**EXHIBIT 99.1****RISK FACTORS**You should carefully consider and evaluate all of the riskfactors set forth below in the context of any forward-lookingstatement, either oral or written, made from time to time byPolypore, Inc. and its subsidiaries, officers or directors. Thereports we file with the Securities and Exchange Commission(“SEC”) and the documents we incorporate by referencein such reports as well as the press releases we issue from timeto time and the oral and written statements of our officers anddirectors made from time to time may contain forward-lookingstatements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. You can identifyforward-looking statements by our use of the words“believe,” “may,” “will,”“should,” “expect,” “intend,”“plan,” “predict,” “anticipate,”“estimate” or “continue” and variations ofsuch words and similar expressions are intended to identify suchforward-looking statements. These forward-looking statements mayinclude, among other things: (1) statements in this AnnualReport on Form 10-K that reflect projections orexpectations of our future financial or economic performance;(2) statements that are not historical information;(3) statements of our beliefs, intentions, plans andobjectives for future operations, including those contained in“Business,” “Properties,” “Controls andProcedures” and “Management’s Discussion andAnalysis of Financial Condition and Results of Operations;”(4) statements relating to our operations or activities forfiscal 2005 and beyond; and (5) statements relating to ourfuture capital projects, legal proceedings and othercontingencies.Although we believe the expectations reflected in ourforward-looking statements are reasonable, we do not knowwhether our expectations will prove correct. We discloseimportant factors that could cause our actual results to differfrom our expectations in cautionary statements made in filingswe have made with the SEC. All subsequent written and oralforward-looking statements attributable to us or to personsacting on our behalf are expressly qualified in their entiretyby these cautionary statements. Our actual results could differmaterially from those anticipated in any such forward-lookingstatements as a result of the risk factors described in thesereports, other factors set forth in or incorporated by referencein these reports and as set forth below.Many of these factors are beyond our ability to control orpredict. We caution you not to put undue reliance onforward-looking statements or to project any future resultsbased on such statements or on present or prior earnings levelsor financial condition. Some of the factors that could cause theactual results to differ materially are set forth below.Additional information concerning these or other factors thatcould cause the actual results to differ materially from thosein the forward-looking statements is contained from time to timein our other SEC filings. Copies of those filings are availablefrom us and from the SEC. The forward-looking statements we makeare based on information available to us as of the date suchstatements are made, and we assume no obligation to update anysuch forward-looking information contained herein.**Risks Related to Our Company That May Affect Our Business,Financial Condition or Operating Results****Our substantial indebtedness could harm our ability to reactto changes to our business and prevent us from fulfilling ourobligations under our indebtedness, including our exchangenotes.**As a result of the transactions related to PP AcquisitionCorporation’s purchase of Polypore, Inc. (the“Transactions”), we have a significant amount ofindebtedness. As of January 1, 2005, our consolidatedindebtedness outstanding was approximately $860.8 million,excluding unused commitments of $90.0 million under ourrevolving loan facility, and our other liabilities wereapproximately $295.8 million. For pro forma fiscal 2004,our interest expense was $56.6 million.Our substantial level of indebtedness increases the possibilitythat we may be unable to generate cash sufficient to pay, whendue, the principal of, interest on or other amounts due inrespect of our indebtedness. Our substantial debt could alsohave other important consequences. For example, it could
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increase our vulnerability to general economic downturns andadverse competitive and industry conditions; require us todedicate all or a substantial portion of our cash flow fromoperations to payments on our indebtedness, thereby reducing theavailability of our cash flow to fund working capital, capitalexpenditures, research and development efforts and other generalcorporate purposes; limit our flexibility in planning for, orreacting to, changes in our business and the industry in whichwe operate; place us at a competitive disadvantage compared tocompetitors that have less debt; limit our ability to raiseadditional financing on satisfactory terms or at all; and makeit more difficult for us to satisfy our financial obligations.**Our variable rate indebtedness subjects us to interest raterisk, which could cause our debt service obligations to increasesignificantly.**Although we may have interest rate hedge arrangements in effectfrom time to time, our interest expense could increase ifinterest rates increase, because our debt under the creditagreement governing our senior secured credit facilities, whichincludes a $370.0 million term loan facility,a €36.0 millionterm loan facility and a revolving loan facility of$90.0 million, may not be fully hedged and will bearinterest at floating rates, generally adjusted LIBOR plus anapplicable margin or the alternate base rate plus an applicablemargin. The alternate base rate is the higher of(i) JPMorgan Chase Bank’s prime rate and (ii) theFederal Funds Effective Rate plus 0.50%. A 1% increase in theinterest rate on our variable rate loans would cost usapproximately $4.2 million per year in incremental interestexpense.Our earnings may not be sufficient to allow us to pay principaland interest on our debt and meet our other obligations. If wedo not have sufficient earnings, we may be required to refinanceall or part of our existing debt, sell assets, borrow more moneyor sell more securities, none of which we can guarantee we willbe able to do.**To service our indebtedness, we will require a significantamount of cash. Our ability to generate cash depends on manyfactors beyond our control.**Our ability to make payments on and to refinance ourindebtedness and to fund our operations will depend on ourability to generate cash in the future, which is subject in partto general economic, financial, competitive, legislative,regulatory and other factors that are beyond our control.Our business may not generate sufficient cash flow fromoperations and future borrowings may not be available to usunder our senior secured credit facilities or otherwise inamounts sufficient to enable us to service our indebtedness orto fund our other liquidity needs. Our annual debt serviceobligations are currently comprised of payment of 1.0% of theoutstanding principal on our senior secured credit facility,current maturities on other debt, plus interest. Principal andinterest payments for fiscal 2004 were approximately$272.9 million and $36.8 million, respectively. If wecannot service our debt, we will have to take actions such asreducing or delaying capital investments, selling assets,restructuring or refinancing our debt or seeking additionalequity capital. Any of these actions may not be effected oncommercially reasonable terms, or at all. In addition, theindenture for our notes and the credit agreement for our seniorsecured credit facilities may restrict us from adopting any ofthese alternatives.**Despite current indebtedness levels, we and our subsidiariesmay still be able to incur substantially more debt. This couldincrease the risks associated with our substantial leverage.**We and our subsidiaries may be able to incur substantialadditional indebtedness in the future. Although the indenturegoverning our notes and the credit agreement governing oursenior secured credit facilities contain restrictions on theincurrence of additional indebtedness, these restrictions aresubject to a number of qualifications and exceptions, and theindebtedness incurred in compliance with these restrictionscould be substantial. We have a $90.0 million revolvingloan facility which may be drawn at any time. Furthermore, theindenture for our notes allows us to incur additional bank debt.Any additional borrowings could be senior to those notes and therelated guarantees. If we incur additional debt above the
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levels in effect upon the closing of the Transactions, the risksassociated with our substantial leverage would increase.**The terms of our senior secured credit facilities and theindenture relating to our notes may restrict our current andfuture operations, particularly our ability to respond tochanges or to take certain actions.**Our senior secured credit facilities contain a number ofrestrictive covenants that impose significant operating andfinancial restrictions on us and may limit our ability to engagein acts that may be in our long-term best interests. Our seniorsecured credit facilities include covenants restricting, amongother things, our ability to: incur, assume or permit to existadditional indebtedness or guarantees; incur liens and engage insale leaseback transactions; make capital expenditures; makeloans and investments; declare dividends, make payments on orredeem or repurchase capital stock; engage in mergers,acquisitions and other business combinations; prepay, redeem orpurchase certain indebtedness, including our notes; amend orotherwise alter terms of our indebtedness, including our notes,and other material agreements; sell assets; engage intransactions with affiliates; and alter the business that weconduct.The indenture relating to our notes also contains numerousoperating and financial covenants including, among other things,restrictions on our ability to: incur or guarantee additionaldebt; issue preferred stock of restricted subsidiaries; paydividends or make other equity distributions; purchase or redeemcapital stock; make certain investments; enter into arrangementsthat restrict dividends from restricted subsidiaries; engage intransactions with affiliates; sell or otherwise dispose ofassets; and merge or consolidate with another entity.Our senior secured credit facilities also include financialcovenants, including requirements that we maintain a minimuminterest coverage ratio and a maximum leverage ratio. Inaddition, these financial covenants include a requirement thatwe not exceed certain maximum aggregate capital expenditures.These financial covenants will become more restrictive overtime. Our ability to meet those financial ratios and test can beaffected by events beyond our control and, over time, we may notsatisfy those tests.A breach of any of these covenants or the inability to complywith the required financial covenants could result in a defaultunder our senior secured credit facilities or our notes. If anysuch default occurs, the lenders under our senior secured creditfacilities and the holders of our notes may elect to declare alloutstanding borrowings, together with accrued interest and otheramounts payable thereunder, to be immediately due and payable.The lenders under our senior secured credit facilities also havethe right in these circumstances to terminate any commitmentsthey have to provide further borrowings. In addition, followingan event of default under our senior secured credit facilities,the lenders under these facilities will have the right toproceed against the collateral granted to them to secure thedebt, which includes our available cash, and they will also havethe right to prevent us from making debt service payments on ournotes. If the debt under our senior secured credit facilities orour notes were to be accelerated, our assets may be insufficientto repay in full our senior subordinated notes and our otherdebt.**Employee slowdowns, strikes or similar actions could disruptour business.**Approximately 66% of our employees are represented undercollective bargaining agreements. A majority of those employeesare located in Italy, France or Germany and are representedunder industry-wide agreements that are subject to national andlocal government regulations and must be renewed annually. Laborunions also represent our employees in Owensboro, Kentucky andCorydon, Indiana. The collective bargaining agreement coveringworkers at the Owensboro facility expires in April 2005 and theagreement covering the workers at the Corydon facility expiresin January 2007. We may not be able to maintain constructiverelationships with these labor unions and we may not be able tosuccessfully negotiate new collective bargaining agreements onsatisfactory terms in the future. A prolonged labor disputecould disrupt our business.
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**Product liability claims exposure could be significant.**We may face exposure to product liability claims in the eventthat the failure of our products, particularly those used in thehealthcare industry, results, or is alleged to result, in bodilyinjury and/or death. We may experience material productliability losses in the future and we may incur significantcosts to defend these claims. In addition, if any of ourproducts are, or are alleged to be, defective, we may berequired to participate in a recall involving those products.Moreover, end-users of our products may look to us forcontribution when faced with product recalls, product liabilityor warranty claims. The future costs associated with providingproduct warranties could be material. A successful productliability claim brought against us in excess of availableinsurance coverage or a requirement to participate in anyproduct recall could reduce our profits or impair our financialcondition. For the periods reported in this Annual Report onForm 10-K, expenses relating to product liability claimswere not material to net income.**Our operations outside the United States pose risks to ourbusiness that are not present with our domestic business.**Our manufacturing facilities in North America accounted for 41%of total sales for fiscal 2004, with facilities in Europeaccounting for 55% and facilities in Asia accounting for 4%.Typically, we sell our products in the currency of the countrywhere the manufacturing facility that produced the products islocated. In addition, as part of our growth and acquisitionstrategy, we may manufacture products or otherwise conductoperations in these or other foreign countries. Our foreignoperations are, and any future foreign operations will be,subject to certain risks that could reduce or impair our sales,profits, cash flows and financial position. These risks includefluctuations in foreign currency exchange rates, inflation,economic or political instability, shipping delays, changes inapplicable laws and regulatory policies and various traderestrictions, all of which could have a significant impact onour ability to deliver products on a competitive and timelybasis. The future imposition of, or significant increases in thelevel of, customs duties, import quotas or other traderestrictions could also increase our costs and reduce ourprofits.**We could incur substantial costs to comply with environmentalrequirements; violations of, and liabilities under,environmental laws and regulations may increase our costs orrequire us to change certain business practices.**We are subject to a broad range of federal, state, local andforeign environmental laws and regulations which govern, amongother things, air emissions, wastewater discharges and thehandling, storage disposal and release of wastes and hazardoussubstances. Such laws and regulations can be complex and changeoften. We incur costs to comply with environmental requirements,and such costs could increase significantly with changes in therequirements or their interpretation or enforcement. Some of ourfacilities have been the subject of actions to enforceenvironmental requirements. We could incur substantial costs,including clean-up costs, fines and sanctions and third-partyproperty damage or personal injury claims, as a result ofviolations of, or liabilities under, environmental laws,relevant common law or the environmental permits required forour operations. Failure to comply with environmentalrequirements could also result in enforcement actions thatmaterially limit or otherwise affect the operations of thefacilities involved. For the periods reported in this AnnualReport on Form 10-K, these expenses were not material tonet income.Pursuant to certain environmental laws, a current or previousowner or operator of a contaminated site may be held liable forthe entire cost of investigation, removal or remediation ofhazardous materials at such property, whether or not the owneror operator knew of, or was responsible for, the presence of anyhazardous materials. Persons who arrange for the disposal ortreatment of hazardous materials also may be held liable forsuch costs at a disposal or treatment site, regardless ofwhether the affected site is owned or operated by them.Contaminants have been detected at some of our present sites,principally in connection with historical operations, andinvestigations and/or clean-ups have been undertaken by us or byformer owners of the sites. We are unaware of material offsitecontamination at any of the sites. The costs of investigatingand remediating environmental conditions at some of ourfacilities may be substantial. Although we believe we areentitled to contractual indemnification for a portion of thesecosts, if we do
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not receive expected indemnification payments, or if our costsare higher than expected, our exposure to these costs wouldincrease. We anticipate additional investigations and cleanupsof onsite contamination under regulatory supervision orvoluntarily at some of our sites. In addition, the imposition ofmore stringent cleanup requirements, the discovery of additionalcontaminants or the discovery of material offsite contaminationat or from one or more of our facilities could result insignificant additional costs to us.**If we are unable to adequately protect our intellectualproperty, we could lose a significant competitive advantage.**Our success with our products depends, in part, on our abilityto protect our current and future technologies and products andto defend our intellectual property rights. If we fail toadequately protect our intellectual property rights, competitorsmay manufacture and market products similar to ours. We may notreceive patents for any of our patent applications and ourexisting or future patents that we receive or license may notprovide competitive advantages for our products. Our competitorsmay challenge, invalidate or avoid the application of anyexisting or future patents that we receive or license. Inaddition, patent rights may not prevent our competitors fromdeveloping, using or selling products that are similar orfunctionally equivalent to our products.**The loss of our senior management could disrupt ourbusiness.**Our senior management is important to the success of ourbusiness. There is significant competition for these kinds ofpersonnel in the separation and filtration membrane industry. Wemay not be able to retain our existing senior management, fillnew positions or vacancies created by expansion or turnover orattract additional senior management personnel. The loss of anymember of our senior management without retaining a replacement(either from inside or outside our existing management team)could disrupt our business.Our Chief Executive Officer has agreed to a binding term sheet.The term sheet extends through the second anniversary of theclosing of the Transactions and is subject to automatic renewalof one additional year unless either the Company or the ChiefExecutive Officer elects not to renew the term. All of ourexecutive officers are free to pursue other businessopportunities (other than our chief executive officer, who isbound by a non-compete agreement), including those that maycompete with us.**We may pursue future acquisitions. If we incur additionaldebt that becomes difficult to service or if we incur contingentliabilities and expenses in connection with future acquisitionsor if we cannot effectively integrate newly acquired operations,our business could be disrupted.**A significant portion of our historical growth has occurredthrough acquisitions and we may enter into acquisitions in thefuture. Acquisitions involve risks that the businesses acquiredwill not perform in accordance with expectations and thatbusiness judgments concerning the value, strengths andweaknesses of businesses acquired will prove incorrect. Futureacquisitions would likely result in the incurrence of debt andcontingent liabilities and an increase in interest expense andamortization expenses or periodic impairment charges related togoodwill and other intangible assets as well as significantcharges relating to integration costs.We may not be able to integrate successfully any business weacquire into our existing business and any acquired businessesmay not be profitable or as profitable as we had expected. Thesuccessful integration of new businesses depends on our abilityto manage these new businesses and cut excess costs. Thesuccessful integration of future acquisitions may also requiresubstantial attention from our senior management and themanagement of the acquired business, which could decrease thetime that they have to service and attract customers and developnew products and services. In addition, because we may activelypursue a number of opportunities simultaneously, we mayencounter unforeseen expenses, complications and delays,including difficulties in employing sufficient staff andmaintaining operational and management oversight. Our inabilityto complete the integration of new businesses in a timely andorderly manner could increase costs, lower profit and ultimatelydisrupt our business.
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**We have recorded a significant amount of intangible assets,which may never generate the returns we expect.**Our acquisitions have resulted in significant increases inidentifiable intangible assets and goodwill. Net identifiableintangible assets, which include trademarks and trade names,license agreements and technology acquired in acquisitions, wereapproximately $226.0 million at January 1, 2005,representing approximately 15.4% of our total assets. Goodwill,which relates to the excess of cost over the fair value of thenet assets of the businesses acquired, was approximately$535.8 million at January 1, 2005, representingapproximately 36.6% of our total assets. Both goodwill andidentifiable intangible assets increased substantially as aresult of the Transactions.Goodwill and identifiable intangible assets are recorded at fairvalue on the date of acquisition and, under Financial AccountingStandards Board Statement No. 142, are reviewed at leastannually for impairment. Impairment may result from, among otherthings, deterioration in the performance of the acquiredbusiness, adverse market conditions, adverse changes inapplicable laws or regulations, including changes that restrictthe activities of the acquired business and a variety of othercircumstances. The amount of any impairment must be written off.We may never realize the full value of our intangible assets.Any future determination requiring the write-off of asignificant portion of intangible assets would reduce ourprofits for the fiscal period in which the write-off occurs.**As a result of annual shutdowns of our European productionfacilities, our results of operations may be subject to seasonalfluctuations.**Operations at our European production facilities aretraditionally subject to shutdowns during the month of Augusteach year for employee vacations. As a result, revenues and netincome during the third quarter of fiscal 2004 were, and duringthe third quarter of any fiscal year in the future may be, lowerthan revenues and net income in other quarters during the samefiscal year. In view of the seasonal fluctuations, we believethat comparisons of our operating results for the third quarterof any fiscal year with those of the other quarters during thesame fiscal year may be of limited relevance in predicting ourfuture financial performance.**Warburg Pincus controls us.**Affiliates and designees of Warburg Pincus control Polypore.Warburg Pincus is able to cause the election of all of themembers of our board of directors, cause the appointment of newmanagement and cause the approval of any action requiring theapproval of our stockholders, including amendment of ourcertificate of incorporation and mergers or sales ofsubstantially all of our assets. The directors elected byWarburg Pincus are able to make decisions affecting our capitalstructure, including decisions to issue additional capitalstock, implement stock repurchase programs and declaredividends. In addition, our equity holders may have an interestin pursuing acquisitions, divestitures, financings or othertransactions that, in their judgment, could enhance their equityinvestments, even though such transactions might involve risksto you as a holder of the notes. Furthermore, Warburg Pincus mayin the future own businesses that directly compete with ours.For information concerning the composition of our managementteam, see “Management.”**Risks Related to Our Industry That May Affect OurBusiness, Financial Condition or Operating Results****Because the markets in which we sell our products are highlycompetitive, we may have difficulty growing our business yearafter year.**The markets in which we sell our products are highlycompetitive. In each of these markets, we compete against asmall number of competitors. Generally, product innovation andperformance, quality, service, utility and cost are the primarycompetitive factors, with technical support being highly valuedby our largest customers. Some of our competitors have greatereconomic resources than we do and are well established assuppliers to the markets that we serve.
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We sell a number of our products into selected specializedmarkets. These specialized markets may attract additionalcompetitors that could have greater financial, technological,manufacturing and marketing resources than we do. In addition,we intend to offer new products that we have under developmentin markets in which we do not currently compete. We may not beable to compete successfully in those new markets.Competition in the market for separators used in batteryapplications is intense and a reduction in overall demand wouldlikely further increase competition between us and otherproducers of membranes. This increased competition could causeus to reduce our prices, which could lower our profit margins.**We must continue developing innovative products in order tomaintain a competitive edge.**Our continued success depends in part upon our ability tomaintain technological capabilities and to continue to identify,develop and commercialize innovative products. In particular,products for some consumer electronics applications have a shortlifecycle and require constant development. If we fail tocontinue to develop products for those markets or to keep pacewith technological developments by our competitors generally, wemay lose market share.**Increased use of synthetic hemodialysis filtration membranesby our customers could reduce our market share.**Hemodialysis filtration membranes are fabricated from twoclasses of materials: cellulosic and synthetic. Historically,most filtration membranes for dialyzers have been manufacturedwith cellulosic materials, but in recent years, use of syntheticmaterials has been growing faster than cellulosic. While most ofthe hemodialysis membranes we have sold historically have beenmanufactured with cellulosic material, we have recently expandedour production capabilities to support the launch of syntheticproducts. However, if the market for hemodialysis membranesshifts from cellulosic to synthetic more quickly than we cansell our production capacity, we may lose market share.**The loss of our customers could reduce our revenues andprofits.**We sell a large volume of our products to several customers. Adecrease in business from, or the loss of, any such large volumecustomer could reduce our revenues and our profits. One of ourcustomers, Exide Technologies, represented approximately 14% ofour sales in fiscal 2004.In addition, a smaller customer, representing approximately 5%of our sales in fiscal 2003, decided to outsource the productionof dialyzers of which our filtration membranes are a component.The company to which this customer’s dialyzer productionwill be outsourced currently purchases filtration membranes fromanother supplier.In addition, our future revenues will depend in part upon thecommercial success of our customers and their continuedwillingness to purchase our products. Any significant downturnin the business of customers could cause them to reduce ordiscontinue their purchases from us.**Vertical integration by our customers of the production ofour products into their own manufacturing processes could reduceour revenues and our profits.**Our future revenues and profits will also depend to asignificant extent upon whether our customers choose in thefuture to manufacture the separation and filtration membranesused in their products instead of purchasing these componentsfrom us. For example, in the healthcare industry, many of thefiltration membranes used in dialyzers are produced by themanufacturers of the dialyzers themselves. If any of ourexisting customers choose to vertically integrate the productionof their products in such a manner, the loss of sales to thesecustomers could reduce our revenues and our profits.
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**Increases in prices for raw materials or the loss of keysupplier contracts could reduce our profit margins.**The primary raw materials we use in the manufacture of most ofour products are polyethylene and polypropylene resins, silica,paper and oil. In fiscal 2004, raw materials accounted forapproximately 36% of our cost of sales. Although our majorcustomer contracts generally allow us to pass increased costs onto our customers, we may not be able to pass on all raw materialprice increases to our customers in each case or without delay.The loss of any of our key suppliers could disrupt our businessuntil we secure alternative supply arrangements. Furthermore,any new supply agreement we enter into may not have terms asfavorable as those contained in our current supply arrangements.
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