<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 2003
                                       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)

     600 Third Avenue, New York, New York                          10016
--------------------------------------------------------------------------------
  (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code (212) 297-0900

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 November 1, 2003, there were 740,398 shares of common stock outstanding.

<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

                                      INDEX

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

         Item 1.  Consolidated Financial Statements (Unaudited)

                  a)       Consolidated Balance Sheets as of September 30, 2003
                           and December 31, 2002                                             3

                  b)       Consolidated Statements of Operations for the nine
                           months ended September 30, 2003 and 2002                          4

                  c)       Consolidated Statements of Operations for the three
                           months ended September 30, 2003 and 2002                          5

                  d)       Consolidated Statements of Cash Flows for the nine
                           months ended September 30, 2003 and 2002                          6

                  e)       Notes to Consolidated Financial Statements                        7

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                       13

         Item 3.  Quantitative and Qualitative Disclosures About
                  Market Risk                                                               17

         Item 4.  Controls and Procedures                                                   18

Part II. Other Information

         Item 6.  Exhibits and Reports on Form 8-K                                          19

Signatures                                                                                  20
</TABLE>

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               September 30,   December 31,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
ASSETS:
Current Assets:
  Cash and cash equivalents                                    $  50,486,000   $  22,735,000
  Accounts receivable, net                                        43,006,000      38,228,000
  Inventory                                                       59,146,000      52,006,000
  Other current assets                                             1,056,000       1,353,000
  Income taxes receivable                                          2,277,000       2,609,000
                                                               -------------   -------------
Total current assets                                             155,971,000     116,931,000
                                                               -------------   -------------

Property, plant and equipment                                    171,398,000     171,374,000
  Less, accumulated depreciation and amortization                108,882,000     105,326,000
                                                               -------------   -------------
                                                                  62,516,000      66,048,000
                                                               -------------   -------------
Deferred charges, net of amortization                             53,384,000      54,195,000
Intangible assets, net of amortization                            16,942,000      17,860,000
Goodwill                                                         167,011,000     167,011,000
                                                               -------------   -------------
                                                               $ 455,824,000   $ 422,045,000
                                                               =============   =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current Liabilities:
  Accounts payable, trade                                      $  12,414,000   $  15,081,000
  Interest payable                                                14,894,000       4,367,000
  Other current liabilities                                       51,083,000      61,936,000
                                                               -------------   -------------
Total current liabilities                                         78,391,000      81,384,000
                                                               -------------   -------------

Minimum pension liability                                         19,819,000      19,819,000
Deferred income taxes                                             21,215,000      16,767,000
Postretirement benefit obligation other
  than pensions                                                   83,631,000      81,307,000
Other long-term liabilities                                       21,654,000      15,424,000
9 1/4% senior subordinated notes due 2007                        185,000,000     185,000,000
9 5/8% senior subordinated notes due 2010                        250,000,000     250,000,000

Stockholders' Deficiency:
  Common stock, $.01 par value - authorized,
  1,000,000 shares; issued and
    outstanding, 740,398 shares                                        7,000           7,000
  Additional paid-in capital                                    (263,259,000)   (263,259,000)
  Retained earnings                                               86,944,000      63,406,000
  Accumulated other comprehensive loss                           (27,578,000)    (27,810,000)
                                                               -------------   -------------
Total stockholders' deficiency                                  (203,886,000)   (227,656,000)
                                                               -------------   -------------
                                                               $ 455,824,000   $ 422,045,000
                                                               =============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                       3
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Sales                                                          $ 247,842,000   $ 251,979,000

Costs and expenses                                               180,283,000     178,419,000

Amortization                                                       3,174,000       2,930,000
                                                               -------------   -------------
Operating income                                                  64,385,000      70,630,000

Interest and investment income                                       373,000          64,000

Interest expense                                                 (32,864,000)    (19,520,000)
                                                               -------------   -------------
Income before income taxes                                        31,894,000      51,174,000

Income tax provision                                              (8,356,000)    (21,495,000)
                                                               -------------   -------------
Net income                                                     $  23,538,000   $  29,679,000
                                                               =============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                       4
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Sales                                                          $  87,821,000   $  93,210,000

Costs and expenses                                                60,033,000      61,419,000

Amortization                                                       1,075,000       1,004,000
                                                               -------------   -------------
Operating income                                                  26,713,000      30,787,000

Interest and investment income                                       146,000          29,000

Interest expense                                                 (10,930,000)     (6,640,000)
                                                               -------------   -------------
Income before income taxes                                        15,929,000      24,176,000

Income tax provision                                              (3,740,000)    (10,155,000)
                                                               -------------   -------------
Net income                                                     $  12,189,000   $  14,021,000
                                                               =============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                       5
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Cash flows from operating activities:
 Net income                                                    $  23,538,000   $  29,679,000
 Adjustments to reconcile net income to net
   cash provided by operating activities:
   Depreciation and amortization                                   9,090,000       8,946,000
   Non-cash interest expense - amortization
    of deferred financing charges                                  1,604,000       1,206,000
   Non-cash interest (income) expense - change
    in fair market value of interest rate swap                    (2,590,000)         90,000
   Deferred income taxes                                           4,448,000      17,757,000
   Changes in assets and liabilities:
    Accounts receivable, net                                      (4,731,000)      1,080,000
    Inventory                                                     (7,093,000)     (2,254,000)
    Other current assets                                             629,000         (26,000)
    Accounts payable, interest payable and
     other current liabilities                                      (265,000)      5,060,000
    Postretirement benefit obligation other
     than pensions                                                 2,324,000               -
    Other long-term liabilities                                    6,230,000      (3,031,000)
                                                               -------------   -------------
 Net cash provided by operating
  activities                                                      33,184,000      58,507,000
                                                               -------------   -------------
Cash flows from investing activities:
 Capital expenditures                                             (2,384,000)     (1,842,000)
 Deferred charges                                                 (3,049,000)     (7,079,000)
                                                               -------------   -------------
 Net cash used in investing activities                            (5,433,000)     (8,921,000)
                                                               -------------   -------------
Cash flows from financing activities:
 Payments of senior revolving loan                                         -     (30,000,000)
 Payments of senior term loans                                             -     (51,625,000)
 Borrowings under senior revolving loan                                    -      34,000,000
                                                               -------------   -------------
 Net cash used in financing activities                                     -     (47,625,000)
                                                               -------------   -------------

 Net increase in cash and cash equivalents                        27,751,000       1,961,000
Cash and cash equivalents, beginning of
 period                                                           22,735,000       5,136,000
                                                               -------------   -------------
Cash and cash equivalents, end of period                       $  50,486,000   $   7,097,000
                                                               =============   =============
Supplemental cash flow information:
 Interest paid during period                                   $  23,323,000   $  14,042,000
                                                               =============   =============
 Income taxes paid during the period                           $   3,117,000   $   3,453,000
                                                               =============   =============
</TABLE>

                 See notes to consolidated financial statements.

                                       6
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       The accompanying unaudited consolidated financial statements have been
         prepared by K & F Industries, Inc. and Subsidiaries (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 statements of
         operations for the three and nine months ended September 30, 2003 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, 2002 Annual Report on Form 10-K.

2.       Accounting Changes and Pronouncements

         Effective January 1, 2002, the Company adopted Statement of Financial
         Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
         Assets." SFAS No. 142 requires that goodwill no longer be amortized,
         but instead be tested for impairment at least annually. SFAS No. 142
         also requires that any recognized intangible asset determined to have
         an indefinite useful life not be amortized, but instead be tested for
         impairment in accordance with this standard until its life is
         determined to no longer be indefinite. The Company adopted SFAS No. 142
         on January 1, 2002, at which time amortization of goodwill ceased. The
         impairment analysis did not result in an impairment charge upon
         adoption or in any subsequent periods.

         There was no change in the carrying amount of goodwill during the three
         and nine months ended September 30, 2003. Goodwill at September 30,
         2003 allocated to the Company's segments, Aircraft Braking Systems and
         Engineered Fabrics, was $135,683,000 and $31,328,000, respectively.

         Effective January 1, 2003, the Company adopted SFAS No. 145,
         "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
         Statement No. 13, and Technical Corrections as of April 2002." SFAS No.
         145 rescinds Statement of Financial Accounting Standards No. 4,
         "Reporting Gains and Losses from Extinguishment of Debt," and an
         amendment of that Statement, SFAS No. 64, "Extinguishments of Debt Made
         to Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds SFAS
         No. 44, "Accounting for Intangible Assets of Motor Carriers." SFAS No.
         145 amends SFAS No. 13, "Accounting for Leases," to eliminate an
         inconsistency between the required accounting for sale-leaseback
         transactions and the required accounting for certain lease
         modifications that have economic effects that are similar to
         sale-leaseback transactions. SFAS No. 145 also amends other existing
         authoritative pronouncements to make various technical corrections,
         clarify meanings or describe their applicability under changed
         conditions. The adoption of this standard did not have a material
         impact on the Company's consolidated financial position, results of
         operations or cash flows.

                                       7
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

         Effective January 1, 2003, the Company adopted SFAS No. 146,
         "Accounting for Costs Associated with Exit or Disposal Activities."
         "This Statement requires companies to recognize costs associated with
         exit or disposal activities when they are incurred rather than at the
         date of a commitment to an exit or disposal plan. SFAS No. 146 is to be
         applied prospectively to exit or disposal activities initiated after
         December 31, 2002. The adoption of this standard did not have an impact
         on the Company's consolidated financial statements.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compenation-Transition and Disclosure-an amendment of SFAS
         No. 123." This Statement amends SFAS No. 123, "Accounting for
         Stock-Based Compensation," to provide alternative methods of accounting
         for stock-based employee compensation. In addition, this Statement
         amends the disclosure requirements of SFAS No. 123 to require prominent
         disclosures in both annual and interim financial statements about the
         method of accounting for stock-based employee compensation and the
         effect of the method used on reported results. SFAS No. 148 did not
         require the Company to change to the fair value method of accounting
         for stock based compensation. Effective January 1, 2002, the disclosure
         provisions of SFAS No. 148 have been adopted by the Company.

         As permitted by SFAS No. 123, the Company accounts for its stock-based
         compensation using the intrinsic value method in accordance with APB
         Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No.
         123 requires the disclosure of pro forma net income had the Company
         adopted the fair value method. However, disclosure has been omitted
         because the pro forma effect on net income required to be disclosed
         under SFAS No. 123 is not material to the Company's results of
         operations.

         In November 2002, the FASB issued Interpretation ("FIN") No. 45,
         "Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others," which expands
         previously issued accounting guidance and disclosure requirements for
         certain guarantees. FIN No. 45 requires the Company to recognize an
         initial liability for the fair value of an obligation assumed by
         issuing a guarantee. The provision for initial recognition and
         measurement of the liability will be applied on a prospective basis to
         guarantees issued or modified after December 31, 2002. The Company
         adopted the disclosure provisions of FIN No. 45 as of December 31,
         2002. In 2003, the Company adopted the initial recognition and initial
         measurement provisions of FIN No. 45. The Company does not provide
         guarantees for performance of third parties, and therefore, there was
         no impact on the Company's consolidated financial statements.

                                       8
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

3.       Receivables are summarized as follows:

<TABLE>
<CAPTION>
                                                     September 30,    December 31,
                                                         2003            2002
                                                     -------------   -------------
<S>                                                  <C>             <C>
Accounts receivable, principally
    from commercial customers                        $  35,544,000   $  36,027,000

Accounts receivable, on U. S
    Government and other long-term
    contracts                                            8,693,000       3,257,000

Allowances                                              (1,231,000)     (1,056,000)
                                                     -------------   -------------

                                                     $  43,006,000   $  38,228,000
                                                     =============   =============
</TABLE>

4.       Inventory consists of the following:

<TABLE>
<CAPTION>
                                                     September 30,    December 31,
                                                         2003            2002
                                                     -------------   -------------
<S>                                                  <C>             <C>
Raw materials and work-in-process                    $  27,078,000   $  24,830,000

Finished goods                                          17,588,000      17,017,000

Inventoried costs related to U.S.
    Government and other long-term
    contracts                                            14,480,000      10,159,000
                                                      -------------   -------------

                                                      $  59,146,000   $  52,006,000
                                                      =============   =============
</TABLE>

         The Company customarily sells original wheel and brake equipment below
         cost as an investment in a new airframe which is expected to be
         recovered through the subsequent sale of replacement parts. These
         commercial investments (losses) are recognized when original equipment
         is shipped. Losses on U.S. Government contracts are immediately
         recognized in full when determinable.

         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.

                                       9
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

5.       Other current liabilities consist of the following:

<TABLE>
<CAPTION>
                                                              September 30,    December 31,
                                                                  2003            2002
                                                              -------------   -------------
<S>                                                           <C>             <C>
Accrued payroll costs                                         $  16,902,000   $  22,888,000
Accrued property taxes and other taxes                            2,472,000       3,665,000
Accrued costs on long-term contracts                              3,474,000       4,605,000
Accrued warranty costs                                           13,568,000      12,810,000
Customer credits                                                  5,319,000       5,128,000
Postretirement benefit obligation other
  than pensions                                                   3,000,000       3,000,000
Fair market value of interest rate swap                             988,000       3,715,000
Other                                                             5,360,000       6,125,000
                                                              -------------   -------------

                                                              $  51,083,000   $  61,936,000
                                                              =============   =============
</TABLE>

6.       Income Taxes

         The Company's effective tax rate of 26.2% for the nine months ended
         September 30, 2003 differs from the statutory rate of 35% due to tax
         benefits derived from export sales and reversal of prior years' tax
         provision no longer needed. The Company's effective tax rate of 42.0%
         for the nine months ended September 30, 2002 differs from the statutory
         rate of 35% due to state, local and foreign income taxes.

         The Company's effective tax rate of 23.5% for the three months ended
         September 30, 2003 differs from the statutory rate of 35% due to tax
         benefits derived from export sales and reversal of prior years' tax
         provision no longer needed. The Company's effective tax rate of 42.0%
         for the three months ended September 30, 2002 differs from the
         statutory rate of 35% due to state, local and foreign income taxes.

7.       Contingencies

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

                                       10
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

8.       Comprehensive Income

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Net income                                                     $  12,189,000   $  14,021,000
Other comprehensive income (loss):

    Cumulative translation adjustments                                55,000         (25,000)

    Amortization of transition adjustment
      included in interest expense                                    46,000          46,000
                                                               -------------   -------------

Comprehensive income                                           $  12,290,000   $  14,042,000
                                                               =============   =============
</TABLE>

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Net income                                                     $  23,538,000   $  29,679,000

Other comprehensive income (loss):

    Cumulative translation adjustments                                94,000         (14,000)

    Amortization of transition adjustment
      included in interest expense                                   138,000         138,000
                                                               -------------   -------------

Comprehensive income                                           $  23,770,000   $  29,803,000
                                                               =============   =============
</TABLE>

9.       Segments

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

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Sales:
    Aircraft Braking Systems                                   $  73,292,000   $  81,270,000
    Engineered Fabrics                                            14,529,000      11,940,000
                                                               -------------   -------------
                                                               $  87,821,000   $  93,210,000
                                                               =============   =============
Operating Profit:
    Aircraft Braking Systems                                   $  24,709,000   $  29,028,000
    Engineered Fabrics                                             2,004,000       1,759,000
                                                               -------------   -------------
      Operating income                                            26,713,000      30,787,000
    Interest expense, net                                        (10,784,000)     (6,611,000)
                                                               -------------   -------------
      Income before income taxes                               $  15,929,000   $  24,176,000
                                                               =============   =============
</TABLE>

                                       11
<PAGE>

                     K & F INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                               -----------------------------
                                                               September 30,   September 30,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Sales:
    Aircraft Braking Systems                                   $ 208,010,000   $ 218,398,000
    Engineered Fabrics                                            39,832,000      33,581,000
                                                               -------------   -------------
                                                               $ 247,842,000   $ 251,979,000
                                                               =============   =============
Operating Profit:
    Aircraft Braking Systems                                   $  59,946,000   $  67,051,000
    Engineered Fabrics                                             4,439,000       3,579,000
                                                               -------------   -------------
          Operating income                                        64,385,000      70,630,000
    Interest expense, net                                        (32,491,000)    (19,456,000)
                                                               -------------   -------------
      Income before income taxes                               $  31,894,000   $  51,174,000
                                                               =============   =============
</TABLE>

<TABLE>
<CAPTION>
                                                               September 30,   December 31,
                                                                   2003            2002
                                                               -------------   -------------
<S>                                                            <C>             <C>
Total Assets:
    Aircraft Braking Systems                                   $ 373,134,000   $ 346,956,000
    Engineered Fabrics                                            70,359,000      60,034,000
    Deferred financing costs not
      allocated to segments                                        9,041,000      10,645,000
    Corporate assets                                               1,013,000       1,801,000
    Income taxes receivable
      not allocated to segments                                    2,277,000       2,609,000
                                                               -------------   -------------
                                                               $ 455,824,000   $ 422,045,000
                                                               =============   =============
</TABLE>

10.      Subsequent Event

         On October 15, 2003, the Company redeemed $40 million aggregate
         principal amount of 9 1/4% Senior Subordinated Notes due 2007, at a
         redemption price of 103.083% of the principal amount thereof. In
         connection therewith, the Company will take a charge to operating
         income of $1.6 million in the fourth quarter of 2003, for redemption
         premiums and the write-off of a portion of related unamortized
         financing costs.

                                       12
<PAGE>

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

General

We are a supplier to manufacturers and operators of commercial, general aviation
and military aircraft. Results for the three and nine months ended September 30,
2003 continue to be adversely affected by the sluggish economy that reduced
demand for air travel and financial difficulties that confronted commercial
aircraft operators.

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.

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

Evaluation of Long-Lived Assets. Long-lived assets are assessed for
recoverability on an ongoing basis in accordance with 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.

Warranty. Estimated costs of product warranty are accrued when individual claims
arise with respect to a product. 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.

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<PAGE>

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.

The discount rate enables us to state expected future cash flows at a present
value on the measurement date. We have little latitude in selecting this rate,
and it must represent 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 7 1/2% discount rate in 2002 and are using
a 6 3/4% discount rate for 2003 to reflect market interest rate 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 1/2% in 2002. We reduced our
expected long-term rate of return on pension plan assets for 2003 to 9% 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 2003 postretirement expense is 10.2%
in 2003 trending down to 4.5% for 2009.

Comparison of Results of Operations for the Nine Months Ended September 30, 2003
and September 30, 2002

Our sales for the nine months ended September 30, 2003 totaled $247,842,000,
reflecting a decrease of $4,137,000, compared with $251,979,000 for the same
period in the prior year. This decrease was principally due to lower sales of
wheels and brakes at Aircraft Braking Systems of $10,388,000. Partially
offsetting this decrease was higher sales at Engineered Fabrics of $6,251,000,
primarily for oil containment booms. Commercial sales at Aircraft Braking
Systems decreased $3,454,000, primarily on the Boeing DC-9 and DC-10 programs,
partially offset by higher sales on the Canadair CRJ-700, CRJ-100/200 and
CRJ-900 programs. General aviation sales decreased $7,767,000, primarily on
Israeli Aircraft Industries, Raytheon and Gulfstream aircraft. Military sales
increased $883,000, primarily on the Lockheed Martin C-130 program.

Our operating income decreased by $6,245,000, to $64,385,000 or 26.0% of sales,
for the nine months ended September 30, 2003, compared with $70,630,000 or 28.0%
of sales for the same period in the prior year. Operating margins decreased at
Aircraft Braking Systems to 28.8% during the nine months ended September 30,
2003, compared with 30.7% for the same period in the prior year. This decrease
in margins at Aircraft Braking Systems was primarily due to higher program
investments and the unfavorable overhead

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<PAGE>

absorption effect relating to the lower sales, partially offset by a favorable
mix of products sold. Operating margins at Engineered Fabrics remained level at
11.1%, as the favorable overhead absorption effect relating to the higher sales
was partially offset by an unfavorable mix of products sold.

Our net interest expense increased by $13,035,000 for the nine months ended
September 30, 2003, compared with the same period in the prior year. This
increase was primarily due to higher interest relating to our issuance of $250.0
million of 9 5/8% senior subordinated notes in December 2002, which were not
outstanding during the nine months ended September 30, 2002. These notes were
issued in connection with the December 2002 recapitalization.

Our effective tax rate of 26.2% for the nine months ended September 30, 2003
differs from the statutory rate of 35% due to tax benefits derived from export
sales and reversal of prior years' tax provision no longer needed. Our effective
tax rate of 42.0% for the nine months ended September 30, 2002 differs from the
statutory rate of 35% due to state, local and foreign income taxes. The decrease
in the effective tax rate in 2003 over 2002 is primarily due to favorable tax
benefits derived from export sales, lower state and local taxes and reversal of
prior years' tax provision.

Comparison of Results of Operations for the Three Months Ended September 30,
2003 and September 30, 2002

Our sales for the three months ended September 30, 2003 totaled $87,821,000,
reflecting a decrease of $5,389,000, compared with $93,210,000 for the same
period in the prior year. This decrease was principally due to lower sales of
wheels and brakes at Aircraft Braking Systems of $7,978,000. Partially
offsetting this decrease was higher sales at Engineered Fabrics of $2,589,000,
primarily for oil containment booms and iceguards on the V-22 and UH-60
programs. Commercial sales at Aircraft Braking Systems decreased $1,448,000,
primarily on the Boeing DC-9 and MD-80 programs. General aviation sales
decreased $1,937,000, primarily on Israel Aircraft Industries, Raytheon and
Gulfstream aircraft. Military sales decreased $4,593,000, primarily on the
Boeing B-1B program.

Our operating income decreased by $4,074,000, to $26,713,000 or 30.4% of sales,
for the three months ended September 30, 2003, compared with $30,787,000 or
33.0% of sales for the same period in the prior year. Operating margins
decreased at Aircraft Braking Systems to 33.7% during the three months ended
September 30, 2003, compared with 35.7% for the same period in the prior year.
This decrease was primarily due to higher program investments and the
unfavorable overhead absorption effect relating to the lower sales, partially
offset by a favorable mix of products sold. Operating margins at Engineered
Fabrics decreased to 13.8% for the three months ended September 30, 2003,
compared with 14.7% for the same period in the prior year. This decrease in
margins at Engineered Fabrics was primarily due to an unfavorable mix of
products sold, partially offset by the favorable overhead absorption effect
relating to the higher sales.

Our net interest expense increased by $4,173,000 for the three months ended
September 30, 2003, compared with the same period in the prior year. This
increase was primarily due to higher interest relating to our issuance of $250.0
million of 9 5/8% senior subordinated notes in December 2002, which were not
outstanding during the three months ended September 30, 2002. These notes were
issued in connection with the December 2002 recapitalization.

Our effective tax rate of 23.5% for the three months ended September 30, 2003
differs from the statutory rate of 35% due to tax benefits derived from export
sales and reversal of prior years' tax provision no longer needed. Our effective
tax rate of 42.0% for the three months ended September 30, 2002 differs from the
statutory rate of 35% due to state, local and foreign income

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<PAGE>

taxes. The decrease in the effective rate in 2003 over 2002 is primarily due to
favorable tax benefits derived from export sales, lower state and local taxes
and reversal of prior years' tax provision.

Liquidity and Financial Position

Our cash and cash equivalents totaled $50.5 million at September 30, 2003,
compared with $22.7 million at December 31, 2002. Our total debt was $435.0
million at September 30, 2003, and we had $28.1 million available to borrow
under our $30.0 million revolving credit facility.

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 and make
program investments. Our primary source of funds for conducting our business
activities and servicing our indebtedness has been cash generated from
operations and borrowings under our credit facility.

On October 15, 2003, we redeemed $40 million aggregate principal amount of our 9
1/4% senior subordinated notes due 2007, at a redemption price of 103.083% of
the principal amount thereof. In connection therewith, we will take a charge to
operating income of $1.6 million in the fourth quarter of 2003, for redemption
premiums and the write-off of a portion of related unamortized financing costs.

Cash Flows

Net cash provided by operating activities during the nine months ended September
30, 2003 amounted to $33,184,000 versus $58,507,000 for the same period in the
prior year, a decrease of $25,323,000. Our cash flow from operating activities
during the nine months ended September 30, 2003, compared to the nine months
ended September 30, 2002, decreased primarily due to higher interest payments
after issuance of our 9 5/8% senior subordinated notes in December 2002,
payments made in 2003 to the holders of our common stock options in connection
with the December 2002 recapitalization and a higher inventory balance resulting
from a softer demand during the third quarter for "make to stock" replacement
parts.

Net cash used in investing activities during the nine months ended September 30,
2003 amounted to $5,433,000 versus $8,921,000 for the same period in the prior
year, a decrease of $3,488,000. This decrease was primarily due to $3,049,000 of
program participation payments made during the nine months ended September 30,
2003, compared with $7,079,000 made during the same period in the prior year.

There was no net cash used in financing activities during the nine months ended
September 30, 2003 versus $47,625,000 of net cash used for the same period in
the prior year. This decrease occurred because we made principal payments during
the first nine months of 2002 on our prior bank credit facility that we repaid
as part of the December 2002 recapitalization. We had no borrowings on our
revolving credit facility during the nine months ended September 30, 2003.

Accounting Changes and Pronouncements

Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill no longer be amortized,
but instead be tested for impairment at least annually. SFAS No. 142 also
requires that any recognized intangible asset determined to have an indefinite
useful life not be amortized, but instead be tested for impairment in accordance
with this standard until its life is determined to no longer be indefinite. We
adopted SFAS No. 142 on January 1, 2002, at which time amortization of goodwill
ceased. The impairment analysis did not result in an impairment charge upon
adoption or in any subsequent periods thereafter. See

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Note 2 to the consolidated financial statements contained herein.

Effective January 1, 2003, we adopted SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002." SFAS No. 145 rescinds Statement of Financial
Accounting Standards No. 4, "Reporting Gains and Losses from Extinguishment of
Debt," and an amendment of that Statement, SFAS No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds SFAS No.
44, "Accounting for Intangible Assets of Motor Carriers." SFAS No. 145 amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings or describe their applicability under changed conditions. The adoption
of this standard did not have a material impact on our consolidated financial
position, results of operations or cash flows.

Effective January 1, 2003, we adopted SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." "This Statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The adoption of this standard did not have an
impact on our consolidated financial statements.

In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," which expands previously issued accounting guidance and
disclosure requirements for certain guarantees. FIN No. 45 requires the Company
to recognize an initial liability for the fair value of an obligation assumed by
issuing a guarantee. The provision for initial recognition and measurement of
the liability will be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. We adopted the disclosure provisions of FIN
No. 45 as of December 31, 2002. In 2003, we adopted the initial recognition and
initial measurement provisions of FIN No. 45. We do not provide guarantees for
performance of third parties, and therefore, there was no impact on our
consolidated financial statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have $435.0 million of total fixed rate debt outstanding at September 30,
2003. Borrowings under the credit facility bear interest that varies with LIBOR,
for which no borrowings were outstanding at September 30, 2003.

As a requirement of a previous credit facility, we entered into an interest rate
swap agreement to reduce the impact of potential increases in interest rates.
This agreement has a notional amount of $84.0 million and we are required to
make payments for the difference between actual three month LIBOR and 5.95% on
this amount. The interest rate swap agreement expires on December 17, 2003. The
payments made under the swap agreement were $1,044,000 and $940,000 million
during the three months ended September 30, 2003 and 2002, respectively, and
$3,004,000 and $2,878,000 during the nine months ended September 30, 2003 and
2002, respectively. Payments are

                                       17
<PAGE>

expected to be approximately $4,000,000 in 2003. Given that all of our
outstanding debt is at a fixed rate, a 10% change in interest rates would not
have a significant impact on fair values, cash flows or earnings. We have no
other derivative financial instruments.

ITEM 4.  CONTROLS AND PROCEDURES

An evaluation of the effectiveness of our disclosure controls and procedures was
performed under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of the end of the
period covered by this Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2003.

There has been no change in our internal controls over financial reporting that
occurred during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

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<PAGE>

                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         31.1 -   Certification of Chief Executive Officer pursuant to Rule
                  15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         31.2 -   Certification of Chief Financial Officer pursuant to Rule
                  15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         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.

(b)      Reports on Form 8-K

         A report on Form 8-K dated July 31, 2003 was filed regarding the second
         quarter 2003 earnings.

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

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<PAGE>

                                   SIGNATURES

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

                                                    K & F INDUSTRIES, INC.
                                                    -----------------------
                                                         Registrant

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

Dated: November 14, 2003

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