million, we will be subject to a springing financial maintenance covenant under which we would likely be in default. In 2012, interest payments of $19.0 million will be due under AGY’s Senior Second Lien Notes, which we expect to be able to meet with our current and projected sources of liquidity and precious metal prices. In the event we are not able to meet those payments, we will seek one or more options to strengthen our liquidity, including: amendment to our Amended Credit Facility, sale of assets, or other financing arrangements. Please refer to “Risk Factors – Risks Related to our Indebtedness” for additional discussion regarding our liquidity.

There are no mandatory payments of principal on the Amended Credit Facility or on the Notes scheduled prior to their earliest maturity in August 2014 and November 2014, respectively.

AGY Asia’s Liquidity

AGY Asia’s cash requirements stem primarily from interest and principal payment, capital expenditures, alloy metals, strategic initiatives, normal recurring operating expenses and working capital requirements and have been funded by cash on hand, cash from operations and borrowings under the AGY Asia Credit Facility.

As of December 31, 2011, AGY Asia had total liquidity of $4.3 million, consisting of $1.8 million of unrestricted cash and approximately $2.5 million of borrowing availability under the AGY Asia Credit Facility. In 2012, semi-annual mandatory principal repayments of $11.0 million are due under the AGY Asia Credit Facility. We have an agreement in principle with the AGY Asia lender to defer the April 2012 required principal payment for three months, to July 2012. However, such deferral is subject to execution of definitive documents, which we expect to complete shortly. Notwithstanding the expected deferral, there is no assurance that we will be able to permanently revise the term loan amortization schedule on terms acceptable to us or at all. We may be unable to make the principal payments without one or more of the following occurrences: a refinancing of our AGY Asia Credit Facility, an amendment to our AGY Asia Credit Facility, sale of assets, or other financing arrangements. Please refer to “Risk Factors – Risks Related to our Indebtedness” for additional discussion regarding the liquidity of AGY Asia.

Working Capital

We define working capital as total current assets, excluding unrestricted cash, less total current liabilities, including short-term borrowings and current portion of long-term debt. We reported a working capital deficiency of $13.3 million on December 31, 2011 compared to working capital of $14.9 million and December 31, 2010. The $28.2 million decrease relates to (a) a $22.3 million decrease in the working capital of AGY Asia due to increases in short-term borrowings and current maturities of long term debt, and (b) a $5.5 million decrease in the working capital of AGY US. This decrease was due to a $3.4 million increase in trade payables primarily due to extending payment terms with suppliers, a $0.8 million increase in accrued liabilities primarily due to the increase of accrued restructuring expenses and of the amount due for pension and retiree medical reimbursement to Owens Corning and a $1.2 million decrease in deferred taxes due to increases in the valuation allowance.

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Contractual Obligations

In the ordinary course of business, the Company enters into contractual obligations to make cash payments to third parties. The Company’s known contractual obligations as of December 31, 2011 were as follows (in thousands):