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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarter Ended June 30, 2012

For the transition period from              to            

Commission file number 333-150749

AGY HOLDING CORP.

(Exact name of registrant as specified in its charter)

2556 Wagener Road

Aiken, South Carolina 29801

(Address of principal executive offices) (Zip Code)

(888) 434-0945

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

There is no established trading market for the Common Stock of the registrant. The total number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of August 13, 2012 was 100.

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PART I – FINANCIAL INFORMATION

ITEM 1. – Consolidated Financial Statements

AGY Holding Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands except per share amounts)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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AGY Holding Corp. and Subsidiaries

Consolidated Statements of Operations

AGY Holding Corp. and Subsidiaries

Consolidated Statements of Comprehensive Loss

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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AGY Holding Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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AGY Holding Corp. and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)

Overview — As used in this Form 10-Q and in these notes, the terms “AGY”, the “Company”, “we,” “us,” or “our” mean AGY Holding Corp. and subsidiary companies. The accompanying unaudited interim consolidated financial statements are those of AGY Holding Corp. and subsidiary companies. Refer to Note 2 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”) for a discussion of our significant accounting policies.

AGY Holding Corp. is a Delaware corporation with its headquarters in South Carolina. KAGY Holding Company, Inc. (“Holdings”) is the sole shareholder of 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, insect screening, 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.

Currently, the Company has two manufacturing facilities in the United States and one in the People’s Republic of China (“PRC” or “China”) and operates as two reportable segments (each a single operating segment) consisting of AGY U.S. manufacturing operations (“AGY US”) and AGY Asian manufacturing operations (“AGY Asia”).

Basis of Consolidation and Presentation — The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The consolidated balance sheet as of December 31, 2011 was derived from audited 2011 consolidated financial statements. In the opinion of management, all adjustments (consisting of items of a normal recurring nature) considered necessary for a fair statement of financial condition and results of operations have been included. Interim operating results are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The Company’s business is conducted through AGY Holding Corp., its two wholly-owned domestic subsidiaries, AGY Aiken LLC and AGY Huntingdon LLC and its wholly-owned foreign subsidiaries, AGY Europe SARL (France) and AGY Cayman LLC (Cayman Islands). AGY Cayman LLC (Cayman Islands) is the holding company of the 70% controlling ownership in AGY Hong Kong Ltd. (formerly Main Union Industrial Ltd.) and its subsidiaries (which are collectively referred to herein as “AGY Asia”) since June 10, 2009. All significant intercompany accounts and transactions have been eliminated in consolidation.

The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in our 2011 Form 10-K. The December 31, 2011 balances are derived from the audited financial statements in the 2011 Form 10-K.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates and are subject to risks and uncertainties, including those identified in the “Risk Factors” section of our 2011 Form 10-K. Changes in facts and circumstances may have a significant impact on the resulting financial statements.

Operations and Liquidity Management — As of June 30, 2012, AGY US had total liquidity of $18.7 million, consisting of $0.6 million in unrestricted cash and approximately $18.1 million of borrowing availability under the Senior Secured revolving credit facility (“Amended Credit Facility”), excluding $6 million of availability that did not become effective until the amendment of the master lease agreement between the Company and Deutsche Bank Energy Trading LLC (“DB”), dated as of September 28, 2009 (the “Master Lease Agreement”) was consummated in July 2012. As further disclosed in Note 8, if our borrowing availability under the Amended Credit Facility falls below $6.25 million, we will be subject to a springing financial maintenance covenant that would likely result in a default under the Amended Credit

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Facility. The Company intends to manage its liquidity needs through enhancements to the gross margins from production process improvements, enhanced sales of higher margin products and other operations focused efforts.

The AGY Asia reporting segment has experienced declining operating profits, has significant debt service obligations coming due in 2012 and may require funding for the rebuilding of the furnace, located in Shanghai, PRC. As a result, in April 2012, we retained William Blair & Company, L.L.C. and its pan alliance partner Business Development Asia (HK) Ltd (“Blair” and “BDA” and together the “Advisor”) to provide certain investment banking services to evaluate and assist with a possible combination of AGY Asia with another party, a recapitalization of a significant portion of AGY Asia’s indebtedness or a change of control of AGY Asia in a transaction involving the Bank of Shanghai, which is the primary lender for the Asian operation. In connection with these potential transactions, several potential buyers have submitted non-binding offers and are currently conducting their due diligence analysis before submitting their final offers, which are expected during the third quarter of 2012.

We do not expect any possible transaction resulting from this engagement to impact the AGY US reporting segment as only approximately 1.5% of the reported revenue for AGY US was derived from products produced by AGY Asia over the last 12 months. Additionally, AGY US expects to maintain its commercial presence and sales channels for glass fibers produced in North America but sold to the Asian market, primarily for specialty electronics applications.

Adoption of New Accounting Standards — Effective January 1, 2012, the Company adopted ASU 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. We elected to present net income (loss) and comprehensive income (loss) in two separate, but consecutive, statements. This is a change in presentation only and the adoption of ASU 2011-05 did not have an impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards — There were no accounting standards issued during 2012 that the Company believes would have a material impact on the financial statements.

Inventories, net of reserves for excess, obsolete, and write-downs to lower of cost or market adjustments of $2,298 and $2,684 as of June 30, 2012 and December 31, 2011, respectively, consist of the following:

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Property, plant and equipment and alloy metals consist of the following:

Depreciation expense was $5,085 and $7,587 in the six months ended June 30, 2012 and 2011, respectively.

Depletion of alloy metals was $4,620 and $3,808 (net of recoveries and excluding expense to process such recoveries) in the six months ended June 30, 2012 and 2011, respectively.

No alloy metals were sold during the first six months of 2011 and 2012.

During 2011, the Company determined the carrying value of the AGY Asia long-lived assets exceeded the fair value and recognized an impairment of $37,898 at December 31, 2011. As of June 30, 2012, the Company determined that no additional impairment needed to be recorded.

As of June 30, 2012, the Company had restricted cash of $1.5 million that was posted as cash collateral in connection with the June 15, 2012 amendment of the Company’s revolving credit facility. The cash collateral secures amounts remaining to be paid under the equipment lease that was financed by the previous revolving lender. The collateral requirement will be reduced by $0.1 million at the end of each quarter beginning December 31, 2012 and ending in October 2015 when all of the scheduled lease payments have been made.

Intangible assets subject to amortization and trademarks, which are not amortized, consist of the following:

In June 2012, the Company entered into the Amended Credit Facility for AGY US and incurred approximately $1.5 million in debt issuance costs. These costs are treated as additional deferred financing fees amortized by the straight-line method over the remaining life of the Amended Credit Facility, which approximates the effective interest method.

The Company’s process technology consists of several patents that relate to the design, application or manufacturing for key products, and its estimated useful life is based on the average legal life of the patents and the Company’s estimated economic life of the processes.

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AGY US

In the fourth quarter of 2011, we initiated actions 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. The approved plan included (a) the severance of 13 salaried positions, and (b) the engagement of a global professional services firm to lead rapid operational improvement opportunities and to provide interim senior management services following the change in our leadership organization. These initiatives continued through the second quarter of 2012 and resulted in a restructuring charge of $2.1 million in the second quarter of 2012 and $5.0 million for the six months ended June 30, 2012. The remaining reserve of $4.4 million at June 30, 2012 for the above initiatives is expected to be paid in 2012 . Additionally, the Company recently announced its decision to initiate a process to sell its CFM business, including the wound products and conductive roving business located in its Huntingdon Pennsylvania facilities, and we expect to incur additional professional advisory services fees throughout 2012.

The following table summarizes the status of unpaid liabilities from the Company’s restructuring initiatives:

AGY Asia

In the first quarter of 2012, our AGY Asia segment engaged a global professional services firm to lead the refinancing of the AGY Asia financing agreements or a change in control of AGY Asia. This initiative resulted in a restructuring charge of $0.6 million in the second quarter of 2012 and $0.7 million for the six months ended June 30, 2012. The remaining reserve of $0.2 million at June 30, 2012 for the above initiatives is expected to be paid in 2012 and AGY Asia expects to incur additional professional advisory services throughout 2012.

Accrued liabilities consist of the following:

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Principal amounts of indebtedness outstanding under the Company’s financing arrangements consist of the following:

Senior Secured Notes

Interest on our Senior Secured Notes due 2014 (the “Notes”) is payable semi-annually on May 15 and November 15 of each year. Our obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on a second-priority basis, by each of our existing and future domestic subsidiaries, other than immaterial subsidiaries, that guarantee the indebtedness of the Company, including the Amended Credit Facility, or the indebtedness of any restricted subsidiaries.

As of June 30, 2012 and December 31, 2011, the estimated fair value of the Notes was $80,800 and $82,560, respectively, compared to a recorded book value of $172,000 for both periods. The fair value of the Notes is estimated on the basis of quoted market prices; however, trading in these securities is limited and may not reflect fair value. The fair value is subject to fluctuations based on, among other things, the Company’s performance, its credit rating and changes in interest rates for debt securities with similar terms.

The indenture governing the Notes contains a Fixed Charge Coverage Ratio (calculated based on “Consolidated Cash Flow” (as defined therein)), which is used to determine our ability to make restricted payments, incur additional indebtedness, issue preferred stock and enter into mergers or consolidations or sales of substantially all assets. The indenture does not allow us to pay dividends or distributions on our outstanding capital stock (including to our parent) and limits or restricts our ability to incur debt, repurchase securities, make certain prohibited investments, create liens, transfer or sell assets, enter into transactions with affiliates, issue or sell stock of a subsidiary or merge or consolidate. The indenture does not contain any financial maintenance covenants.

Under certain events of default, including defaults under the Amended Credit Facility, payment of the outstanding principal and interest could be accelerated.

Senior Secured Revolving Credit Facility

On June 15, 2012, the Company entered into the Second Amended Credit Facility that provides for an expanded credit facility of up to $60,000 and matures on the earlier of June 15, 2016 or 90 days prior to the maturity date of the senior secured notes (“Amended Credit Facility”).

Availability under the facility is determined by a borrowing base equal to the sum of: (i) an advance rate against eligible accounts receivable of up to 85%, plus (ii) the lesser of (A) 65% of the book value of eligible inventory (valued at the lower of cost or market) and (B) 85% of the net orderly liquidation value for eligible inventory, plus (iii) up to $40,000 of eligible alloy inventory, plus (iv) subject to the extension, replacement or renewal of on terms and conditions satisfactory to Agent, the lesser of (x) 70% of the net orderly liquidation value of eligible equipment plus 50% of the fair market value of eligible real estate, (y) an amount equal to $6 million on the Closing Date and reduced by $375,000 on the day after the last day of each full Fiscal Quarter thereafter and (z) 15% of the Borrowing Base (which amount was not included in the calculation of the Borrowing Base until July 25, 2012, when the Master Lease Agreement was amended), minus (v) 100% of mark-to-market risk on certain interest hedging arrangements, minus (vi) a reserve of $2.5 million, and minus (vii) other reserves as the lender may determine in its permitted discretion. This amended definition of the borrowing base calculation resulted in lower reserves and higher advance rates on certain of our assets when compared to the definition that was in effect prior to the amendment of the credit facility as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 30, 2012.

The interest rate for borrowings is LIBOR plus 4.0% or Base Rate plus 3.0% and may be adjusted downward to LIBOR plus 3.5% or Base Rate plus 2.5%, depending on the Company’s fixed charge coverage ratio. In addition, there are customary commitment and letter of credit fees under the Amended Credit Facility.

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All obligations under the Amended Credit Facility are guaranteed by Holdings. The Company’s obligations under the Amended Credit Facility are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority security interest in substantially all of the Company’s assets.

Proceeds from the Amended Credit Facility loan were used to repay all amounts and terminate all commitments outstanding under our previous $50,000 Amended Credit Facility and to pay fees and expenses in connection with the refinancing.

The Company incurred approximately $1,500 in issuance costs, which will be expensed over the life of the Amended Credit Facility.

The Amended Credit Facility contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers and consolidations, dividends and other payments in respect to capital stock, transactions with affiliates, and optional payments and modifications of subordinated and other debt instruments.

In addition, the agreement contains a “springing financial maintenance covenant.” Specifically, if any revolving credit facility commitments are outstanding and after the occurrence of (a) a default or an event of default, or (b) the availability under the facility falling below the greater of $6,250 and 12.5% of the Borrowing Base (as defined) as of the last day of the most recent fiscal month ended, the Company must maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for each period of four fiscal quarters ended during, or on the last day of, the fiscal quarter immediately before the events listed in (a) and (b) above.

The agreement governing the Amended Credit Facility permits the lenders to accelerate payment of the outstanding principal and accrued and unpaid interest and/or to terminate their commitment to lend any additional amounts upon certain events of default, including but not limited to failure to pay principal or interest or other amounts when due, breach of certain covenants or representations including breach of the springing covenant, cross-defaults to certain other agreements and indebtedness in excess of specified amounts, a change of control, or default under our obligation regarding the AGY Asia option exercise. The Company was in compliance with all such covenants as of June 30, 2012.

On July 25, 2012, the Company amended the Amended Credit Facility to, among other things, permit the amendment of the Master Lease Agreement, to require delivery of certain additional reports and to add a minimum Fully Adjusted EBITDA financial covenant, as defined in the Amended Master Lease Agreement, which is measured as of each calendar quarter end based on the last four quarters Fully Adjusted EBITDA. Had the minimum Fully Adjusted EBITDA covenant been in effect as of June 30, 2012, the Company would have been in compliance with such covenant as of June 30, 2012.

As of June 30, 2012, our borrowing base, calculated in accordance with the terms of the Amended Credit Facility, was $48,700. As of June 30, 2012, the Company had issued letters of credit totaling approximately $2,900 and had cash borrowings of $27,700 under the facility. The weighted average interest rate for cash borrowings outstanding as of June 30, 2012 was 4.4%. Borrowing availability after giving effect to the borrowing base at June 30, 2012 was approximately $18,100, which as mentioned previously excludes the $6,000 advance on eligible equipment and real estate that became available in July 2012.

As of December 31, 2011, our borrowing base, calculated in accordance with the terms of the Amended Credit Facility, was $40,700. As of December 31, 2011, the Company had issued letters of credit totaling approximately $2,900 and had cash borrowings of $25,000 under the facility. The weighted average interest rate for cash borrowings outstanding as of December 31, 2011 was 3.4%. Borrowing availability after giving effect to the borrowing base at December 31, 2011 was approximately $12,800.

AGY Asia Credit Facility- Non-recourse

The AGY Asia financing arrangement (“AGY Asia Credit Facility”) consists of a term loan with an original maturity of five years and a one-year working capital loan with original commitments of approximately $43,300 and $12,500, respectively, converted at the then-current exchange rate. Proceeds from the loans were used principally to repay the $37,600 outstanding at the time of the refinancing under AGY Asia’s prior credit agreements.

In April 2012, the remaining unused commitment of approximately $2,500 under the term loan and the working capital loan was terminated by the AGY Asia lender. As a result, there is no remaining availability under the AGY Asia Credit Facility.

Term loan

The term loan is secured by AGY Asia’s building, alloy metals and equipment and bears interest annually at the rate of either the five-year lending rate as published by the People’s Bank of China, plus a margin, or six-month LIBOR plus 3.0%. Term loan borrowings may be made in both local currency and US dollars, up to certain

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limits. At June 30, 2012 and December 31, 2011, AGY Asia had borrowings of approximately $27,500 under the term loan, consisting of a local currency loan of RMB 148,500, or approximately $23,500 converted at the period-end exchange rate, and a U.S.-dollar-denominated loan of $4,000. The weighted average interest rate for cash borrowings outstanding as of June 30, 2012 was 6.8%.

There are semi-annual mandatory payments of principal on the term loan borrowings. At June 30, 2012, the remaining mandatory payments of principal were as follows:

In April and July 2012 AGY Asia and its lender amended the term loan amortization to defer initially until July 2012 and then subsequently until October 2012, the $5.1 million required principal payment originally due in April 2012. In addition, the lender has the right to accelerate the loan repayment at any time if the lender deems that no substantial progress on AGY Asia refinancing, recapitalization or change of control is being made. 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. If AGY Asia is unable to reach agreement with its lender to modify the term loan amortization schedule beyond October 2012, then AGY Asia may default under its loan agreement and the total outstanding debt of $27,500 million may be accelerated. As a result of this uncertainty, all the outstanding borrowings under the term loan were classified as current liabilities as of June 30, 2012 and December 31, 2011.

Working Capital Loan

The working capital loan facility is secured by existing and future equipment and assets acquired by AGY Asia and bears interest annually at the rate of either the one-year lending rate as published by the People’s Bank of China, or three-month LIBOR plus 3.0%. Working capital loan borrowings may be made in both local currency and US Dollars, up to certain limits.

In July 2012, AGY Asia received an extension of the working capital loan facility to October 2012. However, there is no assurance that we will be able to obtain an extension of the commitment beyond October 2012 on terms acceptable to us or at all.

At June 30, 2012 and December 31, 2011, the Company had borrowings of approximately $11,500 outstanding under the working capital loan consisting of (i) a local currency loan of RMB 66,500, or approximately $10,500 converted at the period-end exchange rate, and (ii) a U.S.-dollar-denominated loan of $1,000. The weighted average interest rate for cash borrowings outstanding as of June 30, 2012, was 7.0%.

During the second quarter of 2011, AGY Asia entered into a letter of credit (“LC”) discounting arrangement whereby certain trade receivables backed by LCs may be discounted with recourse and borrowed against at a nominal interest cost. At June 30, 2012, AGY Asia had discounted LCs with a face value of approximately $237 (which amount is recorded in trade receivables at June 30, 2012), receiving proceeds of approximately $213 and maintaining equity of approximately $24 in such receivables. At June 30, 2012, proceeds of $213 received from discounting were recorded as short-term debt payable.

In July 2012, the lender declined extending the letter of credit facility in support of trade supplier payments that was previously in place.

The loan agreements contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, interest coverage, restrictions on indebtedness, liens, investments, mergers and consolidations, dividends and other payments in respect to capital stock, and transactions with affiliates. The loan agreements also include customary events of default, including a default upon a change of control. AGY Asia was in compliance with all such covenants at June 30, 2012.

All amounts borrowed under the AGY Asia Credit Facility are non-recourse to AGY Holding Corp. or any other domestic subsidiary of AGY Holding Corp.

Maturities of Long-Term Debt

As discussed above, we classified all AGY Asia borrowings outstanding under the term loan as current as of June 30, 2012 due to the uncertainty of AGY Asia’s ability to make required principal payments and/or to consummate a refinancing, which would create an event of default and activate an acceleration clause. As a result, maturities of long-term debt at June 30, 2012 only relate to AGY US and consist of the following:

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As discussed in Note 11 of our 2011 Form 10-K, the Company has a management agreement with the principal shareholder of Holdings pursuant to which this party provides management and other advisory services to the Company. This agreement requires AGY to pay an annual management fee of $750 and to reimburse this party for out-of-pocket expenses incurred in connection with its services.

In the fourth quarter of 2011 the Company entered into an agreement with the principal shareholder of Holdings, pursuant to which this party agreed to guarantee in case of default, the Company’s payment of up to approximately $2.9 million for interim management and corporate advisory services to be rendered by a global professional services firm. Such fees, incurred since September 2011, have been accrued and expensed as of June 30, 2012 as restructuring costs (see Note 6).

The authorized capital stock of the Company consists of a total of 1,000 shares of common stock with a par value of $0.01 per share. All 100 outstanding shares of the Company have been owned by Holdings since the Acquisition on April 7, 2006. The holder of each share has the right to one vote for each share of common stock held and no shareholder has special voting rights other than those afforded all shareholders generally under Delaware law. Shareholders will share ratably, based on the number of shares held, in any and all dividends the Company may declare. As indicated in Note 8, the payment of dividends is restricted by the Amended Credit Facility and the Notes and no dividends were paid in either the three months ended June 30, 2012 or 2011.

Pension and Other Post-retirement Benefits

Pension Benefits — As described more fully in our 2011 Form 10-K, we have a reimbursement obligation to Owens Corning (“OC”) under OC’s defined benefit pension plan covering certain of our employees. Our obligation to OC is unfunded. We do not have a defined benefit pension plan.

Other Post-retirement Benefits — We have a post-retirement benefit plan that covers substantially all of our domestic employees. Upon the attainment of age sixty-two and the completion of ten years of continuous service, an employee may elect to retire. Employees eligible to retire may receive limited post-retirement health and life insurance benefits. We also have an unfunded reimbursement obligation to OC for certain of our retirees who retired under OC’s retiree medical plan.

Net periodic benefit costs for the three and six months ended June 30, 2012 and 2011, are as follows:

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Expected net employer contributions for the OC defined benefit plan for the year ending December 31, 2012 are $218. Expected net employer contributions for the postretirement benefit plan for the year ending December 31, 2012 are $556.

Defined Contribution Plan

The Company has a defined contribution 401(k) plan that allows qualifying employees to contribute up to 30% of their annual pretax or after-tax compensation subject to Internal Revenue Service (IRS) limitations. AGY may provide a voluntary matching employer contribution of 50% on up to 6% of each participant’s before-tax salary deferral. In addition, AGY may make an employer contribution to the plan based on the Company’s annual financial performance. Effective December 2011 and January 2012, the Company suspended matching contributions for hourly employees at its Aiken SC location and for all salaried employees, and for hourly employees at the Huntingdon PA location, respectively. For the six months ended June 30, 2012 and 2011, the Company contributed nil and $293, respectively.

Our stock-based compensation includes stock options and restricted stock as described in our 2011 Form 10-K. Total stock-based compensation was $65 and $7 for the three months ended June 30, 2012 and 2011, respectively. During the six months ended June 30, 2012, no additional stock options or restricted stock were granted, exercised, or expired but 70,000 stock options were forfeited.

The following table summarizes the Company’s activity in stock options:

At June 30, 2012 the outstanding options had no intrinsic value.

The Company from time to time enters into fixed-price agreements for the natural gas commodity requirements of our AGY US segment to reduce the variability of the cash flows associated with forecasted purchases of natural gas. Although these contracts are considered derivative instruments, they typically meet the normal purchases exclusion contained in ASC 815, and are therefore exempted from the related accounting requirements. At June 30, 2012, the Company had existing contracts for physical delivery of natural gas at its Aiken, SC and Huntingdon, PA facilities that fix the commodity cost of natural gas for approximately 60% and 80%, respectively, of its estimated natural gas purchase requirements in the next six months.

At June 30, 2012, the Company also had existing contracts for physical delivery of electricity at its Huntingdon, PA facility that fix the commodity cost of all of its estimated electricity purchase requirements through December 2013.

The Company also uses, on occasion, foreign currency derivatives to manage the risk associated with fluctuations in foreign exchange rates. At June 30, 2012 and December 31, 2011, respectively, the Company had no foreign currency hedging agreements in effect.

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The Company leases under short-term operating leases (with lease terms of twelve months or less) a significant portion of the alloy metals needed to support its manufacturing operations. During the six months ended June 30, 2012 and 2011, total lease costs of alloy metals were approximately $2,123 and $2,005, respectively, and were classified as a component of cost of goods sold. In July 2012, we entered into an amended and restated master lease agreement (the “Amended Master Lease Agreement”) with DB, which extended the maturity date to May 31, 2013 from October 7, 2012. The Amended Master Lease Agreement allows AGY to enter into leases of alloy metals, up to 51,057 ounces of platinum and up to 3,308 ounces of rhodium, with terms of one to twelve months. 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 based on DB’s daily precious metal rates. The Amended Master Lease Agreement is secured by a security interest in rhodium up to a value that is the lesser of 35% of the leased platinum or $24,400. The Amended Master Lease Agreement is guaranteed by AGY’s domestic subsidiaries and contains customary events of default, including, without limitation, nonpayment of lease payments, inaccuracy of representations and warranties in any material respect and a cross-default provision with any credit facility or leasing facility greater than $500, including the Amended Credit Facility and the Notes. In addition, the Amended Master Lease Agreement requires us to maintain minimum Fully Adjusted EBITDA (as defined in the Amended Master Lease Agreement) of not be less than $16.5 million for the 12-month period ending June 30, 2012, $17.25 million for the 12-month period ending September 30, 2012, $17.75 million for the 12-month period ending December 31, 2012 and $18.25 million for the 12-month period ending March 31, 2013. Had the Amended Master Lease Agreement been in effect as of June 30, 2012, the Company would have been in compliance with the minimum Fully Adjusted EBITDA covenant as of June 30, 2012.

At June 30, 2012, we leased approximately 49,751 ounces of platinum and 3,285 ounces of rhodium under the Master Lease Agreement, with a notional value of approximately $81,500 and $4,800, respectively. All of the leases outstanding at June 30, 2012 had initial terms of one to twelve months, maturing no later than October 2012 (with future minimum rentals of approximately $850 until maturity in October 2012). Under the Amended Lease Agreement that was consummated in July 2012, the prior leases were terminated and we commenced new leases with terms of five to ten months, maturing no later than May 31, 2013 (with future minimum rentals of approximately $4,400 until maturity in May 2013).

The Company is currently seeking a replacement lessor for DB to extend the lease facility beyond its new maturity date in May 2013, but 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 May 31, 2013 in a manner acceptable to our senior secured revolving lenders, this will be an event of 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.

The Company utilized the valuation hierarchy provided in ASC 820-10 to determine the fair value of assets measured on a non-recurring basis in periods subsequent to the initial adoption of ASC 820-10:

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

At June 30, 2012, there were no assets or liabilities required to be measured at fair value in periods subsequent to their initial recognition.

At December 31, 2011, long-lived assets of AGY Asia were tested for impairment. Accordingly, the Company recorded an impairment charge of $37.9 million based on the orderly liquidation value in exchange basis of the long-lived assets given the uncertainty for AGY Asia to operate as a going concern beyond 2012. The valuation methodologies used to determine fair value, with the assistance of a third party valuation specialist, were a market approach for those assets where a secondary market exists and a replacement cost approach for the remainder. Since there were primarily unobservable inputs, management concluded that this was a Level 3 fair value measurement.

The fair value of the Notes for AGY US was approximately $80,800 and $82,560 at June 30, 2012 and December 31, 2011, respectively. The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at June 30, 2012 and December 31, 2011, or similar debt with the same maturities, rating and interest rates.

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On June 10, 2009 the Company purchased a 70% controlling interest in AGY Asia. The 30% noncontrolling interest (“NCI”) was recorded at the acquisition date at a fair value of $12,431, which was derived from an option agreement, pursuant to which the Company has the right to purchase the remaining 30% NCI at a stipulated multiple of earnings before interest, taxes, depreciation and amortization if certain financial performances are achieved. Grace Technology Investment Co., Ltd and Grace THW Holding Limited (together, “Grace”) have the right to put their remaining 30% ownership to the Company after the one-year anniversary of the execution of the AGY Asia Purchase Agreement at a stipulated multiple of earnings before interest, taxes, depreciation and amortization. The put option became exercisable upon the first anniversary of the completion date of the AGY Asia acquisition, June 10, 2010, and will expire on December 31, 2013.

The Company assessed the option agreement under the guidance of ASC 815 and ASC 480-10 and determined it was not a freestanding financial instrument but a redeemable equity interest, which is not solely within the control of the Company. Therefore, at the acquisition date, the fair value of the redeemable portion of the NCI was reclassified as temporary, or mezzanine, equity presented in the accompanying consolidated balance sheet between total liabilities and shareholder’s equity.

At June 30, 2012 and December 31, 2011, the Company recorded the attribution of the NCI net loss and other comprehensive income according to ASC 810-10-65 and performed a subsequent measurement of the probable redemption amount per ASC 480-10-S99. As of June 30, 2012 and December 31, 2011 the equity instrument is redeemable but remains below its carrying value and was nil as of December 31, 2011. Therefore, only the redemption amount assessed as of the end of the period is classified in mezzanine equity and any NCI above this amount is presented in permanent equity.

Changes in noncontrolling interest are set forth below:

During the three months and six months ended June 30, 2012, the Company’s effective tax rate was (0.6%) and (0.2%) respectively. This rate varied from the statutory rate of 34% due primarily to increases in the valuation allowance for domestic and foreign deferred tax assets which are not more-likely-than-not to be realized, losses on domestic and foreign subsidiaries with no tax benefit, state taxes and foreign rate differential. 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 three months and six months ended June 30, 2011, the Company’s effective tax rate was (0.7%) and (0.3%) respectively. This rate varied from the statutory rate of 34% due primarily to increases in the valuation allowance for domestic and foreign deferred tax assets which are not more-likely-than-not to be realized, losses on domestic and foreign subsidiaries with no tax benefit, state taxes and foreign rate differential.

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There may be insignificant levels of asbestos in certain manufacturing facilities, however, the Company does not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos. Accordingly, management did not record a conditional asset retirement obligation related to such asbestos remediation because, in accordance with the guidance of ASC 410, the Company does not have sufficient information to estimate the fair value of the asset retirement obligation.

In addition to the alloy metal leases discussed in Note 14, we also lease other equipment and property under operating leases. Total rent expense for the six months ended June 30, 2012 and 2011, was approximately $700 and $820, respectively.

We are not a party to any significant litigation or claims, other than routine matters incidental to the operation of the Company. We do not expect that the outcome of any pending claims will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Since the acquisition of AGY Asia on June 10, 2009, the Company has two reportable segments, each a separate operating segment. The AGY US segment includes the US manufacturing operations and its sales of advanced glass fibers that are used worldwide as reinforcing materials in numerous high-value applications and end-markets through AGY Holding Corp., its wholly-owned domestic and French subsidiaries. The AGY Asia segment includes the manufacturing operations of the Company’s 70% controlling interest in AGY Hong Kong Ltd. and its sales 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. The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of making internal operating decisions. We evaluate the performance of our operating segments based on operating profit. Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the operating segment.

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