##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2007
 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: 1-32266
 POLYPORE INTERNATIONAL, INC.
  Delaware
    
    43-2049334(State or Other Jurisdiction of
    
    (IRS EmployerIncorporation or Organization)
    
    Identification No.)11430 North Community House Road, Suite 350Charlotte, North Carolina
    
    28277(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 587-8409
 
  þ o
  o o þ
 o þ




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##### 



Polypore International, Inc.
Index to Quarterly Report on Form 10-Q
For the Three Months Ended June 30, 2007
  
 PagePART I FINANCIAL INFORMATIONItem 1.Financial Statements
    
    
    4Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4.Controls and Procedures
    
    
    32PART II OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    32Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 6.Exhibits
    
    
    32SIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



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 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;
    
    our substantial indebtedness;
    
    interest rate risk related to our variable rate indebtedness;
    
    our inability to generate cash;
    
    restrictions related to the senior secured credit facilities;
    
    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
with future acquisitions;
    
    the adverse impact on our financial condition from past restructuring activities;
    
    the failure to effectively integrate newly acquired operations;
    
    the absence of expected returns from the amount of intangible assets we have recorded; and
    
    natural disasters, epidemics, terrorist acts and other events beyond our control.
  3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Polypore International, Inc.
Condensed Consolidated Balance Sheets
 June 30, 2007(in thousands)
    
    (unaudited)
    
    December 30, 2006*AssetsCurrent assets:Cash and cash equivalents
    
    $
    70,075
    
    
    $
    54,712Accounts receivable, net
    
    
    103,297
    
    
    
    102,110Inventories
    
    
    65,362
    
    
    
    67,741Refundable income taxes
    
    
    3,550
    
    
    
    Prepaid and other
    
    
    12,081
    
    
    
    13,386Total current assets
    
    
    254,365
    
    
    
    237,949Property, plant and equipment, net
    
    
    373,410
    
    
    
    363,526Goodwill
    
    
    568,812
    
    
    
    567,587Intangibles and loan acquisition costs, net
    
    
    194,794
    
    
    
    204,645Environmental indemnification receivable
    
    
    15,833
    
    
    
    15,236Other
    
    
    1,092
    
    
    
    917Total assets
    
    $
    1,408,306
    
    
    $
    1,389,860Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    22,579
    
    
    $
    25,494Accrued liabilities
    
    
    54,329
    
    
    
    55,883Income taxes payable
    
    
    
    
    
    
    3,689Current portion of debt
    
    
    4,539
    
    
    
    3,938Current portion of capital lease obligation
    
    
    1,406
    
    
    
    1,377Total current liabilities
    
    
    82,853
    
    
    
    90,381Debt, less current portion
    
    
    1,055,866
    
    
    
    1,038,837Capital lease obligation, less current portion
    
    
    4,044
    
    
    
    4,754Pension and postretirement benefits
    
    
    64,556
    
    
    
    61,219Postemployment benefits
    
    
    4,067
    
    
    
    4,451Environmental reserve, less current portion
    
    
    23,537
    
    
    
    22,935Deferred income taxes
    
    
    86,708
    
    
    
    94,347Other
    
    
    14,181
    
    
    
    3,274Commitments and contingenciesShareholders equity:Common stock, $.01 par value  200,000,000 shares authorized,
40,306,928 and 25,347,470 shares issued and outstanding at
June 30, 2007 and December 30, 2006, respectively
    
    
    403
    
    
    
    253Paid-in capital
    
    
    390,452
    
    
    
    125,234Common stock subscription receivable, net of underwriting fees
    
    
    (267,900
    )
    
    
    Retained deficit
    
    
    (50,971
    )
    
    
    (51,776
    )Accumulated other comprehensive income (loss)
    
    
    510
    
    
    
    (4,049
    )72,494
    
    
    
    69,662Total liabilities and shareholders equity
    
    $
    1,408,306
    
    
    $
    1,389,860
 
 *
    
    Derived from audited consolidated financial statements See notes to condensed consolidated financial statements
 4




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Polypore International, Inc .  Condensed Consolidated Statements of Operations (Unaudited)
 Three Months Ended
    
    Six Months Ended(in thousands, except share data)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Net sales
    
    $
    131,736
    
    
    $
    123,094
    
    
    $
    261,517
    
    
    $
    238,387Cost of goods sold
    
    
    83,835
    
    
    
    78,461
    
    
    
    165,335
    
    
    
    153,441Gross profit
    
    
    47,901
    
    
    
    44,633
    
    
    
    96,182
    
    
    
    84,946Selling, general and administrative expenses
    
    
    23,211
    
    
    
    22,018
    
    
    
    46,855
    
    
    
    44,516Business restructuring
    
    
    82
    
    
    
    553
    
    
    
    135
    
    
    
    1,325Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Operating income
    
    
    24,608
    
    
    
    22,062
    
    
    
    49,192
    
    
    
    41,698Other (income) expense:Interest expense, net
    
    
    23,829
    
    
    
    23,662
    
    
    
    47,472
    
    
    
    45,762Foreign currency and other
    
    
    507
    
    
    
    1,282
    
    
    
    374
    
    
    
    1,98124,336
    
    
    
    24,944
    
    
    
    47,846
    
    
    
    47,743Income (loss) before income taxes
    
    
    272
    
    
    
    (2,882
    )
    
    
    1,346
    
    
    
    (6,045
    )Income taxes
    
    
    1,323
    
    
    
    (1,508
    )
    
    
    287
    
    
    
    (3,111
    )Income (loss) before the cumulative effect of a
change in accounting principle
    
    
    (1,051
    )
    
    
    (1,374
    )
    
    
    1,059
    
    
    
    (2,934
    )Cumulative effect of a change in accounting
principle related to stock compensation, net of
income taxes of $139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Net income (loss)
    
    $
    (1,051
    )
    
    $
    (1,374
    )
    
    $
    1,059
    
    
    $
    (2,703
    )Net income (loss) per share  basic and diluted:Income (loss) before cumulative effect of a
change in accounting principle
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.04
    
    
    $
    (0.12
    )Cumulative effect of a change in accounting
principle related to stock compensation, net
of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net income (loss)
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.04
    
    
    $
    (0.11
    )Weighted average shares outstanding  basic
    
    
    25,801,434
    
    
    
    25,286,328
    
    
    
    25,572,001
    
    
    
    25,278,790Effect of dilutive stock options
    
    
    
    
    
    
    
    
    
    
    178,577
    
    
    
    Weighted average shares outstanding  diluted
    
    
    25,801,434
    
    
    
    25,286,328
    
    
    
    25,750,578
    
    
    
    25,278,790
 See notes to condensed consolidated financial statements
 5




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Polypore International, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 Six Months Ended(in thousands)
    
    June 30, 2007
    
    July 1, 2006Operating activities:Net income (loss)
    
    $
    1,059
    
    
    $
    (2,703
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation expense
    
    
    15,562
    
    
    
    20,319Amortization expense
    
    
    8,924
    
    
    
    8,824Amortization of loan acquisition costs
    
    
    1,499
    
    
    
    1,496Amortization of debt discount
    
    
    13,170
    
    
    
    11,929Stock compensation
    
    
    296
    
    
    
    73Loss on disposal of property, plant and equipment
    
    
    1,106
    
    
    
    772Foreign currency loss
    
    
    498
    
    
    
    87Deferred income taxes
    
    
    (6,027
    )
    
    
    (8,089
    )Business restructuring
    
    
    135
    
    
    
    1,325Change in accounting principle related to postemployment benefits
    
    
    
    
    
    
    (2,593
    )Cumulative effect of change in accounting principle related to
stock compensation
    
    
    
    
    
    
    (370
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    609
    
    
    
    (10,904
    )Inventories
    
    
    3,701
    
    
    
    (3,319
    )Prepaid and other current assets
    
    
    447
    
    
    
    168Accounts payable and accrued liabilities
    
    
    (5,090
    )
    
    
    6,007Income taxes payable
    
    
    (1,807
    )
    
    
    (1,245
    )Other, net
    
    
    (1,911
    )
    
    
    627Net cash provided by operating activities
    
    
    32,171
    
    
    
    22,404Investing activities:Purchases of property, plant and equipment
    
    
    (9,977
    )
    
    
    (11,128
    )Acquisition of business
    
    
    (5,475
    )
    
    
    Net cash used in investing activities
    
    
    (15,452
    )
    
    
    (11,128
    )Financing activities:Principal payments on debt
    
    
    (1,768
    )
    
    
    (698
    )Initial public offering costs
    
    
    (633
    )
    
    
    Repurchase of common stock
    
    
    (320
    )
    
    
    Loan acquisition costs
    
    
    (34
    )
    
    
    (15
    )Issuance of common stock
    
    
    
    
    
    
    399Net cash used in financing activities
    
    
    (2,755
    )
    
    
    (314
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,399
    
    
    
    1,461Net increase in cash and cash equivalents
    
    
    15,363
    
    
    
    12,423Cash and cash equivalents at beginning of period
    
    
    54,712
    
    
    
    28,060Cash and cash equivalents at end of the period
    
    $
    70,075
    
    
    $
    40,483Supplemental non-cash financing activities:Increase in
common stock and additional paid in capital in connection with initial public offering, net of underwriting fees and other offering costs
    
    $
    266,025
    
    
    
    Offering costs included in accrued liabilities
    
    
    1,875
    
    
    
    Common stock subscription receivable
    
    
    (267,900
    )
    
    
    
 See notes to condensed consolidated financial statements
 6




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Description of Business and Basis of Presentation
 Description of Business
    Basis of Presentation
  2. Recent Accounting Pronouncements
 Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early
Retirement Arrangements) Employers
Accounting for Postemployment Benefits
 Share-Based Payment Accounting for Stock Based Compensation
 7




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Fair Value Measurement
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and
132(R)
 Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement 109
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Initial Public Offering and Related Transactions
   4. Inventories
  (in thousands)
    
    June 30, 2007
    
    December 30, 2006Raw materials
    
    $
    21,702
    
    
    $
    21,714Work-in-process
    
    
    11,766
    
    
    
    10,679Finished goods
    
    
    31,894
    
    
    
    35,348Total
    
    $
    65,362
    
    
    $
    67,741
 8




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 5. Debt
  (in thousands)
    
    June 30, 2007
    
    December 30, 2006Senior secured credit facility:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    369,073
    
    
    
    369,1638.75% senior subordinated notes
    
    
    427,125
    
    
    
    422,55010.50% senior discount notes, net of unamortized original issue discount of
$35,983 and $49,153, respectively
    
    
    264,017
    
    
    
    250,847Other
    
    
    190
    
    
    
    2151,060,405
    
    
    
    1,042,775Less current maturities
    
    
    4,539
    
    
    
    3,938Long-term debt
    
    $
    1,055,866
    
    
    $
    1,038,837
 
   6. Employee Benefit Plans
  Pension PlansThree Months Ended
    
    Six Months Ended(in thousands)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Service cost
    
    $
    815
    
    
    $
    759
    
    
    $
    1,601
    
    
    $
    1,478Interest cost
    
    
    842
    
    
    
    805
    
    
    
    1,654
    
    
    
    1,568Expected return on plan assets
    
    
    (245
    )
    
    
    (200
    )
    
    
    (481
    )
    
    
    (392
    )Recognized net actuarial loss
    
    
    94
    
    
    
    8
    
    
    
    184
    
    
    
    17Net periodic benefit cost
    
    $
    1,506
    
    
    $
    1,372
    
    
    $
    2,958
    
    
    $
    2,671
 9




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Other Postretirement BenefitsThree Months Ended
    
    Six Months Ended(in thousands)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Service cost
    
    $
    8
    
    
    $
    8
    
    
    $
    16
    
    
    $
    16Interest cost
    
    
    28
    
    
    
    28
    
    
    
    56
    
    
    
    57Recognized net actuarial loss
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    4Net periodic benefit cost
    
    $
    36
    
    
    $
    39
    
    
    $
    72
    
    
    $
    77
 7. Environmental Matters
      10




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 8. Business Restructuring
 2006 Restructuring Plan
  2005 Restructuring Plan
  2004 Restructuring Plan
   Balance at
    
    
    
    
    
    
    
    
    
    ForeignDecember 30,
    
    Restructuring
    
    Cash
    
    Currency
    
    Balance at(in thousands)
    
    2006
    
    Charges
    
    Payments
    
    Translation
    
    June 30, 20072006 Restructuring Plan:Severance and benefit costs
    
    $
    11,559
    
    
    $
    
    
    
    $
    (5,630
    )
    
    $
    190
    
    
    $
    6,119Other
    
    
    5,684
    
    
    
    
    
    
    
    (3,265
    )
    
    
    83
    
    
    
    2,50217,243
    
    
    
    
    
    
    
    (8,895
    )
    
    
    273
    
    
    
    8,6212005 Restructuring Plan:Severance and benefit costs
    
    
    876
    
    
    
    135
    
    
    
    (491
    )
    
    
    17
    
    
    
    5372004 Restructuring Plan:Severance and benefit costs
    
    
    1,152
    
    
    
    
    
    
    
    (614
    )
    
    
    17
    
    
    
    555Total
    
    $
    19,271
    
    
    $
    135
    
    
    $
    (10,000
    )
    
    $
    307
    
    
    $
    9,713
 11




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 9. Stock Option Plans
   10. Income Taxes
   Interim Financial Reporting
    12




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 11. Comprehensive Income (Loss)
  Three Months Ended
    
    Six Months Ended(in thousands)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Net income (loss)
    
    $
    (1,051
    )
    
    $
    (1,374
    )
    
    $
    1,059
    
    
    $
    (2,703
    )Other comprehensive
income, primarily foreign
currency translation
    
    
    735
    
    
    
    1,673
    
    
    
    4,559
    
    
    
    3,213Comprehensive income (loss)
    
    $
    (316
    )
    
    $
    299
    
    
    $
    5,618
    
    
    $
    510
 12. Related Party Transactions
  13. Acquisition
 Business Combinations Goodwill and Other Intangible Assets
 13




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 14. Segment Information
    Three Months Ended
    
    Six Months EndedJune 30,
    
    July 1,
    
    June 30,
    
    July 1,(in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Net sales to external customers (by major product group):Lead-acid battery separators
    
    $
    72,126
    
    
    $
    66,197
    
    
    $
    144,717
    
    
    $
    130,409Lithium battery separators
    
    
    20,346
    
    
    
    21,610
    
    
    
    41,653
    
    
    
    40,553Energy storage
    
    
    92,472
    
    
    
    87,807
    
    
    
    186,370
    
    
    
    170,962Healthcare
    
    
    26,165
    
    
    
    24,281
    
    
    
    49,358
    
    
    
    45,826Filtration and specialty
    
    
    13,099
    
    
    
    11,006
    
    
    
    25,789
    
    
    
    21,599Separations media
    
    
    39,264
    
    
    
    35,287
    
    
    
    75,147
    
    
    
    67,425Total net sales to external customers
    
    $
    131,736
    
    
    $
    123,094
    
    
    $
    261,517
    
    
    $
    238,387Operating income:Energy storage
    
    $
    19,888
    
    
    $
    20,122
    
    
    $
    39,764
    
    
    $
    35,479Separations media
    
    
    4,805
    
    
    
    2,571
    
    
    
    9,613
    
    
    
    5,029Corporate
    
    
    (3
    )
    
    
    (78
    )
    
    
    (50
    )
    
    
    (78
    )Segment operating income
    
    
    24,690
    
    
    
    22,615
    
    
    
    49,327
    
    
    
    40,430Business restructuring
    
    
    82
    
    
    
    553
    
    
    
    135
    
    
    
    1,325Change in accounting principle related to post employment
benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Total operating income
    
    
    24,608
    
    
    
    22,062
    
    
    
    49,192
    
    
    
    41,698Reconciling items:Interest expense, net
    
    
    23,829
    
    
    
    23,662
    
    
    
    47,472
    
    
    
    45,762Foreign currency and other
    
    
    507
    
    
    
    1,282
    
    
    
    374
    
    
    
    1,981Income (loss) before income taxes
    
    $
    272
    
    
    $
    (2,882
    )
    
    $
    1,346
    
    
    $
    (6,045
    )Depreciation and amortization:Energy storage
    
    $
    8,178
    
    
    $
    7,721
    
    
    $
    16,363
    
    
    $
    15,727Separations media
    
    
    4,195
    
    
    
    6,862
    
    
    
    8,123
    
    
    
    13,416Total depreciation and amortization
    
    $
    12,373
    
    
    $
    14,583
    
    
    $
    24,486
    
    
    $
    29,143
 14




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors
   Condensed Consolidating Balance Sheet
As of June 30, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    35,655
    
    
    $
    34,420
    
    
    $
    
    
    
    $
    70,075Accounts receivable, net
    
    
    37,300
    
    
    
    65,997
    
    
    
    
    
    
    
    
    
    
    
    103,297Inventories
    
    
    18,116
    
    
    
    47,246
    
    
    
    
    
    
    
    
    
    
    
    65,362Refundable income taxes
    
    
    621
    
    
    
    2,929
    
    
    
    
    
    
    
    
    
    
    
    3,550Other
    
    
    2,651
    
    
    
    9,572
    
    
    
    (142
    )
    
    
    
    
    
    
    12,081Total current assets
    
    
    58,688
    
    
    
    161,399
    
    
    
    34,278
    
    
    
    
    
    
    
    254,365Due from affiliates
    
    
    219,166
    
    
    
    270,428
    
    
    
    286,646
    
    
    
    (776,240
    )
    
    
    Investment in subsidiaries
    
    
    241,118
    
    
    
    300,596
    
    
    
    240,219
    
    
    
    (781,933
    )
    
    
    Property, plant and equipment, net
    
    
    105,739
    
    
    
    267,671
    
    
    
    
    
    
    
    
    
    
    
    373,410Goodwill
    
    
    
    
    
    
    1,268
    
    
    
    567,544
    
    
    
    
    
    
    
    568,812Intangibles and loan acquisition
costs, net
    
    
    50
    
    
    
    
    
    
    
    194,744
    
    
    
    
    
    
    
    194,794Other
    
    
    711
    
    
    
    16,214
    
    
    
    
    
    
    
    
    
    
    
    16,925Total assets
    
    $
    625,472
    
    
    $
    1,017,576
    
    
    $
    1,323,431
    
    
    $
    (1,558,173
    )
    
    $
    1,408,306Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    26,943
    
    
    $
    41,656
    
    
    $
    8,309
    
    
    $
    
    
    
    $
    76,908Current portion of debt
    
    
    
    
    
    
    
    
    
    
    4,539
    
    
    
    
    
    
    
    4,539Current portion of capital lease
obligation
    
    
    1,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,406Total current liabilities
    
    
    28,349
    
    
    
    41,656
    
    
    
    12,848
    
    
    
    
    
    
    
    82,853Due to affiliates
    
    
    315,164
    
    
    
    262,003
    
    
    
    199,073
    
    
    
    (776,240
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    190
    
    
    
    1,055,676
    
    
    
    
    
    
    
    1,055,866Capital lease obligation, less
current portion
    
    
    4,044
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,044Pension and postretirement benefits
    
    
    2,322
    
    
    
    62,108
    
    
    
    126
    
    
    
    
    
    
    
    64,556Postemployment benefits
    
    
    
    
    
    
    4,067
    
    
    
    
    
    
    
    
    
    
    
    4,067Environmental reserve, less
current portion
    
    
    
    
    
    
    23,537
    
    
    
    
    
    
    
    
    
    
    
    23,537Deferred income taxes and other
    
    
    68,553
    
    
    
    50,220
    
    
    
    (17,884
    )
    
    
    
    
    
    
    100,889Shareholders equity
    
    
    207,040
    
    
    
    573,795
    
    
    
    73,592
    
    
    
    (781,933
    )
    
    
    72,494Total liabilities and
shareholders equity
    
    $
    625,472
    
    
    $
    1,017,576
    
    
    $
    1,323,431
    
    
    $
    (1,558,173
    )
    
    $
    1,408,306
 15




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Balance Sheet
As of December 30, 2006
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    30,807
    
    
    $
    23,905
    
    
    $
    
    
    
    $
    54,712Accounts receivable, net
    
    
    37,287
    
    
    
    64,823
    
    
    
    
    
    
    
    
    
    
    
    102,110Inventories
    
    
    16,211
    
    
    
    51,530
    
    
    
    
    
    
    
    
    
    
    
    67,741Other
    
    
    3,435
    
    
    
    10,062
    
    
    
    (111
    )
    
    
    
    
    
    
    13,386Total current assets
    
    
    56,933
    
    
    
    157,222
    
    
    
    23,794
    
    
    
    
    
    
    
    237,949Due from affiliates
    
    
    199,196
    
    
    
    256,327
    
    
    
    284,658
    
    
    
    (740,181
    )
    
    
    Investment in subsidiaries
    
    
    252,129
    
    
    
    304,592
    
    
    
    220,743
    
    
    
    (777,464
    )
    
    
    Property, plant and equipment, net
    
    
    107,050
    
    
    
    256,476
    
    
    
    
    
    
    
    
    
    
    
    363,526Goodwill
    
    
    
    
    
    
    
    
    
    
    567,587
    
    
    
    
    
    
    
    567,587Intangibles and loan acquisition
costs, net
    
    
    57
    
    
    
    
    
    
    
    204,588
    
    
    
    
    
    
    
    204,645Other
    
    
    645
    
    
    
    15,437
    
    
    
    71
    
    
    
    
    
    
    
    16,153Total assets
    
    $
    616,010
    
    
    $
    990,054
    
    
    $
    1,301,441
    
    
    $
    (1,517,645
    )
    
    $
    1,389,860Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    13,769
    
    
    $
    53,741
    
    
    $
    13,867
    
    
    $
    
    
    
    $
    81,377Income taxes payable
    
    
    13,447
    
    
    
    (9,758
    )
    
    
    
    
    
    
    
    
    
    
    3,689Current portion of debt
    
    
    
    
    
    
    152
    
    
    
    3,786
    
    
    
    
    
    
    
    3,938Current portion of capital lease
obligation
    
    
    1,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,377Total current liabilities
    
    
    28,593
    
    
    
    44,135
    
    
    
    17,653
    
    
    
    
    
    
    
    90,381Due to affiliates
    
    
    290,183
    
    
    
    258,683
    
    
    
    191,315
    
    
    
    (740,181
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    63
    
    
    
    1,038,774
    
    
    
    
    
    
    
    1,038,837Capital lease obligations, less
current portion
    
    
    4,754
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,754Pension and postretirement benefits
    
    
    2,302
    
    
    
    58,917
    
    
    
    
    
    
    
    
    
    
    
    61,219Post employment benefits
    
    
    
    
    
    
    4,451
    
    
    
    
    
    
    
    
    
    
    
    4,451Environmental reserve, less
current portion
    
    
    
    
    
    
    22,935
    
    
    
    
    
    
    
    
    
    
    
    22,935Deferred income taxes and other
    
    
    63,593
    
    
    
    49,991
    
    
    
    (15,963
    )
    
    
    
    
    
    
    97,621Shareholders equity
    
    
    226,585
    
    
    
    550,879
    
    
    
    69,662
    
    
    
    (777,464
    )
    
    
    69,662Total liabilities and
shareholders equity
    
    $
    616,010
    
    
    $
    990,054
    
    
    $
    1,301,441
    
    
    $
    (1,517,645
    )
    
    $
    1,389,860
 16




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Operations
For the three months ended June 30, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    46,307
    
    
    $
    85,429
    
    
    $
    
    
    
    $
    
    
    
    $
    131,736Cost of goods sold
    
    
    20,883
    
    
    
    62,952
    
    
    
    
    
    
    
    
    
    
    
    83,835Gross profit
    
    
    25,424
    
    
    
    22,477
    
    
    
    
    
    
    
    
    
    
    
    47,901Selling, general and
administrative expenses
    
    
    13,936
    
    
    
    9,130
    
    
    
    145
    
    
    
    
    
    
    
    23,211Business restructuring
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    82Operating income (loss)
    
    
    11,488
    
    
    
    13,265
    
    
    
    (145
    )
    
    
    
    
    
    
    24,608Other (income) expense, net
    
    
    (1,805
    )
    
    
    2,346
    
    
    
    23,795
    
    
    
    
    
    
    
    24,336Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (13,159
    )
    
    
    13,159
    
    
    
    Income (loss) before income taxes
    
    
    13,293
    
    
    
    10,919
    
    
    
    (10,781
    )
    
    
    (13,159
    )
    
    
    272Income taxes
    
    
    7,612
    
    
    
    3,441
    
    
    
    (9,730
    )
    
    
    
    
    
    
    1,323Net income (loss)
    
    $
    5,681
    
    
    $
    7,478
    
    
    $
    (1,051
    )
    
    $
    (13,159
    )
    
    $
    (1,051
    )
 Condensed Consolidating Statement of Operations
For the three months ended July 1, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    46,262
    
    
    $
    76,832
    
    
    $
    
    
    
    $
    
    
    
    $
    123,094Cost of goods sold
    
    
    19,483
    
    
    
    58,978
    
    
    
    
    
    
    
    
    
    
    
    78,461Gross profit
    
    
    26,779
    
    
    
    17,854
    
    
    
    
    
    
    
    
    
    
    
    44,633Selling, general and
administrative expenses
    
    
    13,080
    
    
    
    8,860
    
    
    
    78
    
    
    
    
    
    
    
    22,018Business restructuring
    
    
    
    
    
    
    553
    
    
    
    
    
    
    
    
    
    
    
    553Operating income (loss)
    
    
    13,699
    
    
    
    8,441
    
    
    
    (78
    )
    
    
    
    
    
    
    22,062Other (income) expense, net
    
    
    (399
    )
    
    
    974
    
    
    
    24,369
    
    
    
    
    
    
    
    24,944Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (11,299
    )
    
    
    11,299
    
    
    
    Income (loss) before income taxes
    
    
    14,098
    
    
    
    7,467
    
    
    
    (13,148
    )
    
    
    (11,299
    )
    
    
    (2,882
    )Income taxes
    
    
    6,617
    
    
    
    3,649
    
    
    
    (11,774
    )
    
    
    
    
    
    
    (1,508
    )Net income (loss)
    
    $
    7,481
    
    
    $
    3,818
    
    
    $
    (1,374
    )
    
    $
    (11,299
    )
    
    $
    (1,374
    )
 17




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Operations
For the six months ended June 30, 2007
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    94,863
    
    
    $
    166,654
    
    
    $
    
    
    
    $
    
    
    
    $
    261,517Cost of goods sold
    
    
    41,711
    
    
    
    123,624
    
    
    
    
    
    
    
    
    
    
    
    165,335Gross profit
    
    
    53,152
    
    
    
    43,030
    
    
    
    
    
    
    
    
    
    
    
    96,182Selling, general and
administrative expenses
    
    
    29,348
    
    
    
    17,173
    
    
    
    334
    
    
    
    
    
    
    
    46,855Business restructuring
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135Operating income (loss)
    
    
    23,804
    
    
    
    25,722
    
    
    
    (334
    )
    
    
    
    
    
    
    49,192Other (income) expense, net
    
    
    (3,519
    )
    
    
    3,996
    
    
    
    47,369
    
    
    
    
    
    
    
    47,846Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (27,982
    )
    
    
    27,982
    
    
    
    Income (loss) before income taxes
    
    
    27,323
    
    
    
    21,726
    
    
    
    (19,721
    )
    
    
    (27,982
    )
    
    
    1,346Income taxes
    
    
    15,411
    
    
    
    5,656
    
    
    
    (20,780
    )
    
    
    
    
    
    
    287Net income
    
    $
    11,912
    
    
    $
    16,070
    
    
    $
    1,059
    
    
    $
    (27,982
    )
    
    $
    1,059
 Condensed Consolidating Statement of Operations
For the six months ended July 1, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    92,109
    
    
    $
    146,278
    
    
    $
    
    
    
    $
    
    
    
    $
    238,387Cost of goods sold
    
    
    41,941
    
    
    
    111,500
    
    
    
    
    
    
    
    
    
    
    
    153,441Gross profit
    
    
    50,168
    
    
    
    34,778
    
    
    
    
    
    
    
    
    
    
    
    84,946Selling, general and
administrative expenses
    
    
    26,677
    
    
    
    17,761
    
    
    
    78
    
    
    
    
    
    
    
    44,516Business restructuring
    
    
    
    
    
    
    1,325
    
    
    
    
    
    
    
    
    
    
    
    1,325Change in accounting principle
related to postemployment
benefits
    
    
    
    
    
    
    (2,593
    )
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Operating income (loss)
    
    
    23,491
    
    
    
    18,285
    
    
    
    (78
    )
    
    
    
    
    
    
    41,698Other (income) expense, net
    
    
    (1,035
    )
    
    
    1,939
    
    
    
    46,839
    
    
    
    
    
    
    
    47,743Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (24,711
    )
    
    
    24,711
    
    
    
    Income (loss) before income taxes
    
    
    24,526
    
    
    
    16,346
    
    
    
    (22,206
    )
    
    
    (24,711
    )
    
    
    (6,045
    )Income taxes
    
    
    13,243
    
    
    
    2,918
    
    
    
    (19,272
    )
    
    
    
    
    
    
    (3,111
    )Net income (loss)
    
    $
    11,283
    
    
    $
    13,428
    
    
    $
    (2,934
    )
    
    $
    (24,711
    )
    
    $
    (2,934
    )
 18




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating activities
    
    $
    20,905
    
    
    $
    25,284
    
    
    $
    13,964
    
    
    $
    (27,982
    )
    
    $
    32,171Investing activities:Purchases of property, plant and equipment
    
    
    (3,679
    )
    
    
    (6,298
    )
    
    
    
    
    
    
    
    
    
    
    (9,977
    )Purchase of 60% share in manufacturing
facility
    
    
    
    
    
    
    (5,475
    )
    
    
    
    
    
    
    
    
    
    
    (5,475
    )Net cash used in investing activities
    
    
    (3,679
    )
    
    
    (11,773
    )
    
    
    
    
    
    
    
    
    
    
    (15,452
    )Financing activities:Principal payments on debt
    
    
    (681
    )
    
    
    (30
    )
    
    
    (1,057
    )
    
    
    
    
    
    
    (1,768
    )Initial public offering costs
    
    
    
    
    
    
    
    
    
    
    (633
    )
    
    
    
    
    
    
    (633
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    (320
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    (34
    )Intercompany transactions, net
    
    
    (16,534
    )
    
    
    (10,044
    )
    
    
    (1,404
    )
    
    
    27,982
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (17,215
    )
    
    
    (10,074
    )
    
    
    (3,448
    )
    
    
    27,982
    
    
    
    (2,755
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (11
    )
    
    
    1,410
    
    
    
    
    
    
    
    
    
    
    
    1,399Net increase in cash and cash equivalents
    
    
    
    
    
    
    4,847
    
    
    
    10,516
    
    
    
    
    
    
    
    15,363Cash and cash equivalents at beginning of
period
    
    
    
    
    
    
    30,807
    
    
    
    23,905
    
    
    
    
    
    
    
    54,712Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    35,654
    
    
    $
    34,421
    
    
    $
    
    
    
    $
    70,075
 Condensed Consolidating Statement of Cash Flows
For the six months ended July 1, 2006
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating activities
    
    $
    21,794
    
    
    $
    10,781
    
    
    $
    14,541
    
    
    $
    (24,712
    )
    
    $
    22,404Investing activities:Purchases of property, plant and equipment
    
    
    (7,106
    )
    
    
    (4,022
    )
    
    
    
    
    
    
    
    
    
    
    (11,128
    )Net cash used in investing activities
    
    
    (7,106
    )
    
    
    (4,022
    )
    
    
    
    
    
    
    
    
    
    
    (11,128
    )Financing activities:Principal payments on debt
    
    
    (631
    )
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    (698
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    (15
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    399Intercompany transactions, net
    
    
    (14,019
    )
    
    
    (2,012
    )
    
    
    (8,681
    )
    
    
    24,712
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (14,650
    )
    
    
    (2,079
    )
    
    
    (8,297
    )
    
    
    24,712
    
    
    
    (314
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    47
    
    
    
    1,414
    
    
    
    
    
    
    
    
    
    
    
    1,461Net increase in cash and cash equivalents
    
    
    85
    
    
    
    6,094
    
    
    
    6,244
    
    
    
    
    
    
    
    12,423Cash and cash equivalents at beginning of
period
    
    
    20
    
    
    
    18,173
    
    
    
    9,867
    
    
    
    
    
    
    
    28,060Cash and cash equivalents at end of period
    
    $
    105
    
    
    $
    24,267
    
    
    $
    16,111
    
    
    $
    
    
    
    $
    40,483
 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our financial condition and results of operations should be read
together with our unaudited consolidated financial statements and the related notes included
elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December
30, 2006.
 Overview
          20




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##### Table of Contents



Initial Public Offering and Related Transactions
    
   Critical accounting policies
  Allowance for doubtful accounts
  Impairment of Intangibles and Goodwill
 Goodwill and Other Intangible Assets
 Pension and other postretirement benefits
  21




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##### Table of Contents



Environmental Matters
    Results of Operations
  Percentage of Net SalesThree Months Ended
    
    Three Months Ended($s in millions)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Net sales
    
    $
    131.7
    
    
    $
    123.1
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    47.9
    
    
    
    44.6
    
    
    
    36.4
    %
    
    
    36.2
    %Selling, general and
administrative expenses
    
    
    23.2
    
    
    
    22.0
    
    
    
    17.6
    %
    
    
    17.9
    %Business restructuring
    
    
    0.1
    
    
    
    0.5
    
    
    
    0.1
    %
    
    
    0.4
    %Operating income
    
    
    24.6
    
    
    
    22.1
    
    
    
    18.7
    %
    
    
    17.9
    %Interest expense, net
    
    
    23.8
    
    
    
    23.7
    
    
    
    18.1
    %
    
    
    19.2
    %Foreign currency and other
    
    
    0.5
    
    
    
    1.3
    
    
    
    0.4
    %
    
    
    1.0
    %24.3
    
    
    
    25.0
    
    
    
    18.5
    %
    
    
    20.2
    %Income (loss) before income taxes
    
    
    0.3
    
    
    
    (2.9
    )
    
    
    0.2
    %
    
    
    (2.3
    )%Income taxes
    
    
    1.3
    
    
    
    (1.5
    )
    
    
    1.0
    %
    
    
    (1.2
    )%Net loss
    
    $
    (1.0
    )
    
    $
    (1.4
    )
    
    
    (0.8
    )%
    
    
    (1.1
    )%
 22




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##### Table of Contents



Percentage of Net SalesSix Months Ended
    
    Six Months Ended($s in millions)
    
    June 30, 2007
    
    July 1, 2006
    
    June 30, 2007
    
    July 1, 2006Net sales
    
    $
    261.5
    
    
    $
    238.4
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    96.2
    
    
    
    84.9
    
    
    
    36.8
    %
    
    
    35.6
    %Selling, general and administrative
expenses
    
    
    46.9
    
    
    
    44.5
    
    
    
    17.9
    %
    
    
    18.7
    %Business restructuring
    
    
    0.1
    
    
    
    1.3
    
    
    
    0.1
    %
    
    
    0.5
    %Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    (1.1
    )%Operating income
    
    
    49.2
    
    
    
    41.7
    
    
    
    18.8
    %
    
    
    17.5
    %Interest expense, net
    
    
    47.5
    
    
    
    45.7
    
    
    
    18.2
    %
    
    
    19.2
    %Foreign currency and other
    
    
    0.4
    
    
    
    2.0
    
    
    
    0.1
    %
    
    
    0.8
    %47.9
    
    
    
    47.7
    
    
    
    18.3
    %
    
    
    20.0
    %Income (loss) before income taxes
    
    
    1.3
    
    
    
    (6.0
    )
    
    
    0.5
    %
    
    
    (2.5
    )%Income taxes
    
    
    0.3
    
    
    
    (3.1
    )
    
    
    0.1
    %
    
    
    (1.3
    )%Income (loss) before the cumulative
effect of a change in accounting
principle
    
    
    1.0
    
    
    
    (2.9
    )
    
    
    0.4
    %
    
    
    (1.2
    )%Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    %Net income (loss)
    
    $
    1.0
    
    
    $
    (2.7
    )
    
    
    0.4
    %
    
    
    (1.1
    )%
 Comparison of the three months ended June 30, 2007 with the three months ended July 1, 2006
 Net sales.
  Gross Profit.
 23




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##### Table of Contents



Selling, general and administrative expenses.
 Interest expense.
 Income taxes.
     Three Months EndedJune 30, 2007
    
    July 1, 2006U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    (3.7
    )
    
    
    8.9Mix of income in taxing jurisdictions
    
    
    (22.1
    )
    
    
    15.7Export sales excluded from taxable income
    
    
    
    
    
    
    6.1Other permanent differences and valuation allowances
    
    
    12.1
    
    
    
    (13.4
    )Effective tax rate prior to impact of the financing transactions
    
    
    21.3
    
    
    
    52.3Change in estimate of 2007 annualized income as a result of the
refinancing of the credit facility and purchase of the senior
discount notes
    
    
    465.1
    %
    
    
    Total effective tax rate
    
    
    486.4
    %
    
    
    52.3
    %
 APB 28 Interim Financial Reporting
 Comparison of the six months ended June 30, 2007 with the six months ended July 1, 2006
 Net sales.
 24




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##### Table of Contents



Gross Profit.
 Selling, general and administrative expenses.
 Interest expense.
 Income taxes.
    25




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##### Table of Contents



Six Months EndedJune 30, 2007
    
    July 1, 2006U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    (3.7
    )
    
    
    8.9Mix of income in taxing jurisdictions
    
    
    (22.1
    )
    
    
    15.7Export sales excluded from taxable income
    
    
    
    
    
    
    6.1Other permanent differences and valuation allowances
    
    
    12.1
    
    
    
    (14.2
    )Total effective tax rate
    
    
    21.3
    %
    
    
    51.5
    %
  Business Restructuring
  Balance at
    
    
    
    
    
    
    
    
    
    ForeignDecember 30,
    
    Restructuring
    
    Cash
    
    Currency
    
    Balance at(in millions)
    
    2006
    
    Charges
    
    Payments
    
    Translation
    
    June 30, 20072006 Restructuring Plan:Severance and benefit costs
    
    $
    11.5
    
    
    $
    
    
    
    $
    (5.6
    )
    
    $
    0.2
    
    
    $
    6.1Other
    
    
    5.7
    
    
    
    
    
    
    
    (3.3
    )
    
    
    0.1
    
    
    
    2.517.2
    
    
    
    
    
    
    
    (8.9
    )
    
    
    0.3
    
    
    
    8.62005 Restructuring Plan:Severance and benefit costs
    
    
    0.9
    
    
    
    0.1
    
    
    
    (0.5
    )
    
    
    
    
    
    
    0.52004 Restructuring Plan:Severance and benefit costs
    
    
    1.2
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    0.6Total
    
    $
    19.3
    
    
    $
    0.1
    
    
    $
    (10.0
    )
    
    $
    0.3
    
    
    $
    9.7
  2006 Restructuring Plan.
 2005 Restructuring Plan.
 26




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##### Table of Contents



2004 Restructuring Plan.
 Liquidity and Capital Resources
  Operating activities
  Investing activities
  Financing activities
  
 27




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##### Table of Contents



Twelve Months Ended(in millions)
    
    June 30, 2007Net loss
    
    $
    (25.8
    )Add:Depreciation
    
    
    37.8Amortization
    
    
    17.8Interest expense, net
    
    
    94.0Income taxes
    
    
    (19.7
    )Stock compensation expense
    
    
    0.8Foreign currency loss
    
    
    2.1Loss on disposal of property, plant and equipment
    
    
    1.6Asset impairment
    
    
    17.5Business restructuring
    
    
    17.8Non-recurring charges
    
    
    1.2Other non-cash charges
    
    
    0.9Adjusted EBITDA
    
    $
    146.0
  Twelve MonthsEnded(in millions)
    
    June 30, 2007Indebtedness (1)
    
    $
    337.6Adjusted EBITDA
    
    
    146.0Actual leverage ratio
    
    
    2.31x
  (1)
    
    Calculated as the sum of outstanding borrowings under the new term loan facility at July 3,
2007 (the date of the refinancing) plus the capital lease obligation of $5.4 million at June
30, 2007, less the amount of cash on hand at June 30, 2007 (not to exceed $50.0 million).  Period
    
    RatioJuly 3, 2007 through and including June 28, 2008
    
    
    3.25 to 1.00Thereafter
    
    
    3.00 to 1.00
   28




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##### Table of Contents



Foreign Operations
  Environmental matters
   29




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##### Table of Contents



Off-Balance Sheet Arrangements
  New Accounting Standards
 Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early
Retirement Arrangements) Employers
Accounting for Postretirement Benefits
 Share-Based Payment Accounting for Stock Based Compensation
 30




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##### Table of Contents



Fair Value Measurement
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 The Fair Value Option for Financial Assets and
Financial Liabilities
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Currency risk
  31




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##### Table of Contents



June 30, 2007
    
    July 1, 2006Period end rate
    
    
    1.3475
    
    
    
    1.2721Period average rate for the three months ended
    
    
    1.3488
    
    
    
    1.2561Period average rate for the six months ended
    
    
    1.3291
    
    
    
    1.2295
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 32




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##### Table of Contents



SIGNATURES
  Date: August 13, 2007
    POLYPORE INTERNATIONAL, INC.
(Registrant)By:
    /s/  Robert B. TothRobert B. TothPresident and Chief Executive Officer
(principal executive officer)By:
    /s/ Lynn AmosLynn AmosChief Financial Officer
(principal financial officer and principal
accounting officer)