Net Sales

Income (loss) from operations

Net loss

Net loss attributable to AGY Holding Corp.

Non-GAAP measures:

EBITDA⁽¹⁾

Adjusted EBITDA⁽¹⁾

Adjusted EBITDA attributable to AGY Holding Corp.⁽²⁾

Adjusted EBITDA margin attributable to AGY Holding Corp.⁽³⁾

Management uses EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, to measure operating performance.

Adjusted EBITDA attributable to AGY Holding Corp. excludes the portion of Adjusted EBITDA attributable to the non-controlling interest.

Adjusted EBITDA margin attributable to AGY Holding Corp. is calculated by dividing Adjusted EBITDA attributable to AGY Holding Corp by net sales.

Consolidated net sales in second quarter 2012 of $46.5 million decreased $3.5 million, or 7.0% from the second quarter of 2011, which consists of $39.4 million of sales reported by the AGY US business segment (“AGY US”) and $7.2 million of sales reported by the AGY Asia business segment (“AGY Asia”). AGY US net sales in the second quarter of 2012 decreased $2.8 million, or 6.7%, compared to the second quarter of 2011. AGY Asia’s contribution to consolidated net sales in the second quarter of 2012 decreased $0.6 million, or 7.7% compared to the second quarter of 2011 level (after accounting for the elimination of intercompany sales).

The decrease in AGY US net sales was primarily driven by lower sales volumes offset by continued favorable mix gains. The weaker demand affected primarily the Construction market due to product rationalization and mix enrichment actions and the Electronics market, which remained depressed and subject to competitive pressure. Additionally sales to this market had benefited in the second quarter of 2011 from filling product shortages at a price premium associated with the 2011 Japanese natural disaster. Sales into the defense market showed the largest year-over-year percentage growth due to the scale-up of some international structural armor programs. The aerospace market remained robust, with an on-going bias toward lighter-weight interior materials. Demand for CFM heavy truck and for industrial applications such as fire retardant mattresses remained robust and helped partially offset volume declines.

The decrease in AGY Asia net sales was primarily driven by lower sales volumes and average selling price due to the softer Asian electronic market in 2012.

Consolidated income from operations was $1.1 million for the second quarter of 2012 compared to a loss of $0.3 million for the same period in 2011, or an improvement of $1.4 million. Adjusting for the impact of restructuring charges of $2.1 million and $0.6 million, AGY US and AGY Asia operating results increased by $3.4 million and $0.7 million, respectively in the second quarter of 2012 compared to the same period of 2011.

Quarterly operating results for AGY US improved year-over-year primarily due to decreased manufacturing costs from the execution of operational efficiency improvement projects and cost control initiatives in a stable manufacturing environment. Additionally, results were positively impacted by lower metal operating losses due to the timing of metal recoveries and a decrease in cost of goods sold as a result of higher overhead absorption in 2012. These gains were partially reduced by the lower sales margin as noted above and by the increase in selling, general and administrative expenses resulting primarily from accrued compensation expenses.

Quarterly AGY Asia operating results improved year-over-year primarily due to lower depreciation expense resulting from a lower carrying value after the impairment charge recorded against the AGY Asia long-lived assets last year. Partially offsetting this gain was lower margin from sales, inflation in labor and energy costs at the Chinese operations.

Adjusted EBITDA attributable to AGY Holding Corp. (which excludes the portion of Adjusted EBITDA attributable to the 30% non-controlling interest in AGY Asia) was $7.5 million for the second quarter of 2012, compared to $5.5 million in the second quarter 2011. AGY US second quarter 2012 Adjusted EBITDA of $6.2 million increased $2.2 million as compared to second quarter 2011 and AGY Asia second quarter 2012 Adjusted EBITDA attributable to AGY Holding Corp. of $1.2 million decreased $0.3 million as compared to the same period in 2011.

As of June 30, 2012, AGY US cash balance and total debt, net of cash, were $0.6 million and $199.7 million, respectively. Compared to December 31, 2011, the $2.6 million increase in net debt was primarily attributable to $3.0 million in debt issuance costs and in restricted cash to provide collateral support for equipment leases in conjunction with the recent amendment of AGY US Amended Credit Facility. As of June 30, 2012, AGY US had total liquidity of approximately $18.7 million.

As of June 30, 2012, AGY Asia cash balance and total debt, net of cash were $2.6 million and $39.2 million, respectively, or a $2.0 million decrease compared to December 31, 2011. As of June 30, 2012, AGY Asia had total liquidity of approximately $2.6 million, consisting only of unrestricted cash as the AGY Asia lender terminated access to undrawn borrowing availability under the AGY Asia financing agreements. The lender agreed to amend the term loan amortization to defer the April 2012 $5.1 million required principal payment to October 2012, provided that substantial progress, as determined by the lender, on an AGY Asia refinancing, recapitalization or change in control transaction continues to be made by such date.

As detailed recently in our reports on Form 8-K, in late July 2012, AGY US entered into an amended and restated master lease agreement (“the A&R Master Lease” ) with DB Energy Trading LLC, providing for leases of precious metals used in the operations of the continuous filament mat business and the glassfiber yarns business of AGY US. This amendment, among other things, extended the scheduled termination date of the agreement to May 31, 2013, increased rent margins and added subsidiary guarantees and a minimum quarterly Fully Adjusted EBITDA financial covenant, as defined in the agreement. Had the A&R Master Lease been in effect as of June 30, 2012, the Company would have been in compliance with this financial covenant as of June 30, 2012.

As detailed in the same report on Form 8-K, on the same date, AGY US also entered into a first amendment (the “Amended Loan Agreement”) to the Second Amended and Restated Loan and Security Agreement, dated as of June 15, 2012, among KAGY Holdings, AGY Holdings, the Guarantors, the lenders party thereto, and UBS AG, Stamford Branch, as Administrative Agent (the “Loan Agreement”). The Amended Loan Agreement modified the Loan Agreement to, among other things, permit the A&R Master Lease, to require delivery of certain additional reports and to add the same minimum EBITDA financial covenant as defined in the A&R Master Lease. The Loan Agreement that was consummated in June 2012 provided a net $11.6 million increase in borrowing availability, calculated as of June 30, 2012, including the additional $6 million that became available in July 2012 concurrently with the extension of the A&R Master Lease.

AGY recently announced its decision to initiate a process to sell its CFM business, including the wound products and conductive roving business located in its Huntingdon Pennsylvania facilities. The re-alignment of its product portfolio will allow AGY to return to its core capabilities and focus on its specialty materials products.

As previously disclosed in April 2012, AGY retained an advisory firm to provide certain investment banking services to evaluate and assist with a possible combination of AGY Asia with another party, a recapitalization of a significant portion of AGY Asia’s indebtedness or a change of control of AGY Asia in a transaction involving the primary lender for the Asian operation. In connection with these potential transactions, several potential buyers have submitted non-binding offers and are currently conducting their due diligence analysis, before submitting their final offers, which are expected during the third quarter of 2012.

Current assets:

Cash

Trade accounts receivable, less allowances of $2,557 and $2,703 at June 30, 2012 and December 31, 2011, respectively

Inventories, net

Deferred tax assets

Other current assets

Total current assets

Property, plant and equipment, and alloy metals, net

Restricted cash

Intangible assets, net

Other assets

Total

Current liabilities:

Accounts payable

Accrued liabilities

Short-term borrowings

Current portion of long-term debt

Total current liabilities

Long-term debt

Pension and other employee benefit plans

Deferred tax liabilities

Total liabilities

Commitments and contingencies

Obligation under put/call for noncontrolling interest

Shareholder’s equity (deficit):

Common stock, $.01 par value per share; 1,000 shares authorized; 100 shares issued and outstanding at June 30, 2012 and December 31, 2011

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive deficit

Total AGY Holding Corp. shareholder’s deficit

Noncontrolling interest

Total shareholder’s deficit

Total

Net sales

Cost of goods sold

Gross profit

Selling, general and administrative expenses

Restructuring charges

Amortization of intangible assets

Other operating (expense) income

Income (loss) from operations

Other non-operating (expense) income:

Interest expense

Other income, net

Loss before income tax expense

Income tax expense

Net loss

Less: Net loss attributable to the noncontrolling interest

Net loss attributable to AGY Holding Corp.

Three Months Ended

June 30,

Six Months Ended

June 30,

Net loss attributable to AGY Holding Corp.

Pension and other postretirement benefit plans – net of tax of $0

Foreign currency translation adjustments

Comprehensive loss attributable to AGY Holding Corp.

Net loss attributable to noncontrolling interest

Foreign currency translation adjustments

Comprehensive (loss) income attributable to noncontrolling interest

Net loss

Pension and other postretirement benefit plans – net of tax of $0

Foreign currency translation adjustments

Comprehensive loss, including portion attributable to noncontrolling interest

Six Months Ended

June 30,

Cash flow from operating activities:

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

Alloy metals depletion, net

Amortization of debt issuance costs

Amortization of intangibles with definite lives

Loss (gain) loss on sale, disposal or exchange of property and equipment and alloy metals

Stock compensation

Changes in assets and liabilities:

Trade accounts receivable

Inventories

Other assets

Accounts payable

Accrued liabilities

Pension and other employee benefit plans

Net cash provided by (used) in operating activities

Cash flows from investing activities:

Purchases of property and equipment and alloy metals

Increase in restricted cash

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from Revolving Credit Facility borrowings

Payments on Revolving Credit Facility borrowings

Payment on AGY Asia Credit Facility borrowings

Debt issuance costs and others

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net increase in cash

Cash, beginning of period

Cash, end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosures of non-cash financing/investing activities:

Increase in minimum pension liability adjustment

Construction in-progress included in accounts payable

Statement of operations data:

Net loss

Interest expense

Income tax expense

Depreciation and amortization

EBITDA

EBITDA

Adjustments to EBITDA:

Alloy depletion charge, net

Non-cash compensation charges

Management fees

Restructuring charges

Adjusted EBITDA

Less: Adjusted EBITDA attributable to the noncontrolling interest

Adjusted EBITDA attributable to AGY Holding Corp.

Adjusted EBITDA allocated to AGY Holding Corp. segment breakdown:

AGY US and Corporate

AGY Asia

Net Sales

Income (loss) from operations

Net loss

Net loss attributable to AGY Holding Corp.

Non-GAAP measures:

EBITDA⁽¹⁾

Adjusted EBITDA⁽¹⁾

Adjusted EBITDA attributable to AGY

Holding Corp.⁽²⁾

Adjusted EBITDA margin attributable

to AGY Holding Corp.⁽³⁾

Net Sales

Income from operations

Net loss

Net loss attributable to AGY Holding Corp.

Non-GAAP measures:

EBITDA⁽¹⁾

Adjusted EBITDA⁽¹⁾

Adjusted EBITDA attributable to AGY Holding Corp.⁽²⁾

Adjusted EBITDA margin attributable to AGY Holding Corp.⁽³⁾

Management uses EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, to measure operating performance.

Adjusted EBITDA attributable to AGY Holding Corp. excludes the portion of Adjusted EBITDA attributable to the non-controlling interest.

Adjusted EBITDA margin attributable to AGY Holding Corp. is calculated by dividing Adjusted EBITDA attributable to AGY Holding Corp by net sales.