<PAGE>

================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ________________

                                    FORM 10-Q
             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                          Commission File No. 333-72321

                              BGF Industries, Inc.
             (Exact name of registrant as specified in its charter)

        Delaware                        2221                     56-1600845
(State of incorporation)    (Primary Standard Industrial     (I.R.S. Employer
                             Classification Code Number)    Identification No.)


    3802 Robert Porcher Way, Greensboro, North Carolina             27410
   (Address of registrant's principal executive office)          (Zip Code)

                                 (336) 545-0011
              (Registrant's telephone number, including area code)
                                ________________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

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 November 9, 2001.



================================================================================

<PAGE>


                              BGF INDUSTRIES, INC.
          QUARTERLY REPORT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page No.
                                                                                          --------
<S>                                                                                       <C>
PART I.        FINANCIAL INFORMATION

Item  1.       Consolidated Financial Statements

               Consolidated Balance Sheets as of September 30, 2001 (unaudited)
               and December 31, 2000                                                       1

               Consolidated Statements of Operations for the three months
               and nine months ended September 30, 2001 and 2000 (unaudited)               2

               Consolidated Statements of Cash Flows for the nine months
               ended September 30, 2001 and 2000 (unaudited)                               3

               Notes to the Consolidated Financial Statements                              4

Item 2.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations

                      Overview                                                             8
                      Results of Operations                                                9
                      Liquidity and Capital Resources                                     12
                      Disclosure Regarding Forward Looking Statements                     14

Item 3.        Quantitative and Qualitative Disclosures About Market Risk                 15


PART II.       OTHER INFORMATION


Item  6.       Exhibits and Reports on Form 8-K
</TABLE>

                                      (i)

<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                           CONSOLIDATED BALANCE SHEETS
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                           September 30,   December 31,
                                                                               2001           2000
                                                                               ----           ----
                                                                            (unaudited)
<S>                                                                      <C>                <C>
                                 ASSETS


Current assets:
     Cash and cash equivalents                                              $       21      $        8
     Trade accounts receivable, net                                             16,645          28,709
     Inventories                                                                47,185          36,745
     Other current assets                                                        5,949           3,070
                                                                            ----------      ----------
           Total current assets                                                 69,800          68,532
Net property, plant and equipment                                               62,892          54,488
Other noncurrent assets, net                                                    14,162          13,373
                                                                            ----------      ----------
     Total assets                                                           $  146,854      $  136,393
                                                                            ==========      ==========

             LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
     Book overdraft                                                         $    7,115      $    5,652
     Accounts payable                                                            6,995          11,233
     Accrued liabilities                                                         5,651          13,906
     Current portion of long-term debt                                               -           3,106
                                                                            ----------      ----------
           Total current liabilities                                            19,761          33,897
Long-term debt, net of discount of  $1,467 and $1,617, respectively            128,533         114,477
Post-retirement and pension benefit obligations                                  4,347           3,596
                                                                            ----------      ----------
     Total liabilities                                                         152,641         151,970
                                                                            ----------      ----------

Commitments and contingencies

Stockholder's equity (deficit):
     Common stock, $1.00 par value. Authorized 3,000 shares; issued
       and outstanding 1,000 shares                                                  1               1
     Capital in excess of par value                                             34,999          34,999
     Retained earnings                                                          75,943          75,733
     Accumulated other comprehensive loss                                         (351)              -
     Loan to parent                                                           (116,379)       (126,310)
                                                                            ----------     -----------
           Total stockholder's deficit                                          (5,787)        (15,577)
                                                                            ----------     -----------
           Total liabilities and stockholder's deficit                      $  146,854     $   136,393
                                                                            ==========     ===========
</TABLE>

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

                                       1

<PAGE>

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                       For the Three Months            For the Nine Months
                                                        Ended September 30,            Ended September 30,
                                                    --------------------------     --------------------------
                                                         2001        2000              2001          2000
                                                    --------------------------     --------------------------
                                                           (unaudited)                    (unaudited)
<S>                                                   <C>          <C>               <C>           <C>
Net sales                                             $ 35,178     $ 51,410          $116,162      $146,429
Cost of goods sold                                      32,656       41,958           101,363       121,166
                                                      --------     --------          --------      --------
         Gross profit                                    2,522        9,452            14,799        25,263
Selling, general and administrative expenses               896        2,027             5,463         6,336
                                                      --------     --------          --------      --------
     Operating income                                    1,626        7,425             9,336        18,927
Interest expense                                         3,978        3,670            10,386        10,676
Other income, net                                         (279)        (150)           (1,390)         (378)
                                                      --------     --------          --------      --------
     Income (loss) before income taxes                  (2,073)       3,905               340         8,629
Income tax expense (benefit)                              (798)       1,504               130         3,315
                                                      --------     --------          --------      --------
         Net income (loss)                            $ (1,275)    $  2,401          $    210      $  5,314
                                                      ========     ========          ========      ========
</TABLE>

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

                                       2

<PAGE>

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                  For the Nine Months
                                                                                  Ended September 30,
                                                                            --------------------------------
                                                                                  2001           2000
                                                                            --------------------------------
                                                                                      (unaudited)

<S>                                                                            <C>             <C>
  Cash flows from operating activities:
    Net earnings                                                               $      210      $    5,314
    Adjustments to reconcile net income to net cash (used in)
      provided by operating activities:
        Depreciation                                                                6,237           6,242
        Amortization of other noncurrent assets                                     1,295             727
        Amortization of discount on notes                                             150             150
        Deferred income taxes                                                      (3,776)         (3,761)
        Post-retirement and pension benefit obligations                               751               6
        (Gain) loss on disposal of equipment                                          172             (13)
    Change in assets and liabilities:
        Trade accounts receivable, net                                             12,064          (8,571)
        Other current assets                                                       (1,362)            822
        Inventories                                                               (10,440)          1,131
        Other assets                                                                 (176)              -
        Accounts payable                                                           (6,493)          3,664
        Accrued liabilities                                                        (8,255)          4,303
                                                                               ----------      ----------
           Net cash (used in) provided by operating activities                     (9,623)         10,014
                                                                               ----------      ----------

Cash flows from investing activities:
       Purchases of property, plant and equipment                                 (12,628)         (3,991)
       Proceeds from sale of equipment                                                 70              36
                                                                               ----------      ----------
            Net cash used in investing activities                                 (12,558)         (3,955)
                                                                               ----------      ----------

Cash flows from financing activities:
       Book overdraft                                                               1,463           4,126
       Proceeds from revolver                                                      65,000          23,000
       Payments on revolver                                                       (35,000)        (33,000)
       Payments on term loan                                                      (19,200)              -
       Payment received on loan to parent                                           9,931               -
                                                                               ----------      ----------
           Net cash provided by (used in) financing activities                     22,194          (5,874)
                                                                               ----------      ----------

Net increase in cash and cash equivalents                                              13             185
Cash and cash equivalents at beginning of period                                        8              17
                                                                               ----------      ----------
Cash and cash equivalents at end of period                                     $       21      $      202
                                                                               ==========      ==========

Supplemental disclosure of non-cash investing activities:
    Property and equipment financed in accounts payable                        $    2,673      $      418
                                                                               ==========      ==========
</TABLE>



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

                                       3

<PAGE>

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (dollars in thousands)

1.    Basis of Presentation

      The accompanying unaudited interim consolidated financial statements of
BGF Industries, Inc. have been prepared in accordance with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of items of a normal recurring nature) considered
necessary for a fair presentation have been included. Operating results for the
three months and nine months ended September 30, 2001 are not necessarily
indicative of the results to be expected for the full year. The Company believes
that the disclosures are adequate to make the information presented not
misleading.

      These financial statements should be read in conjunction with the audited
consolidated financial statements of BGF Industries, Inc. as of and for the year
ended December 31, 2000 on file with the Securities and Exchange Commission in
the 2000 Annual Report on Form 10-K.

      Certain amounts from the prior consolidated financial statements have been
reclassified to conform to the current presentation. In order to conform with
recent technical literature from the Emerging Issues Task Force, net sales and
cost of goods sold have been adjusted to reflect the inclusion of shipping and
handling costs as a component of cost of goods sold instead of a reduction of
net sales.

      Effective at the beginning of the first quarter of 2001, the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and related amendments. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Due to the
limited use of derivative instruments, the adoption of SFAS No. 133 did not have
a significant effect on the Company's financial condition or statement of
operations.

      Total comprehensive income includes net income and the change in
unrealized loss on derivative instruments as shown below:

<TABLE>
<CAPTION>
                                                                  For the Three    For the Nine
                                                                  Months Ended     Months Ended
                                                                  September 30,    September 30,
                                                                      2001             2001
                                                                      ----             ----
<S>                                                              <C>              <C>
     Net income (loss)                                              $  (1,275)       $     210
     Other comprehensive income (loss):
       Cumulative effect of change in accounting principle
       (net of tax)                                                         -              183
       Change in fair value of cash flow hedge
       (net of tax)                                                      (285)            (534)
                                                                    ---------        ---------
     Total comprehensive income:                                    $  (1,560)       $    (141)
                                                                    =========        =========
</TABLE>

                                       4

<PAGE>

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (dollars in thousands)

1.   Basis of Presentation (Continued)

     As of September 30, 2001, approximately $351,000 of deferred net losses on
derivative instruments included in accumulated other comprehensive income are
expected to be reclassified to net income (loss) during the next twelve months.

2.   Inventories

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                              September 30,    December 31,
                                                                                  2001            2000
                                                                              -------------    -----------
                                                                               (unaudited)

<S>                                                                              <C>             <C>
      Supplies                                                                   $   1,598       $   1,605
      Raw materials                                                                  4,240           4,898
      Stock-in-process                                                               6,998           6,536
      Finished goods                                                                34,349          23,706
                                                                                 ---------       ---------
                                                                                 $  47,185       $  36,745
                                                                                 =========       =========
</TABLE>


3.   Other Noncurrent Assets

     Other noncurrent assets consist of the following:

<TABLE>
<CAPTION>
                                                                              September 30,     December 31,
                                                                                  2001             2000
                                                                               ----------        ---------
                                                                              (unaudited)

<S>                                                                              <C>             <C>
     Excess of acquisition cost over assigned value of net assets acquired      $   5,809       $   5,809
     Debt issuance costs                                                            5,013           6,143
                                                                                ---------       ---------
                                                                                   10,822          11,952
     Accumulated amortization                                                      (2,682)         (2,515)
                                                                                ---------       ---------
                                                                                    8,140           9,437
     Deferred income taxes                                                          5,646           3,387
     Other                                                                            376             549
                                                                                ---------       ---------
                                                                                $  14,162       $  13,373
                                                                                =========       =========
</TABLE>

                                        5

<PAGE>

                              BGF INDUSTRIES, INC.
               (a wholly owned subsidiary of Glass Holdings Corp.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (dollars in thousands)

4.   Accrued Liabilities

     Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                             September 30,    December 31,
                                                                                 2001            2000
                                                                             ------------     -----------
                                                                              (unaudited)
<S>                                                                          <C>                 <C>
      Income taxes                                                           $        85      $    4,883
      Payroll                                                                        295             173
      Profit sharing and other benefits                                              175           2,664
      Interest                                                                     2,070           4,817
      Other                                                                        3,026           1,369
                                                                             -----------      ----------
                                                                             $     5,651      $   13,906
                                                                             ===========      ==========
</TABLE>



5.   Debt

     Debt consists of the following:

<TABLE>
<CAPTION>
                                                                             Septembers 30,   December 31,
                                                                                 2001            2000
                                                                             -------------    -----------
                                                                              (unaudited)
<S>                                                                       <C>                  <C>
     Senior Credit Facility
        Amortizing Term Loan                                                 $         -      $   19,200
        Revolving Credit Facility                                                 30,000               -
     Senior subordinated notes, net of amortized discount                         98,533          98,383
                                                                             -----------      ----------
                                                                                 128,533         117,583
     Less current portion                                                              -           3,106
                                                                             ------------     ----------
     Long-term debt                                                          $    128,533     $  114,477
                                                                             ============     ==========
</TABLE>


     On September 28, 2001, the Company amended its senior credit facility.
Under the terms of the amendment, the Company paid off the existing term loan of
$15.6 million, reduced the availability under the revolver from $60 million to
$50 million, and renegotiated the interest rate to 2.75 points over LIBOR
through 2002, at which time the rate will revert back to the initial rate under
the senior credit facility. In addition, the amendment significantly modifies
the financial covenants through the end of 2002.

     As a result of the amendment, the Company wrote off $573,000 in September
2001 of deferred financing fees relating to the original borrowings in 1998
under the senior credit facility. This was charged to interest expense.

                                        6

<PAGE>

6.  Segment Information

     BGF operates in one business segment that manufactures specialty woven and
non-woven fabrics for use in a variety of industrial and commercial
applications. BGF's principal market is the United States. Net sales information
by geographic area is presented below, with sales based on the location of the
customer. BGF does not have any long-lived assets outside the United States.

<TABLE>
<CAPTION>
                                               For the Three Months                 For the Nine Months
                                                Ended September 30                   Ended September 30
                                           -----------------------------     -------------------------------
                                                2001            2000               2001            2000
                                           -----------------------------     -------------------------------
                                                     (unaudited)                      (unaudited)
<S>                                          <C>              <C>                 <C>             <C>
     United States                           $ 34,276         $ 46,794            $111,218        $134,614
     Foreign                                      902            4,616               4,944          11,815
                                             -------          --------            --------        --------
                                             $ 35,178         $ 51,410            $116,162        $146,429
                                             ========         ========            ========        ========
</TABLE>


7.  Commitments and Contingencies

     From time to time, BGF is involved in various legal proceedings and
environmental matters arising in the ordinary course of business. Management
believes, however, that the ultimate resolution of such matters will not have a
material adverse impact on BGF's financial position or results or operations.

8.  Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No. 141")
and Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 141 requires that all business
combinations be accounted for under the purchase method. The statement applies
to all business combinations initiated after June 30, 2001.

     SFAS No. 142 requires that an intangible asset that is acquired shall be
initially recognized and measured based on its fair value. The statement also
provides that goodwill should not be amortized, but shall be tested for
impairment annually, or more frequently if circumstances indicate potential
impairment, through a comparison of fair value to its carrying amount. Existing
goodwill will continue to be amortized through the remainder of 2001 at which
time amortization will cease and the Company will perform a transitional
goodwill impairment test. SFAS No. 142 is effective for fiscal periods beginning
after December 15, 2001. The Company is currently evaluating the impact of the
new accounting standards on existing goodwill and other intangible assets. While
the ultimate impact of the new accounting standards has yet to be determined,
goodwill amortization expense for the nine months ended September 30, 2001 was
$135,000.

9.  Subsequent Event

     A global slowdown in the electronics market and an industry-wide inventory
adjustment has resulted in reduced demand for BGF products. Continued downturn
in market conditions has necessitated further curtailment in production
activity. Subsequent to the end of the third quarter, additional production
employees were furloughed thereby reducing our workforce by

                                       7

<PAGE>

approximately 25%. In addition to the furlough, a company-wide reduction in the
number of salaried positions was implemented, in order to cut costs in future
periods.

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

     This Quarterly Report contains forward-looking statements with respect to
our operations, industry, financial condition and liquidity. These statements
reflect our assessment of a number of risks and uncertainties. Our actual
results could differ materially from the results anticipated in these forward
looking statements as a result of certain factors set forth in this Quarterly
Report. An additional statement made pursuant to the Private Securities
Litigation Reform Act of 1995 and summarizing certain of the principal risks and
uncertainties inherent in our business is included herein under the caption
"Disclosure Regarding Forward Looking Statements." You are encouraged to read
this statement carefully.

          You should read the following discussion and analysis in conjunction
with the accompanying consolidated financial statements and related notes, and
with our audited consolidated financial statements and related notes as of and
for the year ended December 31, 2000 set forth in our 2000 Annual Report on Form
10-K.


Overview

          Our business focuses on the production of value-added specialty woven
and non-woven fabrics made from glass, carbon and aramid yarns. Both in revenue
and market share, we believe we are the second largest manufacturer of glass
fiber fabrics and a leading producer of other high performance fabrics in North
America. Our fabrics are a critical component in the production of a variety of
electronic, filtration, composite, insulation, 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.

                                        8

<PAGE>

Results of Operations

          The following table summarizes our historical results of operations as
a percentage of net sales:

<TABLE>
<CAPTION>
                                                        For the Three Months            For the Nine Months
                                                         Ended September 30,            Ended September 30,
                                                    ---------------------------     ---------------------------
                                                        2001           2000            2001           2000
                                                    ---------------------------     ---------------------------
                                                             (unaudited)                  (unaudited)
<S>                                                      <C>          <C>               <C>            <C>
Net sales                                                100.0%       100.0%            100.0%         100.0%
Cost of goods sold                                        92.8%        81.6%             87.3%          82.7%
                                                         -----       ------            ------         ------
  Gross profit                                             7.2%        18.4%             12.7%          17.3%
Selling, general and administrative expenses               2.5%         3.9%              4.7%           4.3%
                                                         -----       ------            ------         ------
  Operating income                                         4.7%        14.5%              8.0%          13.0%
Interest expense                                          11.3%         7.1%              8.9%           7.3%
Other income, net                                         (0.7)%       (0.2)%            (1.2)%         (0.3)%
                                                         -----       ------            ------         ------
  Income (loss) before income taxes                       (5.9)%        7.5%              0.3%           6.0%
  Income tax expense (benefit)                            (2.3)%        2.8%              0.1%           2.3%
                                                         -----       ------            ------         ------
  Net income (loss)                                       (3.6)%        4.7%              0.2%           3.7%
                                                         =====       ======            ======         ======
</TABLE>


          EBITDA, as presented below, is defined as net income before interest
expense, income taxes, depreciation, amortization expense and non-recurring
non-cash charges. EBITDA is calculated as follows (in thousands):

<TABLE>
<CAPTION>
                                               For the Three Months            For the Nine Months
                                                Ended September 30,            Ended September 30,
                                           -------------------------     ----------------------------
                                               2001           2000            2001           2000
                                           -------------------------     ----------------------------
                                                     (unaudited)                 (unaudited)
<S>                                           <C>           <C>             <C>            <C>
          Net income (loss)                   $ (1,275)     $ 2,401         $    210      $  5,314
          Depreciation and amortization          2,135        2,104            6,372         6,378
          Interest                               3,978        3,670           10,386        10,676
          Taxes                                   (798)       1,504              130         3,315
                                              --------      -------         --------      --------
          EBITDA                              $  4,040      $ 9,679         $ 17,098      $ 25,683
                                              ========      =======         ========      ========
</TABLE>

          EBITDA for the quarter ended September 30, 2001 decreased $5.7
million, or 58.8%, to $4.0 million from $9.7 million for the quarter ended
September 30, 2000, and for the nine months ended September 30, 2001 decreased
by $8.6 million, or 33.5%, to $17.1 million from $25.7 million for the nine
months ended September 30, 2000.

          We believe that EBITDA is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness. EBITDA does not
represent and should not be considered as an alternative to net income or cash
flow from operations as determined by generally accepted accounting principles,
and EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements. Not every company calculates EBITDA in exactly the same
fashion. As a result, EBITDA as presented above may not necessarily be
comparable to similarly titled measures of other companies.

                                        9

<PAGE>

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

         Net Sales. Net sales decreased $16.2 million, or 31.5%, to $35.2
million in the three months ended September 30, 2001, from $51.4 million in the
three months ended September 30, 2000. Sales of glass, carbon and aramid fibers
used in various composite materials and sales of fabrics used in ceiling board
and window shade fabrics increased $1.4 million during the third quarter of 2001
as compared to the third quarter of 2000. However, for the same period, our
sales of electronics fabrics used in multi-layer and rigid printed circuit
boards decreased $15.0 million, or 56.6% and sales of fabrics used in filtration
products decreased $2.8 million, or 43.1%. The decrease in sales of electronics
fabrics was primarily a result of significant inventory adjustments in the
electronics industry that began during the first quarter of 2001. In addition,
the decrease in capital spending in the information technology and
telecommunications industries has led fabricators of printed circuit boards to
reduce production, thus negatively impacting our sales to these customers. We do
not expect sales to the electronics market to increase during the fourth quarter
of 2001.

         The decrease in sales of filtration fabrics is due to fewer large
utility projects that have replaced filter bags as well as a downturn in the
steel and foundry industries. Our second largest market, fabrics used in
composite materials, held up well prior to September 11, 2001. We now expect to
confront a decline in orders from customers in the aerospace industry due to
uncertainty over airline traffic recovery. It is unknown if this decrease will
be fully offset by the market for refurbishing existing aircraft or increased
purchases by the military.

         In response to these market conditions, we are reducing production
schedules and focusing on operating cost reductions. Subsequent to the end of
the third quarter, we have furloughed additional production employees, thereby
reducing our production workforce by approximately 25%. In addition to the
furlough of production employees, we have reduced a number of salaried
positions, in order to cut costs in future periods. In addition, we have amended
our senior credit facility as more fully described under "Liquidity and Capital
Resources."

         Gross Profit Margins. Gross profit margins decreased to 7.2% in the
three months ended September 30, 2001, from 18.4% in the three months ended
September 30, 2000, due primarily to the shifts in product mix discussed above
as well as lower sales and production volumes resulting in less absorption of
fixed costs.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.1 million, or 55.0%, to $0.9 million in the
three months ended September 30, 2001, from $2.0 million in the three months
ended September 30, 2000. This was primarily due to decreased accruals for
profit sharing and management fees and bonuses and a decrease in sales
commission expense.

         Operating Income. As a result of the aforementioned factors, operating
income decreased $5.8 million to $1.6 million, or 4.7% of net sales, in the
three months ended September 30, 2001, from $7.4 million, or 14.5% of net sales,
in the three months ended September 30, 2000.

         Interest Expense. Interest expense increased $0.3 million to $4.0
million, or 11.3% of net sales, in the three months ended September 30, 2001
from $3.7 million, or 7.1% of net sales, in the three months ended September 30,
2000. This increase is due to a write-off of $0.6 million of

                                       10

<PAGE>

deferred financing fees related to our senior credit facility amendment which
was partially offset by a decrease in interest rates on borrowings from the
prior period.

         Income Tax Expense (Benefit). The effective tax rate in the three
months ended September 30, 2001 and 2000 of 38.5%, was higher than the federal
statutory rate of 35.0% primarily due to the effect of state income taxes.

         Net Income (Loss). As a result of the aforementioned factors, net
income decreased $3.7 million to a net loss of $(1.3) million in the three
months ended September 30, 2001, from $2.4 million in the three months ended
September 30, 2000.


Nine Months Ended September 30, 2001 Compared to Nine Months Ended June 30, 2000

         Net Sales. Net sales decreased $30.2 million, or 20.7%, to $116.2
million in the nine months ended September 30, 2001, from $146.4 million in the
nine months ended September 30, 2000. Sales of glass, carbon and aramid fibers
used in various composite materials increased $5.4 million during the nine
months ended September 30, 2001, as compared to the same period in 2000.
However, for the same period, our sales of electronics fabrics used in
multi-layer and rigid printed circuit boards decreased $30.6 million, or 41.7%
and sales of fabrics used in filtration products decreased $5.1 million or
26.6%. The decrease in sales of electronics fabrics was primarily a result of
significant inventory adjustments in the electronics industry that began during
the first quarter of 2001. 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. We do not expect sales to the electronics market to increase
during the fourth quarter of 2001.

         The decrease in sales of filtration fabrics is due to fewer large
utility projects that have replaced filter bags as well as a downturn in the
steel and foundry industries. Our second largest market, fabrics used in
composite materials, held up well prior to September 11, 2001. We now expect to
confront a decline in orders from customers in the aerospace industry due to
uncertainty over airline traffic recovery. It is unlikely that this decrease
will be fully offset by the market for refurbishing existing aircraft or
increased purchases by the military.

         In response to these market conditions, we have reduced production
schedules and focused on operating cost reductions. Subsequent to the end of the
third quarter, we have furloughed additional production employees, thereby
reducing our workforce by approximately 25%. In addition to the furlough of
production employees, we have reduced a number of salaried positions, in order
to cut costs in future periods. In addition, we have amended our senior credit
facility as more fully described under "Liquidity and Capital Resources."

         Gross Profit Margins. Gross profit margins decreased to 12.7% in the
nine months ended September 30, 2001 from 17.3% in the nine months ended
September 30, 2000, due primarily to the shifts in product mix, discussed above
as well as lower sales and production volumes resulting in less absorption of
fixed costs.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 4.7% of net sales in the nine months ended
September 30, 2001 from 4.3% of net sales in the nine months ended September 30,
2000. This was primarily due to lower sales volumes for the nine months ended
September 30, 2001, offset by decreased accruals for profit sharing and
management fees and bonuses during the nine months ended September 30, 2000.

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<PAGE>

         Operating Income. As a result of the aforementioned factors, operating
income decreased $9.6 million to $9.3 million, or 8.0% of net sales, in the nine
months ended September 30, 2001, from $18.9 million, or 13.0% of net sales, in
the nine months ended September 30, 2000.

         Interest Expense. Interest expense decreased $0.3 million to $10.4
million, or 8.9% of net sales, in the nine months ended September 30, 2001, from
$10.7 million, or 7.3% of net sales, in the nine months ended September 30,
2000, due to lower interest rates offset by a write-off of $0.6 million of
deferred financing fees relating to our senior credit facility.

         Other Income, Net. Other income increased $1.0 million to $1.4 million,
or 1.2 % of net sales, in the nine months ended September 30, 2001 from $0.4
million, or 0.3% of net sales, in the nine months ended September 30, 2000.
During June 2001, we received payments from Glass Holdings totaling $9.7 million
on the loan held by us. We and Glass Holdings have agreed that any payments made
on the loan balance will be allocated approximately 90% to principal and 10% to
interest. Accordingly, we reflected $8.7 million of the cash payment received as
a reduction of principal and $1.0 million was recognized as interest income and
recorded in other income on the consolidated statement of operations in 2001.

         Income Tax Expense (Benefit). The effective tax rate in the nine months
ended September 30, 2001 and 2000 of 39.1% and 38.4%, respectively, was higher
than the federal statutory rate of 35.0% primarily due to the effect of state
income taxes.

         Net Income (Loss). As a result of the aforementioned factors, net
income decreased $5.1 million to $0.2 million in the nine months ended September
30, 2001, from $5.3 million in the nine months ended September 30, 2000.


Liquidity and Capital Resources

         Our primary sources of liquidity are cash flows from operations and
borrowings under our credit facilities. Our future need for liquidity will arise
primarily from interest payments on our 10 1/4% Series B Senior Subordinated
Notes due 2009 and our senior credit facility, principal payments on the senior
credit facility, and the funding of our capital expenditures and working capital
requirements. There are no mandatory payments of principal on our notes
scheduled prior to their maturity.

         On September 28, 2001, we amended our senior credit facility. Under the
terms of the amendment, we paid off the existing term loan of $15.6 million,
reduced the availability under the revolver from $60 million to $50 million, and
locked in the interest rate to 2.75 points over LIBOR through 2002 at which time
the rate will revert back to the initial rate under the senior credit facility.
In addition, the amendment significantly modifies the financial covenants
through the end of 2002. Although no assurances can be provided, the terms of
this amendment are favorable to us and should allow us to operate with
sufficient liquidity throughout the current downturn in the electronics
industry. This forward-looking statement is subject to risks and uncertainties
that exist in our operations and business environment. See "Disclosure Regarding
Forward-Looking Statements."

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<PAGE>

         As a result of the amendment, in September 2001, we wrote off $573,000
of deferred financing fees relating to the original borrowings in 1998 under the
senior credit facility. This was charged to interest expense.

         At September 30, 2001, we had outstanding $128.5 million of long-term
debt, consisting of $30 million under the revolver portion of our senior credit
facility and $98.5 million under our notes (net of discount of $1.5 million).
Under the terms of our senior credit facility, we had $20.0 million available
under our revolver as of September 30, 2001.

         Net Cash Used in Operating Activities. Net cash used in operating
activities was $9.3 million for the nine months ended September 30, 2001 and was
primarily the result of non-cash adjustments to net income for depreciation of
$6.2 million, deferred income taxes of $(3.8) million, a decrease in accounts
receivable of $12.1 million, an increase in inventory of $10.4 million and a
decrease in accounts payable and accrued expenses of $14.7 million.

         Net Cash Used in Investing Activities. Net cash used in investing
activities was $12.6 million for the nine months ended September 30, 2001 and
was primarily the result of purchases of property, plant and equipment.

         During the fourth quarter of 2000, we approved the expansion of our
lightweight fabrics facility in South Hill, Virginia, as well as the purchase of
new looms to be installed in our heavyweight production facility in South Hill,
Virginia. The new looms were installed in order to change part of the fabric
production at that facility from heavyweight fabrics to lightweight fabrics.
These capital projects were approved to meet the forecasted growth that was
projected in 2000 for 2001 and thereafter. Given the current environment in the
electronics industry, we have stopped all capital expenditure projects that
could be suspended and are only completing those open projects that are in a
state of completion that have made them impossible to suspend. At this point, we
cannot provide any assurances as to when we will complete the remainder of the
South Hill expansion, if at all. We currently expect our capital expenditures
during 2001 to be approximately $15.4 million.

         Net Cash Provided by Financing Activities. Net cash provided by
financing activities was $21.8 million for the nine months ended September 30,
2001 and was primarily the result of an increase in the book overdraft of $1.5
million, net proceeds on the revolver of $30.0 million, payments on the term
loan of $19.2 million, and payments received on loan to parent of $9.9 million.

         Our ability to make scheduled payments of principal or to pay the
interest or liquidated damages, if any, on, or to refinance, our indebtedness,
including the notes, or to fund planned capital expenditures will depend on our
future performance. Our future performance is generally subject to economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. Based upon the current level of our operations, we believe
that cash flow from operations and available cash, together with availability
under the senior credit facility, will be adequate to meet our future liquidity
needs for at least the next two years. However, we cannot assure you that we
will generate sufficient cash flow from operations or that future borrowings
will be available under our senior credit facility in an amount sufficient to
enable us to service our indebtedness, including the notes, or to fund our other
liquidity needs. In addition, we may need to refinance all or a portion of the
principal of the notes on or prior to maturity. We cannot assure you that we
will be able to effect any refinancing on commercially reasonable terms or at
all.

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<PAGE>

Disclosure Regarding Forward-Looking Statements

     Some of the information in this Quarterly 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 Exchange 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:

     .    the impact of Owens Corning's unpredictable bankruptcy proceeding on
          the ongoing operations of Advanced Glassfiber Yarns, which could
          result in the risk that obtaining raw materials from sources other
          than Advanced Glassfiber Yarns would be more costly;

     .    our significant level of indebtedness and limitations on our ability
          to incur additional debt;

     .    our dependence upon some of our suppliers to provide us with materials
          and services;

     .    downturns in the electronics industry and the movement of electronics
          industry production outside of North America;

     .    our concentrated customer base and the competitive nature of our
          markets;

     .    a disruption of production at one of our facilities;

     .    an easing of import restrictions and duties with respect to glass
          fiber fabrics;

     .    our ability to comply with environmental and safety and health laws
          and requirements;

     .    our ability to address technological advances in the markets we serve;
          and

     .    changes in economic conditions generally.

     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 Quarterly Report and in our 2000 Annual Report on Form 10-K. 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 3.   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

                                       14

<PAGE>

and Analysis of Financial Condition and Results of Operations - Disclosure
Regarding Forward-Looking Statements."

     Our senior credit facility is subject to market risks, including 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 senior credit facility. The senior credit facility bears
interest based on LIBOR. Our risk management strategy is to use derivative
financial instruments, such as swaps, to hedge interest rate exposures. In
addition, we are exposed to foreign currency exchange rate risk mainly as a
result of our purchases of fixed assets from Japanese sources. Our risk
management strategy is to use derivative financial instruments to hedge these
foreign currency exposures. Our overall objective is to limit the impact of
foreign currency and interest rate changes on earnings and cash flows. We do not
enter into derivatives for trading or speculative purposes.

     On September 28, 2001, we amended our senior credit facility. Under the
terms of the amendment, we paid off the existing Term Loan of $15.6 million and
reduced the availability under the revolver from $60 million to $50 million.
Simultaneously, we also amended our interest rate swap term from March 31, 2004
to September 30, 2003 and redesignated the swap to cover only the revolver
portion of our senior credit facility.

     At September 30, 2001, the notional amount of the interest rate swap
agreement was $18.5 million. Under this agreement, we have secured a fixed LIBOR
rate of interest of 5.04% on the notional amount that is reduced in a manner to
amortize fully by the maturity date of the revolver portion of our senior credit
facility. This swap effectively changes our payment of interest on $18.5 million
of variable rate debt to a fixed rate for the contract period.

     The fair value of the interest rate swap agreement represents the estimated
receipts or payments that would be made to terminate the agreement. At September
30, 2001, we would have paid approximately $540,000 to terminate the agreement.
A 100 basis point decrease in LIBOR would increase the amount paid by
approximately $200,000. The fair value is based on dealer quotes, considering
current interest rates. The unrealized loss on this derivative instrument is a
component of other comprehensive income (loss).

     We entered into two Japanese Yen hedges on October 6, 2000, in order to
hedge purchases of fixed assets in Japanese Yen in 2001. These hedges have been
accounted for as fair value hedges of firm commitments. The fixed assets were
received in February 2001 with payment anticipated in October and November 2001.
As of September 30, 2001, the notional value of our foreign currency hedging
instruments was $2.0 million, and the approximate fair value was $(298,000). The
potential fair value of this financial instrument resulting from a hypothetical
10% decrease in the Japanese Yen relative to the U.S. dollar would be
approximately $(108,000) as of September 30, 2001. The potential fair value of
the financial instrument resulting from a hypothetical 10% increase in the
Japanese Yen relative to the U.S. dollar would be approximately $(453,000) as of
September 30, 2001. The fair value is based on dealer quotes, considering
current exchange rates.

     Actual gains and losses in the future may differ materially from the above
analysis, however, based on changes in the timing and amount of interest rate
and foreign currency exchange rate movements and our actual exposures and
hedges.

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                           PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               10     Third Amendment to Credit Agreement, dated as of
                      September 28, 2001, by and among the Company, certain
                      domestic subsidiaries of the Company parties thereto,
                      as guarantors, several banks and other financial
                      institutions parties thereto and First Union National
                      Bank, a national banking association, as agent for
                      the lenders

          (b)  Reports on Form 8-K

               None

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<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    BGF INDUSTRIES, INC.



                                    /s/ Philippe R. Dorier
                                    --------------------------------------------
                                    Philippe R. Dorier
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

Date: November 9, 2001

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