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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File No. 333-72321

BGF Industries, Inc.

(Exact name of registrant as specified in its charter)

(336) 545-0011

(Registrants’ telephone number, including area code)

Securities registered pursuant to Sections 12(b) or 12(g) of the Act: None

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.    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 the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.    Yes  x    No  ¨

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

There is no established trading market for the Common Stock of the registrant. All shares of Common Stock are held by an affiliate of the registrant at March 28, 2005.

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,000 shares of common stock, $1.00 par value, as of March 28, 2005.

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BGF INDUSTRIES, INC.

ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2004

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PART I

Cautionary Statement Regarding Forward-Looking Statements

Some of the information in this Annual Report may contain forward-looking statements. These statements include, in particular, statements about our plans, strategies and prospects within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved. Such statements are based on our current plans and expectations and are subject to risks and uncertainties that exist in our operations and our business environment that could render actual outcomes and results materially different from those predicted. When considering such forward-looking statements, you should keep in mind the following important factors that could cause our actual results to differ materially from those contained in any forward-looking statements:

This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in this Annual Report and in other reports and registration statements we file with the Securities and Exchange Commission. All forward-looking statements attributable to us or persons acting for us are expressly qualified in their entirety by our cautionary statements.

We do not have, and expressly disclaim, any obligation to release publicly any updates or changes in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based.

Item 1. Business

General

Our business focuses on the production of value-added specialty woven and non-woven materials made from glass, carbon, and aramid fibers. In both revenue and market share, we believe we are the second largest manufacturer of glass fiber fabrics in North America and a leading producer of other high performance fabrics and value-added parts. Our materials are a critical component in the production of a variety of products finding their way into such markets as filtration, advanced composites, ballistics, thermal insulation, electronics, and construction. Our products bring to our customers many desirable features such as flame resistance, dimensional stability, tensile strength, ballistic properties, and thermal and acoustical insulation. In the course of our normal operations, we are engaged in various related party transactions. See item 13 for further clarification.

BGF is a Delaware corporation and is an indirect, wholly owned subsidiary of Porcher Industries, S.A. Our headquarters are located at 3802 Robert Porcher Way, Greensboro, North Carolina, 27410, and our telephone number is (336) 545-0011. Our website address is http://www.bgf.com. Our website also provides a link to reports and other documents that we file or furnish with the Securities and Exchange Commission.

Limited Number of Domestic Producers. We are one of a limited number of major domestic manufacturers of glass fiber fabrics. Our major competitors in the global glass fabric weaving industry are Hexcel, Nitto Boseki (Japan), Nan Ya Plastics (Taiwan) and Taiwan Glass (Taiwan). We and Hexcel are the primary manufacturers based in the United States. Direct imports of glass fiber fabrics into the U.S. have been increasing and the relocation of a large segment of the electronics industry to Asia has impacted demand for domestically produced glass fiber fabrics used in printed circuit boards.

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Barriers to Entry. There are a limited number of major global suppliers of glass, carbon and aramid yarns to fabric producers such as BGF, and we have experienced supply shortages from time to time. Accordingly, we believe that it would be difficult for new competitors to ensure a constant and adequate supply of glass and carbon yarns. Additionally, the process of producing high quality glass fabric and other high performance fabrics requires extensive technological expertise and research and development capability, both of which require substantial know-how and capital compared to many less complex businesses.

Diversified Markets and Uses. The unique characteristics of our fabrics make them critical components in a variety of products manufactured for sale in the electronics, composites, filtration, commercial, insulation and construction markets. Within each of these markets, our fabrics have a variety of applications, including:

Lack of Product Substitutes. For many applications of our products, there are a limited number of economical product substitutes, if any. For example, substantially all printed circuit boards for high-end electronics applications use glass fiber fabrics. The unique properties of glass fiber also make it a critical component in high temperature filtration and insulation products. In many composite products, only glass, carbon and aramid fibers can meet the requisite strength-to-weight ratios.

Glass fiber fabrics offer an excellent combination of properties, from high strength to fire resistance. Wide ranges of yarn sizes and weave patterns provide broad design potential, enabling customers to choose the best combination of material performance, economics and product flexibility. Carbon fiber fabrics possess many of the same characteristics of glass fiber fabrics and provide higher strength and lighter weight in the products in which they are incorporated. Aramid fiber fabrics also share many of the same characteristics as glass fiber fabrics and are lighter in weight and provide greater impact resistance in the products in which they are incorporated.

Business Strategy

Our goal is to be the preferred supplier to markets that require a technically complex application of fabrics and nonwoven products made of glass, carbon and aramid yarns. To achieve this goal, we intend to pursue the following long-term strategies:

Capitalize on the Continued Growth of the Filtration and Composites Markets. We believe substantial opportunities exist to increase our sales and market share in both the filtration and composites markets. We intend to leverage our already strong position in the high temperature filtration market by developing new woven and non-woven high performance fabrics for environmental applications in power generation, steel mills and other industries that are subject to strict environmental regulations. In addition, we believe that there may be increased opportunities internationally in this market as lesser-developed countries adopt stricter environmental regulations. We also believe that we have substantial opportunities to increase our sales in the composites market for applications in the transportation industry. In the composites market, we are pursuing strategic relationships with key suppliers to the aerospace and automobile industries for the design and manufacture of new products.

Expand our Value-Added Production of Insulation Products. From our base as a manufacturer of non-woven fiberglass materials, we have introduced a number of value-added products that provide thermal and/or acoustical insulation properties. These products are being utilized in the automotive exhaust and appliance markets. We believe these markets offer excellent growth potential. We plan to continue to expand our capabilities in these processes to provide the required solutions for our customers.

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Expand Market Share in the Protective Markets. In 2004, we entered into the production of materials for protection of personnel and vehicles from ballistic threats. This is a natural outgrowth of our manufacturing expertise with fiber glass and aramid fibers. We have successfully supplied materials that are used to produce rigid armor such as that used to protect military vehicles. We have also begun to supply materials for personal body armor. Demand has been quite strong due to the needs of the military, but we see this area as an ongoing growth opportunity for homeland security as well.

Focus on Profitable Lightweight Fabrics for the Multi-Layer Printed Circuit Board Market. We seek to supply lightweight, specialty fabrics for the multi-layer printed circuit board market. Our internal strategy is to produce the highest quality, most technically challenging materials. In addition, we have the capability to supplement our production with material produced at Porcher Industries’ Asian affiliate.

Develop New Applications for Fabrics. We plan to continue to leverage the technical expertise and experience of our research and development and sales and marketing staff to develop new applications for existing fabrics and to develop new fabrics that meet customer requirements for strength, weight, fire resistance and durability. We believe that many opportunities exist to continue to develop both woven and non-woven fabrics to replace traditional materials in markets which have historically not utilized the fabrics we produce.

Products and Markets

We sell our products primarily in the United States and focus on the following markets:

Commercial. Our glass fiber fabrics are used in commercial applications where fire resistance and dimensional stability are critical. Applications for these products include ceiling tile and acoustical facing fabrics, window coverings and movie screens. Sales of our commercial fabrics were $9.3 million and $9.4 million in 2004 and 2003. These sales represented 5.8% and 7.5% of our net sales in 2004 and 2003, respectively. Sales of commercial products has remained consistent from 2003 to 2004.

Composites. Our glass, carbon and aramid fiber fabrics are used in various applications, including structural aircraft parts and interiors. Net sales of fabrics for composites were $48.0 million in 2004 and $42.3 million in 2003. These sales represented 30.8% and 33.8% of our net sales in 2004 and 2003, respectively. This increase is the result of market share gains and increased activity in commercial and civil aviation.

Construction. The fire resistant qualities of glass fiber fabrics make them a critical component of products used in the construction industry. Applications for these products include smoke and fire barrier curtains, drywall bonding tape, rubber mat backing and fabric structures, such as commercial tents and roofs. Sales of our construction fabrics were $8.6 million and $3.8 million in 2004 and 2003, respectively. These sales represented 5.5% and 3.0% of our net sales in 2004 and 2003, respectively. The increase in sales of construction products is due to a new product introduction, which brings improved performance to the customer product line.

Electronics. We produce glass fiber fabrics for multi-layer and rigid printed circuit boards for use in the electronics industry. Sales of glass fabrics to the electronics industry were $53.8 million in 2004 and $31.0 million in 2003. These sales represented 21.7% and 24.8% of our net sales in 2004 and 2003, respectively. The increase in sales of our electronics products reflects an increase in market demand in 2004 from abnormally low demand in 2003.

Filtration. We produce fabrics for high temperature dust filtration used by industrial customers to control emissions into the environment. Our filtration bags are sold to utilities, producers of asphalt and carbon black, cement plants and steel mills. Sales of our filtration fabrics were $28.7 million in 2004 and $27.3 million in 2003. These sales represented 18.3% and 21.8% of our net sales in 2004 and 2003, respectively. The increase in sales of filtration fabrics is due to a specific large utility project.

Insulation. We produce materials for high-temperature, fire-resistant insulation. Applications for these products include insulation for joints, pipes, valves, transportation exhaust systems, heat shields and home appliances. Sales of our insulation fabrics and parts were $15.5 million and $9.6 million in 2004 and 2003. These sales represented 10.0% and 7.6% of our net sales in 2004 and 2003, respectively. The increase in sales of insulation fabrics is due primarily to the development and sale of new products.

Protective. We produce protective fabrics that are used in various ballistics applications such as armored vehicles and personal protective armor. This is a new product line for us. Sales of our protective fabrics were $11.9 million in 2004 and $1.8 million in 2003, and represented 7.6% of our net sales in 2004 and 1.5% in 2003.

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Sales and Marketing

We sell our products through an experienced direct sales force of six field sales representatives, three market managers and one inside sales representatives. Our sales representatives have specific customer groups, while the market managers are responsible for specific product lines. The sales representatives are compensated on a salary and commission basis and the market managers are compensated on a salary and bonus basis. Each sales representative has a technical orientation and the necessary expertise to sell our full line of products. We maintain an internet web site, located at http://www.bgf.com, which contains extensive product information, as well as a comprehensive B2B capability for our major customers.

We have over 400 customers, including many leading companies in their respective industry segments, including Cytec Engineered Materials, Delphi Energy, GE Energy (formerly BHA), 3M Company, Ohio Armor, Saint Gobain, and W. L. Gore and Associates. We continually seek to strengthen and expand our relationships with our customers. Due to the stringent quality, delivery and performance standards demanded by many of our customers and the ultimate users of our products in various markets, our customers are increasingly moving toward collaborative agreements among fabric producers, such as BGF, and their own customers. We believe that we are well positioned to benefit from this trend because of our strong competitive position within the industry, our investment in technical and manufacturing expertise and our long-term relationships with customers and suppliers. Our markets remain competitive, however, and this competitiveness is exemplified by continual and rapid technological change. To effectively compete, we must effectively process and utilize extensive technological and manufacturing capabilities. We could face further competition if cost effective alternatives to glass, carbon or aramid fiber fabrics are developed.

One of our customers, Cytec Engineered Materials, accounted for 14.4% and 17.0% of our net sales in 2004 and 2003, respectively. Our top ten customers in 2004 and in 2003 accounted for 42.1% and 44.7% of our net sales, respectively. Our customers are not contractually required to purchase any of our products and may terminate their relationship with us at any time.

Industry Segments

We operate in one business segment that manufactures specialty woven and nonwoven fabrics for use in a variety of industrial and commercial applications. The nature of the markets, products, production processes and distribution methods are similar for substantially all of our products.

Research and Development

We maintain a modern, well-equipped research and development facility, located at our headquarters in Greensboro, North Carolina, that divides its efforts among developing new products and improving current products. The research and development facility is divided into seven state-of-the-art laboratories focusing on the following strategic areas of product development:

We have several United States patents, patent applications and trademarks. While we consider our patents to be valuable assets, we do not believe that our competitive position is dependent on patent protection or that our operations are dependent on any individual patent or group of related patents. However, in some instances, patents and patent protection may serve as a barrier to entry in some of our product lines, such as commercial and insulation. Our policy is to obtain patents on our new products and enforce our patent rights.

Raw Materials

The principal materials we use to manufacture our products are glass, aramid and carbon yarns. We purchase yarns from AGY, Inc., Cytec Carbon Fibers, Dupont Company and PPG Industries. AGY, Inc. (“AGY”) is an affiliated company. AGY filed for protection under Chapter 11 of the US Bankruptcy Code on December 10, 2002. On April 2, 2004, AGY emerged from bankruptcy. We have not experienced any interruptions in our supply of materials from AGY. As part of AGY’s reorganization,

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AGY’s glass yarn operation at our South Hill lightweight fabrics facility was closed effective September 30, 2004 and our supply agreement with AGY, relating to this facility, was terminated. The closing of this facility has not affected our raw material supply. Porcher Industries, which owns BGF through NVH, Inc., a US holding company, previously owned a 51% interest in AGY. In conjunction with AGY’s emergence from bankruptcy in April 2004, Porcher Industries indirectly received a 15% interest in the newly emerged AGY entity, AGY Holding Corp., in exchange for entering into a supply agreement with AGY Holding Corp. through December 31, 2006. The supply agreement provides BGF with an economic incentive, but not an obligation, to purchase yarn from AGY. Currently, our main suppliers of carbon yarns are Toray, Toho and Cytec Carbon Fibers and our main supplier of aramid yarns is DuPont.

Employees

As of December 31, 2004, we employed approximately 880 full time and part time employees, 707 of which are hourly employees and 173 of which are paid on a salary basis. All of our employees are located in the United States. None of our employees are represented by a labor union. As part of our restructuring plan, we closed our South Hill heavyweight fabrics facility, effective October 1, 2002, and consolidated operations into our newly constructed South Hill multilayer facility to reduce excess capacity. This resulted in a reduction of our wage and salary workforce by approximately 10% in 2002. We incurred a pre-tax restructuring charge of $0.3 million in August 2002 related to severance payments to the employees at this facility.

During the first quarter of 2005, we eliminated nine salary positions at our South Hill lightweight fabrics facility, which will result in the payment of approximately $0.4 million of non-recurring severance costs in the second quarter of 2005.

Environmental and Health Matters

We are engaged in an Environmental Protection Agency (“EPA”)-supervised Voluntary Remediation Program at our Altavista facility, to address reportable quantities of polychlorinated biphenyls (“PCBs”) discovered during a 1998 environmental site assessment at the former site of a heat transfer oil tank that the previous owner of the facility had removed before BGF’s 1988 acquisition. A 1998 Phase Two Environmental Site Assessment revealed PCB contamination in several areas inside the plant and on its roof, in the soil, in the sanitary and storm sewers within the plant, and in the surface waters to which the storm sewers drain. In addition, testing confirmed that measurable quantities of PCBs may have migrated into the City of Altavista’s water treatment plant.

In 2003, we submitted to the EPA a final Site Characterization Report (“SCR”) documenting the assessment of the BGF property and the creek that drains from the property. In May 2004, the EPA approved the SCR and described acceptable steps for a multi-phased clean-up of the site. We are in the process of drafting a two-phase clean-up plan, consistent with the EPA’s directions. In 2004, we submitted to the EPA a draft plan for Phase I, addressing cleanup around the site. We are currently developing revisions to the Phase I plan and expect to submit an updated plan to the EPA in mid-2005. We will submit a plan for Phase II, addressing the creek areas, after receiving EPA approval for the Phase I cleanup plan. At this time, we are unable to determine if there will be a financial impact on us – that is different from our current established reserves.

A 1998 Phase Two Environmental Site Assessment at our Cheraw, South Carolina facility revealed reportable levels of chlorinated solvents and hydrocarbons in soil and groundwater. The contamination resulted from the previous owner’s printing operations. Assessment and cleanup are regulated by South Carolina’s DHEC, which notified us that the chlorinated solvent residuals constitute the sole remediation concern. With DHEC oversight and approval, we are pursuing a Monitored Natural Attenuation strategy, which includes periodic groundwater monitoring. Recent tests show reduced levels of solvent concentrations.

As of December 31, 2004 and December 31, 2003, we had reserves of $2.7 million for environmental exposure. The reserves reflect the estimated remediation costs for the Altavista facility, as obtained from the environmental consulting firm that conducted the site assessment and submitted the SCR to the EPA. Remediation costs are estimates, subject to the EPA’s approval of a remediation plan and to other factors that may arise in the remediation process. Estimated remediation costs at the Cheraw facility are $0.4 million, which also is reflected in the reserve.

As the cleanup progresses, we may need to revise these reserves but we are unable to derive a more precise estimate at this time, as actual costs remain uncertain. We do not anticipate significant cash outflows associated with this liability in the next twelve months, as we must await the EPA’s approval of the final remediation plan. However, there can be no assurance that we will not be required to respond to our environmental issues on a more immediate basis and that such response, if required, will not result in significant cash outlays that would have a material adverse effect on our financial condition.

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Item 2. Properties

We own and/or lease four manufacturing facilities, a research and development facility, corporate offices, a distribution center and several warehouses. We believe that these facilities are suitable for manufacturing the products we offer and have capacities appropriate to meet existing production requirements. The following table sets forth a description of our facilities as of December 31, 2004.

In October 2002, we closed our South Hill, Virginia heavyweight fiber fabrics facility and consolidated operations with our South Hill, Virginia lightweight fiber fabrics facility. The completion of 136,000 square feet of additions to our lightweight fiber fabrics facility has been delayed until market conditions improve. In September 2004, we designated the land and building at the South Hill heavyweight facility as an asset held for sale. These assets have a net book value as of December 31, 2004 of $0.3 million and have been reclassified as other current assets.

In October 2003, we entered into a lease in Altavista, Virginia for additional warehousing space. In 2004, we converted part of this space into a new manufacturing facility in order to expand capacity for our non-woven fabric products. We also plan to consolidate several of our other leased warehouses into this new warehouse.

In November 2002, we sold our Greensboro, North Carolina facility and entered into a lease agreement. Under this lease agreement, we have an option to repurchase this facility.

Item 3. Legal Proceedings

We are a party to various legal proceedings arising in the ordinary course of business. None of these proceedings are expected to have a material adverse effect on our business, financial condition, liquidity or results of operations. See also “Item 1. Business—Environmental and Safety and Health Matters.”

Item 4. Submission of Matters to a Vote of Security Holders

None

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PART II

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

There is no established trading market for BGF’s common stock. All shares of BGF’s issued and outstanding common stock are held by NVH, Inc., which is a wholly owned subsidiary of Nouveau Verre Holdings, Inc., which is a wholly owned subsidiary of Porcher Industries, S.A.

We did not declare any dividends or make any distributions on our common stock in 2004 Further, we have no commitment or current plans to make dividends or other distributions in 2005 and our financing obligations restrict our ability to pay dividends or other distributions.

We have no equity compensation plans and have not repurchased any of our equity securities.

Item 6. Selected Financial Data

The following table sets forth certain selected financial information derived from our audited consolidated financial statements for the five-year period ended December 31, 2004. The table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes and other financial information included elsewhere in this Report.

We have restated our results for 2003. This restatement is due to an adjustment relating to the accounting in 2003 for a sale and leaseback of our corporate headquarters facility located in Greensboro, North Carolina. The transaction was accounted for as a financing under the provisions of FAS 98 “Accounting for Leases.” In our previously reported financial statements, the amortization of the financing obligation utilized the initial 7 year term of the agreement and an effective interest rate of approximately 4% which was causing the obligation to be amortized faster than the related assets were being depreciated, resulting in a built in loss on the property. We discussed our accounting for the transaction with our independent registered public accounting firm at the time of the transaction. We have now determined that the amortization of the financing obligation should be over the entire 22-year term of the agreement, which includes the renewal option periods, at an effective interest rate of 18%. This adjustment resulted in an increase of $400,000 in interest expense for 2003 and an increase of $100,000 in interest expense for each of the first three quarters of 2004. We have discussed our revised accounting and the related adjustments with our independent registered public accounting firm. See Note 17 to our consolidated financial statements for further discussion of this restatement.

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

The following discussion should be read together with our consolidated financial statements and related notes contained in this Report. The forward-looking statements under this section are subject to risks and uncertainties that exist in our operations and business environment. See Part 1, “Cautionary Statement Regarding Forward-Looking Statements.”

We have restated our results for 2003. This restatement is due to an adjustment relating to the accounting in 2003 for a sale and leaseback of our corporate headquarters facility located in Greensboro, North Carolina. The transaction was accounted for as a financing under the provisions of FAS 98 “Accounting for Leases.” In our previously reported financial statements, the amortization of the financing obligation utilized the initial 7 year term of the agreement and an effective interest

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rate of approximately 4% which was causing the obligation to be amortized faster than the related assets were being depreciated, resulting in a built in loss on the property. We discussed our accounting for the transaction with our independent registered public accounting firm at the time of the transaction. We have now determined that the amortization of the financing obligation should be over the entire 22-year term of the agreement, which includes the renewal option periods, at an effective interest rate of 18%. This adjustment resulted in an increase of $400,000 in interest expense for 2003 and an increase of $100,000 in interest expense for each of the first three quarters of 2004. We have discussed our revised accounting and the related adjustments with our independent registered public accounting firm. See Note 17 to our consolidated financial statements for further discussion of this adjustment.

Overview

Our business focuses on the production of value-added specialty woven and non-woven fabrics made from glass, carbon and aramid yarns. Our fabrics are a critical component in the production of a variety of electronic, filtration, composite, insulation, protective, construction and commercial products. Our glass fiber fabrics are used by our customers in printed circuit boards, which are integral to virtually all advanced electronic products, including computers and cellular telephones. Our fabrics are also used by our customers to strengthen, insulate and enhance the dimensional stability of hundreds of products that they make for their own customers in various markets, including aerospace, transportation, construction, power generation and oil refining. In line with our strategy of continued new product development, we realized 17% of our sales in 2004 from products that are new within the last three years.

In 2004, we have continued to operate in our restructured environment that resulted from a significant deterioration of our business in 2002. The South Hill heavyweight fabrics facility has remained closed and is now being held for sale. We have continued our efforts to maintain a level of inventory that is consistent with our sales level and maximize our asset utilization. Overall sales increased $30.7 million to $155.8 million in 2004 compared to a decrease in sales of $5.8 million from 2002 to 2003. The increase in sales from 2003 to 2004 is mainly the result of increased demand for our electronics fabrics as well as sales of new products for the automotive and ballistics industries. In addition, our profitability improved with gross margins increasing from 14.1% in 2003 to 16.5% in 2004. These factors directly impacted our net income, resulting in an increase in net income of $5.3 million to a net income of $1.9 million in 2004 from a net loss of $(3.4) million in 2003.

In July 2004, our previous parent, Glass Holdings, converted to a limited liability company, Glass Holdings LLC, and subsequently distributed its stock in BGF to NVH, Inc., a 100% owned subsidiary of Nouveau Verre Holdings, Inc., which is a 100% owned subsidiary of Porcher Industries. This transaction had no effect on our operations.

On June 6, 2003, we obtained a five-year financing arrangement with Wells Fargo Foothill, Inc. (“WFF”), formerly Foothill Capital Corporation. The loan with WFF (“WFF Loan”) is for a maximum revolver credit line of $40.0 million with a letter of credit (“L/C”) sub-line of $4.0 million, an inventory sub-line of $15.0 million and a term loan sub-line of $6.0 million, of which the principal is amortized over 60 months. WFF has a first priority, perfected security interest in our assets. The WFF Loan provides for the following: (1) a borrowing base with advance rates on eligible accounts receivable and eligible finished goods and raw materials inventory of 85%, 45% and 35%, respectively, with inventory to be capped at the lesser of the eligible inventory calculation, $15.0 million or 80% of the net orderly liquidation value; (2) borrowing rates of LIBOR + 3.25% or the Wells Fargo Prime Rate (RR) + 1.00% for the revolver with a 50 basis points increase if outstanding advances exceed $7.0 million and of LIBOR + 3.5% or RR + 1.00% for the term loan with, at all times, a minimum rate of 5% for both facilities; (3) certain financial covenants including (i) a minimum excess availability at all times, (ii) a minimum trailing twelve month EBITDA level (iii) a cap on yearly capital expenditures; and (4) an early termination fee of 5% in year one decreasing by 1% each year thereafter. The WFF loan was amended effective July 2004 whereby the $2.0 million limitation on yearly capital expenditures is now set at the lesser of (a) $5.0 million or (b) the last twelve months cumulative EBITDA less $16.0 million times 50% plus $2.0 million.

We are currently negotiating an amendment to the WFF Loan. This amendment would effectively increase our total borrowing availability by approximately $5.0 million. The amendment would provide for the following: (1) reduce the maximum facility size to $25.0 million; (2) reload the term loan back to $6.0 million; (3)increase the advance rate on finished goods inventory from 45% to 55% and (4) extend the contract termination by one month. There can be no assurance that the proposed amendment will be approved by WFF.

The WFF Loan proceeds are used to finance ongoing working capital, capital expenditures, and general corporate needs and to retire other outstanding debt. The WFF Loan is guaranteed by our parent, Glass Holdings. As of December 31, 2004 and 2003, amounts outstanding under the WFF Loan totaled $10.6 million and $5.4 million, respectively, consisting of $6.5 million on the revolver and $4.1 million on the term loan at December 31, 2004 and $5.4 million on only the term loan at December 31, 2003. The interest rate on the WFF Loan at December 31, 2004 and 2003 was 6.25% and 5.0%, respectively.

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AGY, Inc. ( previously Advanced Glassfiber Yarns, LLC) is a major supplier to us. AGY, Inc. (“AGY”) filed for protection under Chapter 11 of the US Bankruptcy Code on December 10, 2002. On April 2, 2004, AGY emerged from bankruptcy. We have not experienced any interruptions in our supply of materials from AGY. As part of AGY’s reorganization, AGY’s glass yarn operation at our South Hill facility was closed effective September 30, 2004 and our supply agreement, relating to this facility was terminated. The closing of this facility has not had a material impact on our raw material supply. Porcher Industries, which owns BGF through NVH, Inc., a US holding company, previously owned a 51% interest in AGY. In conjunction with AGY’s emergence from bankruptcy in April 2004, Porcher Industries indirectly received a 15% interest in the newly emerged AGY entity, AGY Holding Corp., in exchange for entering into a supply agreement with AGY Holding Corp. through December 31, 2006. The supply agreement provides BGF with an economic incentive, but not an obligation, to purchase yarn from AGY.

During the first quarter of 2003, our previous parent, Glass Holdings, received a tax refund related to the filing of the 2002 consolidated tax return. In March 2003, $15.6 million of this tax refund was remitted to BGF, of which $9.6 million was applied to the loan receivable from Glass Holdings. The remaining balance of $6.0 million reduced our income tax receivable. An additional $0.5 million from Glass Holdings was received in January 2003 and another $0.5 million in June 2003. These amounts were applied against the loan receivable. During the second quarter of 2004, Glass Holdings paid us an additional $0.3 million. This amount also applied against the loan receivable. Subsequent to receipt of this payment, the unpaid principal balance on the loan receivable totaled $97.7 million. In July 2004, the note receivable was cancelled. Because we had previously fully reserved the unpaid principal balance of the note in 2002, there was no financial statement impact as a result of the cancellation.

While our performance in 2004 has been consistent with our restructured business plan, there can be no assurance that we will be able to continue to generate sufficient operating cash flow to fund our operations and interest payments on our Senior Subordinated Notes or that we will be able to continue to meet the financial covenants and make required loan payments under the WFF loan.

Critical Accounting Policies

We have selected accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial position, and we apply those accounting policies in a consistent manner. The significant accounting policies are summarized in Note 1 to the consolidated financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants, engineers, lawyers and actuaries to assist in our evaluation. We believe the following accounting policies are the most critical because they involve the most significant judgments and estimates used in preparation of our consolidated financial statements:

Our methodology recognizes projected inventory losses at the time such losses are anticipated rather than at the time goods are actually sold. The adequacy of this estimate is dependent on a number of future factors, including, but not limited to, the state of the economy and the level of customer demand. These factors could cause our inventory reserve to change by a material amount in the near term. During 2002, as a result of a significant decline in the markets in which we operate, we recorded a $5.6 million charge to cost of goods sold to write-down excess and obsolete inventory to the lower of cost or market value. There was no similar charge in 2003 and 2004.

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One of the critical assumptions in the actuarial model that is used to calculate our annual pension expense is the discount rate. The rate we use is based on market rates for highly rated corporate debt instruments at our annual valuation date. The discount rate is used to estimate the present value of our future benefit obligation as of the valuation date. A lower discount rate used in the actuarial model has resulted in a higher present value of benefit obligations and in a higher pension expense and changes in other comprehensive income as of and for the years ended December 31, 2004 and 2003. Differences between actual results and actuarial assumptions are accumulated and amortized over future periods. In recent periods, actual results have varied significantly from actuarial assumptions, as our pension plan assets have declined due to the overall decline in the securities markets and our pension plan liabilities have increased as a result of the decline in the discount rate.

We have a postretirement benefit plan that covers substantially all of our employees. Upon attainment of age fifty-five and ten years of continuous service, an employee may elect to retire. Employees eligible to retire may choose to purchase postretirement health benefits, including medical and dental coverage. Critical assumptions used in the actuarial calculation of our postretirement benefit obligation include the discount rate and the assumed health care cost trend rate, see Note 12 of the consolidated financial statements.

We have deferred compensation arrangements for certain key executives, which generally provide for payments upon retirement or death. A portion of these obligations are funded through life insurance contracts on behalf of the executives participating in these arrangements. Critical assumptions used in the calculation of the ultimate liability under these deferred compensation arrangements include future increases in salary and discount rate.

Due to the decision in the fourth quarter of 2004 to sell the South Hill heavy-weight fabrics facility and the current outlook in the electronics market, we undertook an analysis of our long-lived assets held at that facility and compared the net book value of those assets to the estimated fair market value. As a result, we determined that an impairment of machinery and equipment used in our South Hill heavyweight fabrics manufacturing facility had occurred and recorded a $0.5 million write-down in 2004 to reduce the carrying value of machinery and equipment to its estimated fair value based on prices for similar assets. This charge is recorded as an asset impairment charge on the accompanying 2004 consolidated statement of operations.

As noted above, we have designated the land and building at the South Hill heavyweight facility as an asset to be sold. These assets have a net book value as of September 30, 2004 of $0.3 million and have been reclassified as other current assets. There were no impairment charges in 2003. We recorded an asset impairment charge relating to this facility of $5.8 million during 2002.

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Results of Operations

The following table summarizes our historical results of operations as a percentage of net sales for the years ended December 31, 2004, 2003 and 2002:

Adjusted EBITDA (“EBITDA”) herein is defined as net income (loss) before interest expense, taxes, depreciation, amortization, extraordinary loss and non-recurring charges. We believe EBITDA is a useful financial performance measure of adjusted earnings for us and is a complement to net income and other financial performance measures provided in accordance with GAAP. We use EBITDA to measure the financial performance of our business because it excludes expenses such as depreciation, amortization, taxes and interest expense, which are not indicative of operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our operations. By excluding depreciation and amortization expense, which can vary from asset to asset based on a variety of factors unrelated to our financial performance, we can more accurately assess the financial performance of our business. Our lenders also use EBITDA as a measure of our performance and covenant compliance.

However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as calculated by us, may not be comparable to EBITDA reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent net income (loss) and should not be considered as an alternative to operating income or net income determined in accordance with GAAP. EBITDA does not represent cash flows from operating activities determined in accordance with GAAP, and should not be considered as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. The following table provides a reconciliation of Adjusted EBITDA to net income:

Fiscal Year 2004 Compared to Fiscal Year 2003 (As restated)

Net Sales. Net sales increased $30.7 million, or 24.6%, to $155.8 million in 2004 from $125.1 million in 2003.

Sales of protective fabrics, which are used in various ballistics applications, increased $10.0 million for the year ended December 31, 2004 as compared to the year ended December 31, 2003, due to the development and sale of new products.

Sales of composite fabrics, which are used in various applications, including structural aircraft parts and interiors, increased $5.7 million or 13.5%, for the year ended December 31, 2004 as compared to the year ended December 31, 2003 due to market share gains and increased activity in commercial and civil aviation.

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Sales of our construction fabrics increased $4.8 million, or 126.3%, for the year ended December 31, 2004 as compared to the year ended December 31, 2003 due to a new product introduction, which brings improved performance to the customer product line.

Sales of our insulation fabrics and parts, used for high temperature products, increased $5.9 million, or 62.7%, for the year ended December 31, 2004 as compared to the year ended December 31, 2003 due primarily to the development and sales of new products for the automotive and appliance markets.

Sales of our electronics fabrics used in multi-layer and rigid printed circuit boards, coated fabrics and specialty electronic tapes increased $2.9 million, or 9.4%, for the year ended December 31, 2004 as compared to the year ended December 31, 2003 due to a general worldwide improvement in demand in 2004 from abnormally lower demand in 2003.

Sales of our filtration fabrics used by industrial customers to control emissions into the environment increased $1.4 million, or 5.1% for the year ended December 31, 2004 as compared to the year ended December 31, 2003 due to a specific large utility project.

Gross Profit. Gross profit margins increased to 16.5% in 2004 from 14.1% in 2003 due primarily to successful cost reductions and higher capacity utilization allowing for better absorption of fixed costs as well as a more favorable product mix.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $2.3 million to $10.7 million, or 6.9% of net sales, from $8.5 million or 6.8% of net sales, in 2003. This was primarily due to an increase in consulting and professional fees as well as an increase in employee benefits and sales commissions.

Asset Impairment Charges. In 2004, we recognized a $0.7 million asset impairment charge related to machinery and equipment held at our South Hill heavyweight fabrics facility. A portion of the related equipment was sold to an affiliate during the fourth quarter of 2004. In 2003, we had no asset impairment charges.

Operating Income. As a result of the aforementioned factors, operating income increased $5.0 million to $14.2 million, or 9.1% of net sales, in 2004 from $9.2 million, or 7.3% of net sales, in 2003.

Interest Expense. Interest expense decreased $1.8 million to $12.0 million, or 7.8% of net sales, in 2004 from $13.8 million, or 11.0% of net sales, in 2003, due to lower average borrowings in 2004 as compared to 2003, partially offset by the write-off of $1.4 million of net debt issuance costs in 2003 compared to $0.2 million in 2004.

Other Income (Loss), Net. Other income (loss) decreased $1.5 million to $(0.3) million in 2004 from $1.2 million in 2003. In 2004 we had a loss on extinguishment of debt of $0.2 million due to the purchase of $9.0 million of Senior Subordinated Notes. In 2003, we had a gain on extinguishment of debt of $1.2 million due to the purchase of $4.3 million of Senior Subordinated Notes.

Income Tax Expense (Benefit). The effective tax rate in 2004 and 2003 were 0.7% and 0.0%, respectively. Due to the fact that we have a full valuation allowance against our deferred tax assets, we did not realize a tax benefit for the years ended December 31, 2004 and December 31, 2003. We incurred minimal state tax expense in 2004.

Net Income (Loss). As a result of the aforementioned factors, net income (loss) increased $5.3 million to net income of $1.9 million from a net loss of $3.4 million in 2003.

Fiscal Year 2003 (as Restated) Compared to Fiscal Year 2002

Net Sales. Net sales decreased $5.8 million, or 4.4% to $125.1 million in 2003 from $130.9 million in 2002.

Sales of glass, carbon and aramid fibers used in various composite materials increased $1.0 million during 2003 as compared to 2002 due to an increase in market share.

Sales of fabrics used in filtration products increased $4.2 million, or 18.0% due to an increase in demand for filtration bags.

Sales of electronics fabrics used in multi-layer and rigid printed circuit boards decreased $9.1 million, or 22.7%, primarily as a result of lower demand in the electronics industry that continued throughout 2002 and 2003. In addition, the decrease in capital spending in the information technology and telecommunications industry has led fabricators of printed circuit boards to reduce production, thus negatively impacting our sales to these customers.

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Gross Profit. Gross profit margins increased to 14.1% in 2003 from 1.9% in 2002. During 2003, we had successful cost reductions and lower raw material prices. During 2002, we incurred charges to cost of goods sold of $5.6 million to increase inventory reserves and a settlement charge for the retirement plan of $1.4 million, of which $0.9 million was allocated to cost of goods sold.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $5.3 million to $8.5 million or 6.8% of net sales, in 2003 from $13.8 million, or 10.5% of net sales, in 2002. This was primarily due to a decrease from 2002 in legal, professional and consulting fees associated with restructuring our operations of $3.4 million. In addition, in 2002, we incurred a settlement charge for the retirement plan of $1.4 million, of which $0.5 million was allocated to selling, general and administrative expenses. In 2002, we also increased our environmental reserve by $2.0 million for estimated remediation costs at our Altavista, Virginia facility.

Restructuring Charge. In 2003, we had no restructuring charges. In 2002, we accrued a restructuring charge of $0.3 million related to the severance payments to the employees of our South Hill heavyweight fabrics facility.

Asset Impairment Charges. In 2003, we had no asset impairment charges. During 2002, we recorded a $1.0 million impairment charge on the sale of equipment to an affiliate and a $4.7 million impairment charge on machinery and equipment at our South Hill heavyweight fabric manufacturing facility.

Operating Income. As a result of the aforementioned factors, operating income increased $26.6 million to $9.2 million, or 7.3% of net sales, in 2003 from $(17.4) million, or (13.2)% of net sales, in 2002.

Interest Expense. Interest expense decreased $0.1 million to $13.8 million, or 11.0% of net sales, in 2003 from $13.9 million, or 10.6% of net sales, in 2002, due to lower interest rates on the senior debt combined with lower borrowings in 2003, partially offset by write-offs of debt issuance costs in 2003 of $1.4 million.

Other Income (Loss), Net. Other income (loss) increased $98.9 million to $1.2 million in 2003 from a loss of $97.7 million in 2002. In 2003, we had a gain on extinguishment of debt of $1.2 million due to the purchase of $4.3 million of our Senior Subordinated Notes. As a result of AGY’s bankruptcy filing, and consequently the financial condition of AGY Holdings, evaluations of the potential impairment of the loan from Glass Holdings to AGY Holdings and the similar loan from BGF to Glass Holdings were performed. During 2002, based on the then-current tax positions of the three companies and the insolvency of AGY Holdings, it was determined that a reserve should be recorded against BGF’s loan to Glass Holdings. Accordingly, BGF recorded a reserve of $97.7 million during 2002. This reserve remained in effect as of December 31, 2003.

Income Tax Expense (Benefit). The effective tax rate in 2003 and 2002 were 0.0% and 5.3%, respectively. These rates differ from federal statutory rates primarily due to valuation allowances on deferred tax assets.

Cumulative Effect of Change in Accounting Principle. We adopted SFAS No. 142 effective January 1, 2002 and recorded a non-cash charge of $4.7 million for impairment of goodwill in 2002.

Net Loss. As a result of the aforementioned factors, net loss decreased $137.2 million to a loss of $3.4 million in 2003 from $140.6 million loss in 2002.

Balance Sheets – December 31, 2004 Compared to December 31, 2003 (as restated)

Accounts Receivable. Accounts receivable increased $3.4 million, or 25.5%, from December 31, 2003 to December 31, 2004. This increase was a result of increased sales.

Inventory. Inventory increased $5.0 million, or 22.4%, from December 31, 2003 to December 31, 2004. This was mainly due to an increase in production as a result of increased sales.

Other Current Assets. Other current assets decreased $1.5 million, or 32.2%, from December 31, 2003 to December 31, 2004. This decrease was primarily the result of a decrease in current deferred income taxes and state income taxes receivable.

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Net Property, Plant and Equipment. Net property, plant and equipment decreased $4.8 million, or 10.9%, from December 31, 2003 to December 31, 2004. The net decrease is primarily the result of depreciation expense of $5.5 million, the sale of equipment to an affiliate with a net book value of $0.6 million, and an asset impairment of equipment at the South Hill heavy-weight fabrics facility of $0.7 million, partially offset by capital expenditures of $2.4 million in 2004.

There were no significant individual capital expenditures during 2004. Our forecasted capital expenditures for 2005 are approximately $3.7 million.

Accounts Payable and Accrued Liabilities. Accounts payable and accrued liabilities decreased $2.0 million, or 10.2%, from December 31, 2003 to December 31, 2004. This decrease was primarily the result of a decrease in the required minimum contribution to the retirement plan of $3.3 million from 2003 to 2004, partially offset by an increase in employee benefits.

Long Term Debt. Long-term debt decreased $10.0 million from December 31, 2003 to December 31, 2004. In 2004, we purchased $9.0 million principal amount of our Senior Subordinated Notes and made $1.2 million of principal payments on our term loan. In 2003, we paid $7.6 million on our previously existing senior credit facility, received interim financing of $10.0 million, which we subsequently paid down, and paid $5.0 million on a loan from our parent. We received a $6.0 million term loan under the WFF Facility in 2003 and made term loan payments of $0.6 million. In addition, we purchased $4.3 million principal amount of our Senior Subordinated Notes in 2003.

Post Retirement and Pension Obligations. Post retirement and pension obligations increased $0.4 million, or 7.3%, from 2003 to 2004. This increase was due to an increase in the long-term pension liability of $0.4 million.

Off-balance Sheet Arrangements. We currently have no off-balance sheet arrangements.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our financing arrangements. Our future need for liquidity will arise primarily from interest payments on the $86.0 million principal amount of our outstanding Senior Subordinated Notes ($86.7 million net of unamortized discount of $0.7 million), principal and interest payments on the WFF Loan, and the funding of capital expenditures and working capital requirements. There are no mandatory payments of principal on the Senior Subordinated Notes scheduled prior to their maturity in January 2009. Based upon our current and anticipated levels of operations, we believe, but cannot guarantee, that our cash flows from operations, together with availability under the WFF financing arrangement, will be adequate to meet our liquidity needs for the next twelve months. However, this forward-looking statement is subject to risks and uncertainties. See Part 1, “Cautionary Statements Regarding Forward-Looking Statements”.

On June 6, 2003, we entered into a five-year financing agreement with Wells Fargo Foothill (“WFF) that is for a maximum revolver credit line of $40.0 million with a letter of credit (“L/C”) sub-line of $4.0 million, an inventory sub-line of $15.0 million and a term loan sub-line of $6.0 million of which the principal is amortized over 60 months. The WFF loan was amended effective July 2004 whereby the $2.0 million limitation on yearly capital expenditures is now set at the lesser of (a) $5.0 million or (b) the last twelve months cumulative EBITDA less $16.0 million times 50% plus $2.0 million. The WFF Loan proceeds are used to finance ongoing working capital, capital expenditures, and general corporate needs and to retire other outstanding debt. The WFF Loan is guaranteed by our parent, NVH, Inc.

As of December 31, 2004, amounts outstanding under the WFF Loan totaled $10.6 million and consisted of $4.1 million under the term loan and $6.5 million under the revolver. As of December 31, 2003, amounts outstanding under the WFF Loan totaled $5.4 million and consisted only of the term loan. The interest rate on both the term loan and the revolver on December 31, 2004 and December 31, 2003 was 6.25% and 5.0%, respectively.

We are currently negotiating an amendment of the WFF Loan. This amendment would effectively increase our total borrowing availability by approximately $5.0 million. The amendment would provide for the following: (1) reduce the maximum facility size to $25.0 million; (2) reload the term loan back to $6.0 million; (3)increase the advance rate on finished goods inventory form 45% to 55% and (4) extend the contract termination by one month. There can be no assurance that the proposed amendment will be approved by WFF.

Availability under the revolver as of December 31, 2004 and March 21, 2005 was $6.9 million and $3.1 million, respectively. This availability has been reduced by a reserve to allow for the annual interest payments on the Senior Subordinated Notes as well as a reserve of $0.6 million for potential environmental liabilities. The reserve for interest payments is increased by $0.2 million per week and is reset to $0 when such payment is made. As of December 31, 2004 and March 21, 2005, the outstanding reserves totaled $5.3 million and $2.1 million, respectively.

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The fair value of the outstanding Senior Subordinated Notes as of December 31, 2004 and December 31, 2003 was approximately $86.8 million and $71.8 million, respectively.

In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we or our affiliates may, from time to time, purchase our Senior Subordinated Notes for cash in open market purchases, privately negotiated transactions or otherwise. Under the terms of the WFF loan, we cannot generally purchase any of our Senior Subordinated Notes if such Notes are trading at more than 80% of their face value without WFF’s prior consent. The decision to grant such consent is made by WFF in its sole and absolute discretion for each Notes purchase transaction we propose. In 2004, WFF consented to our purchases of $9.0 million (face value) of Senior Subordinated Notes for $8.7 million plus accrued interest of $0.3 million. In 2004, we entered into a consulting agreement with a financial advisor to assist in redeeming our Notes. The fees to the financial advisor associated with these purchases in 2004 amounted to $0.4 million to be paid over the course of the next four years. As part of the agreement with RSI, we are obligated to pay, on a quarterly basis 25.5% of the interest savings realized on these purchases. The liability of $0.4 million with respect to these purchases has been recorded as of December 31, 2004 and the expense applied against the gain on extinguishment of debt, thus resulting in a loss on extinguishment of debt of $0.2 million. The Senior Subordinated Note purchases were funded by a combination of cash provided by operations and borrowings under the WFF revolver.

On June 20, 2003, we purchased $1.3 million (face amount) of Senior Subordinated Notes for $0.8 million plus accrued interest of $0.1 million. This transaction resulted in a gain of $0.4 million, which was included in other income. On August 25, 2003, we purchased $3.0 million (face amount) of Senior Subordinated Notes for $2.2 million plus accrued interest. This transaction resulted in a gain of $0.8 million, which was included in other income During the second quarter of 2002, our parent, Glass Holdings, received a $6.9 million income tax refund related to the filing of the 2001 consolidated return. On August 13, 2002, this amount was remitted to us, which reduced our loan receivable from Glass Holdings. The entire amount of the refund was applied to principal amount of the loan, due to the financial condition of Glass Holdings. During the first quarter of 2003, the Company’s parent, Glass Holdings, received a tax refund related to the filing of the 2002 consolidated tax return. In March 2003, $15.6 million of this tax refund was remitted to BGF, of which $9.6 million was applied to the loan receivable from Glass Holdings. The remaining balance of $6.0 million reduced the Company’s income tax receivable. An additional $0.5 million from Glass Holdings was received during the first quarter of 2003 and was also applied against the loan receivable and during the second quarter of 2003 an additional $0.5 million was received from Glass Holdings and applied against the loan receivable.

On August 13, 2002, we borrowed $5.0 million from Glass Holdings under a loan agreement whereby the loan matured on June 30, 2003. Interest on the loan was 3.25% and was payable quarterly in arrears beginning December 2002. We repaid the loan in full upon maturity in June 2003.

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $1.1 million for 2004, compared with $8.4 million in 2003. The decrease was primarily the result of an increase in working capital requirements due to higher production levels and sales. Additionally, 2003 included the receipt of a $6.0 million federal income tax refund.

Net Cash Used in Investing Activities. Net cash used in investing activities was $2.4 million and $1.9 million in 2004 and 2003, respectively, and was the result primarily of purchases of property, plant and equipment.

Net Cash Used In Financing Activities. Net cash used in financing activities was $2.7 million for 2004 compared to $3.6 million for 2003, and was primarily the result of a reduction of purchases of our Senior Subordinated Notes.

Prior to July 2004, we had a loan receivable due from our parent company at the time, Glass Holdings. Payments received from our parent on the loan totaled $0.3 million, $10.6 million and $7.7 million in 2004, 2003 and 2002, respectively. The note receivable was cancelled in 2004.

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Contractual Obligations

Following is a summary of our contractual obligations at the end of 2004:

Outlook for 2005

The following section contains forward-looking statements about our plans, strategies and prospects during 2005. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved. Such statements are based on our current plans and expectations and are subject to risks and uncertainties that exist in our operations and our business environment that could render actual outcomes and results materially different from those predicted. When considering such forward-looking statements, you should keep in mind the important factors that could cause our actual results to differ materially from those contained in any forward-looking statements set forth under Part I, “Cautionary Statement Regarding Forward-Looking Statements.”

Looking ahead to 2005:

Related Party Transactions

See Item 13, “Certain Relationships and Related Transactions”, for a discussion of related party transactions.

Impact of Inflation

We generally attempt to pass cost increases on to our customers. Costs are affected by, among other things, inflation, and we may experience the effects of inflation in future periods. We believe, however, that inflation has not had a material impact on us during the past three years.

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151, “Inventory Costs: an Amendment to ARB No. 43” (“SFAS 151”). This statement clarifies the types of costs that should be expensed rather than capitalized as inventory. This statement also clarifies the circumstances under which fixed overhead costs, such as abnormal amounts of idle facility expense, freight, handling costs and wasted material, associated with operating facilities involved in inventory processing should be expensed or capitalized. The provisions of this statement are effective for fiscal years beginning after June 15, 2005. Consequently, we will adopt the standard in 2006. We have not completed our assessment of the impact, if any, that this statement will have on our financial position or results of operations

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Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The effects of potential changes in currency exchange rates and interest rates are discussed below. Our market risk discussion includes “forward-looking statements” and represents an estimate of possible changes in fair value that would occur assuming hypothetical future movements in interest and currency exchange rates. These disclosures are not precise indicators of expected future losses, but only indicators of reasonably possible losses. As a result, actual future results may differ materially from those presented. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Disclosure Regarding Forward-Looking Statements.”

Our financing arrangements are subject to market risks. Our Senior Subordinated Notes bear a 10.25% fixed interest rate and our WFF Loan is subject to interest rate risk. Our financial instruments are not currently subject to commodity price risk. We are exposed to market risk related to changes in interest rates on borrowings under our WFF Loan. The WFF Loan bears interest based on LIBOR or prime. When deemed appropriate, our risk management strategy is to use derivative financial instruments, such as swaps, to hedge interest rate exposures. We do not enter into derivatives for trading or speculative purposes.

The fair value of the Senior Subordinated Notes as of March 16, 2005 and December 31, 2004 was approximately $86.5 million and $88.5 million, respectively. If the interest rate on borrowings under our WFF Loan as of December 31, 2004 is 100 basis points higher or lower during 2005, our interest rate expense would be increased or decreased $0.1 million. As of December 31, 2004, we were not party to any derivative financial instruments.

Item 8. Financial Statements and Supplementary Data

See Page F-1 of the financial reports included herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

SEC rules require us to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management, our President and CFO, to allow timely decisions regarding required disclosure.

As described in Note 17 to our consolidated financial statements, we have restated our results for 2003 and for each of the first three quarters of 2004. This restatement is due to an adjustment relating to the accounting in 2003 for a sale and leaseback of our corporate headquarters facility located in Greensboro, North Carolina. The transaction was accounted for as a financing under the FAS 98 “Accounting for Leases.” The material facts relating to this sale and leaseback transaction were disclosed in our prior quarterly and annual regulatory and financial filings with the Securities and Exchange Commission and our annual reports.

Based on our evaluation of disclosure controls and procedures, as of the date of the end of the period covered by this Annual Report, our President and CFO have concluded that our disclosure controls and procedures were ineffective as a result of the restatement item discussed in the preceding paragraph. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our financial reports have been made known to management, including our President and CFO, and other persons responsible for preparing such reports and is recorded, processed, summarized and reported.

SEC rules also require us to maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Based on management’s evaluation of the restatement item described above, management has determined that a material weakness existed in our internal control over financial reporting. In response to the identified weakness, we have taken steps to strengthen our internal controls over financial reporting to prevent recurrence of the circumstances that resulted in our determination to restate our financial statements for the year ended December 31, 2003 and the first three quarters of 2004. Our new control procedures provide for preparation of a formal assessment with respect to the accounting treatment required under generally accepted accounting principles for unusual one-time transactions such as the sale leaseback transaction in 2002 and an additional level of review over the accounting for similar non routine transactions.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resources constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within BGF have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. BGF conducts periodic evaluations to enhance, where necessary, its procedures and controls.

There have been no changes in our internal controls over financial reporting during our most recent quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Certain changes which occurred after the end of such quarter are described above.

Section 404 of the Sarbanes-Oxley Act of 2002 requires non-accelerated filers, including us, to report on the effectiveness of their internal control over financial reporting in their 2006 Annual Report on Form 10-K, which we are required to file with the SEC no later than March 31, 2007. Our independent registered public accounting firm will be required to attest to that report. Our

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management is working diligently to ensure that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Item 9B. Other Information

None

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PART III

Item 10. Directors and Executive Officers of the Registrant

The names, ages and positions of our directors and executive officers as of March 28, 2005 are set forth below. Our director is also a director of NVH, Inc. and Nouveau Verre Holdings, Inc and NVH, LLC. The director is elected annually by our sole stockholder and holds office until his successor is elected and qualified or until his earlier removal or resignation

Philippe Porcher was named our Chairman of the Board and Chief Executive Officer in July 2002. Previous to that, he served as Vice Chairman since April 1998. He has also served as Vice President of Porcher Industries since March 1993. Before becoming Vice President of Porcher Industries, Mr. Porcher served as Director of Porcher Industries’ industrial division. Since 1998, Mr. Porcher has served as President of the Executive Board of Porcher Industries.

James R. Henderson was named President of BGF in May 2002. Prior to that he was Executive Vice President Sales and Merchandising since 1989. Before joining BGF, Mr. Henderson was employed for 31 years with United Merchants and Manufacturers, Inc., a company engaged in the textile business. Mr. Henderson served as the Senior Vice President of United Merchants and Manufacturers, President of their Uniglass Division, and as Chairman of the Board of United’s Marglass subsidiary in England.

Philippe R. Dorier has been our Senior Vice President, Chief Financial Officer, Secretary and Treasurer since 1993. From 1988 to 1993, he served as our Vice President International Audit. From 1984 until 1988, Mr. Dorier served as the Vice President of Finance of Babolat VS, S.A., and from 1980 until 1983, as the Administration and Finance Manager of Syva-Biomerieux S.A. Since 1998, Mr. Dorier has served as a member of the Executive Board of Porcher Industries.

Disclosure and Corporate Governance. We are an indirect, wholly owned subsidiary of Porcher Industries, S.A. As a result, we have no publicly-traded equity. However, even though we are no longer required by the Securities Exchange Act to file annual, quarterly and current reports with the SEC, the indenture governing our Senior Subordinated Notes requires us to nonetheless file such reports. According to the SEC, this means that we are a “voluntary filer.” As a result, because we are not an “issuer” for purposes of the Sarbanes-Oxley Act, many of its substantive governance reforms do not apply to us. Furthermore, since none of our securities, including our Senior Subordinated Notes, are listed for trading on any national securities exchange, we are not required to comply with any listing standards or corporate governance reforms of the New York Stock Exchange or Nasdaq.

However, because we continue to file or furnish reports with the SEC, most of the enhanced disclosure rules enacted under the Sarbanes-Oxley Act and related SEC rulemaking do apply to this annual report. Accordingly, we disclose below certain additional information regarding our corporate governance.

As permitted by Delaware law with respect to single shareholder corporations, our board consists of only one director, Philippe Porcher. Accordingly, our board has not established any board committees and does not intend to do so. Because Mr. Porcher is also our Chief Executive Officer, he would not be deemed to be an independent director. Mr. Porcher is not a “financial expert” under the SEC rules. We have not established a formal procedure whereby interested persons can communicate with our board regarding auditing matters or other issues. However, we nonetheless encourage investors and other interested parties to contact us at (336) 545-0011 with questions, comments, or requests for additional information.

We have adopted a code of conduct and ethics that applies to our chief executive officer, chief financial officer and controller. Our code of conduct and ethics can be found on our website, www.bgf.com.

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Item 11. Executive Compensation

The following table shows, for the fiscal years ended December 31, 2004, 2003, and 2002, the compensation paid to or earned by our chief executive officer and our two other most highly compensated executive officers, as of December 31, 2004 (dollars are not in thousands).

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Retirement Plans

Retirement System. The Retirement System of BGF Industries, Inc. covers substantially all employees of BGF after they have completed one year of service. Employees with five or more years of service are entitled to benefits beginning at normal retirement age. This plan also provides reduced benefits to participants electing to retire early, beginning at age 55. Participants are required to contribute three percent of covered compensation per year and interest is credited on employee contributions. In general, the normal retirement benefit is payable as an annuity. Participants may also elect a lump-sum distribution of their accrued benefit.

Normal retirement benefits are determined by reference to an employee’s “accumulated contributions.” Accumulated contributions are the sum of all required employee contributions plus interest credited on the contributions, compounded annually at the rate of 120% of the federal mid-term rate in effect under section 1274 of the Internal Revenue Code for the first month of the plan year. In general, the annual normal retirement benefit is equal to 50% of the accumulated employee contributions, plus 1.5% of employee plan compensation up to $6,600 for the plan year 1989.

The estimated annual benefits payable upon retirement at normal retirement age for the executive officers listed in the “Executive Compensation” table above is as follows: Mr. Henderson-$32,633 and Mr. Dorier- $68,735. These calculations are based on 2004 compensation, assume benefits are payable as a straight-life annuity, and assume that each individual will work until age 65. Mr. Philippe Porcher does not participate in the Retirement System.

401(k) Plan. The Employees’ Profit Sharing and Tax Savings Plan of BGF Industries, Inc. covers most employees of BGF. After completing one hour of service, employees may defer up to 50% of their compensation as defined by the plan each year, subject to Internal Revenue Code limitations. We may, in our discretion, match employees’ elective deferrals up to a specified limitation each year and may make a discretionary employer contribution for employees that have completed one year of service. All contributions are 100% vested and non-forfeitable at all times. Benefits are payable after separation from service in a lump sum in cash.

Compensation of Directors

Our director did not receive separate compensation for his services as a director in 2004.

Compensation Committee Interlocks and Insider Participation

Mr. Philippe Porcher, who serves as both an executive officer and as the sole member of the board of directors of BGF Industries, Inc., serves as the President of the Executive Board of Porcher Industries. Mr. Philippe Porcher also serves as an executive officer and chairman of the Board of Directors of NVH, Inc., Nouveau Verre Holdings, Inc., NVH, LLC, Glass Holdings, LLC and BGF Services, Inc. He also served as an executive officer of the former Glass Holdings and AGY Holdings and was the Chairman of the Board of the former Glass Holdings, AGY Holdings and AGY.

Mr. Dorier serves as an executive officer of BGF Industries, Inc. and as a member of the Executive Board of Porcher Industries, whose members are equivalent to executive officers. Mr. Dorier also serves as an executive officer and director of NVH, Inc., Nouveau Verre Holdings, Inc., NVH, LLC, and BGF Services, Inc. He also served as an executive officer of the former Glass Holdings and AGY Holdings and was a director of the former Glass Holdings, AGY Holdings and AGY.

These positions effectively create interlocks between BGF and NVH, Inc., Nouveau Verre Holdings, Inc., NVH LLC, Glass Holdings, AGY Holdings, BGF Services, and AGY. See also “Item 13. Certain Relationships and Related Party Transactions.”

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Deferred Compensation Agreements

We have entered into Deferred Compensation Agreements with our executives and we are the guarantor of Mr. Dorier’s Deferred Compensation Agreement with BGF Services. The agreements provide for both pre-retirement survivor benefits, as well as post-retirement benefits to the executive. The agreements also contain a non-competition provision. Generally, under each of the agreements, if the executive dies before the age of 65, his beneficiary or, if none, his estate will receive monthly payments for a 10-year period of an amount equal to 50% of the greater of:

This amount is decreased progressively if the executive dies after the age of 60 but before 65. The agreements also provide for post-retirement benefits in the form of:

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the beneficial ownership of BGF’s outstanding common stock as of December 31, 2004 for each person or group known to our management to be holding more than 5% of the common stock and for each director and executive officer named in the “Executive Compensation” table and all of our directors and executive officers as a group.

An asterisk in the percent of class column indicates beneficial ownership of less than 1% of the outstanding common stock.

As noted in the table, Porcher Industries indirectly owns 100% of the outstanding common stock of BGF. The address of Porcher Industries is Porcher Industries S.A., Badinières, 38300 Bourgoin-Jallieu, France.

As reflected in the graphic below the table, Mr. Robert Porcher may be deemed to beneficially own 56.05% of the outstanding capital stock of Porcher Industries, and thus Glass Holdings and BGF, through (1) his 7.22% direct ownership interest in Porcher Industries and (2) his ownership interest in Société Civile des Terres Froides. Mr. Robert Porcher’s address is c/o Porcher Industries S.A., Badinières, 38300 Bourgoin-Jallieu, France.

Mr. Robert Porcher’s 56.05% interest includes a 0.7% interest of his son, Philippe Porcher, an executive officer and sole director of BGF, in Société Civile des Terres Froides. Mr. Robert Porcher controls the voting and investment of these shares. The asterisk aside the name of Philippe Porcher represents this interest.

BGF does not have any equity compensation plans.

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Item 13. Certain Relationships and Related Transactions

We are wholly owned by Porcher Industries through NVH, Inc., a U.S. holding company. In July, 2004, our previous parent, Glass Holdings Corp., converted to a limited liability company and subsequently distributed its stock in BGF to NVH, Inc., a 100% owned subsidiary of Nouveau Verre Holdings, Inc., which is a 100% owned subsidiary of Porcher Industries, Inc. Porcher Industries owns a 15% interest in AGY, Inc., a major supplier of BGF, through Nouveau Verre Holdings, LLC., a 100% subsidiary of Nouveau Verre Holdings, Inc. Glass Holdings LLC owns 100% of BGF Services, Inc. We have ongoing financial, managerial and commercial agreements and arrangements with Porcher Industries, Glass Holdings and other wholly-owned subsidiaries of Glass Holdings, as well as other affiliates of Porcher Industries. Mr. Robert Porcher, our former Chairman of the Board and Chief Executive Officer, beneficially owns a controlling interest in Porcher Industries and Mr. Philippe Porcher, our current Chairman of the Board and Chief Executive Officer also owns an interest in Porcher Industries. See “Item 12. Security Ownership of Certain Beneficial Owners and Management.”

We pay management fees to BGF Services, Inc., a wholly owned subsidiary of Glass Holdings, that cover the periodic management services of certain Porcher Industries employees and the full time services of Philippe Dorier, our Chief Financial Officer. We also reimburse BGF Services for the costs associated with automobiles provided to Messrs. Philippe Porcher and Dorier. In connection with these arrangements with BGF Services, we incurred expenses of $1.4 million in 2004. The 2004 fee includes a one-time management fee of $0.8 million. BGF Services does not derive a profit from this arrangement and therefore these terms cannot be considered comparable to those that would be provided to third parties.

Porcher Industries and its French parent company provide general management and strategic planning advice to us in exchange for management fees that reimburse these companies for a portion of the compensation of Robert Porcher, Philippe Porcher and other employees who allocate their time among us and other Porcher Industries affiliates. In 2004, we were not billed by the parent company for management expenses. These terms cannot be considered comparable to those that would be provided to a third party.

We purchase semi-finished and finished products from Porcher Industries. We purchased $4.3 million of these products in 2004. We sell finished goods and occasionally unfinished goods directly to Porcher and its affiliates. In 2004, we billed Porcher Industries and its affiliates $0.3 million for these goods. Porcher Industries billed us for commissions for sales of its products in Asia, Europe, and Australia of $0.1 million in 2004. We believe that prices and commissions paid or received by us for these transactions are comparable to those paid to third parties.

We collect and deposit customer payments on behalf of two wholly owned subsidiaries of Porcher Industries in exchange for fees equal to 2% of amounts collected. We billed $0.01 million in fees for these services incurred in 2004. We believe that these fees are comparable to those that would be paid to third parties.

AGY Inc. leased approximately 27,200 square feet of segregated space at our South Hill, Virginia lightweight fiber fabric facility for the purpose of manufacturing glass yarns for exclusive supply to us under a supply contract that was to expire on December 31, 2008. As part of AGY’s restructuring, the glass yarn operation at the South Hill facility was closed effective October 2004 and the supply agreement with BGF was terminated. As part of the ownership restructuring, Porcher Industries (See Item 13, “Certain Relationships and Related Transactions”) entered into a supply agreement with AGY in which BGF has an incentive but is under no obligation to purchase yarn from AGY. We provided AGY with leased employees at this facility and administrative and technical support services. These services were discontinued in October 2004. We billed AGY approximately $1.2 million pursuant to this agreement in 2004. We also purchased approximately $17.2 million of raw materials from AGY in the twelve months ended December 31, 2004. We believe that each of these arrangements are on terms no more favorable than those that would be provided to third parties. Porcher Industries currently indirectly owns a 15% interest in AGY.

See also Note 16 to the consolidated financial statements filed as part of this Annual Report in Item 15.

Item 14. Principal Accountant Fees and Services

PricewaterhouseCoopers LLP has served as the independent registered public accounting firm of BGF since 1994 and is considered by our management to be well qualified. We have been advised by that firm that neither it nor any member thereof has any financial interest, direct or indirect, in us or any of our subsidiaries in any capacity. The fees shown below are in thousands of dollars.

Audit Fees. We paid PricewaterhouseCoopers LLP $155 in audit fees for services rendered in the fiscal year ended December 31, 2004 as compared to $145 in audit fees during the fiscal year ended December 31, 2003.

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Audit-Related Fees. We paid PricewaterhouseCoopers LLP $8 for audit-related services rendered in 2004 as compared to $0 in audit-related fees rendered in 2003. These audit-related services were for reviewing the accounting treatment of certain transactions.

Tax Fees. We paid PricewaterhouseCoopers LLP $30 in 2004 for tax services rendered as compared to $124 in 2003. These tax services generally included tax return preparation, tax compliance, tax planning and tax advice.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

See Index on page F-1.

See Index on page F-1.

EXHIBITS

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BGF INDUSTRIES, INC.

(a wholly owned subsidiary of NVH, Inc.)

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

of BGF Industries, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(1) on page 26 present fairly, in all material respects, the financial position of BGF Industries, Inc. and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(2) on page 26 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management, our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of the Statement of Financial Accounting Standard No. 142 “Goodwill and Other Intangible Assets” on January 1, 2002.

As discussed in Note 17, the Company’s 2003 consolidated financial statements have been restated to properly account for the sale leaseback of its corporate headquarters.

/S/ PRICEWATERHOUSECOOPERS LLP

Greensboro, North Carolina

March 25, 2005

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BGF INDUSTRIES, INC.

(a wholly owned subsidiary of NVH, Inc.)

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

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

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BGF INDUSTRIES, INC.

(a wholly owned subsidiary of NVH, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)