<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

            For the quarterly period ended June 30, 2005

                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

            Commission file number: 33-29035

                              K&F Industries, Inc.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

            Delaware                             34-1614845
--------------------------------------------------------------------------------
 (State or other jurisdiction of    (I.R.S. Employer Identification No.)
  incorporation or organization)

   50 Main Street, White Plains, New York                       10606
--------------------------------------------------------------------------------
  (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code (914) 448-2700

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

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

As of August 15, 2005, there were 1,000 shares of common stock outstanding.

<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

                                   FORM 10-Q/A

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

                              EXPLANATORY PARAGRAPH

This form 10-Q/A for the quarterly period ended June 30, 2005 is being filed for
the purpose of restating the Company's consolidated statement of cash flows for
the six months ended June 30, 2005. In the six months ended June 30, 2005, an
amount of $14,682,000 was previously included in "net cash provided by operating
activities" and should have been included in "net cash used in investing
activities" as it relates to the payment of deferred purchase price to K&F
Industries, Inc.'s prior equityholders. This restatement does not affect the
total net change in cash and cash equivalents for the six months ended June 30,
2005 and has no impact on the Company's consolidated financial position or
results of operations. Conforming changes have been made to management's
discussion and analysis of financial condition and results of operations
included in the accompanying Form 10-Q/A. See Note 16 in the notes to the
condensed consolidated financial statements for further information relating to
this restatement. This Form 10-Q/A has not been updated for events or
information subsequent to the date of filing of the original Form 10-Q except in
connection with the foregoing. Accordingly, this Form 10-Q/A should be read in
conjunction with the Company's filings made with the SEC subsequent to the
filing of the original Form 10-Q.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
Part I. Condensed Consolidated Financial Information

     Item 1.      Condensed Consolidated Financial Statements (Unaudited)

                  a)   Condensed Consolidated Balance Sheets as of June 30,
                       2005 and December 31, 2004                                      3

                  b)   Condensed Consolidated Statements of Operations for
                       the six months ended June 30, 2005 and 2004
                       (Predecessor)                                                   4

                  c)   Condensed Consolidated Statements of Operations for
                       the three months ended June 30, 2005 and 2004
                       (Predecessor)                                                   5

                  d)   Condensed Consolidated Statements of Cash Flows for
                       the six months ended June 30, 2005 and 2004
                       (Predecessor)                                                   6

                  e)   Notes to Condensed Consolidated Financial Statements            7

     Item 2.      Management's Discussion and Analysis of Financial condition
                  and Results of Operations                                            17

     Item 3.      Quantitative and Qualitative Disclosures About Market Risk           27

     Item 4.      Controls and Procedures                                              28

Part II. Other Information

     Item 6.      Exhibits                                                             29

Signatures                                                                             30
</TABLE>

<PAGE>

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                      K&F INDUSTRIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                June 30,          December 31,
                                                                                  2005               2004
                                                                             ---------------    ---------------
<S>                                                                          <C>                <C>
ASSETS:
Current Assets:
  Cash and cash equivalents                                                  $     9,328,000    $     9,636,000
  Accounts receivable, net                                                        42,765,000         42,333,000
  Inventory                                                                       58,348,000         61,247,000
  Other current assets                                                             5,008,000          4,336,000
                                                                             ---------------    ---------------
Total current assets                                                             115,449,000        117,552,000
                                                                             ---------------    ---------------

Property, plant and equipment                                                    104,153,000        101,083,000
  Less, accumulated depreciation and amortization                                  6,583,000          1,491,000
                                                                             ---------------    ---------------
                                                                                  97,570,000         99,592,000
                                                                             ---------------    ---------------

Other long-term assets                                                                93,000            351,000
Debt issuance costs, net of amortization                                          24,025,000         28,768,000
Program participation costs, net of amortization                                  64,150,000         51,778,000
Intangible assets, net of amortization                                           189,168,000        195,196,000
Goodwill                                                                         856,668,000        856,668,000
                                                                             ---------------    ---------------
                                                                             $ 1,347,123,000    $ 1,349,905,000
                                                                             ===============    ===============

LIABILITIES AND STOCKHOLDER'S EQUITY:
Current Liabilities:
  Accounts payable, trade                                                    $    14,306,000    $    15,030,000
  Interest payable                                                                 4,902,000          3,505,000
  Note payable                                                                            --         14,682,000
  Income taxes payable                                                            18,680,000          3,714,000
  Other current liabilities                                                       44,913,000         46,420,000
                                                                             ---------------    ---------------
Total current liabilities                                                         82,801,000         83,351,000
                                                                             ---------------    ---------------

Pension liabilities                                                               50,248,000         48,248,000
Deferred income taxes                                                             24,354,000         19,541,000
Postretirement benefit obligation other
  than pensions                                                                   93,613,000         92,269,000
Other long-term liabilities                                                        5,128,000          5,180,000
Senior term loan                                                                 456,000,000        475,000,000
7 3/4% senior subordinated notes due 2014                                        315,000,000        315,000,000
9 5/8% senior subordinated notes due 2010                                            577,000            577,000

Stockholder's Equity:
  Preferred stock, $.01 par value - authorized, 0 shares and 9,250 shares;
     issued and outstanding, 0 shares and 9,250 shares                                    --                 --
  Common stock, $.01 par value - authorized, 1,000 shares; issued and
     outstanding, 1,000 shares                                                            --                 --
  Additional paid-in capital                                                     309,810,000        309,790,000
  Retained earnings                                                                9,673,000            880,000
  Accumulated other comprehensive (loss) income                                      (81,000)            69,000
                                                                             ---------------    ---------------
Total stockholder's equity                                                       319,402,000        310,739,000
                                                                             ---------------    ---------------
                                                                             $ 1,347,123,000    $ 1,349,905,000
                                                                             ===============    ===============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               Six Months Ended
                                         ------------------------------
                                           June 30,          June 30,
                                             2005              2004
                                         -------------    -------------
                                                          (Predecessor)
<S>                                      <C>              <C>
Sales                                    $ 178,992,000    $ 166,740,000

Cost of sales (including inventory
  purchase accounting charges of
  $12,084,000 for the six months ended
  June 30, 2005)                           108,665,000       97,582,000
                                         -------------    -------------
Gross profit                                70,327,000       69,158,000

Independent research and development         7,586,000        6,965,000

Selling, general and administrative
  expenses                                  13,940,000       14,498,000

Amortization of intangible assets            6,028,000        2,340,000
                                         -------------    -------------
Operating income                            42,773,000       45,355,000

Interest and investment income                 151,000          220,000

Interest expense                           (29,641,000)     (19,724,000)
                                         -------------    -------------
Income before income taxes                  13,283,000       25,851,000

Income tax provision                        (4,490,000)      (8,592,000)
                                         -------------    -------------
Net income                               $   8,793,000    $  17,259,000
                                         =============    =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                            Three Months Ended
                                       -----------------------------
                                         June 30,        June 30,
                                           2005            2004
                                       ------------    -------------
                                                       (Predecessor)
<S>                                    <C>             <C>
Sales                                  $ 90,302,000    $  83,591,000

Cost of sales                            48,199,000       49,530,000
                                       ------------    -------------
Gross profit                             42,103,000       34,061,000

Independent research and development      3,753,000        3,338,000

Selling, general and administrative
  expenses                                6,661,000        7,350,000

Amortization of intangible assets         3,014,000        1,194,000
                                       ------------    -------------
Operating income                         28,675,000       22,179,000

Interest and investment income               88,000          119,000

Interest expense                        (14,840,000)      (9,861,000)
                                       ------------    -------------
Income before income taxes               13,923,000       12,437,000

Income tax provision                     (4,706,000)      (4,082,000)
                                       ------------    -------------
Net income                             $  9,217,000    $   8,355,000
                                       ============    =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       5
<PAGE>


                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                        ------------------------------
                                                                          June 30,         June 30,
                                                                           2005              2004
                                                                        -------------    -------------
                                                                        (As restated,
                                                                        see Note 16)     (Predecessor)
<S>                                                                     <C>              <C>
Cash flows from operating activities:
 Net income                                                             $   8,793,000    $  17,259,000
 Adjustments to reconcile net income to net
   cash provided by operating activities:
   Depreciation                                                             5,151,000        3,542,000
   Amortization of program participation costs                              1,190,000               --
   Amortization of intangible assets                                        6,028,000        2,340,000
   Non-cash interest expense - amortization of
     debt issuance cost                                                     4,743,000          918,000
   Non-cash interest expense - change in fair
     market value of interest rate cap                                        264,000               --
   Non-recurring inventory purchase accounting
     charge                                                                12,084,000               --
   Deferred income taxes                                                    4,813,000        2,199,000
   Changes in assets and liabilities:
    Accounts receivable, net                                                 (500,000)         925,000
    Inventory                                                              (9,267,000)         (90,000)
    Other current assets                                                     (678,000)         847,000
    Program participation costs                                           (13,562,000)      (4,532,000)
    Accounts payable, interest payable and
      other current liabilities                                            14,132,000       (6,376,000)
    Postretirement benefit obligation other
     than pensions                                                          1,344,000         (151,000)
    Long-term liabilities                                                   1,948,000        4,136,000
                                                                        -------------    -------------
 Net cash provided by operating
   activities                                                              36,483,000       21,017,000
                                                                        -------------    -------------

Cash flows from investing activities:
 Payment of deferred purchase price                                       (14,682,000)              --
 Capital expenditures                                                      (3,129,000)      (1,240,000)
                                                                        -------------    -------------
 Net cash used in investing activities                                    (17,811,000)      (1,240,000)
                                                                        -------------    -------------

Cash flows from financing activities:
 Equity contributions                                                          20,000               --
 Payments of long-term debt                                               (19,000,000)              --
                                                                        -------------    -------------
 Net cash used in financing activities                                    (18,980,000)              --
                                                                        -------------    -------------

 Net (decrease) increase in cash and cash
   equivalents                                                               (308,000)      19,777,000
Cash and cash equivalents, beginning of
 period                                                                     9,636,000       24,464,000
                                                                        -------------    -------------

Cash and cash equivalents, end of period                                $   9,328,000    $  44,241,000
                                                                        =============    =============

Supplemental cash flow information:
 Interest paid during period                                            $  23,237,000    $  18,806,000
                                                                        =============    =============

 Income taxes paid during the period                                    $     167,000    $   4,379,000
                                                                        =============    =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       6
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. Description of the Business and the Acquisition

Description of Business

K&F Industries, Inc. and subsidiaries ("K&F" or the "Company") is primarily
engaged in the design, development, manufacture and distribution of wheels,
brakes and brake control systems for commercial, military and general aviation
aircraft, and the manufacture of materials for fuel tanks, iceguards, inflatable
oil booms and various other products made from coated fabrics for military and
commercial uses. The Company serves the aerospace industry and sells its
products to airframe manufacturers and commercial airlines throughout the world
and to the United States government and certain foreign governments. The
Company's activities are conducted through its two wholly owned subsidiaries,
Aircraft Braking Systems Corporation ("Aircraft Braking Systems") and Engineered
Fabrics Corporation ("Engineered Fabrics").

The Acquisition

On November 18, 2004, K&F Industries Holdings, Inc. ("K&F Parent"), an affiliate
of Aurora Capital Group, acquired K&F in exchange for cash consideration of
approximately $1.06 billion (excluding capitalized transaction costs of $40.4
million) (the "Acquisition"). The former K&F equityholders retained $77.2
million of cash on hand at the Acquisition date. The cash consideration was used
to repay substantially all of K&F's then existing indebtedness and the related
fees and expenses of K&F and certain of its stockholders, with the balance paid
to former equityholders of K&F. In addition, K&F Parent issued a note, in the
amount of $14.7 million, payable for the benefit of the prior K&F equityholders,
for the estimated tax benefits to be received by K&F due to the payments of fees
and premiums in connection with the tender offers for K&F's prior senior
subordinated notes. The Acquisition was financed with an offering by K&F of
$315.0 million of 7 3/4% Senior Subordinated Notes due 2014, the borrowing by
K&F of $480.0 million under a new $530 million senior secured credit facility
and $309.8 million in equity investments from K&F Parent. K&F Parent contributed
the $309.8 million of equity to its wholly-owned subsidiary, K&F Intermediate
Holdco, Inc., which then contributed such proceeds as equity to its wholly-owned
subsidiary, K&F Acquisition, Inc., prior to the merger of K&F Acquisition, Inc.
with and into K&F.

The Acquisition was accounted for using the purchase method of accounting,
pursuant to which the total purchase price, including related fees and expenses,
was allocated to the acquired net assets based upon estimates of fair value.
These adjustments were made by obtaining third-party valuations of certain
tangible and intangible assets and liabilities.

The following table summarizes the fair values assigned to K&F's assets acquired
and liabilities assumed in connection with the Acquisition on November 18, 2004:

                                       7
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<S>                                      <C>
Assets Acquired:

     Current assets                      $  183,467,000
     Property, plant and equipment           99,005,000
     Debt issuance costs                     29,280,000
     Program participation costs             49,238,000
     Other intangible assets                196,636,000
     Goodwill                               856,668,000
                                         --------------
          Total assets acquired           1,414,294,000
                                         --------------

Liabilities Assumed:

     Current liabilities                    142,242,000
     Pension liabilities                     47,629,000
     Postretirement benefit obligation       91,858,000
     Deferred income taxes                   20,169,000
     Other long-term liabilities              5,684,000
     Long-term debt                         796,922,000
                                         --------------
          Total liabilities assumed       1,104,504,000
                                         --------------
Net assets acquired                      $  309,790,000
                                         ==============
</TABLE>

2. Unaudited Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission ("SEC") and, in the opinion of the Company, include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
financial position, results of operations and cash flows. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules. The Company believes that the disclosures
made are adequate to make the information presented not misleading. The
consolidated statement of operations for the three and six months ended June 30,
2005 are not necessarily indicative of the results to be expected for the full
year. It is suggested that these financial statements be read in conjunction
with the audited financial statements and notes thereto included in the
Company's December 31, 2004 Annual Report on Form 10-K.

                                       8
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Since the date of the Acquisition (see Note 1), the accompanying financial
statements include fair value adjustments to assets and liabilities including
inventory, goodwill, other intangible assets, program participation costs,
property, plant and equipment and the subsequent impact on cost of sales,
amortization and depreciation expenses. Accordingly, all references in the
consolidated financial statements and the accompanying notes to events or
activities which occurred prior to the completion of the Acquisition relate to
K&F as the predecessor company and are labeled as "Predecessor".

3. Program Participation Costs

"Program Participation Costs" consist of incentives given to Original Equipment
Aircraft Manufacturers ("OEMs") in connection with their sole source selection
of our products for installation on aircraft. Prior to the completion of the
Federal Aviation Administration ("FAA") certification process, these incentives
consist of cash payments. After the completion of the FAA-certification process,
these incentives consist of cash payments, products discounted below cost and
free products. The costs associated with a discounted product or free product
are equal to the amount by which the cost of production exceeds the sales price
of such product and are expensed prior to the completion of the
FAA-certification process. In most cases, the Company does not receive revenue
from the OEM, and does not generate profits until it sells replacement parts to
the OEMs' customers and end-user aircraft operators.

The Predecessor consolidated financial statements utilize a different accounting
treatment for Program Participation Costs than that used in the periods
subsequent to the Acquisition. The Predecessor consolidated financial
statements: (i) recognized the costs associated with discounted products and
free products given to an OEM after completion of the FAA-certification process
as an expense in cost of sales when the applicable original equipment was
shipped; and (ii) capitalized the cash payments component of Program
Participation Costs, which were then amortized on a straight-line basis over the
shorter of the estimated economic useful life of the aircraft or 20 years, as
amortization expense.

The consolidated financial statements for the three and six months ended June
30, 2005: (i) expense all three components of Program Participation Costs for
non-sole source programs in cost of sales when the applicable original equipment
is shipped or the cash payments component is paid; and (ii) capitalize Program
Participation Costs for sole source contracts. A "sole source contract" is a
contractual commitment from the OEM pursuant to which the OEM: (i) agrees to
purchase parts for newly-produced aircraft exclusively from us; and (ii) agrees
not to support an attempt by a different supplier to be certified as a supplier
of replacement parts for such aircraft platform. These sole source contracts
require the Company to supply the OEM with all of the OEM's parts requirements
for as long as the applicable aircraft is produced and is in service.
Accordingly, the Company amortizes all capitalized Program Participation Costs
as an expense in cost of sales on a straight-line basis over the shorter of the
estimated economic useful life of the aircraft or 25 years.

                                       9
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

4. Accounting Pronouncements

In December 2004 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123-R. SFAS No. 123-R is a revision
of SFAS No. 123 and supersedes Accounting Principles Board ("APB") Opinion No.
25. SFAS No. 123-R eliminates the alternative to use the intrinsic value method
of accounting that was provided in SFAS No. 123, which generally resulted in no
compensation expense recorded in the financial statements related to the
issuance of equity awards to employees. SFAS No. 123-R requires that the cost
resulting from all share-based payment transactions be recognized in the
financial statements. SFAS No. 123-R establishes fair value as the measurement
objective in accounting for share-based payment arrangements and requires all
companies to apply a fair-value-based measurement method in accounting for
generally all share-based payment transactions with employees. See Note 8.

The Company plans to adopt SFAS No. 123-R using a modified prospective
application. Under this application, companies are required to record
compensation expense for all awards granted after the required effective date
and for the unvested portion of previously granted awards that remain
outstanding at the date of adoption. The provisions of SFAS 123-R are effective
for the Company on January 1, 2006.

5. Accounts Receivable are summarized as follows:

<TABLE>
<CAPTION>
                                     June 30,      December 31,
                                       2005            2004
                                   ------------    ------------
<S>                                <C>             <C>
Accounts receivable, principally
  from commercial customers        $ 39,766,000    $ 35,885,000

Accounts receivable, on U.S.
  Government and other long-term
  contracts                           4,212,000       7,684,000

Allowances                           (1,213,000)     (1,236,000)
                                   ------------    ------------

                                   $ 42,765,000    $ 42,333,000
                                   ============    ============
</TABLE>

6. Inventory consists of the following:

<TABLE>
<CAPTION>
                                      June 30,    December 31,
                                        2005          2004
                                    -----------   ------------
<S>                                 <C>           <C>
Raw materials and work-in-process   $31,564,000   $ 35,356,000

Finished goods                       13,483,000     16,017,000

Inventoried costs related to U.S.
  Government and other long-term
  contracts                          13,301,000      9,874,000
                                    -----------   ------------

                                    $58,348,000   $ 61,247,000
                                    ===========   ============
</TABLE>

                                       10
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

      Inventory is stated at average cost, not in excess of net realizable
      value. In accordance with industry practice, inventoried costs may contain
      amounts relating to contracts with long production cycles, a portion of
      which will not be realized within one year. Reserves for slow moving and
      obsolete inventories are provided based on current assessments about
      future product demand and production requirements for the next twelve
      months. The Company evaluates the adequacy of these reserves quarterly.

7.    Other current liabilities consist of the following:

<TABLE>
<CAPTION>
                                            June 30,    December 31,
                                             2005           2004
                                          -----------   ------------
<S>                                       <C>           <C>
Accrued payroll costs                     $12,674,000   $ 15,919,000
Accrued property and other taxes            3,156,000      2,197,000
Accrued costs on long-term contracts        4,907,000      2,639,000
Accrued warranty costs                     13,131,000     12,261,000
Customer credits                            4,241,000      5,402,000
Postretirement benefit obligation other
  than pensions                             4,000,000      4,000,000
Other                                       2,804,000      4,002,000
                                          -----------   ------------

                                          $44,913,000   $ 46,420,000
                                          ===========   ============
</TABLE>

8.    Stock Options

      The following information has been adjusted for a 133 to one stock split
      which occurred on August 8, 2005.

      In 2005, K&F Parent established a stock option plan, covering an aggregate
      of 1,330,000 authorized but unissued shares of common stock, for the
      benefit of, and to incentivize, officers, directors, employees and certain
      other persons of K&F Parent and its subsidiaries. In 2005, K&F Parent
      issued stock options to certain of K&F's officers, directors and employees
      to purchase an aggregate of 927,965 shares of common stock, at an exercise
      price of $7.52 per share, the estimated fair value at the date of grant.
      The options vest at the rate of 20% per year.

      The Company applies the intrinsic value method under APB No. 25,
      "Accounting for Stock Issued to Employees", and related interpretations to
      account for its stock option plan (see Note 4). Accordingly, the Company
      only records compensation expense for any stock options granted with an
      exercise price that is less than the fair market value of the underlying
      stock at the date of grant.

      The following table details the effect on net income had compensation
      expense for the stock option plan been recorded based on the fair value
      method under SFAS No. 123, "Accounting for Stock-based Compensation", as
      amended:

                                       11
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               Three Months Ended
                                           ----------------------------
                                             June 30,        June 30,
                                               2005            2004
                                           -----------    -------------
                                                          (Predecessor)
<S>                                        <C>            <C>
Reported net income                        $ 9,217,000    $   8,355,000
Deduct: Total stock-based employee and
  director compensation expense
  determined under fair value method for
  all awards, net of related tax effects      (128,000)              --
                                           -----------    -------------
Pro forma net income                       $ 9,089,000    $   8,355,000
                                           ===========    =============
</TABLE>

<TABLE>
<CAPTION>
                                                Six Months Ended
                                           ----------------------------
                                             June 30,        June 30,
                                               2005            2004
                                           -----------    -------------
                                                          (Predecessor)
<S>                                        <C>            <C>
Reported net income                        $ 8,793,000    $  17,259,000
Deduct: Total stock-based employee and
  director compensation expense
  determined under fair value method for
  all awards, net of related tax effects      (256,000)              --
                                           -----------    -------------
Pro forma net income                       $ 8,537,000    $  17,259,000
                                           ===========    =============
</TABLE>

      There were no stock options granted during the three and six months ended
      June 30, 2004 (Predecessor). The effects of applying SFAS No. 123 in this
      pro forma disclosure are not indicative of future results.

      The weighted average fair value of K&F Parent stock options granted during
      the six months ended June 30, 2005 was $3.24 per stock option, estimated
      on the date of grant using the Black-Scholes options-pricing model with
      the following weighted average assumptions: expected volatility of 33%
      (represents an average of the three-year trailing volatility of publicly
      traded companies in our peer group); risk-free interest rate of 3.97%
      (represents the rate available on U.S. government bonds at the grant
      date); and expected lives of option grants of seven years.

9.    Income Taxes

      The Company's effective tax rate of 33.8% for the three and six months
      ended June 30, 2005 differs from the statutory rate of 35% due to tax
      benefits derived from export sales. The Company's effective tax rate of
      32.8% and 33.2% for the three and six months ended June 30, 2004
      (Predecessor), respectively, differs from the statutory rate of 35% due to
      tax benefits derived from export sales.

                                       12
<PAGE>


                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

10.   Contingencies

      There are various lawsuits and claims pending against the Company
      incidental to its business. Although the ultimate resolution of such suits
      cannot be predicted with certainty, in the opinion of the Company's
      management, the ultimate settlement, if any, will not have a material
      adverse effect on the Company's consolidated financial statements.

11.   Comprehensive Income

<TABLE>
<CAPTION>
                                             Three Months Ended
                                         ----------------------------
                                           June 30,       June 30,
                                             2005           2004
                                         -----------    -------------
                                                        (Predecessor)
<S>                                      <C>            <C>
Net income                               $ 9,217,000    $   8,355,000

Other comprehensive (loss) income:

    Cumulative translation adjustments      (118,000)         (31,000)
                                         -----------    -------------

Comprehensive income                     $ 9,099,000    $   8,324,000
                                         ===========    =============
</TABLE>

<TABLE>
<CAPTION>
                                               Six Months Ended
                                         ----------------------------
                                           June 30,       June 30,
                                             2005           2004
                                         -----------    -------------
                                                        (Predecessor)
<S>                                      <C>            <C>
Net income                               $ 8,793,000    $  17,259,000

Other comprehensive (loss) income:

    Cumulative translation adjustments      (150,000)          62,000
                                         -----------    -------------

Comprehensive income                     $ 8,643,000    $  17,321,000
                                         ===========    =============
</TABLE>

                                       13
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

12.   Segments

      The following represents financial information about the Company's
      segments:

<TABLE>
<CAPTION>
                                       Three Months Ended
                                   -----------------------------
                                     June 30,        June 30,
                                       2005            2004
                                   ------------    -------------
                                                   (Predecessor)
<S>                                <C>             <C>
Sales:
    Aircraft Braking Systems       $ 73,737,000    $  69,162,000
    Engineered Fabrics               16,565,000       14,429,000
                                   ------------    -------------
                                   $ 90,302,000    $  83,591,000

Operating Profit:
    Aircraft Braking Systems       $ 27,035,000    $  19,937,000
    Engineered Fabrics                1,640,000        2,242,000
                                   ------------    -------------
      Operating income               28,675,000       22,179,000
    Interest expense, net           (14,752,000)      (9,742,000)
                                   ------------    -------------
      Income before income taxes   $ 13,923,000    $  12,437,000
                                   ============    =============
</TABLE>

<TABLE>
<CAPTION>
                                          Six Months Ended
                                   ------------------------------
                                      June 30,         June 30,
                                        2005             2004
                                   -------------    -------------
                                                    (Predecessor)
<S>                                <C>              <C>
Sales:
    Aircraft Braking Systems       $ 147,661,000    $ 138,039,000
    Engineered Fabrics                31,331,000       28,701,000
                                   -------------    -------------
                                   $ 178,992,000    $ 166,740,000
                                   =============    =============

Operating Profit:
    Aircraft Braking Systems       $  40,730,000    $  40,898,000
    Engineered Fabrics                 2,043,000        4,457,000
                                   -------------    -------------
      Operating income                42,773,000       45,355,000
    Interest expense, net            (29,490,000)     (19,504,000)
                                   -------------    -------------
      Income before income taxes   $  13,283,000    $  25,851,000
                                   =============    =============
</TABLE>

<TABLE>
<CAPTION>
                                           June 30,       December 31,
                                             2005             2004
                                        --------------   --------------
<S>                                     <C>              <C>
Total Assets:
    Aircraft Braking Systems            $1,183,336,000   $1,183,123,000
    Engineered Fabrics                     134,005,000      133,750,000
    Debt issuance costs not allocated
         to segments                        24,025,000       28,768,000
    Corporate assets                         5,757,000        4,264,000
                                        --------------   --------------
                                        $1,347,123,000   $1,349,905,000
                                        ==============   ==============
</TABLE>

                                       14
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

13.   Product Warranties

      Estimated costs of product warranty are accrued when individual claims
      arise with respect to a product. When the Company becomes aware of a
      defect in a particular product, the estimated costs of all potential
      warranty claims arising from similar defects of all similar products are
      fully accrued. An analysis of changes in the liability for product
      warranty for the six months ended June 30, 2005 is as follows:

<TABLE>
<S>                            <C>
Balance at December 31, 2004   $ 12,858,000
Current provisions                3,981,000
Expenditures                     (3,111,000)
                               ------------
Balance at June 30,2005        $ 13,728,000
                               ============
</TABLE>

      The current and long-term portions of product warranties are as follows:

<TABLE>
<CAPTION>
                               June 30,     December 31,
                                 2005           2004
                              -----------   ------------
<S>                           <C>           <C>
Current liabilities           $13,131,000   $ 12,261,000
Long-term liabilities             597,000        597,000
                              -----------   ------------
Total                         $13,728,000   $ 12,858,000
                              ===========   ============
</TABLE>

14.   Employee Benefit Plans

      The following represents the net periodic benefit cost for the defined
      benefit and postretirement benefit plans:

<TABLE>
<CAPTION>
                                               Pension Benefits
                        ------------------------------------------------------------
                             Three Months Ended               Six Months Ended
                                  June 30,                       June 30,
                        ----------------------------    ----------------------------
                           2005             2004            2005           2004
                        -----------    -------------    -----------    -------------
                                       (Predecessor)                   (Predecessor)
<S>                     <C>            <C>              <C>            <C>
Service cost            $   836,000    $   1,080,000    $ 2,061,000    $   2,160,000
Interest cost             2,192,000        2,102,000      4,385,000        4,204,000
Expected return on
  plan assets            (2,228,000)      (2,267,000)    (4,446,000)      (4,534,000)
Amortization of prior
  service cost                   --           98,000             --          196,000
Recognized actuarial
  loss                           --          990,000             --        1,980,000
                        -----------    -------------    -----------    -------------
Net periodic benefit
  cost                  $   800,000    $   2,003,000    $ 2,000,000    $   4,006,000
                        ===========    =============    ===========    =============
</TABLE>

                                       15
<PAGE>

                      K&F INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                       Postretirement Benefits
                        ------------------------------------------------------------
                             Three Months Ended               Six Months Ended
                                  June 30,                        June 30,
                        ----------------------------    ----------------------------
                           2005            2004            2005            2004
                        -----------    -------------    -----------    -------------
                                       (Predecessor)                   (Predecessor)
<S>                     <C>            <C>              <C>            <C>
Service cost            $   478,000    $     473,000    $   956,000    $     946,000
Interest cost             1,396,000        1,574,000      2,792,000        3,148,000
Expected return on
 plan assets                     --               --             --               --
Amortization of prior
  service cost                   --       (1,305,000)            --       (2,610,000)
Recognized actuarial
  loss                           --          586,000             --        1,172,000
                        -----------    -------------    -----------    -------------
Net periodic benefit
  cost                  $ 1,874,000    $   1,328,000    $ 3,748,000    $   2,656,000
                        ===========    =============    ===========    =============
</TABLE>

      The Company did not make any contributions to its pension plans during the
      first six months of 2005 and will not make any during the remainder of
      2005.

15.   Subsequent Event

      K&F amended its Management Services Agreement with Aurora Management
      Partners LLC. The amendment eliminated the $1 million annual fee, payable
      over the term of the Management Services Agreement for a $5.0 million
      termination fee. K&F made this payment on August 12, 2005 and will record
      this as a charge to its third quarter 2005 earnings.

16.   Restatement

      Subsequent to the issuance of the Company's consolidated financial
      statements for the quarterly period ended June 30, 2005, management
      determined that the Company's condensed consolidated statement of cash
      flows for the six months ended June 30, 2005 should be restated. In the
      six months ended June 30,2005, an amount of $14,682,0000 was previously
      included in "net cash provided by operating activities" and should have
      been included in "net cash used in investing activities" as it relates to
      the payment of deferred purchase price to K&F's prior equityholders.

      A summary of the effect of the restatement on the Company's condensed
      consolidated statement of cash flows for the six months ended June 30,
      2005 is as follows:

<TABLE>
<CAPTION>
                                              For the Six Months
                                              Ended June 30, 2005
                                         -----------------------------
                                         As Previously
                                            Reported      As Restated
                                         -------------    ------------
<S>                                      <C>             <C>
Cash Flows from Operating Activities:
 Payment of deferred purchase price      $ (14,682,000)   $         --
 Net cash provided by operating
   activities                               21,801,000      36,483,000

Cash Flows from Investing Activities:
 Payment of deferred purchase price                 --     (14,682,000)
 Net cash used in investing activities      (3,129,000)    (17,811,000)
</TABLE>

                                       16
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                 OF OPERATIONS

Restatement

The discussion of cash flows in the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the six months ended June 30, 2005 has been restated. In the six
months ended June 30, 2005, an amount of $14,682,000 was previously included
"net cash provided by operating activities" and should have been included in
"net cash used in investing activities" as it relates to the payment of deferred
purchase price to K&F Industries, Inc.'s prior equityholders. This restatement
does not affect the total net change in cash and cash equivalents for the six
months ended June 30, 2005 and has no impact on the Company's consolidated
financial position or results of operations.

General

K&F Industries, Inc. and subsidiaries, or "K&F", is primarily engaged in the
design, development, manufacture and distribution of wheels, brakes and brake
control systems for commercial, military and general aviation aircraft, and the
manufacture of materials for fuel tanks, iceguards, inflatable oil booms and
various other products made from coated fabrics for military and commercial
uses. We serve the aerospace industry and sell our products to airframe
manufacturers and commercial airlines throughout the world and to the United
States government and certain foreign governments. Our activities are conducted
through our two wholly owned subsidiaries, Aircraft Braking Systems Corporation,
or "Aircraft Braking Systems" and Engineered Fabrics Corporation, or "Engineered
Fabrics".

Termination of Management Services Agreement

K&F amended its Management Services Agreement with Aurora Management Partners
LLC. The amendment eliminated the $1 million annual fee payable over the term of
the Management Services Agreement in exchange for a $5.0 million termination
fee. K&F made this payment on August 12, 2005 and will record this as a charge
to its third quarter 2005 earnings.

The Acquisition

On November 18, 2004, K&F Industries Holdings, Inc., or "K&F Parent", an
affiliate of Aurora Capital Group, acquired K&F in exchange for cash
consideration of approximately $1.06 billion (excluding capitalized transaction
costs of $40.4 million). The former K&F equityholders retained $77.2 million of
cash on hand at the acquisition date. The cash consideration was used to repay
substantially all of K&F's then existing indebtedness and the related fees and
expenses of K&F and certain of its stockholders, with the balance paid to the
former equityholders. In addition, K&F Parent issued a note in the amount of
$14.7 million, payable for the benefit of the prior K&F equityholders, for the
estimated tax benefits to be received by K&F due to the payments of fees and
premiums in connection with the tender offers for our prior senior subordinated
notes. We refer to this as the "Acquisition".

The Acquisition was financed with an offering by us of $315.0 million of 7 3/4%
Senior Subordinated Notes due 2014, the borrowing by us of $480.0 million under
a new $530 million senior secured credit facility and $309.8

                                       17
<PAGE>

million in equity investments from K&F Parent. K&F Parent contributed the $309.8
million of equity to its wholly-owned subsidiary, K&F Intermediate Holdco, Inc.,
which then contributed such proceeds as equity to its wholly-owned subsidiary,
K&F Acquisition, Inc., prior to the merger of K&F Acquisition, Inc. with and
into K&F.

The Acquisition was accounted for using the purchase method of accounting,
pursuant to which the total purchase price, including related fees and expenses,
was allocated to the acquired net assets based upon estimates of fair value.
These adjustments were made by obtaining third-party valuations of certain
tangible and intangible assets and liabilities.

Since the date of the Acquisition, our financial statements include fair value
adjustments to assets and liabilities including inventory, goodwill, other
intangible assets, program participation costs, property, plant and equipment
and the subsequent impact on cost of sales, amortization and depreciation
expenses. Accordingly, all references to events or activities which occurred
prior to the completion of the Acquisition relate to K&F as the predecessor
company and are labeled as "Predecessor".

"EBITDA" represents net income before interest expense, income tax provision and
depreciation and amortization. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations, as
determined in accordance with GAAP, and our calculations thereof may not be
comparable to similarly entitled measures reported by other companies. We
present EBITDA because we believe it is a useful indicator of our operating
performance. Our management uses EBITDA principally as a measure of our
operating performance and believes that EBITDA is useful to investors because it
is frequently used by securities analysts, investors and other interested
parties in their evaluation of companies in industries similar to ours. We also
believe EBITDA is useful to our management and investors as a measure of
comparative operating performance between time periods and among companies as it
is reflective of changes in pricing decisions, cost controls and other factors
that affect operating performance. Our management also uses EBITDA for planning
purposes, including the preparation of our annual operating budget and financial
projections.

EBITDA does not represent and should not be considered as an alternative to
results of operations under GAAP and has significant limitations as an
analytical tool. Although we use EBITDA as a measure to assess the performance
of our business, the use of EBITDA is limited because it excludes certain
material costs. For example, it does not include interest expense, which is a
necessary element of our costs and ability to generate revenue, because we have
borrowed money in order to finance our operations. Because we use capital
assets, depreciation expense is a necessary element of our costs and ability to
generate revenue. In addition, the omission of the substantial amortization
expense associated with our intangible assets further limits the usefulness of
this measure. EBITDA also does not include the payment of taxes, which is also a
necessary element of our operations. Because EBITDA does not account for these
expenses, its utility as a measure of our operating performance has material
limitations. Because of these limitations management does not view EBITDA in
isolation or as a primary performance measure and also uses other measures, such
as net income, sales, bookings and operating profit, to measure operating
performance.

                                       18
<PAGE>

The following is a reconciliation of net income to EBITDA:

<TABLE>
<CAPTION>
                                              Three Months Ended
                                          ---------------------------
                                            June 30,      June 30,
                                             2005           2004
                                          -----------   -------------
                                                        (Predecessor)
<S>                                       <C>           <C>
Net income                                $ 9,217,000   $   8,355,000
Adjustments:
  Depreciation and amortization expense     6,236,000       3,006,000
  Interest expense, net                    14,752,000       9,742,000
  Income tax provision                      4,706,000       4,082,000
                                          -----------   -------------
EBITDA                                    $34,911,000   $  25,185,000
                                          ===========   =============
</TABLE>

<TABLE>
<CAPTION>
                                               Six Months Ended
                                          ---------------------------
                                           June 30,        June 30,
                                             2005           2004
                                          -----------   -------------
                                                        (Predecessor)
<S>                                       <C>           <C>
Net income                                $ 8,793,000   $  17,259,000
Adjustments:
  Depreciation and amortization expense    12,369,000       5,882,000
  Interest expense, net                    29,490,000      19,504,000
  Income tax provision                      4,490,000       8,592,000
                                          -----------   -------------
EBITDA                                    $55,142,000   $  51,237,000
                                          ===========   =============
</TABLE>

The following tables show the non-recurring and certain other items which are
included in EBITDA: non-recurring inventory accounting adjustments,
non-recurring salary and benefit expense, non-recurring non-cash income and
capitalization of Program Participation Costs. We believe this information, when
reviewed in connection with our presentation of EBITDA, provides another useful
tool to our management and investors for measuring comparative operating
performance between time periods and among companies. In addition to EBITDA, our
management assesses the adjustments presented below when preparing our annual
operating budget and financial projections. Specifically, because these tables
exclude non-recurring salary and benefit expense and non-recurring non-cash
income, we believe this information allows our management and investors to
assess our operating performance during the periods these charges were incurred
on a consistent basis with the periods during which these unusual charges were
not incurred. Further, because of the significant changes in our capital
structure resulting from the Acquisition, including the post-Acquisition
capitalization of our Program Participation Costs, we believe that the
presentation of the adjustments relating to non-recurring inventory purchase
accounting adjustments and capitalization of Program Participation Costs both
enable our management and investors to assess the impact of the Acquisition on
our operating performance and provides a consistent measure of our operating
performance for periods subsequent to the Acquisition.

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                            Three Months Ended
                                         ------------------------
                                         June 30,     June 30,
                                           2005         2004
                                         --------   -------------
                                                    (Predecessor)
<S>                                      <C>        <C>
Non-recurring salary and benefit
  expense                                $     --    $ 1,707,000
Program Participation Costs previously
  expensed                                     --      6,098,000
                                         --------    -----------
                                         $     --    $ 7,805,000
                                         ========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                              Six Months Ended
                                         ----------------------------
                                           June 30,       June 30,
                                             2005          2004
                                         ------------   -------------
                                                        (Predecessor)
<S>                                      <C>            <C>
Inventory purchase accounting
  charge                                 $ 12,084,000   $          --
Non-recurring salary and benefit
  expense                                          --       3,428,000
Non-recurring non-cash income                      --        (592,000)
Program Participation Costs previously
  expensed                                         --      10,817,000
                                         ------------   -------------
                                         $ 12,084,000   $  13,653,000
                                         ============   =============
</TABLE>

Critical Accounting Policies and Estimates

This section is based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
our management to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to bad debts, inventories, intangible assets,
income taxes, warranty obligations, workers compensation liabilities, pension
and other postretirement benefits, and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates. We believe the following critical accounting policies affect
our more significant judgments and estimates used in the preparation of the
consolidated financial statements.

Revenue Recognition. Revenue from the sale of products is generally recognized
upon shipment to customers, provided that there are no uncertainties regarding
customer acceptance, there is persuasive evidence of an agreement, the sales
price is fixed and determinable and collection of the receivable is probable.

Inventory. Inventory is stated at average cost, not in excess of net realizable
value. In accordance with industry practice, inventoried costs may

                                       20
<PAGE>

contain amounts related to contracts with long production cycles, a portion of
which will not be realized within one year. Reserves for slow moving and
obsolete inventories are provided based on current assessments about future
product demand and production requirements for the next twelve months. These
factors are impacted by market conditions, technology changes, and changes in
strategic direction, and require estimates and management judgment that may
include elements that are uncertain. We evaluate the adequacy of these reserves
quarterly.

Although we strive to achieve a balance between market demands and risk of
inventory excess or obsolescence, it is possible that, should conditions change,
additional reserves may be needed. Any changes in reserves will impact operating
income during a given period. This policy is consistently applied to each of our
operating segments and we do not anticipate any changes to our policy in the
near term.

Program Participation Costs. "Program Participation Costs" consist of incentives
given to Original Equipment Aircraft Manufacturers ("OEMs") in connection with
their sole source selection of our products for installation on aircraft. Prior
to the completion of the Federal Aviation Administration ("FAA") certification
process, these incentives consist of cash payments. After the completion of the
FAA-certification process, these incentives consist of cash payments, products
discounted below cost and free products. The costs associated with a discounted
product or free product are equal to the amount by which the cost of production
exceeds the sales price of such product and are expensed prior to the completion
of the FAA-certification process. In most cases, we do not receive revenue from
the OEM, and do not generate profits until we sell replacement parts to the
OEMs' customers and end-user aircraft operators.

The Predecessor consolidated financial statements utilize a different accounting
treatment for Program Participation Costs than that used in the periods
subsequent to the Acquisition. The Predecessor consolidated financial
statements: (i) recognized the costs associated with discounted products and
free products given to an OEM after completion of the FAA-certification process
as an expense in cost of sales when the applicable original equipment was
shipped; and (ii) capitalized the cash payments component of Program
Participation Costs, which were then amortized on a straight-line basis over the
shorter of the estimated economic useful life of the aircraft or 20 years, as
amortization expense.

The consolidated financial statements for the three and six months ended June
30, 2005: (i) expense all three components of Program Participation Costs for
non-sole source programs in cost of sales when the applicable original equipment
is shipped or the cash payments component is paid; and (ii) capitalize Program
Participation Costs for sole source contracts. A "sole source contract" is a
contractual commitment from the OEM pursuant to which the OEM: (i) agrees to
purchase parts for newly-produced aircraft exclusively from us; and (ii) agrees
not to support an attempt by a different supplier to be certified as a supplier
of replacement parts for such aircraft platform. These sole source contracts
require us to supply the OEM with all of the OEM's parts requirements for as
long as the applicable aircraft is produced and is in service. Accordingly, we
amortize all capitalized Program Participation Costs as an expense in cost of
sales on a straight-line basis over the shorter of the estimated economic useful
life of the aircraft or 25 years.

                                       21
<PAGE>

Evaluation of Long-Lived Assets. Long-lived assets are assessed for
recoverability on an ongoing basis in accordance with Statement of Financial
Accounting Standards or, "SFAS" No. 144. In evaluating the value and future
benefits of long-lived assets, their carrying value is compared to management's
estimate of the anticipated undiscounted future net cash flows of the related
long-lived asset. Any necessary impairment charges would be recorded when we do
not believe the carrying value of the long-lived asset will be recoverable.

Goodwill and Other Intangible Assets. In accordance with SFAS No. 142, "Goodwill
and Other Intangible Assets," we do not amortize goodwill and other intangible
assets that are deemed to have indefinite lives. We test these assets for
impairment at least annually or more frequently if any event occurs or
circumstances change that indicate possible impairment.

Goodwill represents the excess cost of the businesses acquired over the fair
market value of the identifiable net assets.

Upon completion of the Acquisition, we determined that Aircraft Braking Systems
and Engineered Fabrics qualified as reporting units because discrete financial
information exists for each operation and the management of each operation
directly reviewed the operation's performance. In the future, if we determine
that our current structure no longer meets the requirements of a reporting unit,
we will reevaluate the reporting units with respect to the changes in our
reporting structure.

The first step of the impairment test identifies potential impairments by
comparing the estimated fair value using a market multiple analysis and a
discounted cash flow analysis of each reporting unit with its corresponding net
book value, including goodwill. If the net book value of the reporting unit
exceeds its fair value, the second step of the impairment test determines the
potential impairment loss by applying the estimated fair value first to the
tangible assets, then to the identifiable intangible assets. Any remaining value
would then be applied to the goodwill. The excess carrying value of goodwill
over the remaining fair value would indicate the amount of the impairment
charge.

Warranty. Estimated costs of warranty are accrued when individual claims arise
with respect to a product or performance. When we become aware of those types of
defects, the estimated costs of all potential warranty claims arising from those
types of defects are fully accrued.

Pension and Other Postretirement Benefits. We have significant pension and
postretirement benefit costs and liabilities. The determination of our
obligation and expense for pension and other postretirement benefits is
dependent on our selection of certain assumptions used by actuaries in
calculating those amounts. Assumptions are made about interest rates, expected
investment return on plan assets, rate of increase in health care costs, total
and involuntary turnover rates, and rates of future compensation increases. In
addition, our actuarial consultants use subjective factors such as withdrawal
rates and mortality rates to develop our valuations. We generally review and
update these assumptions at the beginning of each fiscal year. We are required
to consider current market conditions, including changes in interest rates, in
making these assumptions. The actuarial assumptions that we may use may differ
materially from actual results due to changing market and economic conditions,
higher or lower withdrawal rates or longer or shorter life spans of
participants. These differences may result in a significant impact on the amount
of pension and postretirement benefits expense we have recorded or may record.

                                       22
<PAGE>

The discount rate enables us to state expected future cash flows at a present
value on the measurement date. The rate represents the market rate of
high-quality fixed income investments. A lower discount rate increases the
present value of benefit obligations and increases pension expense. We used a
6 1/4% discount rate in 2004 and are using a 6.0% discount rate for 2005 to
reflect market conditions.

To determine the expected long-term rate of return on pension plan assets, we
consider the current and expected asset allocations, as well as historical and
expected returns on various categories of plan assets. We assumed that the
long-term return on our pension plan assets was 9.0% in 2004 and will remain at
9.0% for 2005 to reflect projected returns in the fixed income and equity
markets.

The annual postretirement expense was calculated using a number of actuarial
assumptions, including a health care cost trend rate and a discount rate. Our
discount rate assumption for postretirement benefits is consistent with that
used in the calculation of pension benefits. The healthcare cost trend rate
being used to calculate the calendar year 2005 postretirement expense is 10.1%
in 2005 trending down to 5.0% for 2010.

Comparison of Results of Operations for the Six Months Ended June 30, 2005 and
June 30, 2004

Our sales for the six months ended June 30, 2005 totaled $178,992,000,
reflecting an increase of $12,252,000, compared with $166,740,000 for the same
period in the prior year. This increase was due to higher sales at Aircraft
Braking Systems of $9,622,000 and Engineered Fabrics of $2,630,000.

Commercial sales at Aircraft Braking Systems increased $4,610,000, primarily due
to higher sales of wheels and brakes on the Boeing DC-10 and DC-9, Fokker FO-100
and Embraer ERJ-170 programs, partially offset by the Boeing MD-80 and
Bombardier CRJ-100/200 programs. General aviation sales increased $4,867,000,
primarily on Gulfstream and Dassault aircraft. Military sales were level with
the prior year with an increase in the Lockheed C-130, offset by a decrease in
the Boeing B-1B program. Sales at Engineered Fabrics increased primarily due to
higher military sales of fuel tanks, primarily for the Boeing CH-47 and F-15 and
Northrop Grumman T-38 programs, partially offset by lower shipments on the F-18
program. In addition, sales increased due to higher shipments of oil containment
booms and iceguards for the Sikorsky UH-60 program.

Our gross profit increased by $1,169,000 to $70,327,000, or 39.3% of sales for
the six months ended June 30, 2005, compared with $69,158,000, or 41.5% of sales
for the same period in the prior year. This increase was primarily attributable
to lower expensed Program Participation Costs of $8,636,000 and the higher sales
volume, partially offset by a $12,084,000 non-recurring charge included in cost
of sales pertaining to an inventory purchase accounting adjustment (which
represents the remaining balance of the fair value adjustment to inventory
recorded in connection with the Acquisition) and higher depreciation of
$1,668,000 relating to purchase accounting allocations.

                                       23
<PAGE>

The following table provides additional information detailing Program
Participation Costs:

<TABLE>
<CAPTION>
                                              Six Months Ended
                                        -----------------------------
                                          June 30,        June 30,
                                            2005            2004
                                        ------------    -------------
                                                        (Predecessor)
<S>                                     <C>             <C>
Gross Program Participation Costs       $ 18,931,000    $  16,195,000
Amount capitalized during period         (12,562,000)              --
Amortization of Program Participation
  Costs                                    1,190,000               --
                                        ------------    -------------
Program Participation Costs expensed
  in period                             $  7,559,000    $  16,195,000
                                        ============    =============
</TABLE>

Aircraft Braking Systems' gross profit was $74,440,000, or 50.4% of sales
(excluding $11,293,000, relating to its portion of the non-recurring inventory
purchase accounting adjustment) for the six months ended June 30, 2005, compared
with $63,103,000, or 45.7% of sales for the same period in the prior year.
Aircraft Braking Systems' gross margin increased primarily due to lower expensed
investments, as discussed above and the overhead absorption effect relating to
the higher sales, partially offset by higher depreciation expense, as discussed
above. Engineered Fabrics' gross profit was $7,971,000, or 25.4% of sales
(excluding $791,000, relating to its portion of the non-recurring inventory
purchase accounting adjustment) for the six months ended June 30, 2005, compared
with $6,055,000, or 21.1% of sales for the same period in the prior year.
Engineered Fabrics' gross margin increased primarily due to the overhead
absorption effect relating to the higher sales and a favorable mix of products
sold.

Independent research and development costs increased by $621,000 for the six
months ended June 30, 2005, as compared with the same period in the prior year.
This increase was primarily due to higher costs on various development programs,
partially offset by lower costs on the Dassault Falcon 7X program.

Selling, general and administrative expenses decreased by $558,000 during the
six months ended June 30, 2005, as compared with the same period in the prior
year. This decrease was primarily due to lower compensation costs, partially
offset by costs associated with the implementation of our productivity
enhancement program.

Amortization expense increased by $3,688,000 during the six months ended June
30, 2005, as compared with the same period in the prior year. This increase was
due to the fair value accounting for intangible assets related to the
Acquisition.

Our net interest expense increased $9,986,000 for the six months ended June 30,
2005, as compared with the same period in the prior year. This increase was
primarily due to the increased debt and related debt issuance costs we incurred
in connection with the Acquisition. The increase related to the amortization of
debt issuance costs was $3,825,000 during the six months ended June 30, 2005, as
compared with the same period in the prior year.

Our effective tax rate of 33.8% for the six months ended June 30, 2005 differs
from the statutory rate of 35% due to tax benefits derived from export sales.
Our effective tax rate of 33.2% for the six months ended June 30, 2004 differs
from the statutory rate of 35% due to tax benefits derived from export sales.

                                       24
<PAGE>

Comparison of Results of Operations for the Three Months Ended June 30, 2005 and
June 30, 2004

Our sales for the three months ended June 30, 2005 totaled $90,302,000,
reflecting an increase of $6,711,000, compared with $83,591,000 for the same
period in the prior year. This increase was due to higher sales at Aircraft
Braking Systems of $4,575,000 and Engineered Fabrics of $2,136,000.

Commercial sales at Aircraft Braking Systems increased $1,720,000, primarily due
to higher sales of wheels and brakes on the Boeing DC-10 and Embraer ERJ-170
programs, partially offset by lower sales on the Bombardier CRJ-100/200 and the
Boeing MD-90 programs. General aviation sales increased $2,933,000, primarily on
Dassault and Gulfstream aircraft. Military sales were level with the prior year.
Sales at Engineered Fabrics increased primarily due to higher military sales of
fuel tanks, primarily for the Boeing CH-47 and F-15 and Northrop Grumman T-38
programs, partially offset by lower shipments on the F-18 program. In addition,
sales increased due to higher shipments of oil containment booms.

Our gross profit increased by $8,042,000 to $42,103,000, or 46.6% of sales for
the three months ended June 30, 2005, compared with $34,061,000, or 40.7% of
sales for the same period in the prior year. This increase was primarily
attributable to lower expensed Program Participation Costs of $4,876,000 and the
higher sales volume, partially offset by higher depreciation of $834,000
relating to purchase accounting allocations.

The following table provides additional information detailing Program
Participation Costs:

<TABLE>
<CAPTION>
                                            Three Months Ended
                                        ----------------------------
                                         June 30,         June 30,
                                           2005             2004
                                        -----------    -------------
                                                       (Predecessor)
<S>                                     <C>            <C>
Gross Program Participation Costs       $ 9,861,000    $   8,664,000
Amount capitalized during period         (6,704,000)              --
Amortization of Program Participation
  Costs                                     631,000               --
                                        -----------    -------------
Program Participation Costs expensed
  in period                             $ 3,788,000    $   8,664,000
                                        ===========    =============
</TABLE>

Aircraft Braking Systems' gross profit was $38,441,000, or 52.1% of sales for
the three months ended June 30, 2005, compared with $31,165,000, or 45.1% of
sales for the same period in the prior year. Aircraft Braking Systems' gross
margin increased primarily due to lower expensed investments, as discussed above
and the overhead absorption effect relating to the higher sales, partially
offset by higher depreciation expense, as discussed above. Engineered Fabrics'
gross profit was $3,662,000, or 22.1% of sales for the three months ended June
30, 2005, compared with $2,896,000, or 20.1% of sales for the same period in the
prior year. Engineered Fabrics' gross margin increased primarily due to the
overhead absorption effect relating to the higher sales and a favorable mix of
products sold.

Independent research and development costs increased by $415,000 for the three
months ended June 30, 2005, as compared with the same period in the prior year.
This increase was primarily due to higher costs on various development programs,
partially offset by lower costs on the Dassault Falcon 7X program.

                                       25
<PAGE>

Selling, general and administrative expenses decreased by $689,000 during the
three months ended June 30, 2005, as compared with the same period in the prior
year. This decrease was primarily due to lower compensation costs, partially
offset by costs associated with the implementation of our productivity
enhancement program.

Amortization expense increased by $1,820,000 during the three months ended June
30, 2005, as compared with the same period in the prior year. This increase was
due to the fair value accounting for intangible assets related to the
Acquisition.

Our net interest expense increased by $5,010,000 for the three months ended June
30, 2005, as compared with the same period in the prior year. This increase was
primarily due to the increased debt and related debt issuance costs we incurred
in connection with the Acquisition. The increase related to the amortization of
debt issuance costs was $1,593,000 during the three months ended June 30, 2005,
as compared with the same period in the prior year.

Our effective tax rate of 33.8% for the three months ended June 30, 2005 differs
from the statutory rate of 35% due to tax benefits derived from export sales.
Our effective tax rate of 32.8% for the three months ended June 30, 2004 differs
from the statutory rate of 35% due to tax benefits derived from export sales.

Liquidity and Capital Resources

Our cash and cash equivalents totaled $9.3 million at June 30, 2005, compared
with $9.6 million at December 31, 2004. Our total debt was $771.6 million at
June 30, 2005 and $790.6 million at December 31, 2004. We prepaid $19.0 million
of long-term debt during the six months ended June 30, 2005. We had $48.0
million (which is net of letters of credit of $2.0 million) available to borrow
under our $50 million revolving credit facility. In the past, the cash generated
from operations has been sufficient to pay our indebtedness.

We expect that our principal use of funds for the next several years will be to
pay interest and principal on indebtedness, fund capital expenditures, make
program participation investments and to fund strategic acquisitions. Our
primary source of funds for conducting our business activities and servicing our
indebtedness has been cash generated from operations.

The credit facility contains certain covenants and events of default, including
limitations on additional indebtedness, liens, asset sales, making certain
restricted payments, capital expenditures, creating guarantee obligations,
material lease obligations and limits on the amount of acquisitions we may make.
The credit facility also contains certain financial ratio requirements,
including a cash interest coverage ratio and a leverage ratio. We were in
compliance with all debt covenants at June 30, 2005.

Our contractual obligations are detailed in our Annual Report on Form 10-K for
the year ended December 31, 2004. As of June 30, 2005, our contractual
obligations have not materially changed from December 31, 2004.

Cash Flows

During the six months ended June 30, 2005, net cash provided by operating
activities amounted to $36,483,000, compared with $21,017,000 for the same
period in the prior year, an increase of $15,466,000. Our cash flows from

                                       26
<PAGE>

operating activities increased from the prior year primarily due to the receipt
of a $15,425,000 income tax refund relating to expenses incurred in connection
with the Acquisition, lower upfront cash program participation payments and
lower income tax payments, partially offset by a higher increase in inventory
and higher interest payments.

During the six months ended June 30, 2005, net cash used in investing activities
amounted to $17,811,000 versus $1,240,000 for the same period in the prior year,
an increase of $16,571,000. This increase was due to the payment of $14,682,000
of deferred purchase price to the former K&F equityholders and higher capital
expenditures of $1,889,000 relating to our new carbon manufacturing facility in
Danville, Kentucky.

During the six months ended June 30, 2005, net cash used in financing activities
amounted to $18,980,000 versus $0 for the same period in the prior year, due to
payments of $19,000,000 of long-term debt in 2005 versus no payments made during
2004.

Accounting Pronouncements

In December 2004 the Financial Accounting Standards Board issued SFAS No. 123-R.
SFAS No. 123-R is a revision of SFAS No. 123 and supersedes APB Opinion No. 25.
SFAS No. 123-R eliminates the alternative to use the intrinsic value method of
accounting that was provided in SFAS No. 123, which generally resulted in no
compensation expense recorded in the financial statements related to the
issuance of equity awards to employees. SFAS No. 123-R requires that the cost
resulting from all share-based payment transactions be recognized in the
financial statements. SFAS No. 123-R establishes fair value as the measurement
objective in accounting for share-based payment arrangements and requires all
companies to apply a fair-value-based measurement method in accounting for
generally all share-based payment transactions with employees.

We plan to adopt SFAS No. 123-R using a modified prospective application. Under
this application, companies are required to record compensation expense for all
awards granted after the required effective date and for the unvested portion of
previously granted awards that remain outstanding at the date of adoption. The
provisions of SFAS 123-R are effective for us on January 1, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We had $315.6 million of total fixed rate debt and $456.0 million of variable
rate debt outstanding at June 30, 2005. Borrowings under the new credit facility
bear interest that varies with the federal funds rate. Interest rate changes
generally do not affect the market value of such debt, but do impact the amount
of our interest payments and, therefore, our future earnings and cash flows,
assuming other factors are held constant. Assuming other variables remain
constant, including levels of indebtedness, a 10% increase in interest rates on
our variable debt would have an estimated impact on pre-tax earnings and cash
flows for the next twelve months of approximately $2.0 million.

As a requirement of our new credit facility, we have entered into the following
interest rate hedges:

-     a 3 month LIBOR interest rate cap at 4.5% from December 2004 to December
      2005 on $240 million of our term loans;

                                       27
<PAGE>

-     a 3 month LIBOR interest rate cap at 6% from December 2005 to December
      2007 for an increasing notional amount starting at $144.6 million,
      increasing to $161.2 million;

-     a swap arrangement for a portion of our term loans from a variable 3 month
      LIBOR interest rate to a fixed rate of 4.0375%, beginning January 24,
      2006. The notional amount of the swaps is initially $95.4 million and
      declines to $78.8 million on January 24, 2008 at the termination of the
      swap agreement; and

-     a swap arrangement for a portion of our term loans from a variable 3 month
      LIBOR interest rate to a fixed rate of 4.506%, beginning January 24, 2006.
      The notional amount of the swaps is initially $47.7 million and declines
      to $39.4 million on January 24, 2008 at the termination of the swap
      agreement.

We have no other derivative financial instruments.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosures. Any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives. Our management, with the participation of our Chief Executive
Officer and our Chief Financial Officer, have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of June 30,
2005. Based upon that evaluation and subject to the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of our disclosure controls and procedures provided reasonable
assurance that the disclosure controls and procedures are effective to
accomplish their objectives.

In addition, there was no change to our internal control over financial
reporting that occurred during the quarter ended June 30, 2005 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

                                       28
<PAGE>

                           PART II. OTHER INFORMATION

Item 6.  Exhibits

(a)   Exhibits

      31.1 -      Certification of Chief Executive Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a)of the Securities Exchange Act, as
                  amended.

      31.2 -      Certification of Chief Financial Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a)of the Securities Exchange Act, as
                  amended.

      32.1 -      Certification of Chief Executive Office pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

      32.2 -      Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.

                                       29
<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 hereunto duly authorized.

                                            K&F INDUSTRIES, INC.
                                                 Registrant

                                         /s/ DIRKSON R. CHARLES
                                             ------------------
                                             Dirkson R. Charles
                                          Executive Vice President and
                                          Chief Financial Officer and
                                          Registrant's Authorized Officer

Dated: November 11, 2005

                                       30