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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





Form 10-K


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended January 1, 2005                                                   
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the transition period
    from           to                                             

Commission File Number  333-119224





Polypore, Inc.




|                                                                                              |  |                                      
|--------------------------------------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                                                      |  | 57-1006871                           
|(State or Other Jurisdiction of
    Incorporation or Organization)                            |  | (IRS Employer
    Identification No.)
|                                                                                             
|13800 South Lakes Drive
    Charlotte, North Carolina(Address of Principal Executive Offices) |  | 28273(Zip Code)                      













þ o


þ


o þ












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Polypore, Inc.


Index to Annual Report on Form 10-K




|           |  |                                                                                                                      |    |      |    | 
|---------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           | 
|           |  |                                                                                                                      |    | Page |   
|           | 
|Part I     |  |                                                                                                                      |    |      |    | 
|Item 1.    |  | Business                                                                                                             |    |      | 4  | 
|Item 2.    |  | Properties                                                                                                           |    |      | 14 | 
|Item 3.    |  | Legal Proceedings                                                                                                    |    |      | 14 | 
|Item 4.    |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |      | 15 | 
|Part II    |  |                                                                                                                      |    |      |    | 
|Item 5.    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 16 | 
|Item 6.    |  | Selected Financial Data                                                                                              |    |      | 16 | 
|Item 7.    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |      | 18 | 
|Item 7A.   |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |      | 29 | 
|Item 8.    |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 31 | 
|Item 9.    |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |      | 71 | 
|Item 9A.   |  | Controls and Procedures                                                                                              |    |      | 71 | 
|Item 9B.   |  | Other Information                                                                                                    |    |      | 71 | 
|Part III   |  |                                                                                                                      |    |      |    | 
|Item 10.   |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 72 | 
|Item 11.   |  | Executive Compensation                                                                                               |    |      | 74 | 
|Item 12.   |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |      | 80 | 
|Item 13.   |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 80 | 
|Item 14.   |  | Principal Accountant Fees and Services                                                                               |    |      | 82 | 
|Part IV    |  |                                                                                                                      |    |      |    | 
|Item 15.   |  | Exhibits and Financial Statement
    Schedules                                                                       |    |      | 83 | 
|Signatures |  |                                                                                                                      | 87 |     
|          
|Ex-12.1   
|Ex-21.1   
|Ex-31.1   
|Ex-31.2   
|Ex-32.1   
|Ex-32.2   
|Ex-99.1   







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Forward-looking Statements






| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | the highly competitive nature of the markets in which we sell
    our products;                                                  
|
| |  | the failure to continue to develop innovative products;                                                                          
|
| |  | the increased use of synthetic hemodialysis filtration membranes
    by our customers;                                           
|
| |  | the loss of our customers;                                                                                                       
|
| |  | the vertical integration by our customers of the production of
    our products into their own manufacturing process;            
|
| |  | increases in prices for raw materials or the loss of key
    supplier contracts;                                                 
|
| |  | employee slowdowns, strikes or similar actions;                                                                                  
|
| |  | product liability claims exposure;                                                                                               
|
| |  | risks in connection with our operations outside the United
    States;                                                           
|
| |  | the incurrence of substantial costs to comply with, or as a
    result of violations of, or liabilities under environmental laws;
|
| |  | the failure to protect our intellectual property;                                                                                
|
| |  | the failure to replace lost senior management;                                                                                   
|
| |  | the incurrence of additional debt, contingent liabilities and
    expenses in connection of future acquisitions;                 
|
| |  | the failure to effectively integrate newly acquired
    operations; and                                                          
|
| |  | the absence of expected returns from the amount of intangible
    assets we have recorded.                                       



2



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3



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|        |         
|------- | --------
|Item 1. | Business

General














4



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|  |                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------
| | productivity gains through improved and integrated business
    processes,                                  
| 
| | employee empowerment by encouraging quick decision-making at the
    lowest practical management levels, and
| 
| | overhead reduction through continued cost focus and control.                                                

Products, markets and customers




|                  |  |                                               |  |                                                           |  |                                                                                                                              
|----------------- |  | --------------------------------------------- |  | --------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|                 
|Segment           |  | Applications                                  |  | Major brands                                              |  | End-uses and markets                                                                                                         
|                 
|Energy storage    |  | Lead-acid batteries                           |  | Armorib®
    DARAK®
    Daramic®                          |  | Transportation and industrial batteries                                                                                      
|                  |  | Rechargeable and disposable lithium batteries |  | CELGARD®                                                  |  | Electronics products such as laptop computers, mobile
    telephones, cameras and military equipment                         
|Separations media |  | Hemodialysis                                  |  | Cuprophan®
    DIAPES®
    Hemophan®
    SMC®
    Purema® |  | Hemodialysis dialyzers which replicate function of healthy
    kidneys                                                       
|                  |  | Blood oxygenation                             |  | CELGARD®
    HEX PET®
    OXYPHAN®
    OXYPLUS®           |  | Heart-lung machine oxygenation unit for open-heart surgical
    procedures                                                   
|                  |  | Plasmapheresis                                |  | FractioPES®
    MicroPES®
    PLASMAPHAN®                 |  | Blood cell and plasma separation equipment                                                                                   
|                  |  | Industrial and specialty applications         |  | Accurel®                                                  |  | Microelectronics manufacturing/ chemical filtration                                                                          
|                  |  |                                               |  | Accurel Systems®                                          |  | Polymer additives carrier                                                                                                    
|                  |  |                                               |  | Artisyn®                                                  |  | Printing media/graphic arts                                                                                                  
|                  |  |                                               |  | Liqui-Cel®                                                |  | Water degasification, semiconductor and microelectronics
    manufacturing, beverage processing and pharmaceutical production
|                  |  |                                               |  | MicroPES®                                                 |  | Water/chemical filtration for drinking water treatment and food
    and beverage processing                                  
|                  |  |                                               |  | SuperPhobic®                                              |  | Solvent/ink de-bubbling for ink jet printers and semiconductor
    manufacturing                                             
|                  |  |                                               |  | UltraPES®                                                 |  | Prefiltration for reverse osmosis, water filtration                                                                          
|                 

5



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Energy storage




Transportation and industrial applications.




Electronics applications.


Separations media




Hemodialysis.




6



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Blood oxygenation.


Plasmapheresis.


Industrial and specialty applications.


7



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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | MicroPES® is a polyethersulfone flat sheet or hollow fiber
    microfiltration membrane with broad chemical and low protein
    binding characteristics, properties which are attractive to
    end-users who desire minimal absorption of their product. This
    membrane is primarily used in tap water filtration and
    miscellaneous food and beverage filtration applications.                                                                                                                                                                                                                                                        
| 
| | Accurel® is a polypropylene membrane which can be used in a
    wide range of pH conditions. This membrane is an economical
    choice for many applications compared to certain higher priced
    products, and is primarily used for chemical filtration in
    semiconductor processing applications.                                                                                                                                                                                                                                                                                                                                      
| 
| | UltraPES® is a hollow fiber, ultrafiltration
    polyethersulfone membrane used for reverse osmosis systems
    pretreatment, the filtration of drinking water and municipal
    city wastewater and the separation of oil content from
    industrial process water streams.                                                                                                                                                                                                                                                                                                                                                                 
| 
| | Liqui-Cel® membrane contactors are modular products
    incorporating hydrophobic hollow fiber membranes and are used in
    a wide variety of industries including semiconductor and
    microelectronics manufacturing, beverages and pharmaceuticals.
    This purification technology is also used for flat panel display
    manufacturing and in power plants.                                                                                                                                                                                                                                                                          
| 
| | SuperPhobic® membrane contactors are a special type of
    membrane contactor which can treat liquids which otherwise
    penetrate the membrane pores of conventional Liqui-Cel®
    membrane contactors. Typical applications involve the
    elimination of microbubbles in liquids which, upon occurrence,
    negatively impact customer production processes, quality and
    yield. Some applications include the degassing of inks, paper
    coating solutions, photoemulsion and alcohol debubbling. This
    membrane is primarily used for ink degassing for ink jet
    delivery systems and semiconductor photoresist solutions.



New product development








End-market overview






8



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Wards Motor Vehicles Facts and Figures,






Sales and marketing






9



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Manufacturing and operations


General










Manufacturing processes




10



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Battery separators.




Hemodialysis, blood oxygenation, and plasmapheresis
membranes.


Competition








|  |                                                                                                                                                                                                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have developed significant proprietary manufacturing know-how
    by producing specialized products over many years that, in
    certain cases, we believe cannot be reproduced in the market
    and, in other cases, would be prohibitively expensive for a
    competitor to replicate.
| 
| | Most of our products require years of development and extensive
    testing and, in the case of our healthcare products, regulatory
    approval prior to the marketing of our customers products.                                                                                          
| 
| | We have continually improved manufacturing efficiency and
    expanded capacity through equipment modifications, process
    improvement and capital expenditures, particularly over the past
    three years.                                                                               

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We believe we are number one or number two in global market
    share in most of our product lines as a result of the superior
    performance characteristics of our products, our well-known
    brands within the industries we serve and our ability to develop
    and manufacture new generations of value-added products at
    competitive costs.                                                                                   
| 
| | Our research and development team works closely with our
    customers, and we often partner with our customers on product
    development and end-use testing. As a result, many of our
    products have been customized to our customers
    manufacturing and end-use specifications. In addition, we are
    often selected as a customers exclusive supplier for our
    microporous membrane products.                             
| 
| | We produce a variety of separation and filtration products
    addressing niche end-markets, some of which provide us with a
    stable and recurring revenue base, while other end-markets
    provide us with strong growth potential.                                                                                                                                                                                                    
| 
| | We are committed to innovation. We have introduced many of the
    major innovations in the market for separators for use in
    batteries, including the first polyethylene separator for
    lead-acid batteries and the first multilayer separator for
    lithium batteries. In addition, we have introduced major
    innovations within the healthcare market including the first
    membrane-based technology used for hemodialysis.
| 
| | We manufacture, market and service our products in 11 facilities
    throughout North America, Europe and Asia. By strategically
    positioning our manufacturing, sales and marketing and technical
    service personnel near our customers, we can respond to their
    needs more effectively and provide a higher level of service.                                                                                                   
| 
| | We believe we have state-of-the-art manufacturing facilities and
    capabilities.                                                                                                                                                                                                                                                                                                                                                          

Raw materials








Management information systems




12



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Employees




|                    |       |           |     |       |            |  |                  |               |  |  |              |  | 
|------------------- | ----- | --------- | --- | ----- | ---------- |  | ---------------- | ------------- |  |  | ------------ |  | 
|                    |      
|                    |       | Number of |     |       |           
|                    |       | unionized |     |       |            |  | Date of contract |              
|Location            |       | employees |     |       | % of total |  |                  | renegotiation | 
|                    |      
|Corydon             |       |           | 88  |       |            |  | 79               |               |  |  | January 2007 | 
|Feistritz (Jüngfer) |       |           | 48  |       |            |  | 80               |               |  |  | Annual       | 
|Obernberg           |       |           | 43  |       |            |  | 75               |               |  |  | Annual       | 
|Owensboro           |       |           | 154 |       |            |  | 71               |               |  |  | April 2005   | 
|Potenza             |       |           | 141 |       |            |  | 100              |               |  |  | Annual       | 
|Sélestat            |       |           | 138 |       |            |  | 79               |               |  |  | Annual       | 
|Wuppertal           |       |           | 643 |       |            |  | 92               |               |  |  | Annual       | 
|Norderstedt         |       |           | 47  |       |            |  | 57               |               |  |  | Annual       | 
|                    |       |           |     |       |            |  |                  |               | 
|                    | Total |           |     | 1,302 |            |  |                  |               |  |  |              |  | 
|                    |       |           |     |       |            |  |                  |               | 
|                   

Environmental matters







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Intellectual property rights









|        |           
|------- | ----------
|Item 2. | Properties



|                          |  |            |           |  |                  |                                     |                   |               |          |                             |                     | 
|------------------------- |  | ---------- | --------- |  | ---------------- | ----------------------------------- | ----------------- | ------------- | -------- | --------------------------- | ------------------- | 
|                          | 
|                          |  | Floor Area |           |  |                 
|Location(1)               |  | (sq. ft.)  |           |  | Business Segment |                                     |                   | Certification |         
|                          | 
|Owensboro, Kentucky       |  |            | 213,000   |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Corydon, Indiana(2)       |  |            | 161,095   |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Selestat, France          |  |            | 110,000   |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Norderstedt, Germany      |  |            | 124,000   |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Potenza, Italy            |  |            | 143,000   |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Prachinburi, Thailand     |  |            | 42,000    |  |                  |                                     | Energy Storage    |               |          | ISO 14001, ISO9001, QS 9000
|Feistritz, Austria(3)     |  |            | 93,000    |  |                  |                                     | Energy Storage    |               |          |                             | ISO 14001, ISO 9001 | 
|Charlotte, North Carolina |  |            | 141,650   |  |                  | Energy Storage andSeparations Media |                   |               | ISO 9001 |                            
|Shanghai, China(3)        |  |            | 13,700    |  |                  | Energy Storage andSeparations Media |                   |               |         |                            
|Wuppertal, Germany        |  |            | 1,592,480 |  |                  |                                     | Separations Media |               |          |                             | ISO 14001, ISO 9001 | 
|Obernberg, Germany(3)     |  |            | 23,064    |  |                  |                                     | Separations Media |               |          |                             | ISO 9001            | 
|                         



|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Excludes leased sales offices in Shanghai, China; Tokyo, Japan;
    Victoria, Australia; and Sao Paulo, Brazil.
|   
|(2) | Polypore owns the land and building and subleases the
    manufacturing equipment at this facility.            
|   
|(3) | Polypore owns the equipment and leases the facility.                                                           








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





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



15



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Part II







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



3 4  3 4 3 4 3 4




3 4 3 4 3 4 3 4 3 4


1 2







|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data







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|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |   |       |   |  |   |       |  
|-------------------------------------------------------------------------------------- |  | ---------------- | ----- | ---------- | ------------ | - | ----------- | ---------- |  | - | ----- |  |  | ---- | ----- | - | ---- | - | ----- | - |  | - | ----- | -
|                                                                                       | 
|                                                                                       |  |                  |       | Post-      |             
|                                                                                       |  | Pre-Transactions |       |            | Transactions |  
|                                                                                       |  |                  |       |            |              |  
|                                                                                       |  |                  |       | Period     |              |   |            
|                                                                                       |  |                  |       | from       |              |   |            
|                                                                                       |  |                  |       | January 4, |              |   | Period from |           
|                                                                                       |  |                  |       | 2004       |              |   | May 2, 2004 |           
|                                                                                       |  | Fiscal Year      |       |            | through      |   |             | through    | 
|                                                                                       |  |                  |       |            | May 1,       |   |             | January 1, | 
|(in millions)                                                                          |  | 2000             |       |            | 2001         |   |             | 2002       |  |   | 2003  |  |  | 2004 |       |   | 2005 |  
|                                                                                       | 
|Statement of operations data:                                                          |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |   |       |   |  |   |       |  
|Net sales                                                                              |  | $                | 256.8 |            |              | $ | 245.7       |            |  | $ | 345.4 |  |  | $    | 441.1 |   |      | $ | 179.3 |   |  | $ | 311.1 |  
|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |  
|Gross profit                                                                           |  |                  | 91.9  |            |              |   | 91.3        |            |  |   | 102.0 |  |  |      | 155.4 |   |      |   | 69.1  |   |  |   | 85.2  |  
|Selling, general and administrative expenses                                           |  |                  | 35.8  |            |              |   | 33.5        |            |  |   | 48.9  |  |  |      | 69.7  |   |      |   | 24.9  |   |  |   | 48.0  |  
|Business restructuring                                                                 |  |                  |      |            |              |   |            |            |  |   |      |  |  |      |      |   |      |   |      |   |  |   | 13.9  |  
|In process research and development                                                    |  |                  |      |            |              |   |            |            |  |   |      |  |  |      |      |   |      |   |      |   |  |   | 5.3   |  
|Other                                                                                  |  |                  |      |            |              |   |            |            |  |   |      |  |  |      |      |   |      |   | (1.5  | ) |  |   |      |  
|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |  
|Operating income                                                                       |  |                  | 56.2  |            |              |   | 57.8        |            |  |   | 53.2  |  |  |      | 85.7  |   |      |   | 45.7  |   |  |   | 18.0  |  
|Interest expense, net                                                                  |  |                  | 18.2  |            |              |   | 14.1        |            |  |   | 20.9  |  |  |      | 21.5  |   |      |   | 6.0   |   |  |   | 37.8  |  
|Foreign currency and other                                                             |  |                  | 2.5   |            |              |   | 1.0         |            |  |   | 1.5   |  |  |      | 2.4   |   |      |   | .5    |   |  |   | 1.8   |  
|Unrealized (gain) loss on derivative instrument                                        |  |                  |      |            |              |   | 3.1         |            |  |   | 2.5   |  |  |      | (2.3  | ) |      |   | (1.3  | ) |  |   |      |  
|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |  
|Income before income taxes and cumulative effect of change in
    accounting principle |  |                  | 35.5  |            |              |   | 39.6        |            |  |   | 28.2  |  |  |      | 64.1  |   |      |   | 40.5  |   |  |   | (21.6 | )
|Income taxes                                                                           |  |                  | 14.1  |            |              |   | 16.0        |            |  |   | 11.4  |  |  |      | 18.8  |   |      |   | 13.7  |   |  |   | (6.7  | )
|Cumulative effect of change in accounting principle, net                               |  |                  |      |            |              |   | 1.2         |            |  |   |      |  |  |      |      |   |      |   |      |   |  |   |      |  
|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |  
|Net income (loss)                                                                      |  | $                | 21.4  |            |              | $ | 22.4        |            |  | $ | 16.8  |  |  | $    | 45.3  |   |      | $ | 26.8  |   |  | $ | (14.9 | )
|                                                                                       |  |                  |       |            |              |   |             |            |  |   |       |  |  |      |       |   |      |  
|                                                                                      

|                                                                        |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |         | 
|----------------------------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ------- | 
|                                                                        | 
|                                                                        |  | 2000 |       |  | 2001 |   |       | 2002 |  |   | 2003  |  |  | 2004 |      
|                                                                        | 
|Balance sheet data (at end of period):                                  |  |      |       |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |         | 
|Total assets                                                            |  | $    | 318.3 |  |      | $ | 360.4 |      |  | $ | 633.1 |  |  | $    | 730.6 |  |  | $ | 1,464.0 | 
|Total debt and capital lease obligations, including current
    portion |  |      | 175.9 |  |      |   | 187.7 |      |  |   | 311.0 |  |  |      | 284.1 |  |  |   | 860.8   | 
|Redeemable preferred stock and cumulative dividends payable             |  |      | 45.1  |  |      |   | 46.8  |      |  |   | 15.0  |  |  |      | 16.2  |  |  |   |        | 
|Shareholders equity                                                    |  |      | 44.7  |  |      |   | 60.6  |      |  |   | 97.6  |  |  |      | 189.8 |  |  |   | 307.3   | 
|                                                                       

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|                                      |                      |                  |      |             |              |   |             |            |   |   |      |        |   |             |      |       |      |   |      |      |   |   |      |       |  
|------------------------------------- | -------------------- | ---------------- | ---- | ----------- | ------------ | - | ----------- | ---------- | - | - | ---- | ------ | - | ----------- | ---- | ----- | ---- | - | ---- | ---- | - | - | ---- | ----- | -
|                                      |                     
|                                      |                      |                  |      | Post-       |             
|                                      |                      | Pre-Transactions |      |             | Transactions |  
|                                      |                      |                  |      |             |              |  
|                                      |                      |                  |      | Period from |              |   | Period from |           
|                                      |                      |                  |      | January 4,  |              |   | May 2, 2004 |           
|                                      |                      | Fiscal Year      |      |             | 2004         |   |             | through    |  
|                                      |                      |                  |      |             | through      |   |             | January 1, |  
|(in millions)                         |                      | 2000             |      |             | 2001         |   |             | 2002       |   |   | 2003 |        |   | May 1, 2004 |      |       | 2005 |  
|                                      |                     
|Other financial data:                 |                      |                  |      |             |              |   |             |            |   |   |      |        |   |             |      |       |      |   |      |      |   |   |      |      
|Depreciation and amortization         |                      | $                | 15.6 |             |              | $ | 16.7        |            |   | $ | 30.8 |        |   | $           | 38.7 |       |      | $ | 15.2 |      |   | $ | 33.7 |      
|Capital expenditures                  |                      |                  | 13.4 |             |              |   | 26.3        |            |   |   | 28.8 |        |   |             | 33.8 |       |      |   | 5.5  |      |   |   | 9.9  |      
|Net cash provided by (used in):       |                      |                  |      |             |              |   |             |            |   |   |      |        |   |             |      |       |      |   |      |      |   |   |      |      
|                                      | Operating activities |                  |      | 36.7        |              |   |             | 29.4       |   |   |      | 83.5   |   |             |      | 56.5  |      |   |      | 28.9 |   |   |      | 22.1  |  
|                                      | Investing activities |                  |      | (14.9       | )            |   |             | (36.5      | ) |   |      | (141.4 | ) |             |      | (33.8 | )    |   |      | (3.6 | ) |   |      | (9.8  | )
|                                      | Financing activities |                  |      | (14.1       | )            |   |             | 3.9        |   |   |      | 83.0   |   |             |      | (28.3 | )    |   |      | (7.4 | ) |   |      | (20.1 | )
|Ratio of earnings to fixed charges(1) |                      |                  | 2.8  | x           |              |   | 3.6         | x          |   |   | 2.3  | x      |   |             | 3.8  | x     |      |   | 7.2  | x    |   |   | 0.5  | x    
|                                     



|    |                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For purposes of computing the ratio of earnings to fixed
    charges, earnings consist of earnings before income taxes plus
    fixed charges. Fixed charges consist of interest expense,
    amortization of debt issuance costs and the portion of rental
    expense that management believes is representative of the
    interest component of rental expense.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following discussions of our financial condition and
results of operations should be read together with the
Selected Financial Data and our audited consolidated
financial statements and the related notes included elsewhere in
this Annual Report on Form 10-K.


Overview




Wards Motor Vehicles Facts and Figures,


18



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3 4 3 4


Business Combinations Goodwill and Other Intangible Assets


Critical accounting policies




19



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Allowance for doubtful accounts




Impairment of Intangibles and Goodwill


Goodwill and Other Intangible Assets


Pension and other postretirement benefits




Environmental Matters








20



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Results of operations






|                                                |  |             |       |  |      |   |       |         |  |   |       |  
|----------------------------------------------- |  | ----------- | ----- |  | ---- | - | ----- | ------- |  | - | ----- | -
|                                                | 
|                                                |  | Fiscal Year |      
|                                                |  |             |      
|                                                |  | 2002        |       |  | 2003 |   |       | 2004(1) | 
|                                                | 
|Net sales                                       |  | $           | 345.4 |  |      | $ | 441.1 |         |  | $ | 490.4 |  
|                                                |  |            
|Gross profit                                    |  |             | 102.0 |  |      |   | 155.4 |         |  |   | 176.8 |  
|Selling, general and administrative expenses    |  |             | 48.9  |  |      |   | 69.7  |         |  |   | 78.1  |  
|Business restructuring                          |  |             |      |  |      |   |      |         |  |   | 13.9  |  
|Other                                           |  |             |      |  |      |   |      |         |  |   | (1.5  | )
|                                                |  |            
|Operating income                                |  |             | 53.2  |  |      |   | 85.7  |         |  |   | 86.3  |  
|Interest expense, net                           |  |             | 20.9  |  |      |   | 21.5  |         |  |   | 56.6  |  
|Foreign currency and other                      |  |             | 1.5   |  |      |   | 2.4   |         |  |   | 2.3   |  
|Unrealized (gain) loss on derivative instrument |  |             | 2.5   |  |      |   | (2.3  | )       |  |   |      |  
|                                                |  |            
|Income before income taxes                      |  |             | 28.2  |  |      |   | 64.1  |         |  |   | 27.4  |  
|Income taxes                                    |  |             | 11.4  |  |      |   | 18.8  |         |  |   | 10.4  |  
|                                                |  |            
|Net income                                      |  | $           | 16.8  |  |      | $ | 45.3  |         |  | $ | 17.0  |  
|                                                |  |            
|                                               



|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Unaudited pro forma financial information as if the Transactions
    had occurred on January 4, 2004, the first day of the year
    ending January 1, 2005.

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|                                                |  |             |       |   |      |  |       |         |  |  |       |   
|----------------------------------------------- |  | ----------- | ----- | - | ---- |  | ----- | ------- |  |  | ----- | --
|                                                | 
|                                                |  | Fiscal Year |      
|                                                |  |             |      
|                                                |  | 2002        |       |   | 2003 |  |       | 2004(1) | 
|                                                | 
|Net sales                                       |  |             | 100.0 | % |      |  | 100.0 | %       |  |  | 100.0 | % 
|                                                |  |            
|Gross profit                                    |  |             | 29.5  | % |      |  | 35.2  | %       |  |  | 36.1  | % 
|Selling, general and administrative expenses    |  |             | 14.1  | % |      |  | 15.8  | %       |  |  | 15.9  | % 
|Business restructuring                          |  |             |      |   |      |  |      |         |  |  | 2.8   | % 
|Other                                           |  |             |      |   |      |  |      |         |  |  | (0.3  | )%
|                                                |  |            
|Operating income                                |  |             | 15.4  | % |      |  | 19.4  | %       |  |  | 17.6  | % 
|Interest expense, net                           |  |             | 6.0   | % |      |  | 4.9   | %       |  |  | 11.5  | % 
|Foreign currency and other                      |  |             | 0.4   | % |      |  | 0.6   | %       |  |  | 0.5   | % 
|Unrealized (gain) loss on derivative instrument |  |             | 0.7   | % |      |  | (0.5  | )%      |  |  | 0.0   | % 
|                                                |  |            
|Income before income taxes                      |  |             | 8.2   | % |      |  | 14.5  | %       |  |  | 5.6   | % 
|Income taxes                                    |  |             | 3.3   | % |      |  | 4.3   | %       |  |  | 2.1   | % 
|                                                |  |            
|Net income                                      |  |             | 4.9   | % |      |  | 10.3  | %       |  |  | 3.5   | % 
|                                                |  |            
|                                               



|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Unaudited pro forma financial information as if the Transactions
    had occurred on January 4, 2004, the first day of the year
    ending January 1, 2005.

Pro forma fiscal 2004 compared with fiscal 2003


Net sales.


Gross Profit.


22



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Selling, general and administrative expenses.


Business restructuring.


Interest expense, net. 3 4


Income taxes, net.


Fiscal 2003 compared with fiscal 2002


Net sales.


23



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Gross profit.


Selling, general and administrative expenses.


Interest expense, net.


Income taxes.


Foreign Operations




Seasonality




24



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Liquidity and Capital Resources




Operating activities.




Investing activities.


Financing activities.






25



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3 4













|                |                                                           |             |      |       |         |   |      |       |  
|--------------- | --------------------------------------------------------- | ----------- | ---- | ----- | ------- | - | ---- | ----- | -
|                |                                                          
|                |                                                           | Fiscal Year |     
|                |                                                           |             |     
|                |                                                           | 2003        |      |       | 2004(1) |  
|                |                                                          
|Net income      |                                                           | $           | 45.3 |       |         | $ | 11.9 |      
|Add:            |                                                           |             |      |       |         |   |      |      
|                | Depreciation and amortization                             |             |      | 38.7  |         |   |      | 49.0  |  
|                | Interest expense, net                                     |             |      | 21.5  |         |   |      | 43.9  |  
|                | Provision for income taxes                                |             |      | 18.8  |         |   |      | 7.0   |  
|                |                                                           |             |      |       |         |  
|                | EBITDA                                                    |             |      | 124.3 |         |   |      | 111.8 |  
|Add/(Subtract): |                                                           |             |      |       |         |   |      |      
|                | Foreign currency (gain) loss                              |             |      | 2.6   |         |   |      | 3.3   |  
|                | Unrealized hedging gain(2)                                |             |      | (2.3  | )       |   |      | (1.3  | )
|                | Salary and bonus paid to former officers(3)               |             |      | 5.5   |         |   |      | 0.4   |  
|                | Inventory purchase accounting adjustments(4)              |             |      |      |         |   |      | 19.0  |  
|                | In-process research and development(5)                    |             |      |      |         |   |      | 5.3   |  
|                | Transaction costs(6)                                      |             |      | 0.6   |         |   |      | 1.6   |  
|                | Operating lease payments on leases to be refinanced(7)    |             |      | 4.7   |         |   |      | 3.9   |  
|                | Business restructuring(8)                                 |             |      |      |         |   |      | 15.7  |  
|                | (Gain) loss on disposal of property, plant, and equipment |             |      | 0.2   |         |   |      | (0.9  | )
|                |                                                           |             |      |       |         |  
|                | Adjusted EBITDA                                           |             | $    | 135.6 |         |   | $    | 158.8 |  
|                |                                                           |             |      |       |         |  
|               



|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Statement of operations data presented for the year ended
    January 1, 2005 represents the combination of historical
    results for the periods January 4, 2004 through May 1,
    2004 and May 2, 2004 through January 1, 2005.

26



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|    |                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents the non-cash hedging gain for changes in the fair
    value of the derivative instruments used to manage interest rate
    risk as required by Polypores former credit agreement.                                                                                                                                    
|   
|(3) | Represents the salary and bonus for former owners who are not
    involved with Polypore subsequent to the Transactions.                                                                                                                                                                                                         
|   
|(4) | Represents the write-off of the inventory purchase accounting
    adjustment for inventory that was sold during the period.                                                                                                                                                                                                      
|   
|(5) | Represents the one-time charge for purchased in-process research
    and development.                                                                                                                                                                                                                                            
|   
|(6) | Represents non-recurring costs incurred in connection with the
    Transactions.                                                                                                                                                                                                                                                 
|   
|(7) | Represents payments under two operating lease agreements that
    the Company intends to refinance. On October 29, 2004, the
    Company refinanced one of the operating leases through a capital
    lease agreement. The Company intends to terminate the other
    operating lease and purchase the equipment from the lessor.
|   
|(8) | Represents business restructuring costs, including estimated
    costs of employee layoffs and the loss on an inventory purchase
    commitment included in cost of goods sold.                                                                                                                                                  







3 4 3 4 3 4








27



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Contractual Obligations




|                                                |  |                       |         |  |      |   |        |           |  |   |           |  |  |            |        |  |  |   |         | 
|----------------------------------------------- |  | --------------------- | ------- |  | ---- | - | ------ | --------- |  | - | --------- |  |  | ---------- | ------ |  |  | - | ------- | 
|                                                | 
|                                                |  | Payment due by Period |        
|                                                |  |                       |        
|                                                |  | Total                 |         |  | 2005 |   |        | 2006-2007 |  |   | 2008-2009 |  |  | Thereafter |       
|                                                | 
|Long-term debt, including current portion(1)(2) |  | $                     | 422,884 |  |      | $ | 27,260 |           |  | $ | 9,883     |  |  | $          | 9,138  |  |  | $ | 376,603 | 
|83/4% Notes(3)(4)                               |  |                       | 429,315 |  |      |   |       |           |  |   |          |  |  |            |       |  |  |   | 429,315 | 
|Capital lease obligations(5)                    |  |                       | 9,759   |  |      |   | 1,604  |           |  |   | 3,208     |  |  |            | 3,208  |  |  |   | 1,739   | 
|Operating lease obligations(6)                  |  |                       | 5,268   |  |      |   | 3,993  |           |  |   | 1,103     |  |  |            | 165    |  |  |   | 7       | 
|Business restructuring                          |  |                       | 16,200  |  |      |   | 14,502 |           |  |   | 1,698     |  |  |            |       |  |  |   |        | 
|                                                |  |                      
|                                                |  | $                     | 883,426 |  |      | $ | 47,359 |           |  | $ | 15,892    |  |  | $          | 12,511 |  |  | $ | 807,664 | 
|                                                |  |                      
|                                               



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in long-term debt are amounts owed under our term loan
    facilities and other debt. The term loan facilities include euro
    denominated debt held in the U.S. The table assumes that
    the euro/dollar exchange rate is the rate at January 1,
    2005 for all periods presented and that the debt is held to
    maturity. The amounts due in 2005 include the $25 million
    optional prepayment that we made on March 1, 2005. In
    accordance with the credit agreement, the prepayment was first
    applied to the quarterly payments due for the next twelve months
    and second, pro rata against the remaining scheduled
    installments of principal. The payment schedule included in the
    table reflects the impact of the optional prepayment on minimum
    scheduled future principal payments.
|   
|(2) | The table does not include accrued interest under the long-term
    debt. Interest rates under the term loan facilities are, at our
    option, equal to either an alternate base rate or an adjusted
    LIBO rate, plus an applicable margin percentage. The applicable
    margin percentage under the amended credit agreement is equal to
    1.25% for alternate base rate loans or 2.25% for adjusted LIBO
    rate loans.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | The
    83/4% Notes
    are due 2012. This senior subordinated debt
    includes 150,000,000
    euro denominated debt held in U.S. The table assumes that
    the euro/dollar exchange rate is the rate at January 1,
    2005 for all periods presented and that the debt is held to
    maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | The table does not include accrued interest under the
    83/4% senior
    subordinated notes. Interest is accrued from the issue date at
    8.75% and paid semi-annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(5) | We lease manufacturing equipment under a capital lease
    agreement. The lease agreement expires in February 2011 and
    contains an early buyout option in October 2009. The capital
    lease payments include interest under the capital lease
    agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(6) | We lease certain equipment and facilities under operating
    leases. Some lease agreements provide us with the option to
    renew the lease agreement. Our future operating lease
    obligations would change if we exercised these renewal options
    and if we entered into additional operating lease agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(7) | As discussed in the notes to consolidated financial statements
    included elsewhere in this Annual Report on Form 10-K, we
    have long-term liabilities for pension, post retirement and post
    employment benefits. Company contributions for these benefit
    plans are not included in the table above since the timing and
    amount of payments are dependent upon many factors, including
    when an employee retires or leaves the Company, certain benefit
    elections by employees, return on plan assets, minimum                                                                                                                                                                                                                                                                                                 

28



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | funding requirements and foreign currency exchange rates. We
    estimate that contributions to the pension and post retirement
    plans in 2005 will be $1.9 million, as compared to 2004
    actual contributions of $2.1 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(8) | As discussed in the notes to the consolidated financial
    statements included elsewhere in this Annual Report on
    Form 10-K, we have environmental obligations and related
    indemnification receivables. Payments related to these
    obligations and the related amounts to be indemnified under
    indemnification agreements are not included in the table above
    since the timing of payments and indemnifications is not known.
    We estimate that we will make payments, net of indemnification
    amounts, of $3.7 million in 2005. Payments against
    environmental obligations in 2004 were $2.2 million with no
    amounts received under indemnification agreements. We expect
    that payments for environmental obligations and amounts received
    under indemnification agreements will occur over the next seven
    to ten years.

Off Balance Sheet Arrangements




New Accounting Standards


Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions
(FAS 153).


Inventory Costs (FAS 151). Inventory Pricing,







|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk



Interest rate risk




29



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Currency risk




30



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|                    |  |             |        |  |      |  |        |      |  |  |        | 
|------------------- |  | ----------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                    | 
|                    |  | Fiscal Year |       
|                    |  |             |       
|                    |  | 2002        |        |  | 2003 |  |        | 2004 | 
|                    | 
|Period end rate     |  |             | 1.0487 |  |      |  | 1.2630 |      |  |  | 1.3621 | 
|Period average rate |  |             | .9358  |  |      |  | 1.1179 |      |  |  | 1.2411 | 
|                   








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



31



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Report of Independent Registered Public Accounting Firm














| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP





32



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Polypore, Inc.


Consolidated balance sheets


|                                                |                                                                                                                                                                                                               |                   |           |         |                  |   |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | --------- | ------- | ---------------- | - | ------- | ------- | 
|                                                |                                                                                                                                                                                                              
|                                                |                                                                                                                                                                                                               | Post-Transactions |           |         | Pre-Transactions |  
|                                                |                                                                                                                                                                                                               |                   |           |         |                  |  
|(in thousands, except share data)               |                                                                                                                                                                                                               | January 1, 2005   |           |         | January 3, 2004  |  
|                                                |                                                                                                                                                                                                              
|Assets                                          |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|Current assets:                                 |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|                                                | Cash and equivalents                                                                                                                                                                                          |                   | $         | 31,684  |                  |   | $       | 20,063  | 
|                                                | Accounts receivable, net                                                                                                                                                                                      |                   |           | 106,296 |                  |   |         | 89,471  | 
|                                                | Inventories                                                                                                                                                                                                   |                   |           | 61,789  |                  |   |         | 60,941  | 
|                                                | Refundable income taxes                                                                                                                                                                                       |                   |           | 8,238   |                  |   |         |        | 
|                                                | Deferred income taxes                                                                                                                                                                                         |                   |           | 7,954   |                  |   |         | 298     | 
|                                                | Prepaid and other                                                                                                                                                                                             |                   |           | 5,288   |                  |   |         | 5,953   | 
|                                                | Due from related parties                                                                                                                                                                                      |                   |           |        |                  |   |         | 5,212   | 
|                                                |                                                                                                                                                                                                               |                  
|Total current assets                            |                                                                                                                                                                                                               |                   | 221,249   |         |                  |   | 181,938 |        
|Property, plant and equipment, net              |                                                                                                                                                                                                               |                   | 441,350   |         |                  |   | 480,602 |        
|Goodwill                                        |                                                                                                                                                                                                               |                   | 535,844   |         |                  |   | 32,200  |        
|Intangibles and loan acquisition costs, net     |                                                                                                                                                                                                               |                   | 244,256   |         |                  |   | 17,735  |        
|Environmental indemnification receivable        |                                                                                                                                                                                                               |                   | 20,125    |         |                  |   | 17,183  |        
|Other                                           |                                                                                                                                                                                                               |                   | 1,142     |         |                  |   | 984     |        
|                                                |                                                                                                                                                                                                               |                  
|Total assets                                    |                                                                                                                                                                                                               | $                 | 1,463,966 |         |                  | $ | 730,642 |        
|                                                |                                                                                                                                                                                                               |                  
|                                               
|Liabilities and shareholders equity            |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|Current liabilities:                            |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|                                                | Revolving credit obligations                                                                                                                                                                                  |                   | $         |        |                  |   | $       | 10,000  | 
|                                                | Accounts payable                                                                                                                                                                                              |                   |           | 20,581  |                  |   |         | 20,966  | 
|                                                | Accrued liabilities                                                                                                                                                                                           |                   |           | 50,464  |                  |   |         | 40,644  | 
|                                                | Income taxes payable                                                                                                                                                                                          |                   |           |        |                  |   |         | 5,769   | 
|                                                | Current portion of debt  optional prepayment                                                                                                                                                                 |                   |           | 25,000  |                  |   |         |        | 
|                                                | Current portion of debt                                                                                                                                                                                       |                   |           | 2,260   |                  |   |         | 23,609  | 
|                                                | Current portion of capital lease obligation                                                                                                                                                                   |                   |           | 1,272   |                  |   |         |        | 
|                                                |                                                                                                                                                                                                               |                  
|Total current liabilities                       |                                                                                                                                                                                                               |                   | 99,577    |         |                  |   | 100,988 |        
|Debt, less current portion                      |                                                                                                                                                                                                               |                   | 824,939   |         |                  |   | 250,519 |        
|Capital lease obligations, less current portion |                                                                                                                                                                                                               |                   | 7,344     |         |                  |   |        |        
|Pension and postretirement benefits             |                                                                                                                                                                                                               |                   | 48,652    |         |                  |   | 37,209  |        
|Post employment benefits                        |                                                                                                                                                                                                               |                   | 10,119    |         |                  |   | 13,808  |        
|Environmental reserve, less current portion     |                                                                                                                                                                                                               |                   | 24,394    |         |                  |   | 22,661  |        
|Deferred income taxes                           |                                                                                                                                                                                                               |                   | 138,566   |         |                  |   | 98,117  |        
|Other                                           |                                                                                                                                                                                                               |                   | 3,033     |         |                  |   | 1,362   |        
|Commitments and contingencies                   |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|Redeemable preferred stock (Pre-Transactions):  |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|                                                | Class A, 8% Senior Cumulative, non-voting,
    $.01 par value (liquidation value of $1,000 per
    share)  authorized 20,000 shares,
    14,000 shares issued and outstanding at January 3, 2004             |                   |           |        |                  |   |         |        | 
|                                                | Class B-1, 8% Junior Cumulative Convertible Preferred
    Stock, $.01 par value (liquidation value of $100 per
    share)  authorized 10,000 shares, no shares
    issued and outstanding at January 3, 2004 |                   |           |        |                  |   |         |        | 
|                                                | Class B-2, 8% Junior Cumulative Convertible Preferred
    Stock, $.01 par value (liquidation value of $100 per
    share)  authorized 5,000 shares, no shares
    issued and outstanding at January 3, 2004  |                   |           |        |                  |   |         |        | 
|                                                | Class C, 13% Senior Cumulative Redeemable Preferred
    Stock, $.01 par value (liquidation value of $1,000 per
    share)  authorized 40,000 shares, no shares
    issued and outstanding at January 3, 2004 |                   |           |        |                  |   |         |        | 
|                                                | Paid-in capital                                                                                                                                                                                               |                   |           |        |                  |   |         | 14,000  | 
|                                                | Cumulative dividends payable                                                                                                                                                                                  |                   |           |        |                  |   |         | 2,221   | 
|                                                |                                                                                                                                                                                                               |                  
|                                                |                                                                                                                                                                                                               |                   |          |         |                  |   | 16,221  |        
|Shareholders equity:                           |                                                                                                                                                                                                               |                   |           |         |                  |   |         |        
|                                                | Class A Common Stock, $.01 par value
    (Post-Transactions)  100 shares authorized,
    issued and outstanding at January 1, 2005                                                                           |                   |           |        |                  |   |         |        | 
|                                                | Class A Common Stock, $.01 par value
    (Pre-Transactions)  250,000 shares authorized,
    141,292 shares issued and outstanding at January 4,
    2004                                                     |                   |           |        |                  |   |         | 1       | 
|                                                | Class B Non-Voting Common Stock, $.01 par value
    (Pre-Transactions) authorized 50,000 shares,
    6,040 shares issued and outstanding at January 3, 2004                                                   |                   |           |        |                  |   |         |        | 
|                                                | Class C Non-Voting Common Stock, $.01 par value
    (Pre-Transactions)  authorized 25,000 shares,
    7,754 shares issued and outstanding at January 3, 2004                                                 |                   |           |        |                  |   |         | 1       | 
|                                                | Paid-in capital                                                                                                                                                                                               |                   |           | 321,516 |                  |   |         | 1,718   | 
|                                                | Retained earnings (deficit)                                                                                                                                                                                   |                   |           | (14,870 | )                |   |         | 124,519 | 
|                                                | Accumulated other comprehensive income                                                                                                                                                                        |                   |           | 696     |                  |   |         | 63,518  | 
|                                                |                                                                                                                                                                                                               |                  
|                                                |                                                                                                                                                                                                               |                   | 307,342   |         |                  |   | 189,757 |        
|                                                |                                                                                                                                                                                                               |                  
|Total liabilities and shareholders equity      |                                                                                                                                                                                                               | $                 | 1,463,966 |         |                  | $ | 730,642 |        
|                                                |                                                                                                                                                                                                               |                  
|                                               

See accompanying notes.


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Polypore, Inc.


Consolidated statements of operations


|                                              |                                                 |                 |         |        |                  |   |         |                 |   |   |                   |        |   |   |         |        | 
|--------------------------------------------- | ----------------------------------------------- | --------------- | ------- | ------ | ---------------- | - | ------- | --------------- | - | - | ----------------- | ------ | - | - | ------- | ------ | 
|                                              |                                                
|                                              |                                                 | Post-           |         |        |                 
|                                              |                                                 | Transactions    |         |        | Pre-Transactions |  
|                                              |                                                 |                 |         |        |                  |  
|                                              |                                                 | May 2, 2004     |         |        | January 4, 2004  |   |         |                
|                                              |                                                 | through         |         |        | through          |   |         | Year ended      |   |   | Year ended        |       
|(in thousands)                                |                                                 | January 1, 2005 |         |        | May 1, 2004      |   |         | January 3, 2004 |   |   | December 28, 2002 |       
|                                              |                                                
|Net sales                                     |                                                 | $               | 311,089 |        |                  | $ | 179,273 |                 |   | $ | 441,076           |        |   | $ | 345,432 |       
|Cost of goods sold                            |                                                 |                 | 225,918 |        |                  |   | 110,166 |                 |   |   | 285,631           |        |   |   | 243,383 |       
|                                              |                                                 |                
|Gross profit                                  |                                                 |                 | 85,171  |        |                  |   | 69,107  |                 |   |   | 155,445           |        |   |   | 102,049 |       
|Selling, general and administrative expenses  |                                                 |                 | 48,024  |        |                  |   | 24,895  |                 |   |   | 69,684            |        |   |   | 48,866  |       
|Business restructuring                        |                                                 |                 | 13,899  |        |                  |   |        |                 |   |   |                  |        |   |   |        |       
|In process research and development           |                                                 |                 | 5,250   |        |                  |   |        |                 |   |   |                  |        |   |   |        |       
|Other                                         |                                                 |                 |        |        |                  |   | (1,514  | )               |   |   |                  |        |   |   |        |       
|                                              |                                                 |                
|Operating income                              |                                                 |                 | 17,998  |        |                  |   | 45,726  |                 |   |   | 85,761            |        |   |   | 53,183  |       
|Other (income) expense:                       |                                                 |                 |         |        |                  |   |         |                 |   |   |                   |        |   |   |         |       
|                                              | Interest expense, net                           |                 |         | 37,831 |                  |   |         | 6,048           |   |   |                   | 21,521 |   |   |         | 20,862 | 
|                                              | Foreign currency and other                      |                 |         | 1,751  |                  |   |         | 481             |   |   |                   | 2,433  |   |   |         | 1,545  | 
|                                              | Unrealized (gain) loss on derivative instrument |                 |         |       |                  |   |         | (1,321          | ) |   |                   | (2,287 | ) |   |         | 2,542  | 
|                                              |                                                 |                
|                                              |                                                 |                 | 39,582  |        |                  |   | 5,208   |                 |   |   | 21,667            |        |   |   | 24,949  |       
|                                              |                                                 |                
|Income (loss) before income taxes             |                                                 |                 | (21,584 | )      |                  |   | 40,518  |                 |   |   | 64,094            |        |   |   | 28,234  |       
|Income taxes                                  |                                                 |                 | (6,714  | )      |                  |   | 13,685  |                 |   |   | 18,781            |        |   |   | 11,388  |       
|                                              |                                                 |                
|Net income (loss)                             |                                                 |                 | (14,870 | )      |                  |   | 26,833  |                 |   |   | 45,313            |        |   |   | 16,846  |       
|Redeemable preferred stock dividends          |                                                 |                 |        |        |                  |   | (424    | )               |   |   | (1,260            | )      |   |   | (1,735  | )     
|Redemption premium on Class C preferred stock |                                                 |                 |        |        |                  |   |        |                 |   |   |                  |        |   |   | (2,600  | )     
|                                              |                                                 |                
|Net income (loss) applicable to common stock  |                                                 | $               | (14,870 | )      |                  | $ | 26,409  |                 |   | $ | 44,053            |        |   | $ | 12,511  |       
|                                              |                                                 |                
|                                             

See accompanying notes.


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Polypore, Inc.


Consolidated statements of shareholders equity


|                                                                                                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | - | ------------- | - | ------- | --------- |  | ------------- | -------- | - |  | ----- | ------- | ------ | ------ | - | -------- | - |  | - | ------- | -
|                                                                                                                                         | 
|                                                                                                                                         |  | Accumulated |    |   |              
|                                                                                                                                         |  | Other       |    |   |              
|                                                                                                                                         |  | Retained    |    |   | Comprehensive |   |         |           |  | Comprehensive |         
|                                                                                                                                         |  | Common      |    |   | Paid-In       |   |         | Earnings  |  |               | Income   |   |  |       |         | Income |       
|(in thousands, except per share data)                                                                                                    |  | Stock       |    |   | Capital       |   |         | (Deficit) |  |               | (Loss)   |   |  | Total |         |        | (Loss) |  
|                                                                                                                                         | 
|Balance at December 29, 2001 (Pre-Transactions)                                                                                          |  | $           | 1  |   |               | $ | 1,718   |           |  | $             | 67,955   |   |  | $     | (9,122  | )      |        | $ | 60,552   |   |  |   |         |  
|Net income for the year ended December 28, 2002                                                                                          |  |             |   |   |               |   |        |           |  |               | 16,846   |   |  |       |        |        |        |   | 16,846   |   |  | $ | 16,846  |  
|Foreign currency translation adjustment, net of income tax
    benefit of $7,585                                                         |  |             |   |   |               |   |        |           |  |               |         |   |  |       | 24,521  |        |        |   | 24,521   |   |  |   | 24,521  |  
|Issuance of Class C Non-Voting Common Stock in connection
    with exercise of stock purchase warrant                                    |  |             | 1  |   |               |   |        |           |  |               |         |   |  |       |        |        |        |   | 1        |   |  |   |        |  
|Redemption premium on Class C Preferred Stock                                                                                            |  |             |   |   |               |   |        |           |  |               | (2,600   | ) |  |       |        |        |        |   | (2,600   | ) |  |   |        |  
|Cumulative dividends on Class A Preferred Stock 
    $89.68 per share                                                                   |  |             |   |   |               |   |        |           |  |               | (1,256   | ) |  |       |        |        |        |   | (1,256   | ) |  |   |        |  
|Cumulative dividends on Class C Preferred Stock 
    $23.96 per share                                                                   |  |             |   |   |               |   |        |           |  |               | (479     | ) |  |       |        |        |        |   | (479     | ) |  |   |        |  
|                                                                                                                                         |  |            
|Balance at December 28, 2002 (Pre-Transactions)                                                                                          |  |             | 2  |   |               |   | 1,718   |           |  |               | 80,466   |   |  |       | 15,399  |        |        |   | 97,585   |   |  |   |         |  
|Comprehensive income for the year ended December 28, 2002
    (Pre-Transactions)                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |   |          |   |  | $ | 41,367  |  
|                                                                                                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |  
|Net income for the year ended January 3, 2004                                                                                            |  |             |   |   |               |   |        |           |  |               | 45,313   |   |  |       |        |        |        |   | 45,313   |   |  | $ | 45,313  |  
|Foreign currency translation adjustment, net of income tax
    expense of $520                                                           |  |             |   |   |               |   |        |           |  |               |         |   |  |       | 49,914  |        |        |   | 49,914   |   |  |   | 49,914  |  
|Foreign currency translation gains reclassified into earnings
    from other comprehensive income, net of income tax benefit of
    $524 |  |             |   |   |               |   |        |           |  |               |         |   |  |       | (1,456  | )      |        |   | (1,456   | ) |  |   | (1,456  | )
|Additional minimum pension liability, net of income tax benefit
    of $225                                                              |  |             |   |   |               |   |        |           |  |               |         |   |  |       | (339    | )      |        |   | (339     | ) |  |   | (339    | )
|Cumulative dividends on Class A Preferred Stock 
    $90.01 per share                                                                   |  |             |   |   |               |   |        |           |  |               | (1,260   | ) |  |       |        |        |        |   | (1,260   | ) |  |   |        |  
|                                                                                                                                         |  |            
|Balance at January 3, 2004 (Pre-Transactions)                                                                                            |  |             | 2  |   |               |   | 1,718   |           |  |               | 124,519  |   |  |       | 63,518  |        |        |   | 189,757  |   |  |   |         |  
|Comprehensive income for the year ended January 3, 2004
    (Pre-Transactions)                                                           |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |   |          |   |  | $ | 93,432  |  
|                                                                                                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |  
|Net income for the period from January 4, 2004 through
    May 1, 2004 (Pre-Transactions)                                                |  |             |   |   |               |   |        |           |  |               | 26,833   |   |  |       |        |        |        |   | 26,833   |   |  | $ | 26,833  |  
|Foreign currency translation adjustment, net of income tax
    expense of $0                                                             |  |             |   |   |               |   |        |           |  |               |         |   |  |       | (19,883 | )      |        |   | (19,883  | ) |  |   | (19,883 | )
|Additional minimum pension liability, net of income tax benefit
    of $18                                                               |  |             |   |   |               |   |        |           |  |               |         |   |  |       | 35      |        |        |   | 35       |   |  |   | 35      |  
|Cumulative dividends on Class A Preferred Stock 
    $3.27 per share                                                                    |  |             |   |   |               |   |        |           |  |               | (424     | ) |  |       |        |        |        |   | (424     | ) |  |   |        |  
|                                                                                                                                         |  |            
|Balance at May 1, 2004 (Pre-Transactions)                                                                                                |  |             | 2  |   |               |   | 1,718   |           |  |               | 150,928  |   |  |       | 43,670  |        |        |   | 196,318  |   |  |   |         |  
|Comprehensive income for the period from January 4, 2004
    through May 1, 2004 (Pre-Transactions)                                      |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |   |          |   |  | $ | 6,985   |  
|                                                                                                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |  
|Elimination of historical shareholders equity for the
    Transactions                                                                  |  |             | (2 | ) |               |   | (1,718  | )         |  |               | (150,928 | ) |  |       | (43,670 | )      |        |   | (196,318 | ) |  |   |         |  
|Equity contributions for the change in ownership in connection
    with the Transactions                                                 |  |             |    |   |               |   | 320,385 |           |  |               |          |   |  |       |         |        |        |   | 320,385  |   |  |   |         |  
|                                                                                                                                         |  |            
|Balance at May 1, 2004 (Post-Transactions)                                                                                               |  |             |   |   |               |   | 320,385 |           |  |               |         |   |  |       |        |        |        |   | 320,385  |   |  |   |         |  
|Net income (loss) for the period from May 2, 2004 through
    January 1, 2005 (Post-Transactions)                                        |  |             |   |   |               |   |        |           |  |               | (14,870  | ) |  |       |        |        |        |   | (14,870  | ) |  | $ | (14,870 | )
|Capital contribution from Parent                                                                                                         |  |             |    |   |               |   | 1,131   |           |  |               |          |   |  |       |         |        |        |   | 1,131    |   |  |   |         |  
|Foreign currency translation adjustment, net of income tax
    expense of $0                                                             |  |             |   |   |               |   |        |           |  |               |         |   |  |       | 696     |        |        |   | 696      |   |  |   | 696     |  
|                                                                                                                                         |  |            
|Balance at January 1, 2005 (Post-Transactions)                                                                                           |  | $           |   |   |               | $ | 321,516 |           |  | $             | (14,870  | ) |  | $     | 696     |        |        | $ | 307,342  |   |  |   |         |  
|                                                                                                                                         |  |             |    |   |              
|Comprehensive loss for the period from May 2, 2004 through
    January 1, 2005 (Post-Transactions)                                       |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |   |          |   |  | $ | (14,174 | )
|                                                                                                                                         |  |             |    |   |               |   |         |           |  |               |          |   |  |       |         |        |        |  
|                                                                                                                                        

See accompanying notes.


35



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##### Table of Contents



Polypore, Inc.


Consolidated statements of cash flows


|                                                                                      |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |        |        |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------- | -------- | ------ | ---------------- | - | ------ | --------------- | ------- | ---------- | ------------ | ------ | ------- | - | -------- | ------ | ------ | -
|                                                                                      |                                                         
|                                                                                      |                                                          | Post-                                    |          |        |                 
|                                                                                      |                                                          | Transactions                             |          |        | Pre-Transactions |  
|                                                                                      |                                                          |                                          |          |        |                  |  
|                                                                                      |                                                          | May 2, 2004                              |          |        | January 4, 2004  |   |        |                 |         | Year ended |             
|                                                                                      |                                                          | through                                  |          |        | through          |   |        | Year ended      |         |            | December 28, |       
|(in thousands)                                                                        |                                                          | January 1, 2005                          |          |        | May 1, 2004      |   |        | January 3, 2004 |         |            | 2002         |       
|                                                                                      |                                                         
|Operating activities:                                                                 |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Net income (loss)                                                                     |                                                          | $                                        | (14,870  | )      |                  | $ | 26,833 |                 |         | $          | 45,313       |        |         | $ | 16,846   |       
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|                                                                                      | Depreciation expense                                     |                                          |          | 21,962 |                  |   |        | 14,409          |         |            |              | 36,222 |         |   |          | 28,098 |       
|                                                                                      | Amortization expense                                     |                                          |          | 11,775 |                  |   |        | 808             |         |            |              | 2,471  |         |   |          | 2,669  |       
|                                                                                      | Inventory purchase accounting                            |                                          |          | 19,007 |                  |   |        |                |         |            |              |       |         |   |          |       |       
|                                                                                      | (Gain) loss on disposal of property, plant and equipment |                                          |          | 488    |                  |   |        | (1,432          | )       |            |              |       |         |   |          |       |       
|                                                                                      | Foreign currency and other                               |                                          |          | 2,602  |                  |   |        | 334             |         |            |              | 1,265  |         |   |          | 1,545  |       
|                                                                                      | Unrealized (gain) loss on derivative instrument          |                                          |          |       |                  |   |        | (1,321          | )       |            |              | (2,287 | )       |   |          | 2,542  |       
|                                                                                      | Deferred income taxes                                    |                                          |          | (7,193 | )                |   |        | 2,080           |         |            |              | (2,711 | )       |   |          | 773    |       
|                                                                                      | Business restructuring                                   |                                          |          | 15,687 |                  |   |        |                |         |            |              |       |         |   |          |       |       
|                                                                                      | Changes in operating assets and liabilities:             |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |        |       
|                                                                                      |                                                          | Accounts receivable                      |          |        | 737              |   |        |                 | (13,189 | )          |              |        | (14,528 | ) |          |        | 9,790  |  
|                                                                                      |                                                          | Inventories                              |          |        | 1,943            |   |        |                 | (1,434  | )          |              |        | (6,790  | ) |          |        | (6,432 | )
|                                                                                      |                                                          | Prepaid and other current assets         |          |        | 694              |   |        |                 | (107    | )          |              |        | (293    | ) |          |        | (1,543 | )
|                                                                                      |                                                          | Accounts payable and accrued liabilities |          |        | (10,109          | ) |        |                 | 1,906   |            |              |        | 399     |   |          |        | 20,774 |  
|                                                                                      |                                                          | Income taxes payable                     |          |        | (15,664          | ) |        |                 | 233     |            |              |        | (1,584  | ) |          |        | 3,334  |  
|                                                                                      |                                                          | Other, net                               |          |        | (4,992           | ) |        |                 | (209    | )          |              |        | (1,006  | ) |          |        | 5,074  |  
|                                                                                      |                                                          |                                         
|Net cash provided by operating activities                                             |                                                          |                                          | 22,067   |        |                  |   | 28,911 |                 |         |            | 56,471       |        |         |   | 83,470   |       
|Investing activities:                                                                 |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Purchases of property, plant and equipment                                            |                                                          |                                          | (9,882   | )      |                  |   | (5,497 | )               |         |            | (33,797      | )      |         |   | (28,785  | )     
|Proceeds from sale of property, plant and equipment                                   |                                                          |                                          | 62       |        |                  |   | 1,923  |                 |         |            |             |        |         |   |         |       
|Acquisitions, net of cash acquired                                                    |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | (112,624 | )     
|                                                                                      |                                                          |                                         
|Net cash used in investing activities                                                 |                                                          |                                          | (9,820   | )      |                  |   | (3,574 | )               |         |            | (33,797      | )      |         |   | (141,409 | )     
|Financing activities:                                                                 |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Proceeds from debt                                                                    |                                                          |                                          | 820,792  |        |                  |   | 610    |                 |         |            | 1,738        |        |         |   | 161,896  |       
|Principal payments on debt                                                            |                                                          |                                          | (265,024 | )      |                  |   | (7,923 | )               |         |            | (39,756      | )      |         |   | (18,543  | )     
|Borrowings on revolving credit agreement                                              |                                                          |                                          | 1,500    |        |                  |   |       |                 |         |            | 15,500       |        |         |   | 1,500    |       
|Payments on revolving credit agreement                                                |                                                          |                                          | (11,500  | )      |                  |   |       |                 |         |            | (5,500       | )      |         |   | (21,500  | )     
|Loan acquisition costs                                                                |                                                          |                                          | (20,015  | )      |                  |   | (59    | )               |         |            | (311         | )      |         |   | (4,139   | )     
|Payments made for the change in ownership in connection with the
    Transactions     |                                                          |                                          | (867,369 | )      |                  |   |       |                 |         |            |             |        |         |   |         |       
|Proceeds from equity investment                                                       |                                                          |                                          | 321,516  |        |                  |   |       |                 |         |            |             |        |         |   |         |       
|Redemption of redeemable preferred stock                                              |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | (22,600  | )     
|Payment of dividends                                                                  |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | (13,563  | )     
|                                                                                      |                                                          |                                         
|Net cash (used in) provided by financing activities                                   |                                                          |                                          | (20,100  | )      |                  |   | (7,372 | )               |         |            | (28,329      | )      |         |   | 83,051   |       
|Effect of exchange rate changes on cash and cash equivalents                          |                                                          |                                          | 3,665    |        |                  |   | (2,156 | )               |         |            | 1,112        |        |         |   | (14,046  | )     
|                                                                                      |                                                          |                                         
|Net (decrease) increase in cash and equivalents                                       |                                                          |                                          | (4,188   | )      |                  |   | 15,809 |                 |         |            | (4,543       | )      |         |   | 11,066   |       
|Cash and equivalents at beginning of period                                           |                                                          |                                          | 35,872   |        |                  |   | 20,063 |                 |         |            | 24,606       |        |         |   | 13,540   |       
|                                                                                      |                                                          |                                         
|Cash and equivalents at end of period                                                 |                                                          | $                                        | 31,684   |        |                  | $ | 35,872 |                 |         | $          | 20,063       |        |         | $ | 24,606   |       
|                                                                                      |                                                          |                                         
|Supplemental cash flow information                                                    |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Cash paid for interest                                                                |                                                          | $                                        | 30,897   |        |                  | $ | 5,921  |                 |         | $          | 26,931       |        |         | $ | 18,046   |       
|Cash paid for income taxes                                                            |                                                          |                                          | 9,550    |        |                  |   | 7,607  |                 |         |            | 21,852       |        |         |   | 10,817   |       
|Supplemental non-cash financing activities                                            |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Unpaid dividends on preferred stock                                                   |                                                          |                                          |         |        |                  |   | 424    |                 |         |            | 1,260        |        |         |   | 961      |       
|Accrued interest converted to debt                                                    |                                                          |                                          |         |        |                  |   |       |                 |         |            | 592          |        |         |   | 683      |       
|Equipment financed under capital lease                                                |                                                          |                                          | 8,823    |        |                  |   |       |                 |         |            |             |        |         |   |         |       
|Acquisitions                                                                          |                                                          |                                          |          |        |                  |   |        |                 |         |            |              |        |         |   |          |       
|Fair value of assets acquired                                                         |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | 217,800  |       
|Liabilities assumed and incurred                                                      |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | 100,794  |       
|Cash paid                                                                             |                                                          |                                          |         |        |                  |   |       |                 |         |            |             |        |         |   | 117,006  |       
|                                                                                     

See accompanying notes.


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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements




|   |                                        
|-- | ---------------------------------------
|1. | Description of Business and Transaction

Description of Business




Change in Ownership




Business Combinations Goodwill and Other Intangible Assets


37



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                                    
|-- | ---------------------------------------------------
|1. | Description of Business and Transaction (continued)



|                                                     |  |   |           | 
|---------------------------------------------------- |  | - | --------- | 
|                                                     | 
|(in thousands)                                       |  |  
|                                                     | 
|Current assets                                       |  | $ | 201,405   | 
|Property, plant and equipment                        |  |   | 406,934   | 
|Intangible assets                                    |  |   | 253,005   | 
|Goodwill                                             |  |   | 535,844   | 
|Other                                                |  |   | 23,933    | 
|                                                     |  |   |          
|Total assets acquired                                |  |   | 1,421,121 | 
|Current liabilities                                  |  |   | 83,159    | 
|Debt, less current portion                           |  |   | 819,790   | 
|Pension, postretirement and post employment benefits |  |   | 54,027    | 
|Deferred income taxes                                |  |   | 121,296   | 
|Other                                                |  |   | 22,464    | 
|                                                     |  |   |          
|Total liabilities assumed                            |  |   | 1,100,736 | 
|                                                     |  |   |          
|Net assets acquired                                  |  | $ | 320,385   | 
|                                                     |  |   |          
|                                                    

Applicability of FASB Statement
No. 2 to Business Combinations Accounted for by the
Purchase Method.






|                                      |  |            |         |  |            |   |         | 
|------------------------------------- |  | ---------- | ------- |  | ---------- | - | ------- | 
|                                      | 
|                                      |  | Year ended |        
|                                      |  |            |        
|                                      |  | January 1, |         |  | January 3, |  
|(in thousands, except per share data) |  | 2005       |         |  | 2004       |  
|                                      | 
|Net sales                             |  | $          | 490,362 |  |            | $ | 441,076 | 
|Net income                            |  | $          | 17,034  |  |            | $ | 10,081  | 
|                                     

38



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                    
|-- | -------------------
|2. | Accounting Policies

Basis of Presentation and Use of Estimates






Accounting Period




Revenue Recognition




Cash Equivalents




39



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                
|-- | -------------------------------
|2. | Accounting Policies (continued)

Inventories




|                |  |                 |        |  |                 |   |        | 
|--------------- |  | --------------- | ------ |  | --------------- | - | ------ | 
|                | 
|(in thousands)  |  | January 1, 2005 |        |  | January 3, 2004 |  
|                | 
|Raw materials   |  | $               | 22,243 |  |                 | $ | 20,179 | 
|Work-in-process |  |                 | 6,395  |  |                 |   | 9,230  | 
|Finished goods  |  |                 | 33,151 |  |                 |   | 31,532 | 
|                |  |                
|Total           |  | $               | 61,789 |  |                 | $ | 60,941 | 
|                |  |                
|               

Property, Plant and Equipment




Intangibles and Loan Acquisition Costs




Impairment of Long-Lived Assets




Goodwill


Goodwill and
Other Intangible Assets


Research and Development




40



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                
|-- | -------------------------------
|2. | Accounting Policies (continued)

Income Taxes


Accounting for Income Taxes


Foreign Currency Translation


Foreign Currency Translation






Accounts Receivable and Concentrations of Credit Risk


Disclosure of Information about Financial
Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentration of Credit Risk.


41



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                
|-- | -------------------------------
|2. | Accounting Policies (continued)

Derivatives


Accounting for Derivatives
and Hedging Activity








Fair Value of Financial Instruments




Restructuring Charges


Accounting for Costs
Associated with Exit or Disposal Activities Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring) Employers Accounting for Postemployment Benefits


42



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                
|-- | -------------------------------
|2. | Accounting Policies (continued)

Other Accounting Pronouncements


Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions
(FAS 153).


Inventory Costs (FAS 151). Inventory Pricing,




|   |             
|-- | ------------
|3. | Acquisitions







43



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                         
|-- | ------------------------
|3. | Acquisitions (continued)



|               |  |                   |         | 
|-------------- |  | ----------------- | ------- | 
|               | 
|(in thousands) |  | December 28, 2002 |        
|               | 
|Net sales      |  | $                 | 362,832 | 
|Net income     |  |                   | 16,970  | 
|              



|   |                              
|-- | -----------------------------
|4. | Property, Plant and Equipment



|                              |                                 |                 |         |         |                 |   |         |         | 
|----------------------------- | ------------------------------- | --------------- | ------- | ------- | --------------- | - | ------- | ------- | 
|                              |                                
|(in thousands)                |                                 | January 1, 2005 |         |         | January 3, 2004 |  
|                              |                                
|Cost:                         |                                 |                 |         |         |                 |   |         |        
|                              | Land                            |                 | $       | 16,116  |                 |   | $       | 15,005  | 
|                              | Buildings and land improvements |                 |         | 116,041 |                 |   |         | 121,194 | 
|                              | Machinery and equipment         |                 |         | 305,529 |                 |   |         | 449,408 | 
|                              | Construction in progress        |                 |         | 28,545  |                 |   |         | 29,764  | 
|                              |                                 |                
|                              |                                 |                 | 466,231 |         |                 |   | 615,371 |        
|Less accumulated depreciation |                                 |                 | 24,881  |         |                 |   | 134,769 |        
|                              |                                 |                
|                              |                                 | $               | 441,350 |         |                 | $ | 480,602 |        
|                              |                                 |                
|                             



|   |                                              
|-- | ---------------------------------------------
|5. | Intangibles, Loan Acquisition and Other Costs



|                                                     |                        |                 |  |            |                 |   |         |              |  |   |          |       |  |              |        |        |  |   |        |       | 
|---------------------------------------------------- | ---------------------- | --------------- |  | ---------- | --------------- | - | ------- | ------------ |  | - | -------- | ----- |  | ------------ | ------ | ------ |  | - | ------ | ----- | 
|                                                     |                       
|                                                     |                        | January 1, 2005 |  |            | January 3, 2004 |  
|                                                     |                        |                 |  |            |                 |  
|                                                     |                        | Gross           |  |            |                 |   | Gross   |              |  |  
|                                                     |                        | Average         |  |            | Carrying        |   |         | Accumulated  |  |   | Carrying |       |  | Accumulated  |       
|(in thousands)                                       |                        | Life            |  |            | Amount          |   |         | Amortization |  |   | Amount   |       |  | Amortization |       
|                                                     |                       
|Intangible and other assets subject to amortization: |                        |                 |  |            |                 |   |         |              |  |   |          |       |  |              |        |        |  |   |        |      
|                                                     | Supply agreement       |                 |  | 5          |                 |   | $       | 9,070        |  |   | $        | 1,267 |  |              | $      | 19,818 |  |   | $      | 8,067 | 
|                                                     | Customer relationships |                 |  | 10-20      |                 |   |         | 180,467      |  |   |          | 7,395 |  |              |        |       |  |   |        |      | 
|                                                     | Technology and patents |                 |  | 8          |                 |   |         | 36,695       |  |   |          | 3,062 |  |              |        |       |  |   |        |      | 
|                                                     | Loan acquisition costs |                 |  | 7.5-8      |                 |   |         | 20,935       |  |   |          | 1,934 |  |              |        | 13,858 |  |   |        | 7,874 | 
|Intangible assets not subject to amortization:       |                        |                 |  |            |                 |   |         |              |  |   |          |       |  |              |        |        |  |   |        |      
|                                                     | Trade names            |                 |  | Indefinite |                 |   |         | 10,747       |  |   |          |      |  |              |        |       |  |   |        |      | 
|                                                     |                        |                 |  |            |                
|                                                     |                        |                 |  |            |                 | $ | 257,914 |              |  | $ | 13,658   |       |  | $            | 33,676 |        |  | $ | 15,941 |      
|                                                     |                        |                 |  |            |                
|                                                    

44



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                                          
|-- | ---------------------------------------------------------
|5. | Intangibles, Loan Acquisition and Other Costs (continued)



|               |  |   |        | 
|-------------- |  | - | ------ | 
|               | 
|(in thousands) |  |  
|               | 
|2005           |  | $ | 20,483 | 
|2006           |  |   | 20,374 | 
|2007           |  |   | 20,352 | 
|2008           |  |   | 20,344 | 
|2009           |  |   | 18,564 | 
|              



|   |         
|-- | --------
|6. | Goodwill



|                                                                  |  |         |         |   |             |   |         |       |  |   |         |  
|----------------------------------------------------------------- |  | ------- | ------- | - | ----------- | - | ------- | ----- |  | - | ------- | -
|                                                                  | 
|                                                                  |  | Energy  |         |   | Separations |   |         |      
|(in thousands)                                                    |  | Storage |         |   | Media       |   |         | Total | 
|                                                                  | 
|Balance as of December 28, 2002                                   |  | $       | 31,622  |   |             | $ |        |       |  | $ | 31,622  |  
|Foreign currency translation adjustment                           |  |         | 578     |   |             |   |        |       |  |   | 578     |  
|                                                                  |  |        
|Balance as of January 3, 2004                                     |  |         | 32,200  |   |             |   |        |       |  |   | 32,200  |  
|Foreign currency translation adjustment                           |  |         | (748    | ) |             |   |        |       |  |   | (748    | )
|                                                                  |  |        
|Balance as of May 2, 2004                                         |  |         | 31,452  |   |             |   |        |       |  |   | 31,452  |  
|Additional goodwill recognized in accounting for the Transactions |  |         | 340,343 |   |             |   | 164,049 |       |  |   | 504,392 |  
|                                                                  |  |        
|Balance as of January 1, 2005                                     |  | $       | 371,795 |   |             | $ | 164,049 |       |  | $ | 535,844 |  
|                                                                  |  |        
|                                                                 



|   |                    
|-- | -------------------
|7. | Accrued Liabilities



|                                          |  |                 |        |  |                 |   |        | 
|----------------------------------------- |  | --------------- | ------ |  | --------------- | - | ------ | 
|                                          | 
|(in thousands)                            |  | January 1, 2005 |        |  | January 3, 2004 |  
|                                          | 
|Business restructuring                    |  | $               | 14,502 |  |                 | $ |       | 
|Salaries, wages and other fringe benefits |  |                 | 14,161 |  |                 |   | 16,154 | 
|Accrued interest                          |  |                 | 4,994  |  |                 |   | 298    | 
|Current portion of environmental reserve  |  |                 | 4,014  |  |                 |   | 4,873  | 
|Taxes other than income                   |  |                 | 2,378  |  |                 |   | 3,465  | 
|Current portion of social plan            |  |                 | 60     |  |                 |   | 1,099  | 
|Fair value of financial instrument        |  |                 |       |  |                 |   | 5,351  | 
|Other                                     |  |                 | 10,355 |  |                 |   | 9,404  | 
|                                          |  |                
|                                          |  | $               | 50,464 |  |                 | $ | 40,644 | 
|                                          |  |                
|                                         

45



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |     
|-- | ----
|8. | Debt



|                          |                                                |                 |         |         |                 |   |         |         | 
|------------------------- | ---------------------------------------------- | --------------- | ------- | ------- | --------------- | - | ------- | ------- | 
|                          |                                               
|(in thousands)            |                                                | January 1, 2005 |         |         | January 3, 2004 |  
|                          |                                               
|Senior credit facilities: |                                                |                 |         |         |                 |   |         |        
|                          | Revolving credit facility                      |                 | $       |        |                 |   | $       | 10,000  | 
|                          | Term loan facilities                           |                 |         | 416,941 |                 |   |         | 266,645 | 
|                          | 8.75% senior subordinated notes                |                 |         | 429,315 |                 |   |         |        | 
|                          | Other                                          |                 |         | 5,943   |                 |   |         | 7,483   | 
|                          |                                                |                
|                          |                                                |                 | 852,199 |         |                 |   | 284,128 |        
|                          | Less optional prepayment made on March 1, 2005 |                 |         | 25,000  |                 |   |         |        | 
|                          | Less current maturities                        |                 |         | 2,260   |                 |   |         | 33,609  | 
|                          |                                                |                
|Long-term debt            |                                                | $               | 824,939 |         |                 | $ | 250,519 |        
|                          |                                                |                
|                         








46



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                 
|-- | ----------------
|8. | Debt (continued)




:


|               |  |   |         | 
|-------------- |  | - | ------- | 
|               | 
|(in thousands) |  |  
|               | 
|2005           |  | $ | 27,260  | 
|2006           |  |   | 4,766   | 
|2007           |  |   | 5,117   | 
|2008           |  |   | 4,740   | 
|2009           |  |   | 4,398   | 
|Thereafter     |  |   | 805,918 | 
|               |  |   |        
|               |  | $ | 852,199 | 
|               |  |   |        
|              





|   |                              
|-- | -----------------------------
|9. | Commitments and Contingencies

Leases






47



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|   |                                          
|-- | -----------------------------------------
|9. | Commitments and Contingencies (continued)



|                                        |  |                |       |  |                  |   |       | 
|--------------------------------------- |  | -------------- | ----- |  | ---------------- | - | ----- | 
|                                        | 
|(in thousands)                          |  | Capital Leases |       |  | Operating Leases |  
|                                        | 
|2005                                    |  | $              | 1,604 |  |                  | $ | 3,993 | 
|2006                                    |  |                | 1,604 |  |                  |   | 784   | 
|2007                                    |  |                | 1,604 |  |                  |   | 319   | 
|2008                                    |  |                | 1,604 |  |                  |   | 152   | 
|2009                                    |  |                | 1,604 |  |                  |   | 13    | 
|Thereafter                              |  |                | 1,739 |  |                  |   | 7     | 
|                                        |  |               
|                                        |  |                | 9,759 |  |                  | $ | 5,268 | 
|                                        |  |                |       |  |                  |  
|Less amounts representing interest      |  |                | 1,143 |  |                  |   |       | 
|                                        |  |                |       |  |                  |  
|Present value of minimum lease payments |  |                | 8,616 |  |                  |   |       | 
|Less current portion                    |  |                | 1,272 |  |                  |   |       | 
|                                        |  |                |       |  |                  |  
|                                        |  | $              | 7,344 |  |                  |   |       | 
|                                        |  |                |       |  |                  |  
|                                       

Raw Materials




Collective Bargaining Agreements




Other




48



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |             
|--- | ------------
|10. | Income Taxes





|                               |                                          |                 |          |          |                 |   |          |          |  
|------------------------------ | ---------------------------------------- | --------------- | -------- | -------- | --------------- | - | -------- | -------- | -
|                               |                                         
|(in thousands)                 |                                          | January 1, 2005 |          |          | January 3, 2004 |  
|                               |                                         
|Deferred tax assets:           |                                          |                 |          |          |                 |   |          |         
|                               | Pension and postretirement benefits      |                 | $        | 14,820   |                 |   | $        | 10,972   |  
|                               | Vacation pay                             |                 |          | 523      |                 |   |          | 556      |  
|                               | Unrealized loss on derivative instrument |                 |          |         |                 |   |          | 2,035    |  
|                               | Foreign tax credits                      |                 |          | 6,288    |                 |   |          |         |  
|                               | State tax credits                        |                 |          | 944      |                 |   |          |         |  
|                               | Net operating loss carryforwards         |                 |          | 2,701    |                 |   |          | 470      |  
|                               | Environmental reserve                    |                 |          | 2,404    |                 |   |          | 3,681    |  
|                               | Other                                    |                 |          | 5,701    |                 |   |          | 4,779    |  
|                               |                                          |                
|Total deferred tax assets      |                                          |                 | 33,381   |          |                 |   | 22,493   |         
|Valuation allowance            |                                          |                 | (1,989   | )        |                 |   | (484     | )       
|                               |                                          |                
|Net deferred tax assets        |                                          |                 | 31,392   |          |                 |   | 22,009   |         
|Deferred tax liabilities:      |                                          |                 |          |          |                 |   |          |         
|                               | Property, plant and equipment            |                 |          | (103,480 | )               |   |          | (113,181 | )
|                               | Intangibles                              |                 |          | (52,884  | )               |   |          |         |  
|                               | Other                                    |                 |          | (5,640   | )               |   |          | (6,647   | )
|                               |                                          |                
|Total deferred tax liabilities |                                          |                 | (162,004 | )        |                 |   | (119,828 | )       
|                               |                                          |                
|Net deferred taxes             |                                          | $               | (130,612 | )        |                 | $ | (97,819  | )       
|                               |                                          |                
|                              





|                                   |  |                 |          |   |                 |   |         |  
|---------------------------------- |  | --------------- | -------- | - | --------------- | - | ------- | -
|                                   | 
|(in thousands)                     |  | January 1, 2005 |          |   | January 3, 2004 |  
|                                   | 
|Current deferred tax asset         |  | $               | 7,954    |   |                 | $ | 298     |  
|Non-current deferred tax liability |  |                 | (138,566 | ) |                 |   | (98,117 | )
|                                   |  |                
|Net deferred taxes                 |  | $               | (130,612 | ) |                 | $ | (97,819 | )
|                                   |  |                
|                                  

49



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                         
|--- | ------------------------
|10. | Income Taxes (continued)



|                      |  |                 |         |   |                  |   |        |                 |  |   |                   |  |  |   |        | 
|--------------------- |  | --------------- | ------- | - | ---------------- | - | ------ | --------------- |  | - | ----------------- |  |  | - | ------ | 
|                      | 
|                      |  | Post-           |         |   |                 
|                      |  | Transactions    |         |   | Pre-Transactions |  
|                      |  |                 |         |   |                  |  
|                      |  | May 2, 2004     |         |   | January 4, 2004  |   |        |                
|                      |  | through         |         |   | through          |   |        | Year ended      |  |   | Year ended        | 
|(in thousands)        |  | January 1, 2005 |         |   | May 1, 2004      |   |        | January 3, 2004 |  |   | December 28, 2002 | 
|                      | 
|Pretax income (loss): |  |                 |         |   |                  |   |        |                 |  |   |                   |  |  |   |        | 
|United States         |  | $               | (21,959 | ) |                  | $ | 22,706 |                 |  | $ | 27,918            |  |  | $ | 6,004  | 
|Foreign               |  |                 | 375     |   |                  |   | 17,812 |                 |  |   | 36,176            |  |  |   | 22,230 | 
|                      |  |                
|                      |  | $               | (21,584 | ) |                  | $ | 40,518 |                 |  | $ | 64,094            |  |  | $ | 28,234 | 
|                      |  |                
|                     



|               |                               |                 |         |         |                  |   |        |                 |   |   |                   |        |   |   |        |        |  
|-------------- | ----------------------------- | --------------- | ------- | ------- | ---------------- | - | ------ | --------------- | - | - | ----------------- | ------ | - | - | ------ | ------ | -
|               |                              
|               |                               | Post-           |         |         |                 
|               |                               | Transactions    |         |         | Pre-Transactions |  
|               |                               |                 |         |         |                  |  
|               |                               | May 2, 2004     |         |         | January 4, 2004  |   |        |                
|               |                               | through         |         |         | through          |   |        | Year ended      |   |   | Year ended        |       
|(in thousands) |                               | January 1, 2005 |         |         | May 1, 2004      |   |        | January 3, 2004 |   |   | December 28, 2002 |       
|               |                              
|Current:       |                               |                 |         |         |                  |   |        |                 |   |   |                   |        |   |   |        |       
|               | U.S. taxes on domestic income |                 | $       | (11,459 | )                |   | $      | 10,805          |   |   | $                 | 4,854  |   |   | $      | 1,792  |  
|               | Foreign taxes                 |                 |         | (2,448  | )                |   |        | 4,960           |   |   |                   | 15,769 |   |   |        | 8,863  |  
|               |                               |                
|Total current  |                               |                 | (13,907 | )       |                  |   | 15,765 |                 |   |   | 20,623            |        |   |   | 10,655 |       
|Deferred:      |                               |                 |         |         |                  |   |        |                 |   |   |                   |        |   |   |        |       
|               | U.S. taxes on domestic income |                 |         | 5,062   |                  |   |        | (3,145          | ) |   |                   | 2,777  |   |   |        | 2,963  |  
|               | Foreign taxes                 |                 |         | 2,131   |                  |   |        | 1,065           |   |   |                   | (4,619 | ) |   |        | (2,230 | )
|               |                               |                
|Total deferred |                               |                 | 7,193   |         |                  | $ | (2,080 | )               |   |   | (1,842            | )      |   |   | 733    |       
|               |                               |                
|               |                               | $               | (6,714  | )       |                  | $ | 13,685 |                 |   | $ | 18,781            |        |   | $ | 11,388 |       
|               |                               |                
|              



50



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                         
|--- | ------------------------
|10. | Income Taxes (continued)



|                                                     |  |                 |        |   |                  |   |        |                 |  |   |                   |   |  |   |        |  
|---------------------------------------------------- |  | --------------- | ------ | - | ---------------- | - | ------ | --------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                     | 
|                                                     |  | Post-           |        |   |                 
|                                                     |  | Transactions    |        |   | Pre-Transactions |  
|                                                     |  |                 |        |   |                  |  
|                                                     |  | May 2, 2004     |        |   | January 4, 2004  |   |        |                
|                                                     |  | through         |        |   | through          |   |        | Year ended      |  |   | Year ended        |  
|(in thousands)                                       |  | January 1, 2005 |        |   | May 1, 2004      |   |        | January 3, 2004 |  |   | December 28, 2002 |  
|                                                     | 
|Computed income taxes at the expected statutory rate |  | $               | (7,554 | ) |                  | $ | 14,181 |                 |  | $ | 22,433            |   |  | $ | 9,882  |  
|In process research and development                  |  |                 | 1,953  |   |                  |   |       |                 |  |   |                  |   |  |   |       |  
|Extraterritorial income exclusion                    |  |                 | (1,256 | ) |                  |   | (688   | )               |  |   | (1,607            | ) |  |   |       |  
|State and local taxes                                |  |                 | (790   | ) |                  |   | 681    |                 |  |   | 756               |   |  |   | (67    | )
|Foreign taxes                                        |  |                 | 584    |   |                  |   | (1,306 | )               |  |   | (1,030            | ) |  |   | (841   | )
|Foreign net operating losses                         |  |                 |       |   |                  |   |       |                 |  |   | (586              | ) |  |   |       |  
|Valuation allowance                                  |  |                 | 512    |   |                  |   |       |                 |  |   |                  |   |  |   | 2,487  |  
|Other                                                |  |                 | (163   | ) |                  |   | 817    |                 |  |   | (1,185            | ) |  |   | (73    | )
|                                                     |  |                
|Income tax provision (benefit)                       |  | $               | (6,714 | ) |                  | $ | 13,685 |                 |  | $ | 18,781            |   |  | $ | 11,388 |  
|                                                     |  |                
|                                                    









51



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                       
|--- | ----------------------
|11. | Employee Benefit Plans

Pension and Other Postretirement Benefits




|                                               |  |                   |         |   |                  |   |         |                 |  |   |         |  
|---------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | --------------- |  | - | ------- | -
|                                               | 
|                                               |  | Pension Plans     |        
|                                               |  |                   |        
|                                               |  | Post-Transactions |         |   | Pre-Transactions |  
|                                               |  |                   |         |   |                  |  
|(in thousands)                                 |  | January 1, 2005   |         |   | May 1, 2004      |   |         | January 3, 2004 | 
|                                               | 
|Change in Benefit Obligation                   |  |                   |         |   |                  |   |         |                 |  |   |         |  
|Benefit obligation at beginning of year        |  | $                 | (56,786 | ) |                  | $ | (58,022 | )               |  | $ | (43,366 | )
|Service cost                                   |  |                   | (1,708  | ) |                  |   | (604    | )               |  |   | (1,824  | )
|Interest cost                                  |  |                   | (2,144  | ) |                  |   | (891    | )               |  |   | (2,607  | )
|Plan amendments                                |  |                   |        |   |                  |   |        |                 |  |   | (370    | )
|Actuarial gain/(loss)                          |  |                   | (1,085  | ) |                  |   | (516    | )               |  |   | (1,845  | )
|Benefit payments                               |  |                   | 915     |   |                  |   | 453     |                 |  |   | 1,128   |  
|Curtailments                                   |  |                   |        |   |                  |   |        |                 |  |   | 154     |  
|Foreign currency translation                   |  |                   | (7,567  | ) |                  |   | 2,794   |                 |  |   | (9,292  | )
|                                               |  |                  
|Projected benefit obligation at end of year    |  |                   | (68,375 | ) |                  |   | (56,786 | )               |  |   | (58,022 | )
|Change in Plan Assets                          |  |                   |         |   |                  |   |         |                 |  |   |         |  
|Fair value of plan assets at beginning of year |  |                   | 17,672  |   |                  |   | 17,723  |                 |  |   | 13,771  |  
|Actual return on plan assets                   |  |                   | 1,175   |   |                  |   | 583     |                 |  |   | 701     |  
|Company contributions                          |  |                   | 844     |   |                  |   | 217     |                 |  |   | 815     |  
|Benefit payments                               |  |                   | (289    | ) |                  |   | (143    | )               |  |   | (302    | )
|Foreign currency translation                   |  |                   | 2,246   |   |                  |   | (708    | )               |  |   | 2,738   |  
|                                               |  |                  
|Fair value of plan assets at end of year       |  |                   | 21,648  |   |                  |   | 17,672  |                 |  |   | 17,723  |  
|Funded Status                                  |  |                   |         |   |                  |   |         |                 |  |   |         |  
|Funded status at end of year                   |  |                   | (46,727 | ) |                  |   | (39,114 | )               |  |   | (40,299 | )
|Unrecognized net actuarial loss                |  |                   |        |   |                  |   | 223     |                 |  |   | 214     |  
|Foreign currency translation                   |  |                   |        |   |                  |   | (135    | )               |  |   | 494     |  
|Unrecognized prior service cost                |  |                   |        |   |                  |   | (707    | )               |  |   | (499    | )
|Unrecognized net gain                          |  |                   |        |   |                  |   | 5,030   |                 |  |   | 4,308   |  
|                                               |  |                  
|Net amount recognized                          |  | $                 | (46,727 | ) |                  | $ | (34,703 | )               |  | $ | (35,782 | )
|                                               |  |                  
|                                              

52



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                   
|--- | ----------------------------------
|11. | Employee Benefit Plans (continued)

|                                            |  |                               |        |   |                  |   |        |                 |  |   |        |  
|------------------------------------------- |  | ----------------------------- | ------ | - | ---------------- | - | ------ | --------------- |  | - | ------ | -
|                                            | 
|                                            |  | Other Postretirement Benefits |       
|                                            |  |                               |       
|                                            |  | Post-Transactions             |        |   | Pre-Transactions |  
|                                            |  |                               |        |   |                  |  
|(in thousands)                              |  | January 1, 2005               |        |   | May 1, 2004      |   |        | January 3, 2004 | 
|                                            | 
|Change in Benefit Obligation                |  |                               |        |   |                  |   |        |                 |  |   |        |  
|Benefit obligation at beginning of year     |  | $                             | (1,843 | ) |                  | $ | (1,851 | )               |  | $ | (1,428 | )
|Service cost                                |  |                               | (19    | ) |                  |   | (9     | )               |  |   |       |  
|Interest cost                               |  |                               | (77    | ) |                  |   | (38    | )               |  |   | (122   | )
|Plan amendments                             |  |                               |       |   |                  |   |       |                 |  |   | (657   | )
|Participant contributions                   |  |                               | (28    | ) |                  |   | (14    | )               |  |   | (28    | )
|Actuarial gain/(loss)                       |  |                               | (236   | ) |                  |   | 12     |                 |  |   | 259    |  
|Benefit payments                            |  |                               | 115    |   |                  |   | 57     |                 |  |   | 125    |  
|Other                                       |  |                               | 163    |   |                  |   |       |                 |  |   |       |  
|                                            |  |                              
|Projected benefit obligation at end of year |  |                               | (1,925 | ) |                  |   | (1,843 | )               |  |   | (1,851 | )
|Change in Plan Assets                       |  |                               |        |   |                  |   |        |                 |  |   |        |  
|Company contributions                       |  |                               | 87     |   |                  |   | 43     |                 |  |   | 97     |  
|Participant contributions                   |  |                               | 28     |   |                  |   | 14     |                 |  |   | 28     |  
|Benefit payments                            |  |                               | (115   | ) |                  |   | (57    | )               |  |   | (125   | )
|                                            |  |                              
|Fair value of plan assets at end of period  |  |                               |       |   |                  |   |       |                 |  |   |       |  
|Funded Status                               |  |                               |        |   |                  |   |        |                 |  |   |        |  
|Funded status at end of period              |  |                               | (1,925 | ) |                  |   | (1,843 | )               |  |   | (1,851 | )
|Unrecognized prior service cost             |  |                               |       |   |                  |   | 332    |                 |  |   | 286    |  
|Unrecognized net loss                       |  |                               |       |   |                  |   | 236    |                 |  |   | 138    |  
|                                            |  |                              
|Net amount recognized                       |  | $                             | (1,925 | ) |                  | $ | (1,275 | )               |  | $ | (1,427 | )
|                                            |  |                              
|                                           



|                                       |  |                 |         |   |                               |   |         |                 |  |   |                 |   |  |   |        |  
|-------------------------------------- |  | --------------- | ------- | - | ----------------------------- | - | ------- | --------------- |  | - | --------------- | - |  | - | ------ | -
|                                       | 
|                                       |  | Pension Plans   |         |   | Other Postretirement Benefits |  
|                                       |  |                 |         |   |                               |  
|(in thousands)                         |  | January 1, 2005 |         |   | January 3, 2004               |   |         | January 1, 2005 |  |   | January 3, 2004 |  
|                                       | 
|Accrued benefit cost                   |  | $               | (46,727 | ) |                               | $ | (35,218 | )               |  | $ | (1,925          | ) |  | $ | (1,427 | )
|Accumulated other comprehensive income |  |                 |        |   |                               |   | (564    | )               |  |   |                |   |  |   |       |  
|                                       |  |                
|Net amount recognized                  |  | $               | (46,727 | ) |                               | $ | (35,782 | )               |  | $ | (1,925          | ) |  | $ | (1,427 | )
|                                       |  |                
|                                      





53



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                   
|--- | ----------------------------------
|11. | Employee Benefit Plans (continued)



|                                     |  |                   |       |   |                  |   |       |                 |  |            |              |   |  |   |       |  
|------------------------------------ |  | ----------------- | ----- | - | ---------------- | - | ----- | --------------- |  | ---------- | ------------ | - |  | - | ----- | -
|                                     | 
|                                     |  | Pension Plans     |      
|                                     |  |                   |      
|                                     |  | Post-Transactions |       |   | Pre-Transactions |  
|                                     |  |                   |       |   |                  |  
|                                     |  | May 2, 2004       |       |   | January 4, 2004  |   |       |                 |  | Year ended |             
|                                     |  | through           |       |   | through          |   |       | Year ended      |  |            | December 28, |  
|(in thousands)                       |  | January 1, 2005   |       |   | May 1, 2004      |   |       | January 3, 2004 |  |            | 2002         |  
|                                     | 
|Service cost                         |  | $                 | 1,708 |   |                  | $ | 604   |                 |  | $          | 1,824        |   |  | $ | 1,400 |  
|Interest cost                        |  |                   | 2,144 |   |                  |   | 891   |                 |  |            | 2,607        |   |  |   | 2,113 |  
|Expected return on plan assets       |  |                   | (589  | ) |                  |   | (261  | )               |  |            | (866         | ) |  |   | (824  | )
|Amortization of prior service cost   |  |                   |      |   |                  |   | 57    |                 |  |            | 178          |   |  |   | 109   |  
|Recognized net actuarial loss (gain) |  |                   | 8     |   |                  |   | 48    |                 |  |            | 273          |   |  |   | (64   | )
|                                     |  |                  
|Net periodic benefit cost            |  | $                 | 3,271 |   |                  | $ | 1,339 |                 |  | $          | 4,016        |   |  | $ | 2,734 |  
|                                     |  |                  
|                                    

|                                     |  |                               |    |  |                  |   |     |                 |  |            |              |   |  |   |     |  
|------------------------------------ |  | ----------------------------- | -- |  | ---------------- | - | --- | --------------- |  | ---------- | ------------ | - |  | - | --- | -
|                                     | 
|                                     |  | Other Postretirement Benefits |   
|                                     |  |                               |   
|                                     |  | Post-Transactions             |    |  | Pre-Transactions |  
|                                     |  |                               |    |  |                  |  
|                                     |  | May 2, 2004                   |    |  | January 4, 2004  |   |     |                 |  | Year ended |             
|                                     |  | through                       |    |  | through          |   |     | Year ended      |  |            | December 28, |  
|(in thousands)                       |  | January 1, 2005               |    |  | May 1, 2004      |   |     | January 3, 2004 |  |            | 2002         |  
|                                     | 
|Service cost                         |  | $                             | 19 |  |                  | $ | 9   |                 |  | $          |             |   |  | $ |    |  
|Interest cost                        |  |                               | 77 |  |                  |   | 38  |                 |  |            | 122          |   |  |   | 104 |  
|Amortization of prior service cost   |  |                               |   |  |                  |   | (15 | )               |  |            | (6           | ) |  |   | (80 | )
|Recognized net actuarial loss (gain) |  |                               |   |  |                  |   | 1   |                 |  |            | (261         | ) |  |   |    |  
|                                     |  |                              
|Net periodic benefit cost (income)   |  | $                             | 96 |  |                  | $ | 33  |                 |  | $          | (145         | ) |  | $ | 24  |  
|                                     |  |                              
|                                    



|                                                   |  |                      |               |          |                 |  |               |            |  |  |       |  |  |  |       | 
|-------------------------------------------------- |  | -------------------- | ------------- | -------- | --------------- |  | ------------- | ---------- |  |  | ----- |  |  |  | ----- | 
|                                                   | 
|                                                   |  | Other Postretirement |              
|                                                   |  |                      |               | Benefits |                
|                                                   |  | Pension Plans        |               |          |                 | 
|                                                   |  |                      |               |          | January 1,      |  |               | January 3, | 
|Weighted Average Assumptions as of the End of Year |  | January 1, 2005      |               |          | January 3, 2004 |  |               | 2005       |  |  | 2004  | 
|                                                   | 
|Discount rate                                      |  |                      | 2.19% - 6.07% |          |                 |  | 2.19% - 6.50% |            |  |  | 6.50% |  |  |  | 6.50% | 
|Expected return on plan assets                     |  |                      | 6.00% - 8.00% |          |                 |  | 6.00% - 8.00% |            |  |  | N/A   |  |  |  | N/A   | 
|Rate of compensation increase                      |  |                      | 2.00% - 4.00% |          |                 |  | 2.00% - 4.00% |            |  |  | N/A   |  |  |  | N/A   | 
|Increase in pension payments                       |  |                      | 2.00%         |          |                 |  | 2.00%         |            |  |  | N/A   |  |  |  | N/A   | 
|Weighted average discount rate                     |  |                      | 5.07%         |          |                 |  | 4.92%         |            |  |  | N/A   |  |  |  | N/A   | 
|                                                  



54



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                   
|--- | ----------------------------------
|11. | Employee Benefit Plans (continued)







|                                                                                                                    |  |          |   |  |          |   |    |  
|------------------------------------------------------------------------------------------------------------------- |  | -------- | - |  | -------- | - | -- | -
|                                                                                                                    | 
|                                                                                                                    |  | 1%       |   |  | 1%       |  
|(in thousands)                                                                                                      |  | Increase |   |  | Decrease |  
|                                                                                                                    | 
|Effect on total of service and interest cost components of net
    periodic postretirement health care benefit cost |  | $        | 1 |  |          | $ | (1 | )
|Effect on the health care component of the accumulated
    postretirement benefit obligation                        |  | $        | 8 |  |          | $ | (8 | )
|                                                                                                                   



|               |  |                |        |  |          |   |     | 
|-------------- |  | -------------- | ------ |  | -------- | - | --- | 
|               | 
|               |  | Other          |       
|               |  | Postretirement |       
|(in thousands) |  | Pension Plans  |        |  | Benefits |  
|               | 
|2005           |  | $              | 2,544  |  |          | $ | 192 | 
|2006           |  |                | 2,788  |  |          |   | 207 | 
|2007           |  |                | 3,158  |  |          |   | 152 | 
|2008           |  |                | 3,377  |  |          |   | 119 | 
|2009           |  |                | 3,370  |  |          |   | 95  | 
|2010-2014      |  |                | 22,931 |  |          |   | 512 | 
|              





Post Employment Benefits


Employers
Accounting for Post Employment Benefits


55



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                    
|--- | -------------------
|12. | Segment Information







|                                      |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |         | 
|------------------------------------- | ---------------------------------------------------- | --------------- | ------- | ------- | ---------------- | - | ------- | --------------- | - | ---------- | ------------ | ------- |  | - | ------- | ------- | 
|                                      |                                                     
|                                      |                                                      | Post-           |         |         |                 
|                                      |                                                      | Transactions    |         |         | Pre-Transactions |  
|                                      |                                                      |                 |         |         |                  |  
|                                      |                                                      | May 2, 2004     |         |         | January 4, 2004  |   |         |                 |   | Year ended |             
|                                      |                                                      | through         |         |         | through          |   |         | Year ended      |   |            | December 28, |        
|(in thousands)                        |                                                      | January 1, 2005 |         |         | May 1, 2004      |   |         | January 3, 2004 |   |            | 2002         |        
|                                      |                                                     
|Net sales to external customers:      |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |        
|                                      | Energy storage                                       |                 | $       | 213,411 |                  |   | $       | 119,436         |   |            | $            | 295,256 |  |   | $       | 235,776 | 
|                                      | Separations media                                    |                 |         | 97,678  |                  |   |         | 59,837          |   |            |              | 145,820 |  |   |         | 109,656 | 
|                                      |                                                      |                
|Total net sales to external customers |                                                      | $               | 311,089 |         |                  | $ | 179,273 |                 |   | $          | 441,076      |         |  | $ | 345,432 |        
|                                      |                                                      |                
|Operating income:                     |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |        
|                                      | Energy storage                                       |                 | $       | 42,148  |                  |   | $       | 35,146          |   |            | $            | 64,490  |  |   | $       | 37,967  | 
|                                      | Separations media                                    |                 |         | 15,794  |                  |   |         | 10,580          |   |            |              | 21,271  |  |   |         | 15,216  | 
|                                      |                                                      |                
|Segment operating income              |                                                      |                 | 57,942  |         |                  |   | 45,726  |                 |   |            | 85,761       |         |  |   | 53,183  |        
|Business restructuring                |                                                      |                 | (15,687 | )       |                  |   |        |                 |   |            |             |         |  |   |        |        
|In-process research and development   |                                                      |                 | (5,250  | )       |                  |   |        |                 |   |            |             |         |  |   |        |        
|Inventory purchase accounting         |                                                      |                 | (19,007 | )       |                  |   |        |                 |   |            |             |         |  |   |        |        
|                                      |                                                      |                
|Total operating income                |                                                      |                 | 17,998  |         |                  |   | 45,726  |                 |   |            | 85,761       |         |  |   | 53,183  |        
|Reconciling items:                    |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |        
|                                      | Interest expense                                     |                 |         | 37,831  |                  |   |         | 6,048           |   |            |              | 21,521  |  |   |         | 20,862  | 
|                                      | Other                                                |                 |         | 1,751   |                  |   |         | (840            | ) |            |              | 146     |  |   |         | 4,087   | 
|                                      |                                                      |                
|                                      | Total consolidated income (loss) before income taxes |                 | $       | (21,584 | )                |   | $       | 40,518          |   |            | $            | 64,094  |  |   | $       | 28,234  | 
|                                      |                                                      |                
|Depreciation and amortization:        |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |        
|                                      | Energy storage                                       |                 | $       | 19,223  |                  |   | $       | 7,208           |   |            | $            | 18,616  |  |   | $       | 16,869  | 
|                                      | Separations media                                    |                 |         | 14,514  |                  |   |         | 8,009           |   |            |              | 20,077  |  |   |         | 13,898  | 
|                                      |                                                      |                
|Total depreciation and amortization   |                                                      | $               | 33,737  |         |                  | $ | 15,217  |                 |   | $          | 38,693       |         |  | $ | 30,767  |        
|                                      |                                                      |                
|Capital expenditures:                 |                                                      |                 |         |         |                  |   |         |                 |   |            |              |         |  |   |         |        
|                                      | Energy storage                                       |                 | $       | 6,255   |                  |   | $       | 3,289           |   |            | $            | 14,434  |  |   | $       | 11,506  | 
|                                      | Separations media                                    |                 |         | 3,627   |                  |   |         | 2,208           |   |            |              | 19,363  |  |   |         | 17,279  | 
|                                      |                                                      |                
|Total capital expenditures            |                                                      | $               | 9,882   |         |                  | $ | 5,497   |                 |   | $          | 33,797       |         |  | $ | 28,785  |        
|                                      |                                                      |                
|                                     

56



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                
|--- | -------------------------------
|12. | Segment Information (continued)

|               |                   |                 |           |         |                 |   |         |         | 
|-------------- | ----------------- | --------------- | --------- | ------- | --------------- | - | ------- | ------- | 
|               |                  
|(in thousands) |                   | January 1, 2005 |           |         | January 3, 2004 |  
|               |                  
|Assets:        |                   |                 |           |         |                 |   |         |        
|               | Energy storage    |                 | $         | 895,733 |                 |   | $       | 343,503 | 
|               | Separations media |                 |           | 536,576 |                 |   |         | 371,662 | 
|               | Corporate assets  |                 |           | 31,657  |                 |   |         | 15,477  | 
|               |                   |                
|Total assets   |                   | $               | 1,463,966 |         |                 | $ | 730,642 |        
|               |                   |                
|              



|                                     |               |                 |         |         |                  |   |         |                 |  |            |              |         |  |   |         |         | 
|------------------------------------ | ------------- | --------------- | ------- | ------- | ---------------- | - | ------- | --------------- |  | ---------- | ------------ | ------- |  | - | ------- | ------- | 
|                                     |              
|                                     |               | Post-           |         |         |                 
|                                     |               | Transactions    |         |         | Pre-Transactions |  
|                                     |               |                 |         |         |                  |  
|                                     |               | May 2, 2004     |         |         | January 4, 2004  |   |         |                 |  | Year ended |             
|                                     |               | through         |         |         | through          |   |         | Year ended      |  |            | December 28, |        
|(in thousands)                       |               | January 1, 2005 |         |         | May 1, 2004      |   |         | January 3, 2004 |  |            | 2002         |        
|                                     |              
|Net sales to unaffiliated customers: |               |                 |         |         |                  |   |         |                 |  |            |              |         |  |   |         |        
|                                     | United States |                 | $       | 125,134 |                  |   | $       | 76,230          |  |            | $            | 181,655 |  |   | $       | 146,303 | 
|                                     | Germany       |                 |         | 94,465  |                  |   |         | 59,972          |  |            |              | 145,820 |  |   |         | 107,911 | 
|                                     | France        |                 |         | 40,734  |                  |   |         | 18,959          |  |            |              | 53,402  |  |   |         | 47,044  | 
|                                     | Italy         |                 |         | 24,664  |                  |   |         | 12,852          |  |            |              | 30,918  |  |   |         | 27,137  | 
|                                     | Other         |                 |         | 26,092  |                  |   |         | 11,260          |  |            |              | 29,281  |  |   |         | 17,037  | 
|                                     |               |                
|Total                                |               | $               | 311,089 |         |                  | $ | 179,273 |                 |  | $          | 441,076      |         |  | $ | 345,432 |        
|                                     |               |                
|                                    



|                   |               |                 |           |         |                 |   |         |         | 
|------------------ | ------------- | --------------- | --------- | ------- | --------------- | - | ------- | ------- | 
|                   |              
|(in thousands)     |               | January 1, 2005 |           |         | January 3, 2004 |  
|                   |              
|Long-lived assets: |               |                 |           |         |                 |   |         |        
|                   | United States |                 | $         | 893,149 |                 |   | $       | 146,295 | 
|                   | Germany       |                 |           | 234,192 |                 |   |         | 288,655 | 
|                   | France        |                 |           | 24,018  |                 |   |         | 20,211  | 
|                   | Italy         |                 |           | 34,901  |                 |   |         | 33,530  | 
|                   | Other         |                 |           | 35,190  |                 |   |         | 41,846  | 
|                   |               |                
|Total              |               | $               | 1,221,450 |         |                 | $ | 530,537 |        
|                   |               |                
|                  

57



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                           
|--- | --------------------------
|13. | Redeemable Preferred Stock



|                                         |  |                 |         |   |                  |   |        |                 |  |            |              |  |  |   |         |  
|---------------------------------------- |  | --------------- | ------- | - | ---------------- | - | ------ | --------------- |  | ---------- | ------------ |  |  | - | ------- | -
|                                         | 
|                                         |  | Post-           |         |   |                 
|                                         |  | Transactions    |         |   | Pre-Transactions |  
|                                         |  |                 |         |   |                  |  
|                                         |  | May 2, 2004     |         |   | January 4, 2004  |   |        |                 |  | Year ended |             
|                                         |  | through         |         |   | through          |   |        | Year ended      |  |            | December 28, | 
|(in thousands)                           |  | January 1, 2005 |         |   | May 1, 2004      |   |        | January 3, 2004 |  |            | 2002         | 
|                                         | 
|Balance at beginning of period           |  | $               | 16,645  |   |                  | $ | 16,221 |                 |  | $          | 14,961       |  |  | $ | 46,789  |  
|Redemption of redeemable preferred stock |  |                 | (16,645 | ) |                  |   |       |                 |  |            |             |  |  |   | (20,000 | )
|Dividends earned                         |  |                 |        |   |                  |   | 424    |                 |  |            | 1,260        |  |  |   | 1,735   |  
|Dividends paid                           |  |                 |        |   |                  |   |       |                 |  |            |             |  |  |   | (13,563 | )
|                                         |  |                
|Balance at end of period                 |  | $               |        |   |                  | $ | 16,645 |                 |  | $          | 16,221       |  |  | $ | 14,961  |  
|                                         |  |                
|                                        







|    |                                  
|--- | ---------------------------------
|14. | Other Comprehensive Income (Loss)





|    |                                            
|--- | -------------------------------------------
|15. | Quarterly Results of Operations (Unaudited)

|                                  |  |                  |         |               |                   |   |             |              |  |   |         |  |  |         |         |   |  |   |         |  
|--------------------------------- |  | ---------------- | ------- | ------------- | ----------------- | - | ----------- | ------------ |  | - | ------- |  |  | ------- | ------- | - |  | - | ------- | -
|                                  | 
|                                  |  | Pre-Transactions |         |               | Post-Transactions |  
|                                  |  |                  |         |               |                   |  
|                                  |  |                  |         | April 3, 2004 |                   |   | May 2, 2004 |              |  |  
|                                  |  | First            |         |               | through           |   |             | through      |  |   | Third   |  |  | Fourth  |        
|(in thousands)                    |  | Quarter          |         |               | May 1, 2004       |   |             | July 3, 2004 |  |   | Quarter |  |  | Quarter |        
|                                  | 
|Fiscal year ended January 1, 2005 |  |                  |         |               |                   |   |             |              |  |   |         |  |  |         |         |   |  |   |         |  
|Net sales                         |  | $                | 140,120 |               |                   | $ | 39,153      |              |  | $ | 88,729  |  |  | $       | 117,496 |   |  | $ | 104,864 |  
|Gross profit                      |  |                  | 53,859  |               |                   |   | 15,248      |              |  |   | 30,579  |  |  |         | 25,663  |   |  |   | 28,929  |  
|Net income (loss)                 |  |                  | 20,738  |               |                   |   | 6,095       |              |  |   | 2,641   |  |  |         | (12,203 | ) |  |   | (5,308  | )
|                                 



58



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                                        
|--- | -------------------------------------------------------
|15. | Quarterly Results of Operations (Unaudited) (continued)





|                                  |  |                  |         |  |         |   |         |         |  |   |         |  |  |   |         | 
|--------------------------------- |  | ---------------- | ------- |  | ------- | - | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                  | 
|                                  |  | Pre-Transactions |        
|                                  |  |                  |        
|                                  |  | First            |         |  | Second  |   |         | Third   |  |   | Fourth  | 
|(in thousands)                    |  | Quarter          |         |  | Quarter |   |         | Quarter |  |   | Quarter | 
|                                  | 
|Fiscal year ended January 3, 2004 |  |                  |         |  |         |   |         |         |  |   |         |  |  |   |         | 
|Net sales                         |  | $                | 102,502 |  |         | $ | 107,516 |         |  | $ | 108,996 |  |  | $ | 122,062 | 
|Gross profit                      |  |                  | 34,166  |  |         |   | 36,967  |         |  |   | 37,155  |  |  |   | 47,157  | 
|Net income                        |  |                  | 8,529   |  |         |   | 7,858   |         |  |   | 11,313  |  |  |   | 17,613  | 
|                                 





|    |                           
|--- | --------------------------
|16. | Related Party Transactions







59



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                      
|--- | ---------------------
|17. | Environmental Matters











|    |                       
|--- | ----------------------
|18. | Business Restructuring



60



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                   
|--- | ----------------------------------
|18. | Business Restructuring (continued)





|                            |  |               |        |  |            |   |      |          |  |   |             |   |  |            |       |  |  |   |        | 
|--------------------------- |  | ------------- | ------ |  | ---------- | - | ---- | -------- |  | - | ----------- | - |  | ---------- | ----- |  |  | - | ------ | 
|                            | 
|                            |  | Foreign       |        |  | Balance at |  
|                            |  | Restructuring |        |  | Non-Cash   |   |      | Cash     |  |   | Currency    |   |  | January 1, |      
|(in thousands)              |  | Charges       |        |  | Charges    |   |      | Payments |  |   | Translation |   |  | 2005       |      
|                            | 
|Severance and benefit costs |  | $             | 13,899 |  |            | $ |     |          |  | $ | (389        | ) |  | $          | 1,434 |  |  | $ | 14,944 | 
|Raw materials               |  |               | 1,788  |  |            |   | (651 | )        |  |   |            |   |  |            | 119   |  |  |   | 1,256  | 
|                            |  |              
|Balance at January 1, 2005  |  | $             | 15,687 |  |            | $ | (651 | )        |  | $ | (389        | ) |  | $          | 1,553 |  |  | $ | 16,200 | 
|                            |  |              
|                           





|    |                                   
|--- | ----------------------------------
|19. | Financial Statements of Guarantors





61



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating balance sheet


As of January 1, 2005


|                                                |  |              |         |  |              |   |         |         |  |                   |              |  |  |              |            |   |  |   |           | 
|----------------------------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | ------- |  | ----------------- | ------------ |  |  | ------------ | ---------- | - |  | - | --------- | 
|                                                | 
|                                                |  | Combined     |         |  |             
|                                                |  | Combined     |         |  | Non-         |   |         |         |  | Reclassifications |              |  | 
|                                                |  | Guarantor    |         |  | Guarantor    |   |         | The     |  |                   | and          |  |  |             
|(in thousands)                                  |  | Subsidiaries |         |  | Subsidiaries |   |         | Company |  |                   | Eliminations |  |  | Consolidated |           
|                                                | 
|Assets                                          |  |              |         |  |              |   |         |         |  |                   |              |  |  |              |            |   |  |   |           | 
|Cash and cash equivalents                       |  | $            | 2,263   |  |              | $ | 20,244  |         |  | $                 | 9,177        |  |  | $            |           |   |  | $ | 31,684    | 
|Accounts receivable, net                        |  |              | 37,237  |  |              |   | 69,059  |         |  |                   |             |  |  |              |           |   |  |   | 106,296   | 
|Inventories                                     |  |              | 19,265  |  |              |   | 42,524  |         |  |                   |             |  |  |              |           |   |  |   | 61,789    | 
|Other                                           |  |              | 1,561   |  |              |   | 9,985   |         |  |                   | 9,934        |  |  |              |           |   |  |   | 21,480    | 
|                                                |  |             
|Total current assets                            |  |              | 60,326  |  |              |   | 141,812 |         |  |                   | 19,111       |  |  |              |           |   |  |   | 221,249   | 
|Due from affiliates                             |  |              | 178,805 |  |              |   | 253,225 |         |  |                   | 300,797      |  |  |              | (732,827   | ) |  |   |          | 
|Investment in subsidiaries                      |  |              | 172,531 |  |              |   | 206,645 |         |  |                   | 247,400      |  |  |              | (626,576   | ) |  |   |          | 
|Property, plant and equipment, net              |  |              | 113,048 |  |              |   | 328,302 |         |  |                   |             |  |  |              |           |   |  |   | 441,350   | 
|Other                                           |  |              | 879     |  |              |   | 20,470  |         |  |                   | 780,018      |  |  |              |           |   |  |   | 801,367   | 
|                                                |  |             
|Total assets                                    |  | $            | 525,589 |  |              | $ | 950,454 |         |  | $                 | 1,347,326    |  |  | $            | (1,359,403 | ) |  | $ | 1,463,966 | 
|                                                |  |             
|                                               
|Liabilities and shareholders equity            |  |              |         |  |              |   |         |         |  |                   |              |  |  |              |            |   |  |   |           | 
|Accounts payable, accrued liabilities and other |  | $            | 8,857   |  |              | $ | 54,561  |         |  | $                 | 7,627        |  |  | $            |           |   |  | $ | 71,045    | 
|Current portion of debt                         |  |              | 97      |  |              |   | 2,163   |         |  |                   | 25,000       |  |  |              |           |   |  |   | 27,260    | 
|Current portion of capital lease obligation     |  |              | 1,272   |  |              |   |        |         |  |                   |             |  |  |              |           |   |  |   | 1,272     | 
|                                                |  |             
|Total current liabilities                       |  |              | 10,266  |  |              |   | 56,724  |         |  |                   | 32,627       |  |  |              |           |   |  |   | 99,577    | 
|Due to affiliates                               |  |              | 306,530 |  |              |   | 281,718 |         |  |                   | 144,579      |  |  |              | (732,827   | ) |  |   |          | 
|Debt, less current portion                      |  |              |        |  |              |   | 3,683   |         |  |                   | 821,256      |  |  |              |           |   |  |   | 824,939   | 
|Capital lease obligations, less current portion |  |              | 7,344   |  |              |   |        |         |  |                   |             |  |  |              |           |   |  |   | 7,344     | 
|Pension and postretirement benefits             |  |              | 2,231   |  |              |   | 46,421  |         |  |                   |             |  |  |              |           |   |  |   | 48,652    | 
|Post employment benefits                        |  |              |        |  |              |   | 10,119  |         |  |                   |             |  |  |              |           |   |  |   | 10,119    | 
|Environmental reserve, less current portion     |  |              |        |  |              |   | 24,394  |         |  |                   |             |  |  |              |           |   |  |   | 24,394    | 
|Deferred income taxes and other                 |  |              | 3,359   |  |              |   | 71,073  |         |  |                   | 67,167       |  |  |              |           |   |  |   | 141,599   | 
|Shareholders equity                            |  |              | 195,899 |  |              |   | 456,322 |         |  |                   | 281,697      |  |  |              | (626,576   | ) |  |   | 307,342   | 
|                                                |  |             
|Total liabilities and shareholders equity      |  | $            | 525,589 |  |              | $ | 950,454 |         |  | $                 | 1,347,326    |  |  | $            | (1,359,403 | ) |  | $ | 1,463,966 | 
|                                                |  |             
|                                               

62



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating balance sheet


As of January 3, 2004


|                                                |  |              |         |  |              |   |         |         |  |   |                   |  |  |              |            |   |  |   |         | 
|----------------------------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | ------- |  | - | ----------------- |  |  | ------------ | ---------- | - |  | - | ------- | 
|                                                | 
|                                                |  | Combined     |         |  |             
|                                                |  | Combined     |         |  | Non-         |   |         |        
|                                                |  | Guarantor    |         |  | Guarantor    |   |         | The     |  |   | Reclassifications |  |  |             
|(in thousands)                                  |  | Subsidiaries |         |  | Subsidiaries |   |         | Company |  |   | and Eliminations  |  |  | Consolidated |           
|                                                | 
|Assets                                          |  |              |         |  |              |   |         |         |  |   |                   |  |  |              |            |   |  |   |         | 
|Cash and cash equivalents                       |  | $            | 1,531   |  |              | $ | 13,762  |         |  | $ | 4,770             |  |  | $            |           |   |  | $ | 20,063  | 
|Accounts receivable, net                        |  |              | 36,826  |  |              |   | 52,645  |         |  |   |                  |  |  |              |           |   |  |   | 89,471  | 
|Inventories                                     |  |              | 16,586  |  |              |   | 44,355  |         |  |   |                  |  |  |              |           |   |  |   | 60,941  | 
|Other                                           |  |              | 1,355   |  |              |   | 4,594   |         |  |   | 5,514             |  |  |              |           |   |  |   | 11,463  | 
|                                                |  |             
|Total current assets                            |  |              | 56,298  |  |              |   | 115,356 |         |  |   | 10,284            |  |  |              |           |   |  |   | 181,938 | 
|Due from affiliates                             |  |              | 125,042 |  |              |   | 231,007 |         |  |   | 317,246           |  |  |              | (673,295   | ) |  |   |        | 
|Investment in subsidiaries                      |  |              | 171,890 |  |              |   | 225,627 |         |  |   | 248,512           |  |  |              | (646,029   | ) |  |   |        | 
|Property, plant and equipment, net              |  |              | 105,565 |  |              |   | 375,037 |         |  |   |                  |  |  |              |           |   |  |   | 480,602 | 
|Other                                           |  |              | 35,974  |  |              |   | 26,693  |         |  |   | 5,435             |  |  |              |           |   |  |   | 68,102  | 
|                                                |  |             
|Total assets                                    |  | $            | 494,769 |  |              | $ | 973,720 |         |  | $ | 581,477           |  |  | $            | (1,319,324 | ) |  | $ | 730,642 | 
|                                                |  |             
|                                               
|Liabilities and shareholders equity            |  |              |         |  |              |   |         |         |  |   |                   |  |  |              |            |   |  |   |         | 
|Revolving credit obligations                    |  | $            |        |  |              | $ | 10,000  |         |  | $ |                  |  |  | $            |           |   |  | $ | 10,000  | 
|Accounts payable, accrued liabilities and other |  |              | 10,797  |  |              |   | 47,445  |         |  |   | 9,137             |  |  |              |           |   |  |   | 67,379  | 
|Current portion of debt                         |  |              | 16      |  |              |   | 7,015   |         |  |   | 16,578            |  |  |              |           |   |  |   | 23,609  | 
|                                                |  |             
|Total current liabilities                       |  |              | 10,813  |  |              |   | 64,460  |         |  |   | 25,715            |  |  |              |           |   |  |   | 100,988 | 
|Due to affiliates                               |  |              | 324,035 |  |              |   | 260,933 |         |  |   | 88,327            |  |  |              | (673,295   | ) |  |   |        | 
|Debt, less current portion                      |  |              | 78      |  |              |   | 5,267   |         |  |   | 245,174           |  |  |              |           |   |  |   | 250,519 | 
|Pension and postretirement benefits             |  |              | 1,648   |  |              |   | 35,561  |         |  |   |                  |  |  |              |           |   |  |   | 37,209  | 
|Post employment benefits                        |  |              |        |  |              |   | 13,808  |         |  |   |                  |  |  |              |           |   |  |   | 13,808  | 
|Environmental reserve, less current portion     |  |              |        |  |              |   | 22,661  |         |  |   |                  |  |  |              |           |   |  |   | 22,661  | 
|Deferred income taxes and other                 |  |              | 1,325   |  |              |   | 81,871  |         |  |   | 16,283            |  |  |              |           |   |  |   | 99,479  | 
|Redeemable preferred stock                      |  |              |        |  |              |   |        |         |  |   | 16,221            |  |  |              |           |   |  |   | 16,221  | 
|Shareholders equity                            |  |              | 156,870 |  |              |   | 489,159 |         |  |   | 189,757           |  |  |              | (646,029   | ) |  |   | 189,757 | 
|                                                |  |             
|Total liabilities and shareholders equity      |  | $            | 494,769 |  |              | $ | 973,720 |         |  | $ | 581,477           |  |  | $            | (1,319,324 | ) |  | $ | 730,642 | 
|                                                |  |             
|                                               

63



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of operations


For the period May 2, 2004 through January 1,
2005


|                                             |  |              |         |   |              |   |         |         |  |   |                   |   |  |              |        |   |  |   |         |  
|-------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | ------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | ------- | -
|                                             | 
|                                             |  | Combined     |         |   |             
|                                             |  | Combined     |         |   | Non-         |   |         |        
|                                             |  | Guarantor    |         |   | Guarantor    |   |         | The     |  |   | Reclassifications |   |  |             
|(in thousands)                               |  | Subsidiaries |         |   | Subsidiaries |   |         | Company |  |   | and Eliminations  |   |  | Consolidated |       
|                                             | 
|Net sales                                    |  | $            | 125,082 |   |              | $ | 186,007 |         |  | $ |                  |   |  | $            |       |   |  | $ | 311,089 |  
|Cost of goods sold                           |  |              | 79,640  |   |              |   | 146,278 |         |  |   |                  |   |  |              |       |   |  |   | 225,918 |  
|                                             |  |             
|Gross profit                                 |  |              | 45,442  |   |              |   | 39,729  |         |  |   |                  |   |  |              |       |   |  |   | 85,171  |  
|Selling, general and administrative expenses |  |              | 29,201  |   |              |   | 18,823  |         |  |   |                  |   |  |              |       |   |  |   | 48,024  |  
|Business restructuring                       |  |              |        |   |              |   | 13,899  |         |  |   |                  |   |  |              |       |   |  |   | 13,899  |  
|In process research and development          |  |              | 5,250   |   |              |   |        |         |  |   |                  |   |  |              |       |   |  |   | 5,250   |  
|                                             |  |             
|Operating income                             |  |              | 10,991  |   |              |   | 7,007   |         |  |   |                  |   |  |              |       |   |  |   | 17,998  |  
|Other (income) expense, net                  |  |              | (1,832  | ) |              |   | 4,516   |         |  |   | 36,898            |   |  |              |       |   |  |   | 39,582  |  
|Equity in loss of subsidiaries               |  |              |        |   |              |   |        |         |  |   | 1,855             |   |  |              | (1,855 | ) |  |   |        |  
|                                             |  |             
|Income (loss) before income taxes            |  |              | 12,823  |   |              |   | 2,491   |         |  |   | (38,753           | ) |  |              | 1,855  |   |  |   | (21,584 | )
|Income taxes                                 |  |              | 17,016  |   |              |   | 153     |         |  |   | (23,883           | ) |  |              |       |   |  |   | (6,714  | )
|                                             |  |             
|Net income (loss) applicable to common stock |  | $            | (4,193  | ) |              | $ | 2,338   |         |  | $ | (14,870           | ) |  | $            | 1,855  |   |  | $ | (14,870 | )
|                                             |  |             
|                                            

Condensed consolidating statement of operations


For the period January 4, 2004 through May 1,
2004


|                                             |  |              |        |   |              |   |         |         |  |   |                   |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | ------------ | ------ | - | ------------ | - | ------- | ------- |  | - | ----------------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             | 
|                                             |  | Combined     |        |   |             
|                                             |  | Combined     |        |   | Non-         |   |         |        
|                                             |  | Guarantor    |        |   | Guarantor    |   |         | The     |  |   | Reclassifications |   |  |             
|(in thousands)                               |  | Subsidiaries |        |   | Subsidiaries |   |         | Company |  |   | and Eliminations  |   |  | Consolidated |        
|                                             | 
|Net sales                                    |  | $            | 76,282 |   |              | $ | 102,991 |         |  | $ |                  |   |  | $            |        |   |  | $ | 179,273 |  
|Cost of goods sold                           |  |              | 34,796 |   |              |   | 75,370  |         |  |   |                  |   |  |              |        |   |  |   | 110,166 |  
|                                             |  |             
|Gross profit                                 |  |              | 41,486 |   |              |   | 27,621  |         |  |   |                  |   |  |              |        |   |  |   | 69,107  |  
|Selling, general and administrative expenses |  |              | 13,105 |   |              |   | 11,790  |         |  |   |                  |   |  |              |        |   |  |   | 24,895  |  
|Other                                        |  |              |       |   |              |   | (1,514  | )       |  |   |                   |   |  |              |         |   |  |   | (1,514  | )
|                                             |  |             
|Operating income                             |  |              | 28,381 |   |              |   | 17,345  |         |  |   |                  |   |  |              |        |   |  |   | 45,726  |  
|Other (income) expense, net                  |  |              | (367   | ) |              |   | 971     |         |  |   | 4,604             |   |  |              |        |   |  |   | 5,208   |  
|Equity in earnings of subsidiaries           |  |              |       |   |              |   |        |         |  |   | (30,056           | ) |  |              | 30,056  |   |  |   |        |  
|                                             |  |             
|Income before income taxes                   |  |              | 28,748 |   |              |   | 16,374  |         |  |   | 25,452            |   |  |              | (30,056 | ) |  |   | 40,518  |  
|Income taxes                                 |  |              | 9,775  |   |              |   | 5,291   |         |  |   | (1,381            | ) |  |              |        |   |  |   | 13,685  |  
|                                             |  |             
|Net income                                   |  |              | 18,973 |   |              |   | 11,083  |         |  |   | 26,833            |   |  |              | (30,056 | ) |  |   | 26,833  |  
|Redeemable preferred stock dividends         |  |              |       |   |              |   |        |         |  |   | (424              | ) |  |              |        |   |  |   | (424    | )
|                                             |  |             
|Net income applicable to common stock        |  | $            | 18,973 |   |              | $ | 11,083  |         |  | $ | 26,409            |   |  | $            | (30,056 | ) |  | $ | 26,409  |  
|                                             |  |             
|                                            

64



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##### Table of Contents



Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of operations


For the year ended January 3, 2004


|                                              |  |              |         |   |               |   |         |         |  |   |                   |   |  |              |         |   |  |   |         |  
|--------------------------------------------- |  | ------------ | ------- | - | ------------- | - | ------- | ------- |  | - | ----------------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                              | 
|                                              |  | Combined     |         |   | Combined      |   |         |        
|                                              |  | Guarantor    |         |   | Non-Guarantor |   |         | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                |  | Subsidiaries |         |   | Subsidiaries  |   |         | Company |  |   | and Eliminations  |   |  | Consolidated |        
|                                              | 
|Net sales                                     |  | $            | 181,655 |   |               | $ | 259,421 |         |  | $ |                  |   |  | $            |        |   |  | $ | 441,076 |  
|Cost of goods sold                            |  |              | 97,306  |   |               |   | 188,325 |         |  |   |                  |   |  |              |        |   |  |   | 285,631 |  
|                                              |  |             
|Gross profit                                  |  |              | 84,349  |   |               |   | 71,096  |         |  |   |                  |   |  |              |        |   |  |   | 155,445 |  
|Selling, general and administrative expenses  |  |              | 38,028  |   |               |   | 31,656  |         |  |   |                  |   |  |              |        |   |  |   | 69,684  |  
|                                              |  |             
|Operating income                              |  |              | 46,321  |   |               |   | 39,440  |         |  |   |                  |   |  |              |        |   |  |   | 85,761  |  
|Other (income) expense, net                   |  |              | (158    | ) |               |   | 3,441   |         |  |   | 18,384            |   |  |              |        |   |  |   | 21,667  |  
|Equity in earnings of subsidiaries            |  |              |        |   |               |   |        |         |  |   | (50,467           | ) |  |              | 50,467  |   |  |   |        |  
|                                              |  |             
|Income before income taxes                    |  |              | 46,479  |   |               |   | 35,999  |         |  |   | 32,083            |   |  |              | (50,467 | ) |  |   | 64,094  |  
|Income taxes                                  |  |              | 21,036  |   |               |   | 10,975  |         |  |   | (13,230           | ) |  |              |        |   |  |   | 18,781  |  
|                                              |  |             
|Net income                                    |  |              | 25,443  |   |               |   | 25,024  |         |  |   | 45,313            |   |  |              | (50,467 | ) |  |   | 45,313  |  
|Redeemable preferred stock dividends          |  |              |        |   |               |   |        |         |  |   | (1,260            | ) |  |              |        |   |  |   | (1,260  | )
|Redemption premium on Class C preferred stock |  |              |        |   |               |   |        |         |  |   |                  |   |  |              |        |   |  |   |        |  
|                                              |  |             
|Net income applicable to common stock         |  | $            | 25,443  |   |               | $ | 25,024  |         |  | $ | 44,053            |   |  | $            | (50,467 | ) |  | $ | 44,053  |  
|                                              |  |             
|                                             

65



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of operations


For the year ended December 28, 2002


|                                              |  |              |         |  |              |   |         |         |  |   |                   |   |  |              |         |   |  |   |         |  
|--------------------------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | ------- |  | - | ----------------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                              | 
|                                              |  | Combined     |         |  |             
|                                              |  | Combined     |         |  | Non-         |   |         |        
|                                              |  | Guarantor    |         |  | Guarantor    |   |         | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                |  | Subsidiaries |         |  | Subsidiaries |   |         | Company |  |   | and Eliminations  |   |  | Consolidated |        
|                                              | 
|Net sales                                     |  | $            | 146,304 |  |              | $ | 199,128 |         |  | $ |                  |   |  | $            |        |   |  | $ | 345,432 |  
|Cost of goods sold                            |  |              | 90,994  |  |              |   | 152,389 |         |  |   |                  |   |  |              |        |   |  |   | 243,383 |  
|                                              |  |             
|Gross profit                                  |  |              | 55,310  |  |              |   | 46,739  |         |  |   |                  |   |  |              |        |   |  |   | 102,049 |  
|Selling, general and administrative expenses  |  |              | 29,428  |  |              |   | 19,438  |         |  |   |                  |   |  |              |        |   |  |   | 48,866  |  
|                                              |  |             
|Operating income                              |  |              | 25,882  |  |              |   | 27,301  |         |  |   |                  |   |  |              |        |   |  |   | 53,183  |  
|Other (income) expense, net                   |  |              | 11,334  |  |              |   | 5,071   |         |  |   | 8,544             |   |  |              |        |   |  |   | 24,949  |  
|Equity in earnings of subsidiaries            |  |              |        |  |              |   |        |         |  |   | (24,711           | ) |  |              | 24,711  |   |  |   |        |  
|                                              |  |             
|Income before income taxes                    |  |              | 14,548  |  |              |   | 22,230  |         |  |   | 16,167            |   |  |              | (24,711 | ) |  |   | 28,234  |  
|Income taxes                                  |  |              | 5,546   |  |              |   | 6,521   |         |  |   | (679              | ) |  |              |        |   |  |   | 11,388  |  
|                                              |  |             
|Net income                                    |  |              | 9,002   |  |              |   | 15,709  |         |  |   | 16,846            |   |  |              | (24,711 | ) |  |   | 16,846  |  
|Redeemable preferred stock dividends          |  |              |        |  |              |   |        |         |  |   | (1,735            | ) |  |              |        |   |  |   | (1,735  | )
|Redemption premium on Class C preferred stock |  |              |        |  |              |   |        |         |  |   | (2,600            | ) |  |              |        |   |  |   | (2,600  | )
|                                              |  |             
|Net income applicable to common stock         |  | $            | 9,002   |  |              | $ | 15,709  |         |  | $ | 12,511            |   |  | $            | (24,711 | ) |  | $ | 12,511  |  
|                                              |  |             
|                                             

66



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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of cash flows


For the period May 2, 2004 through January 1,
2005


|                                                             |  |              |         |   |              |   |        |         |  |   |                   |   |  |              |      |   |  |   |          |  
|------------------------------------------------------------ |  | ------------ | ------- | - | ------------ | - | ------ | ------- |  | - | ----------------- | - |  | ------------ | ---- | - |  | - | -------- | -
|                                                             | 
|                                                             |  | Combined     |         |   |             
|                                                             |  | Combined     |         |   | Non-         |   |        |        
|                                                             |  | Guarantor    |         |   | Guarantor    |   |        | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                               |  | Subsidiaries |         |   | Subsidiaries |   |        | Company |  |   | and Eliminations  |   |  | Consolidated |     
|                                                             | 
|Net cash provided by operating activities                    |  | $            | 16,723  |   |              | $ | 5,225  |         |  | $ |                  |   |  | $            | 119  |   |  | $ | 22,067   |  
|Investing activities:                                        |  |              |         |   |              |   |        |         |  |   |                   |   |  |              |      |   |  |   |          |  
|Purchases of property, plant and equipment                   |  |              | (4,427  | ) |              |   | (5,455 | )       |  |   |                  |   |  |              |     |   |  |   | (9,882   | )
|Proceeds from sale of property, plant and equipment          |  |              |        |   |              |   | 62     |         |  |   |                  |   |  |              |     |   |  |   | 62       |  
|                                                             |  |             
|Net cash used in investing activities                        |  |              | (4,427  | ) |              |   | (5,393 | )       |  |   |                  |   |  |              |     |   |  |   | (9,820   | )
|Financing activities:                                        |  |              |         |   |              |   |        |         |  |   |                   |   |  |              |      |   |  |   |          |  
|Proceeds from debt                                           |  |              |        |   |              |   | 1,457  |         |  |   | 819,335           |   |  |              |     |   |  |   | 820,792  |  
|Principal payments on debt                                   |  |              | (1,244  | ) |              |   | (808   | )       |  |   | (262,972          | ) |  |              |     |   |  |   | (265,024 | )
|Borrowings on the revolving credit agreement                 |  |              |        |   |              |   |       |         |  |   | 1,500             |   |  |              |     |   |  |   | 1,500    |  
|Payments on the revolving credit agreement                   |  |              |        |   |              |   |       |         |  |   | (11,500           | ) |  |              |     |   |  |   | (11,500  | )
|Loan acquisition costs                                       |  |              |        |   |              |   |       |         |  |   | (20,015           | ) |  |              |     |   |  |   | (20,015  | )
|Payments made in connection with change in ownership         |  |              |        |   |              |   |       |         |  |   | (867,369          | ) |  |              |     |   |  |   | (867,369 | )
|Proceeds from equity investment                              |  |              |        |   |              |   |       |         |  |   | 321,516           |   |  |              |     |   |  |   | 321,516  |  
|Payment of dividends                                         |  |              | 4,140   |   |              |   | (4,140 | )       |  |   |                  |   |  |              |     |   |  |   |         |  
|Intercompany Transactions, net                               |  |              | (20,711 | ) |              |   | (3,736 | )       |  |   | 24,566            |   |  |              | (119 | ) |  |   |         |  
|                                                             |  |             
|Net cash provided by (used) in financing activities          |  |              | (17,815 | ) |              |   | (7,227 | )       |  |   | 5,061             |   |  |              | (119 | ) |  |   | (20,100  | )
|Effect of exchange rate changes on cash and cash equivalents |  |              | 20      |   |              |   | 3,645  |         |  |   |                  |   |  |              |     |   |  |   | 3,665    |  
|                                                             |  |             
|Net increase (decrease) in cash and cash equivalents         |  |              | (5,499  | ) |              |   | (3,750 | )       |  |   | 5,061             |   |  |              |     |   |  |   | (4,188   | )
|Cash and cash equivalents at beginning of period             |  |              | 7,673   |   |              |   | 24,084 |         |  |   | 4,115             |   |  |              |     |   |  |   | 35,872   |  
|                                                             |  |             
|Cash and cash equivalents at end of period                   |  | $            | 2,174   |   |              | $ | 20,334 |         |  | $ | 9,176             |   |  | $            |     |   |  | $ | 31,684   |  
|                                                             |  |             
|                                                            

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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of cash flows


For the period January 4, 2004 through May 1,
2004


|                                                             |  |              |        |   |              |   |        |         |  |   |                   |   |  |              |        |   |  |   |        |  
|------------------------------------------------------------ |  | ------------ | ------ | - | ------------ | - | ------ | ------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | ------ | -
|                                                             | 
|                                                             |  | Combined     |        |   |             
|                                                             |  | Combined     |        |   | Non-         |   |        |        
|                                                             |  | Guarantor    |        |   | Guarantor    |   |        | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                               |  | Subsidiaries |        |   | Subsidiaries |   |        | Company |  |   | and Eliminations  |   |  | Consolidated |       
|                                                             | 
|Net cash provided by operating activities                    |  | $            | 14,891 |   |              | $ | 16,640 |         |  | $ |                  |   |  | $            | (2,620 | ) |  | $ | 28,911 |  
|Investing activities:                                        |  |              |        |   |              |   |        |         |  |   |                   |   |  |              |        |   |  |   |        |  
|Purchases of property, plant and equipment                   |  |              | (2,958 | ) |              |   | (2,539 | )       |  |   |                  |   |  |              |       |   |  |   | (5,497 | )
|Proceeds from sale of property, plant and equipment          |  |              |       |   |              |   | 1,923  |         |  |   |                  |   |  |              |       |   |  |   | 1,923  |  
|                                                             |  |             
|Net cash used in investing activities                        |  |              | (2,958 | ) |              |   | (616   | )       |  |   |                  |   |  |              |       |   |  |   | (3,574 | )
|Financing activities:                                        |  |              |        |   |              |   |        |         |  |   |                   |   |  |              |        |   |  |   |        |  
|Proceeds from debt                                           |  |              |       |   |              |   | 610    |         |  |   |                  |   |  |              |       |   |  |   | 610    |  
|Principal payments on debt                                   |  |              |       |   |              |   | (3,778 | )       |  |   | (4,145            | ) |  |              |       |   |  |   | (7,923 | )
|Loan acquisition costs                                       |  |              |       |   |              |   |       |         |  |   | (59               | ) |  |              |       |   |  |   | (59    | )
|Intercompany Transactions, nets                              |  |              | (6,028 | ) |              |   | (141   | )       |  |   | 3,549             |   |  |              | 2,620  |   |  |   |       |  
|                                                             |  |             
|Net cash used in financing activities                        |  |              | (6,028 | ) |              |   | (3,309 | )       |  |   | (655              | ) |  |              | 2,620  |   |  |   | (7,372 | )
|Effect of exchange rate changes on cash and cash equivalents |  |              | 237    |   |              |   | (2,393 | )       |  |   |                  |   |  |              |       |   |  |   | (2,156 | )
|                                                             |  |             
|Net increase (decrease) in cash and cash equivalents         |  |              | 6,142  |   |              |   | 10,322 |         |  |   | (655              | ) |  |              |       |   |  |   | 15,809 |  
|Cash and cash equivalents at beginning of period             |  |              | 1,531  |   |              |   | 13,762 |         |  |   | 4,770             |   |  |              |       |   |  |   | 20,063 |  
|                                                             |  |             
|Cash and cash equivalents at end of period                   |  | $            | 7,673  |   |              | $ | 24,084 |         |  | $ | 4,115             |   |  | $            |       |   |  | $ | 35,872 |  
|                                                             |  |             
|                                                            

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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of cash flows


For the year ended January 3, 2004


|                                                               |  |              |         |   |              |   |         |         |  |   |                   |   |  |              |        |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | ------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                               | 
|                                                               |  | Combined     |         |   |             
|                                                               |  | Combined     |         |   | Non-         |   |         |        
|                                                               |  | Guarantor    |         |   | Guarantor    |   |         | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                                 |  | Subsidiaries |         |   | Subsidiaries |   |         | Company |  |   | and Eliminations  |   |  | Consolidated |       
|                                                               | 
|Net cash provided by operating activities                      |  | $            | 32,066  |   |              | $ | 28,849  |         |  | $ |                  |   |  | $            | (4,444 | ) |  | $ | 56,471  |  
|Investing activities Purchase of property, plant and equipment |  |              | (10,988 | ) |              |   | (22,809 | )       |  |   |                  |   |  |              |       |   |  |   | (33,797 | )
|                                                               |  |             
|Net cash used in investing activities                          |  |              | (10,988 | ) |              |   | (22,809 | )       |  |   |                  |   |  |              |       |   |  |   | (33,797 | )
|Financing activities Proceeds from debt                        |  |              |        |   |              |   | 1,738   |         |  |   |                  |   |  |              |       |   |  |   | 1,738   |  
|Principal payments on debt                                     |  |              |        |   |              |   | (3,312  | )       |  |   | (36,444           | ) |  |              |       |   |  |   | (39,756 | )
|Borrowings on revolving credit agreement                       |  |              |        |   |              |   | 10,000  |         |  |   | 5,500             |   |  |              |       |   |  |   | 15,500  |  
|Payments on revolving credit agreement                         |  |              |        |   |              |   |        |         |  |   | (5,500            | ) |  |              |       |   |  |   | (5,500  | )
|Loan acquisition costs                                         |  |              |        |   |              |   | (3      | )       |  |   | (308              | ) |  |              |       |   |  |   | (311    | )
|Intercompany Transactions, net                                 |  |              | (23,255 | ) |              |   | (14,269 | )       |  |   | 33,080            |   |  |              | 4,444  |   |  |   |        |  
|                                                               |  |             
|Net cash provided by (used in) financing activities            |  |              | (23,255 | ) |              |   | (5,846  | )       |  |   | (3,672            | ) |  |              | 4,444  |   |  |   | (28,329 | )
|Effect of exchange rate changes on cash and cash equivalents   |  |              |        |   |              |   | 1,112   |         |  |   |                  |   |  |              |       |   |  |   | 1,112   |  
|                                                               |  |             
|Net decrease in cash and cash equivalents                      |  |              | (2,177  | ) |              |   | 1,306   |         |  |   | (3,672            | ) |  |              |       |   |  |   | (4,543  | )
|Cash and cash equivalents at beginning of period               |  |              | 3,708   |   |              |   | 12,456  |         |  |   | 8,442             |   |  |              |       |   |  |   | 24,606  |  
|                                                               |  |             
|Cash and cash equivalents at end of period                     |  | $            | 1,531   |   |              | $ | 13,762  |         |  | $ | 4,770             |   |  | $            |       |   |  | $ | 20,063  |  
|                                                               |  |             
|                                                              

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Polypore, Inc.


Notes to consolidated financial statements (continued)




|    |                                               
|--- | ----------------------------------------------
|19. | Financial Statements of Guarantors (continued)

Condensed consolidating statement of cash flows


For the year ended December 28, 2002


|                                                             |  |              |         |   |              |   |          |         |  |   |                   |   |  |              |        |   |  |   |          |  
|------------------------------------------------------------ |  | ------------ | ------- | - | ------------ | - | -------- | ------- |  | - | ----------------- | - |  | ------------ | ------ | - |  | - | -------- | -
|                                                             | 
|                                                             |  | Combined     |         |   |             
|                                                             |  | Combined     |         |   | Non-         |   |          |        
|                                                             |  | Guarantor    |         |   | Guarantor    |   |          | The     |  |   | Reclassifications |   |  |             
|(in thousands)                                               |  | Subsidiaries |         |   | Subsidiaries |   |          | Company |  |   | and Eliminations  |   |  | Consolidated |       
|                                                             | 
|Net cash provided by operating activities                    |  | $            | 32,313  |   |              | $ | 43,089   |         |  | $ |                  |   |  | $            | 8,068  |   |  | $ | 83,470   |  
|Investing activities:                                        |  |              |         |   |              |   |          |         |  |   |                   |   |  |              |        |   |  |   |          |  
|Purchase of property, plant and equipment                    |  |              | (8,900  | ) |              |   | (19,602  | )       |  |   | (283              | ) |  |              |       |   |  |   | (28,785  | )
|Acquisitions, net of cash acquired                           |  |              |        |   |              |   | (112,624 | )       |  |   |                  |   |  |              |       |   |  |   | (112,624 | )
|                                                             |  |             
|Net cash used in investing activities                        |  |              | (8,900  | ) |              |   | (132,226 | )       |  |   | (283              | ) |  |              |       |   |  |   | (141,409 | )
|Financing activities:                                        |  |              |         |   |              |   |          |         |  |   |                   |   |  |              |        |   |  |   |          |  
|Proceeds from debt                                           |  |              |        |   |              |   | 1,213    |         |  |   | 160,683           |   |  |              |       |   |  |   | 161,896  |  
|Principal payments on debt                                   |  |              |        |   |              |   | (4,353   | )       |  |   | (14,190           | ) |  |              |       |   |  |   | (18,543  | )
|Borrowings on revolving credit agreement                     |  |              |        |   |              |   |         |         |  |   | 1,500             |   |  |              |       |   |  |   | 1,500    |  
|Payments on the revolving credit agreement                   |  |              |        |   |              |   |         |         |  |   | (21,500           | ) |  |              |       |   |  |   | (21,500  | )
|Loan acquisition costs                                       |  |              |        |   |              |   |         |         |  |   | (4,139            | ) |  |              |       |   |  |   | (4,139   | )
|Redemption of redeemable preferred stock                     |  |              |        |   |              |   |         |         |  |   | (22,600           | ) |  |              |       |   |  |   | (22,600  | )
|Payments of dividends                                        |  |              |        |   |              |   |         |         |  |   | (13,563           | ) |  |              |       |   |  |   | (13,563  | )
|Intercompany Transactions, net                               |  |              | (28,932 | ) |              |   | 114,466  |         |  |   | (77,466           | ) |  |              | (8,068 | ) |  |   |         |  
|                                                             |  |             
|Net cash provided by (used in) financing activities          |  |              | (28,932 | ) |              |   | 111,326  |         |  |   | 8,725             |   |  |              | (8,068 | ) |  |   | 83,051   |  
|Effect of exchange rate changes on cash and cash equivalents |  |              |        |   |              |   | (14,046  | )       |  |   |                  |   |  |              |       |   |  |   | (14,046  | )
|                                                             |  |             
|Net decrease in cash and cash equivalents                    |  |              | (5,519  | ) |              |   | 8,143    |         |  |   | 8,442             |   |  |              |       |   |  |   | 11,066   |  
|Cash and cash equivalents at beginning of period             |  |              | 9,227   |   |              |   | 4,313    |         |  |   |                  |   |  |              |       |   |  |   | 13,540   |  
|                                                             |  |             
|Cash and cash equivalents at end of period                   |  | $            | 3,708   |   |              | $ | 12,456   |         |  | $ | 8,442             |   |  | $            |       |   |  | $ | 24,606   |  
|                                                             |  |             
|                                                            

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on Accounting
    and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures








Item 9B.     Other
Information




71



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##### Table of Contents






Part III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                |  |     |    |  |          |                                                 
|--------------- |  | --- | -- |  | -------- | ------------------------------------------------
|               
|Name            |  | Age |    |  | Position
|               
|Frank Nasisi    |  |     | 65 |  |          | President, Chief Executive Officer and Director 
|Lynn Amos       |  |     | 39 |  |          | Chief Financial Officer, Treasurer and Secretary
|Stefan Geyler   |  |     | 48 |  |          | Vice President & General Manager, Membrana GmbH 
|Brad Reed       |  |     | 46 |  |          | Vice President & General Manager, Celgard LLC   
|Pierre Hauswald |  |     | 51 |  |          | Vice President & General Manager, Daramic LLC   
|David A. Barr   |  |     | 40 |  |          | Director                                        
|Michael Graff   |  |     | 52 |  |          | Chairman of the Board of Directors              
|Kevin Kruse     |  |     | 34 |  |          | Director                                        
|               

Frank Nasisi


Lynn Amos


Stefan Geyler


Brad Reed


Pierre Hauswald has


David A. Barr


72



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##### Table of Contents





Michael Graff


Kevin Kruse


Term of executive officers and directors




Code of Ethics




Board composition


see See


Board committees




Audit committee




73



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##### Table of Contents





Compensation committee









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Compensation Committee Report






2004 Executive Officer Compensation Program










74



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##### Table of Contents



Chief Executive Officer Compensation








| |                         
| | ------------------------
| | Compensation Committee  
|
| | Michael Graff  Chairman
| | David A. Barr           

75



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Summary Compensation Table




|                                      |  |                     |      |              |        |   |           |       |  |   |                 |  |  |                 |        |  |  |   |           | 
|------------------------------------- |  | ------------------- | ---- | ------------ | ------ | - | --------- | ----- |  | - | --------------- |  |  | --------------- | ------ |  |  | - | --------- | 
|                                      | 
|                                      |  | Annual Compensation |      |              |       
|                                      |  |                     |      |              |       
|                                      |  |                     |      | Other Annual |        |   | All Other |      
|Name and Principal Position           |  | Year                |      |              | Salary |   |           | Bonus |  |   | Compensation(1) |  |  | Compensation(2) |       
|                                      | 
|Frank Nasisi                          |  |                     | 2004 |              |        | $ | 404,600   |       |  | $ | 609,000         |  |  | $               | 5,875  |  |  | $ | 481,375   | 
|President and Chief Executive Officer |  |                     | 2003 |              |        |   | 356,743   |       |  |   | 515,000         |  |  |                 | 8,225  |  |  |   | 16,000    | 
|                                      |  |                     | 2002 |              |        |   | 255,827   |       |  |   | 268,500         |  |  |                 | 4,875  |  |  |   | 15,756    | 
|                                     
|Lynn Amos                             |  |                     | 2004 |              |        | $ | 198,015   |       |  | $ | 600,000         |  |  | $               |       |  |  | $ | 478,822   | 
|Chief Financial Officer,              |  |                     | 2003 |              |        |   | 127,253   |       |  |   | 415,000         |  |  |                 | 24,787 |  |  |   | 9,964     | 
|Treasurer and Secretary               |  |                     | 2002 |              |        |   | 124,233   |       |  |   | 130,000         |  |  |                 | 4,291  |  |  |   | 7,060     | 
|                                     
|Stefan Geyler                         |  |                     | 2004 |              |        | $ | 179,835   |       |  | $ | 197,862         |  |  | $               | 15,413 |  |  | $ | 235,000   | 
|Vice President & General Manager,     |  |                     | 2003 |              |        |   | 156,506   |       |  |   | 170,833         |  |  |                 | 13,883 |  |  |   |          | 
|Membrana GmbH                         |  |                     | 2002 |              |        |   | 106,494   |       |  |   | 77,758          |  |  |                 | 11,621 |  |  |   |          | 
|                                     
|Brad Reed                             |  |                     | 2004 |              |        | $ | 198,477   |       |  | $ | 310,000         |  |  | $               | 4,645  |  |  | $ | 250,471   | 
|Vice President & General Manager,     |  |                     | 2003 |              |        |   | 191,169   |       |  |   | 255,000         |  |  |                 | 5,654  |  |  |   | 14,659    | 
|Celgard, LLC                          |  |                     | 2002 |              |        |   | 173,077   |       |  |   | 135,000         |  |  |                 | 5,636  |  |  |   | 13,368    | 
|                                     
|Pierre Hauswald                       |  |                     | 2004 |              |        | $ | 175,967   |       |  | $ | 172,358         |  |  | $               |       |  |  | $ | 4,056     | 
|Vice President & General Manager,     |  |                     | 2003 |              |        |   | 145,146   |       |  |   | 103,220         |  |  |                 |       |  |  |   | 3,590     | 
|Daramic, LLC                          |  |                     | 2002 |              |        |   | 115,716   |       |  |   | 105,048         |  |  |                 |       |  |  |   |          | 
|                                     
|Jerry Zucker(3)                       |  |                     | 2004 |              |        | $ | 129,800   |       |  | $ |                |  |  | $               |       |  |  | $ | 1,014,544 | 
|Former President and                  |  |                     | 2003 |              |        |   | 334,720   |       |  |   | 4,078,998       |  |  |                 |       |  |  |   | 15,991    | 
|Chief Executive Officer               |  |                     | 2002 |              |        |   | 312,480   |       |  |   | 1,788,500       |  |  |                 |       |  |  |   | 15,977    | 
|                                     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts in this column represent relocation expenses or personal
    mileage amounts related to company-owned vehicles.                                                                                                                                                                                                                                                                                                  
|   
|(2) | Consists of employer 401(k) contributions or similar items for
    executives based outside the United States. In addition to
    bonuses paid pursuant to the Companys executive bonus
    plan, Mr. Nasisi, Mr. Amos, Mr. Geyler and
    Mr. Reed each received a one-time bonus in connection with
    the closing of the Transactions in the amounts of $465,000,
    $465,000, $235,000 and $235,000, respectively.
|   
|(3) | Mr. Zuckers employment was terminated on May 13,
    2004, with the closing of the Transactions. In connection with
    his termination, Mr. Zucker received a severance payment of
    $1,004,160.                                                                                                                                                                                                                     

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Option Grants in 2004




Option Grants in Last Fiscal Year


|                |  |                      |     |  |                  |  |      |             |  |   |            |  |  |                    |            |  |  |   |         | 
|--------------- |  | -------------------- | --- |  | ---------------- |  | ---- | ----------- |  | - | ---------- |  |  | ------------------ | ---------- |  |  | - | ------- | 
|                | 
|                |  | Individual Grants(1) |     |  |                 
|                |  |                      |     |  |                 
|                |  | Number of            |     |  |                  |  |     
|                |  | Securities           |     |  | Percent Of Total |  |      |            
|                |  | Underlying           |     |  | Options Granted  |  |      | Exercise Or |  |   |           
|                |  | Option               |     |  | To Employees     |  |      | Base Price  |  |   | Expiration |  |  | Grant Date Present |           
|Name            |  | Granted              |     |  | In Fiscal Year   |  |      | ($/Sh)      |  |   | Date       |  |  | Value($)(2)        |           
|                | 
|Frank Nasisi    |  |                      | 807 |  |                  |  | 18.0 |             |  | $ | 1,000      |  |  |                    | 05/13/2014 |  |  | $ | 214,720 | 
|Lynn Amos       |  |                      | 484 |  |                  |  | 10.8 |             |  | $ | 1,000      |  |  |                    | 05/13/2014 |  |  | $ | 128,779 | 
|Stefan Geyler   |  |                      | 449 |  |                  |  | 10.1 |             |  | $ | 1,000      |  |  |                    | 05/13/2014 |  |  | $ | 119,466 | 
|Brad Reed       |  |                      | 449 |  |                  |  | 10.1 |             |  | $ | 1,000      |  |  |                    | 05/13/2014 |  |  | $ | 119,466 | 
|Pierre Hauswald |  |                      | 449 |  |                  |  | 10.1 |             |  | $ | 1,000      |  |  |                    | 05/13/2014 |  |  | $ | 119,426 | 
|               



|    |                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Stock options are issued at an exercise price not less than the
    fair market value of the underlying stock on the grant date. The
    options expire in ten years from the grant date and vest and
    become fully exercisable after five years based on satisfaction
    of certain performance criteria, or upon change in control as
    defined.
|   
|(2) | The fair value of the stock options was determined by the
    Black-Scholes option pricing model with a weighed-average
    expected life of five years, risk-free interest rate of 3.96%
    and expected volatility of 20%.                                                                                                                           

Aggregated Option Exercises In Last Fiscal Year and Fiscal
Year-End Option Values




|                |  |                     |   |  |                   |  |                    |                  |  |              |               |  |  |  |      | 
|--------------- |  | ------------------- | - |  | ----------------- |  | ------------------ | ---------------- |  | ------------ | ------------- |  |  |  | ---- | 
|                | 
|                |  | Number Of           |   |  | Value of          | 
|                |  | Securities          |   |  | Unexercised       | 
|                |  | Underlying          |   |  | In-The-Money      | 
|                |  | Unexercised Options |   |  | Options At Fiscal | 
|                |  | Shares Acquired     |   |  |                   |  | At Fiscal Year-End |                  |  | Year-End ($) |              
|                |  | On                  |   |  | Value             |  |                    | (#) Exercisable/ |  |              | Exercisable/  | 
|Name            |  | Exercise (#)        |   |  | Realized($)       |  |                    | Unexercisable    |  |              | Unexercisable | 
|                | 
|Frank Nasisi    |  |                     |  |  |                   |  |                   |                  |  |              | /807         |  |  |  | /$ | 
|Lynn Amos       |  |                     |  |  |                   |  |                   |                  |  |              | /484         |  |  |  | /$ | 
|Stefan Geyler   |  |                     |  |  |                   |  |                   |                  |  |              | /449         |  |  |  | /$ | 
|Brad Reed       |  |                     |  |  |                   |  |                   |                  |  |              | /449         |  |  |  | /$ | 
|Pierre Hauswald |  |                     |  |  |                   |  |                   |                  |  |              | /449         |  |  |  | /$ | 
|               

Geyler Pension Plan




77



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|              |         |                  |        |        |    |  |        |         |  |  |        |         |  |    |        |         |  |  |        |         | 
|------------- | ------- | ---------------- | ------ | ------ | -- |  | ------ | ------- |  |  | ------ | ------- |  | -- | ------ | ------- |  |  | ------ | ------- | 
|              |        
|              |         | Years of Service |       
|              |         |                  |       
|Annual Salary |         | 15               |        |        | 20 |  |        | 25      |  |  | 30     |         |  | 35 |       
|              |        
|$125,000      |         |                  | 14,366 |        |    |  | 19,155 |         |  |  | 23,944 |         |  |    | 28,732 |         |  |  | 33,521 |        
|              | 150,000 |                  |        | 18,550 |    |  |        | 24,733  |  |  |        | 30,916  |  |    |        | 37,100  |  |  |        | 43,283  | 
|              | 175,000 |                  |        | 22,733 |    |  |        | 30,311  |  |  |        | 37,889  |  |    |        | 45,467  |  |  |        | 53,045  | 
|              | 200,000 |                  |        | 26,917 |    |  |        | 35,889  |  |  |        | 44,862  |  |    |        | 53,834  |  |  |        | 62,806  | 
|              | 225,000 |                  |        | 31,101 |    |  |        | 41,468  |  |  |        | 51,835  |  |    |        | 62,201  |  |  |        | 72,568  | 
|              | 250,000 |                  |        | 35,284 |    |  |        | 47,046  |  |  |        | 58,807  |  |    |        | 70,569  |  |  |        | 82,330  | 
|              | 300,000 |                  |        | 43,652 |    |  |        | 58,202  |  |  |        | 72,753  |  |    |        | 87,303  |  |  |        | 101,854 | 
|              | 400,000 |                  |        | 60,386 |    |  |        | 80,515  |  |  |        | 100,644 |  |    |        | 120,772 |  |  |        | 140,901 | 
|              | 450,000 |                  |        | 68,753 |    |  |        | 91,671  |  |  |        | 114,589 |  |    |        | 137,507 |  |  |        | 160,425 | 
|              | 500,000 |                  |        | 77,121 |    |  |        | 102,828 |  |  |        | 128,534 |  |    |        | 154,241 |  |  |        | 179,948 | 
|             



Severance agreements




Management investment




Indemnification agreements




78



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##### Table of Contents





Stock plans




2004 Stock Option Plan




Stock Incentive Plan




Accounting
for Stock-Based Compensation.


79



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##### Table of Contents



Employment agreements


Frank Nasisi




Director compensation




Compensation committee interlocks and insider
participation









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








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

The Transactions


 3 4 3 4


80



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##### Table of Contents





Tax sharing agreement




Management investments




Operating agreement






Stockholders agreement




81



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##### Table of Contents





Stockholders registration rights agreement




Transition services




Payments on behalf of affiliates




German investment









|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



|                      |  |      |       |  |      |   |       | 
|--------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                      | 
|(in thousands)        |  | 2004 |       |  | 2003 |  
|                      | 
|Audit Fees(1)         |  | $    | 1,537 |  |      | $ | 477   | 
|Audit-Related Fees(2) |  |      | 302   |  |      |   | 26    | 
|Tax Fees(3)           |  |      | 1,891 |  |      |   | 1,133 | 
|All Other Fees        |  |      |      |  |      |   |      | 
|                     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit Fees. This fee category consists of professional services
    rendered for the audit of our annual financial statements,
    review of our quarterly financial statements and services
    normally provided by the independent auditors in connection with
    statutory and regulatory filings, including services associated
    with SEC registration statements, other documents filed with the
    SEC, and advice on audit and accounting matters that arose
    during the audit or review of our financial statements. There
    remain additional fees that have not been invoiced.

82



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Audit-Related Fees. This fee category consists of assurance and
    related professional services rendered by Ernst & Young
    LLP that are reasonably related to performing the audit and
    review of our financial statements and are not reported above
    under Audit Fees. The services for these fees
    include audits of financial statements for the Companys
    employee benefit plans and Transaction related expenses.
|   
|(3) | Tax Fees. This fee category consists of professional services
    rendered by Ernst & Young LLP for tax return
    preparation, tax compliance and tax planning and advice.                                                                                                                                                                                                                                                                








Part IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules



Financial Statements.




| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting Firm                                                                                                                                                             
|
| |  | Consolidated Balance Sheets as of January 1, 2005, and
    January 3, 2004                                                                                                                                          
|
| |  | Consolidated Statements of Operations for the periods from
    January 4, 2004 through May 1, 2004, May 2, 2004
    through January 1, 2005 and the years ended January 3,
    2004 and December 28, 2002           
|
| |  | Consolidated Statements of Shareholders Equity for the
    periods from January 4, 2004 through May 1, 2004,
    May 2, 2004 through January 1, 2005 and the years
    ended January 3, 2004 and December 28, 2002.
|
| |  | Consolidated Statements of Cash Flows for the periods from
    January 4, 2004 through May 1, 2004, May 2, 2004
    through January 1, 2005 and the years ended January 3,
    2004 and December 28, 2002           
|
| |  | Notes to Consolidated Financial Statements                                                                                                                                                                          

Financial Statement Schedules.




| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Valuation and Qualifying Accounts for the periods from
    January 4, 2004 through May 1, 2004 and from
    May 2, 2004 through January 1, 2005 and the years
    ended January 3, 2004 and December 28, 2002.



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Exhibits.


|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|Exhibit
|Number  |    | Exhibit Description
|       
|        | 3  | .1                  |  | Certificate of Incorporation of Polypore, Inc. (incorporated by
    reference to Exhibit 3.1 to the Companys Registration
    Statement on Form S-4 filed on November 1, 2004
    (Commission File No. 333-119224))                                                                                                                                                                                                                                                                                                                                                                              
|        | 3  | .2                  |  | Bylaws of Polypore, Inc. (incorporated by reference to
    Exhibit 3.2 to the Companys Registration Statement on
    Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 4  | .1                  |  | Indenture, dated as of May 13, 2004, by and among PP
    Acquisition Corporation (merged with and into Polypore, Inc.),
    the Guarantors (as defined therein) and The Bank of New York, as
    Trustee (incorporated by reference to Exhibit 4.1 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                                                                                        
|        | 4  | .2                  |  | Form of
    83/4% senior
    subordinated dollar notes due 2012 (incorporated by reference to
    Exhibit 4.2 to the Companys Registration Statement on
    Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                                                                                                                                                                                                             
|        | 4  | .3                  |  | Form of
    83/4% senior
    subordinated euro notes due 2012 (incorporated by reference to
    Exhibit 4.3 to the Companys Registration Statement on
    Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                                                                                                                                                                                                               
|        | 4  | .4                  |  | Registration Rights Agreement, dated as of May 13, 2004, by
    and among PP Acquisition Corporation (merged with and into
    Polypore, Inc.), the Guarantors (as defined therein),
    J.P. Morgan Securities Inc. acting as representative of the
    Dollar Initial Purchasers (as defined therein) and
    J.P. Morgan Securities Ltd. acting as representative of the
    Euro Initial Purchasers (as defined therein) (incorporated by
    reference to Exhibit 4.4 to the Companys Registration
    Statement on Form S-4 filed on November 1, 2004
    (Commission File No. 333-119224))
|        | 10 | .1                  |  | Stock Purchase Agreement, dated as of January 30, 2004, by
    and among Polypore, Inc., PP Acquisition Corporation and the
    stockholders of Polypore, Inc. (incorporated by reference to
    Exhibit 10.1 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                                                                                                             
|        | 10 | .2                  |  | Credit Agreement, dated as of May 13, 2004, by and among PP
    Holdings Corporation, PP Acquisition Corporation, as Borrower,
    the Several Lenders (as defined therein) from time to time
    parties thereto, General Electric Capital Corporation, as
    Documentation Agent, Bear Stearns Corporate Lending Inc., as
    Syndication Agent, and JPMorgan Chase Bank, as Administrative
    Agent (incorporated by reference to Exhibit 10.2 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                       
|        | 10 | .3                  |  | Amendment to Credit Agreement, dated as of May 13, 2004, by
    and among PP Holdings Corporation, PP Acquisition
    Corporation, as Borrower, the Several Lenders (as defined
    therein) from time to time parties thereto, General Electric
    Capital Corporation, as Documentation Agent, Bear Stearns
    Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase
    Bank, as Administrative Agent (incorporated by reference to
    Exhibit 10.3 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))      
|        | 10 | .4                  |  | Guarantee and Collateral Agreement, dated as of May 13,
    2004, by and among PP Holdings Corporation,
    PP Acquisition Corporation and the subsidiaries of
    PP Acquisition Corporation identified therein (incorporated
    by reference to Exhibit 10.4 to the Companys
    Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                                                                           
|        | 10 | .5                  |  | Mortgage, Security Agreement, Assignment of Leases and Rents,
    and Fixture Filing, dated as of May 13, 2004, made by
    Daramic, LLC (f/k/a Daramic, Inc.) to JPMorgan Chase Bank, as
    Administrative Agent (incorporated by reference to
    Exhibit 10.5 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                                                         
|        | 10 | .6                  |  | Mortgage, Fixture Filing and Assignment of Leases and Rents,
    dated as of May 13, 2004, made by Daramic, LLC (f/k/a
    Daramic, Inc.) to JPMorgan Chase Bank, as Administrative Agent
    (incorporated by reference to Exhibit 10.6 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                                                                                                  

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|        |    |     |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | --- | ------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|Exhibit
|Number  |    |     | Exhibit Description
|       
|        | 10 | .7  |                     | Deed of Trust, Security Agreement, Fixture Filing and Assignment
    of Leases and Rent with Provision for Future Advances, dated as
    of May 13, 2004, made by Celgard, LLC (f/k/a Celgard, Inc.)
    to JPMorgan Chase Bank, as Administrative Agent (incorporated by
    reference to Exhibit 10.7 to the Companys
    Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))         
|        | 10 | .8  |                     | Tax Sharing Agreement, dated as of May 13, 2004, by and
    among Polypore International, Inc., PP Holding Corporation
    and Polypore, Inc. (incorporated by reference to
    Exhibit 10.8 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                    
|        | 10 | .9  |                     | Stockholders Agreement, dated as of May 13, 2004, by
    and among Warburg Pincus Private Equity VIII, L.P., Warburg
    Pincus International Partners, L.P., PP Holding, LLC and
    Polypore International, Inc. (incorporated by reference to
    Exhibit 10.9 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                              
|        | 10 | .10 |                     | Registration Rights Agreement, dated as of May 13, 2004, by
    and among Warburg Pincus Private Equity VIII, L.P., Warburg
    Pincus International Partners, L.P., PP Holding, LLC,
    Polypore International, Inc. and certain other persons a party
    thereto (incorporated by reference to Exhibit 10.10 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))
|        | 10 | .11 |                     | Polypore International, Inc. 2004 Stock Option Plan
    (incorporated by reference to Exhibit 10.11 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                                                                             
|        | 10 | .12 |                     | Polypore International, Inc. 2004 Stock Incentive Plan
    (incorporated by reference to Exhibit 10.12 to the
    Companys Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                                                                          
|        | 10 | .13 |                     | Severance Agreement, dated as of December 10, 2003, by and
    among Polypore, Inc. and Frank Nasisi (incorporated by reference
    to Exhibit 10.13 to the Companys Registration
    Statement on Form S-4 filed on November 1, 2004
    (Commission File No. 333-119224))                                                                                                                                                            
|        | 10 | .14 |                     | Severance Agreement, dated as of December 8, 2003, by and
    among Polypore, Inc. and Lynn Amos (incorporated by reference to
    Exhibit 10.14 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                
|        | 10 | .15 |                     | Severance Agreement, dated as of December 10, 2003, by and
    among Polypore, Inc. and Brad Reed (incorporated by reference to
    Exhibit 10.15 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                               
|        | 10 | .16 |                     | Severance Agreement, dated as of December 19, 2003, by and
    among Polypore, Inc. and Stefan Geyler (incorporated by
    reference to Exhibit 10.16 to the Companys
    Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                                           
|        | 10 | .17 |                     | Term Sheet regarding Employment Agreement between Polypore, Inc.
    and Frank Nasisi (incorporated by reference to
    Exhibit 10.17 to the Companys Registration Statement
    on Form S-4 filed on November 1, 2004 (Commission File
    No. 333-119224))                                                                                                                                                                           
|        | 10 | .18 |                     | Form of Indemnification Agreement entered into between Polypore,
    Inc. and certain employees of Polypore, Inc. (incorporated by
    reference to Exhibit 10.18 to the Companys
    Registration Statement on Form S-4 filed on
    November 1, 2004 (Commission File No. 333-119224))                                                                                                                                               
|        | 12 | .1  |                     | Statement Regarding Computation of Ratio of Earnings to Fixed
    Charges                                                                                                                                                                                                                                                                                                                                                               
|        | 21 | .1  |                     | Subsidiaries of Polypore, Inc.                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 31 | .1  |                     | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                  
|        | 31 | .2  |                     | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                  
|        | 32 | .1  |                     | Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                  

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|        |    |    |                     |                                                                                                       
|------- | -- | -- | ------------------- | ------------------------------------------------------------------------------------------------------
|       
|Exhibit
|Number  |    |    | Exhibit Description
|       
|        | 32 | .2 |                     | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
|        | 99 | .1 |                     | Risk Factors                                                                                          
|       

86



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##### Table of Contents






Signatures






| |               
| | --------------
| | POLYPORE, INC.



| |     |                 
| | --- | ----------------
| | By: | /s/ Frank Nasisi

| |                                      
| | -------------------------------------
| |                                      
| | Frank Nasisi                         
| | President and Chief Executive Officer





|                                   |  |                                                                                            |  |                |  | 
|---------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|                                  
|/s/ Frank NasisiFrank
    Nasisi   |  | President, Chief Executive Officer and Director (Principal
    Executive Officer           |  | March 30, 2005
|                                  
|/s/ Lynn AmosLynn
    Amos         |  | Chief Financial Officer (Principal Financial Officer and
    Principal Accounting Officer) |  | March 30, 2005
|                                  
|/s/ David BarrDavid
    Barr       |  | Director                                                                                   |  | March 30, 2005
|                                  
|/s/ Michael GraffMichael
    Graff |  | Director                                                                                   |  | March 30, 2005
|                                  
|/s/ Kevin KruseKevin
    Kruse     |  | Director                                                                                   |  | March 30, 2005
|                                  

SUPPLEMENTAL INFORMATION TO BE FURNISHED


WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT
BY REGISTRANTS


WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT




87



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##### Table of Contents



Polypore, Inc.


Financial statement schedule  Valuation and
qualifying accounts






|                                                 |                                           |              |       |       |          |   |       |          |   |   |            |       |            |        |        |        |      |   |       |       | 
|------------------------------------------------ | ----------------------------------------- | ------------ | ----- | ----- | -------- | - | ----- | -------- | - | - | ---------- | ----- | ---------- | ------ | ------ | ------ | ---- | - | ----- | ----- | 
|                                                 |                                          
|                                                 |                                           | Additions    |       |       |         
|                                                 |                                           |              |       |       |         
|                                                 |                                           | Charged      |       |       |          |   |      
|                                                 |                                           | Balance at   |       |       | to costs |   |       | Charged  |   |   |            |       | Balance at |       
|                                                 |                                           | beginning of |       |       | and      |   |       | to other |   |   |            |       | end of     |       
|(in thousands)                                   |                                           | period       |       |       | expenses |   |       | accounts |   |   | Deductions |       |            | period |       
|                                                 |                                          
|Period from May 2, 2004 through January 1, 2005: |                                           |              |       |       |          |   |       |          |   |   |            |       |            |        |        |        |      |   |       |      
|                                                 | Allowance for doubtful accounts           |              | $     | 6,672 |          |   | $     | (959     | ) |   | $          | 633   | (1)        |        | $      | (384   | )(2) |   | $     | 5,962 | 
|                                                 | Valuation allowance of deferred tax asset |              |       | 2,258 |          |   |       | 78       |   |   |            |      |            |        | $      | (347   | )(3) |   |       | 1,989 | 
|                                                 |                                           |             
|                                                 |                                           | $            | 8,930 |       |          | $ | (978  | )        |   | $ | 633        |       |            | $      | (634   | )      |      | $ | 7,951 |      
|Period from January 4, 2004 through May 1, 2004: |                                           |              |       |       |          |   |       |          |   |   |            |       |            |        |        |        |      |   |       |      
|                                                 | Allowance for doubtful accounts           |              | $     | 5,324 |          |   |       | 1,628    |   |   | $          | (280  | )(1)       |        |        |       |      |   | $     | 6,672 | 
|                                                 | Valuation allowance of deferred tax asset |              |       | 484   |          |   |       | 1,774    |   |   |            |      |            |        |        |       |      |   |       | 2,258 | 
|                                                 |                                           |             
|                                                 |                                           | $            | 5,808 |       |          | $ | 3,402 |          |   | $ | (280       | )     |            | $      |       |        |      | $ | 8,930 |      
|Year ended January 3, 2004:                      |                                           |              |       |       |          |   |       |          |   |   |            |       |            |        |        |        |      |   |       |      
|                                                 | Allowance for doubtful accounts           |              | $     | 3,059 |          |   |       | 1,985    |   |   | $          | 666   | (1)        |        | $      | (386   | )(2) |   | $     | 5,324 | 
|                                                 | Valuation allowance of deferred tax asset |              |       | 3,519 |          |   |       |         |   |   |            |      |            |        | $      | (3,035 | )(3) |   |       | 484   | 
|                                                 |                                           |             
|                                                 |                                           | $            | 6,578 |       |          | $ | 1,985 |          |   | $ | 666        |       |            | $      | (3,421 | )      |      | $ | 5,808 |      
|Year ended December 28, 2002:                    |                                           |              |       |       |          |   |       |          |   |   |            |       |            |        |        |        |      |   |       |      
|                                                 | Allowance for doubtful accounts           |              | $     | 808   |          |   | $     | 989      |   |   | $          | 1,372 | (4)        |        | $      | (110   | )(2) |   | $     | 3,059 | 
|                                                 | Valuation allowance of deferred tax asset |              |       | 2,392 |          |   |       | 1,987    |   |   |            |      |            |        |        | (860   | )(3) |   |       | 3,519 | 
|                                                 |                                           |             
|                                                 |                                           | $            | 3,200 |       |          | $ | 2,976 |          |   | $ | 1,372      |       |            | $      | 970    |        |      | $ | 6,578 |      
|                                                



|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Foreign currency translation adjustment.                                                                                                                         
|   
|(2) | The amount represents charge-offs net of recoveries.                                                                                                             
|   
|(3) | Utilization and expiration of foreign tax credits that were
    previously considered to be unrealizable and the utilization of
    foreign net operating losses.
|   
|(4) | Allowance for doubtful accounts recorded in purchase accounting,
    net of foreign currency translation adjustment.                                             

S-1