##### 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 28, 2008
 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 
Incorporation or Organization)
    
    (IRS Employer
Identification No.)11430 North Community House Road, Suite 350
Charlotte, North Carolina
    
    28277(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 587-8409
 þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



Polypore International, Inc.
Index to Quarterly Report on Form 10-Q
For the Three Months Ended June 28, 2008
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    28Item 6.
    
    Exhibits
    
    
    28SIGNATURESExhibit 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 failure to effectively integrate newly acquired operations;
    
    the adverse impact on our financial condition of past restructuring activities;
    
    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 28, 2008(in thousands, except share data)
    
    (unaudited)
    
    December 29, 2007*AssetsCurrent assets:Cash and cash equivalents
    
    $
    56,076
    
    
    $
    54,934Accounts receivable, net
    
    
    126,827
    
    
    
    115,619Inventories
    
    
    73,624
    
    
    
    64,329Deferred income taxes
    
    
    1,390
    
    
    
    1,808Prepaid and other
    
    
    15,753
    
    
    
    12,665Total current assets
    
    
    273,670
    
    
    
    249,355Property, plant and equipment, net
    
    
    481,787
    
    
    
    401,284Goodwill
    
    
    601,452
    
    
    
    568,784Intangibles and loan acquisition costs, net
    
    
    198,518
    
    
    
    187,861Environmental indemnification receivable
    
    
    20,212
    
    
    
    15,640Other
    
    
    7,088
    
    
    
    6,119Total assets
    
    $
    1,582,727
    
    
    $
    1,429,043Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    34,361
    
    
    $
    33,795Accrued liabilities
    
    
    52,538
    
    
    
    50,759Income taxes payable
    
    
    196
    
    
    
    424Current portion of debt
    
    
    3,780
    
    
    
    4,549Current portion of capital lease obligation
    
    
    1,465
    
    
    
    1,435Total current liabilities
    
    
    92,340
    
    
    
    90,962Debt, less current portion
    
    
    832,683
    
    
    
    813,536Capital lease obligation, less current portion
    
    
    2,579
    
    
    
    3,319Pension and postretirement benefits
    
    
    72,675
    
    
    
    65,779Postemployment benefits
    
    
    3,320
    
    
    
    3,673Environmental reserve, less current portion
    
    
    24,256
    
    
    
    22,627Deferred income taxes
    
    
    95,737
    
    
    
    74,833Other
    
    
    24,868
    
    
    
    18,983Commitments and contingenciesShareholders equity:Preferred stock  15,000,000 shares authorized, zero issued and
outstanding
    
    
    
    
    
    
    Common stock, $.01 par value  200,000,000 shares authorized,
44,312,793 and 40,326,537 issued and outstanding at
June 28, 2008 and December 29, 2007, respectively
    
    
    443
    
    
    
    403Paid-in capital
    
    
    476,980
    
    
    
    390,337Retained deficit
    
    
    (27,398
    )
    
    
    (51,484
    )Accumulated other comprehensive loss
    
    
    (15,756
    )
    
    
    (3,925
    )434,269
    
    
    
    335,331Total liabilities and shareholders equity
    
    $
    1,582,727
    
    
    $
    1,429,043
 
 *
    
    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 EndedJune 28,
    
    June 30,
    
    June 28,
    
    June 30,(in thousands, except share data)
    
    2008
    
    2007
    
    2008
    
    2007Net sales
    
    $
    164,665
    
    
    $
    131,063
    
    
    $
    309,994
    
    
    $
    260,099Cost of goods sold
    
    
    105,470
    
    
    
    83,288
    
    
    
    195,839
    
    
    
    164,178Business interruption insurance recovery
    
    
    (1,900
    )
    
    
    
    
    
    
    (2,400
    )
    
    
    Gross profit
    
    
    61,095
    
    
    
    47,775
    
    
    
    116,555
    
    
    
    95,921Selling, general and administrative expenses
    
    
    29,747
    
    
    
    23,102
    
    
    
    55,065
    
    
    
    46,637Business restructuring
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    135Operating income
    
    
    31,348
    
    
    
    24,591
    
    
    
    61,490
    
    
    
    49,149Other (income) expense:Interest expense, net
    
    
    16,083
    
    
    
    23,829
    
    
    
    32,023
    
    
    
    47,472Foreign currency and other
    
    
    (546
    )
    
    
    507
    
    
    
    (643
    )
    
    
    37415,537
    
    
    
    24,336
    
    
    
    31,380
    
    
    
    47,846Income from continuing operations before
income taxes
    
    
    15,811
    
    
    
    255
    
    
    
    30,110
    
    
    
    1,303Income taxes
    
    
    4,637
    
    
    
    1,317
    
    
    
    8,384
    
    
    
    271Income (loss) from continuing operations
    
    
    11,174
    
    
    
    (1,062
    )
    
    
    21,726
    
    
    
    1,032Income from discontinued operations
    
    
    
    
    
    
    11
    
    
    
    2,360
    
    
    
    27Net income (loss)
    
    $
    11,174
    
    
    $
    (1,051
    )
    
    $
    24,086
    
    
    $
    1,059Net income (loss) per share  basic:Continuing operations
    
    $
    0.27
    
    
    $
    (0.04
    )
    
    $
    0.53
    
    
    $
    0.04Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.06
    
    
    
    Net income (loss) per share
    
    $
    0.27
    
    
    $
    (0.04
    )
    
    $
    0.59
    
    
    
    0.04Net income (loss) per share diluted:Continuing operations
    
    $
    0.26
    
    
    $
    (0.04
    )
    
    $
    0.53
    
    
    $
    0.04Discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.05
    
    
    
    Net income (loss) per share
    
    $
    0.26
    
    
    $
    (0.04
    )
    
    $
    0.58
    
    
    
    0.04Weighted average shares outstanding  basic
    
    
    41,946,581
    
    
    
    25,801,434
    
    
    
    41,135,800
    
    
    
    25,572,001Effect of dilutive stock options
    
    
    248,319
    
    
    
    
    
    
    
    241,157
    
    
    
    178,577Weighted average shares outstanding  diluted
    
    
    42,194,900
    
    
    
    25,801,434
    
    
    
    41,376,957
    
    
    
    25,750,578
 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 28, 2008
    
    June 30, 2007Operating activities:Net income
    
    $
    24,086
    
    
    $
    1,059Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense
    
    
    18,160
    
    
    
    15,562Amortization expense
    
    
    9,281
    
    
    
    8,924Amortization of loan acquisition costs
    
    
    1,294
    
    
    
    1,499Amortization of debt discount
    
    
    
    
    
    
    13,170Stock-based compensation
    
    
    533
    
    
    
    296Loss on disposal of property, plant and equipment
    
    
    503
    
    
    
    1,106Foreign currency (gain) loss
    
    
    (1,427
    )
    
    
    498Deferred income taxes
    
    
    1,130
    
    
    
    (6,027
    )Business restructuring
    
    
    
    
    
    
    135Gain on sale of synthetic paper business
    
    
    (3,774
    )
    
    
    Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    661
    
    
    
    609Inventories
    
    
    (3,271
    )
    
    
    3,701Prepaid and other current assets
    
    
    (808
    )
    
    
    447Accounts payable and accrued liabilities
    
    
    (2,661
    )
    
    
    (5,090
    )Income taxes payable
    
    
    (74
    )
    
    
    (1,807
    )Other, net
    
    
    (838
    )
    
    
    (1,911
    )Net cash provided by operating activities
    
    
    42,795
    
    
    
    32,171Investing activities:Acquisitions, net of cash acquired
    
    
    (86,783
    )
    
    
    (5,475
    )Purchases of property, plant and equipment
    
    
    (28,309
    )
    
    
    (9,977
    )Proceeds from sale of synthetic paper business
    
    
    4,000
    
    
    
    Net cash used in investing activities
    
    
    (111,092
    )
    
    
    (15,452
    )Financing activities:Proceeds from issuance of common stock, net of underwriting fees and other offering related costs
    
    
    84,949
    
    
    
    Proceeds from revolving credit facility
    
    
    46,000
    
    
    
    Payments on revolving credit facility
    
    
    (46,000
    )
    
    
    Principal payments on debt
    
    
    (17,204
    )
    
    
    (1,768
    )Proceeds from stock option exercises
    
    
    1,200
    
    
    
    Initial public offering costs
    
    
    
    
    
    
    (633
    )Repurchase of common stock
    
    
    
    
    
    
    (320
    )Loan acquisition costs
    
    
    
    
    
    
    (34
    )Net cash provided by (used in) financing activities
    
    
    68,945
    
    
    
    (2,755
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    494
    
    
    
    1,399Net increase in cash and cash equivalents
    
    
    1,142
    
    
    
    15,363Cash and cash equivalents at beginning of period
    
    
    54,934
    
    
    
    54,712Cash and cash equivalents at end of the period
    
    $
    56,076
    
    
    $
    70,075
 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
 Disclosures about Derivative Instruments and
Hedging Activities Accounting for Derivative
Instruments and Hedging Activities
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 3. Issuance of Common Stock
   4. Inventories
  (in thousands)
    
    June 28, 2008
    
    December 29, 2007Raw materials
    
    $
    28,805
    
    
    $
    23,545Work-in-process
    
    
    12,805
    
    
    
    11,544Finished goods
    
    
    32,014
    
    
    
    29,240Total
    
    $
    73,624
    
    
    $
    64,329
 7




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 5. Debt
  (in thousands)
    
    June 28, 2008
    
    December 29, 2007Senior credit facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    375,049
    
    
    
    373,1228.75% senior subordinated notes
    
    
    461,265
    
    
    
    444,825Other
    
    
    149
    
    
    
    138836,463
    
    
    
    818,085Less current maturities
    
    
    3,780
    
    
    
    4,549Long-term debt
    
    $
    832,683
    
    
    $
    813,536
 Accounting for Derivative Instruments and Hedging Activities .
 6. Employee Benefit Plans
  Pension PlansThree Months Ended
    
    Six Months Ended(in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Service cost
    
    $
    606
    
    
    $
    815
    
    
    $
    1,199
    
    
    $
    1,601Interest cost
    
    
    1,079
    
    
    
    842
    
    
    
    2,136
    
    
    
    1,654Expected return on plan assets
    
    
    (289
    )
    
    
    (245
    )
    
    
    (571
    )
    
    
    (481
    )Amortization of prior service cost
    
    
    (21
    )
    
    
    
    
    
    
    (42
    )
    
    
    Recognized net actuarial loss
    
    
    114
    
    
    
    94
    
    
    
    224
    
    
    
    184Net periodic benefit cost
    
    $
    1,489
    
    
    $
    1,506
    
    
    $
    2,946
    
    
    $
    2,958
 Other Postretirement BenefitsThree Months Ended
    
    Six Months Ended(in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Service cost
    
    $
    17
    
    
    $
    8
    
    
    $
    34
    
    
    $
    16Interest cost
    
    
    34
    
    
    
    28
    
    
    
    68
    
    
    
    56Recognized net actuarial loss
    
    
    4
    
    
    
    
    
    
    
    8
    
    
    
    Net periodic benefit cost
    
    $
    55
    
    
    $
    36
    
    
    $
    110
    
    
    $
    72
 8




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 7. Environmental Matters
     8. Business Restructuring
 2006 Restructuring Plan
  2005 Restructuring Plan
  9




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Balance at
    
    
    
    
    
    
    
    
    
    ForeignDecember 29,
    
    Restructuring
    
    Cash
    
    Currency
    
    Balance at(in thousands)
    
    2007
    
    Charges
    
    Payments
    
    Translation
    
    June 28, 20082006 Restructuring Plan:Severance and benefit costs
    
    $
    3,548
    
    
    $
    
    
    
    $
    (365
    )
    
    $
    250
    
    
    $
    3,433Other
    
    
    1,288
    
    
    
    
    
    
    
    (404
    )
    
    
    81
    
    
    
    9654,836
    
    
    
    
    
    
    
    (769
    )
    
    
    331
    
    
    
    4,3982005 Restructuring Plan:Severance and benefit costs
    
    
    404
    
    
    
    
    
    
    
    (56
    )
    
    
    29
    
    
    
    377Total
    
    $
    5,240
    
    
    $
    
    
    
    $
    (825
    )
    
    $
    360
    
    
    $
    4,775
 9. Income Taxes
  10. Acquisitions
      Business Combinations Goodwill
and Other Intangible Assets
 10




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 (in thousands)Current assets
    
    $
    15,836Property, plant and equipment
    
    
    58,863Intangible assets
    
    
    19,494Goodwill
    
    
    32,668Total assets acquired
    
    
    126,861Current liabilities
    
    
    7,380Debt assumed
    
    
    14,235Deferred taxes and other liabilities
    
    
    18,463Total liabilities assumed
    
    
    40,078Net assets acquired
    
    $
    86,783
   11. Business Interruption Insurance Recovery
  12. Comprehensive Income (Loss)
  Three Months Ended
    
    Six Months Ended(in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Net income (loss)
    
    $
    11,174
    
    
    $
    (1,051
    )
    
    $
    24,086
    
    
    $
    1,059Foreign currency
translation adjustment,
net of income taxes
    
    
    (3,872
    )
    
    
    789
    
    
    
    (11,044
    )
    
    
    4,673Net actuarial gain (loss)
and prior service credit,
net of income taxes
    
    
    8
    
    
    
    (54
    )
    
    
    (258
    )
    
    
    (114
    )Unrealized gain (loss) on
interest rate swap
agreements, net of income
taxes
    
    
    1,849
    
    
    
    
    
    
    
    (529
    )
    
    
    Comprehensive income (loss)
    
    $
    9,159
    
    
    $
    (316
    )
    
    $
    12,255
    
    
    $
    5,618
 13. Related Party Transactions
  11




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 14. Segment Information
    Three Months Ended
    
    Six Months Ended(in thousands)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Net sales to external customers (by major product group):Lead-acid battery separators
    
    $
    97,111
    
    
    $
    71,453
    
    
    $
    177,702
    
    
    $
    143,299Lithium battery separators
    
    
    24,838
    
    
    
    20,346
    
    
    
    48,209
    
    
    
    41,653Energy storage
    
    
    121,949
    
    
    
    91,799
    
    
    
    225,911
    
    
    
    184,952Healthcare
    
    
    27,364
    
    
    
    26,165
    
    
    
    54,663
    
    
    
    49,358Filtration and specialty
    
    
    15,352
    
    
    
    13,099
    
    
    
    29,420
    
    
    
    25,789Separations media
    
    
    42,716
    
    
    
    39,264
    
    
    
    84,083
    
    
    
    75,147Total net sales to external customers
    
    $
    164,665
    
    
    $
    131,063
    
    
    $
    309,994
    
    
    $
    260,099Operating income:Energy storage
    
    $
    24,047
    
    
    $
    19,871
    
    
    $
    47,669
    
    
    $
    39,721Separations media
    
    
    7,567
    
    
    
    4,805
    
    
    
    14,373
    
    
    
    9,613Corporate
    
    
    (266
    )
    
    
    (3
    )
    
    
    (552
    )
    
    
    (50
    )Segment operating income
    
    
    31,348
    
    
    
    24,673
    
    
    
    61,490
    
    
    
    49,284Business restructuring
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    135Total operating income
    
    
    31,348
    
    
    
    24,591
    
    
    
    61,490
    
    
    
    49,149Reconciling items:Interest expense, net
    
    
    16,083
    
    
    
    23,829
    
    
    
    32,023
    
    
    
    47,472Foreign currency and other
    
    
    (546
    )
    
    
    507
    
    
    
    (643
    )
    
    
    374Income from continuing operations before income taxes
    
    $
    15,811
    
    
    $
    255
    
    
    $
    30,110
    
    
    $
    1,303Depreciation and amortization:Energy storage
    
    $
    9,552
    
    
    $
    8,178
    
    
    $
    18,160
    
    
    $
    16,363Separations media
    
    
    4,759
    
    
    
    4,195
    
    
    
    9,281
    
    
    
    8,123Total depreciation and amortization
    
    $
    14,311
    
    
    $
    12,373
    
    
    $
    27,441
    
    
    $
    24,486
 15.
Subsequent Event
  16. Discontinued Operations
  12




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Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 17. Financial Statements of Guarantors
   Condensed Consolidating Balance Sheet
As of June 28, 2008
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    15,856
    
    
    $
    40,220
    
    
    $
    
    
    
    $
    56,076Accounts receivable, net
    
    
    44,447
    
    
    
    82,380
    
    
    
    
    
    
    
    
    
    
    
    126,827Inventories
    
    
    24,253
    
    
    
    49,371
    
    
    
    
    
    
    
    
    
    
    
    73,624Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,390
    
    
    
    
    
    
    
    1,390Prepaid and other
    
    
    5,109
    
    
    
    13,953
    
    
    
    (3,309
    )
    
    
    
    
    
    
    15,753Total current assets
    
    
    73,809
    
    
    
    161,560
    
    
    
    38,301
    
    
    
    
    
    
    
    273,670Due from affiliates
    
    
    299,782
    
    
    
    381,154
    
    
    
    305,940
    
    
    
    (986,876
    )
    
    
    Investment in subsidiaries
    
    
    212,144
    
    
    
    295,640
    
    
    
    347,066
    
    
    
    (854,850
    )
    
    
    Property, plant and equipment, net
    
    
    160,859
    
    
    
    320,928
    
    
    
    
    
    
    
    
    
    
    
    481,787Goodwill
    
    
    
    
    
    
    
    
    
    
    601,452
    
    
    
    
    
    
    
    601,452Intangibles and loan acquisition
costs, net
    
    
    38
    
    
    
    
    
    
    
    198,480
    
    
    
    
    
    
    
    198,518Other
    
    
    5,619
    
    
    
    21,681
    
    
    
    
    
    
    
    
    
    
    
    27,300Total assets
    
    $
    752,251
    
    
    $
    1,180,963
    
    
    $
    1,491,239
    
    
    $
    (1,841,726
    )
    
    $
    1,582,727Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    35,708
    
    
    $
    47,278
    
    
    $
    3,913
    
    
    $
    
    
    
    $
    86,899Income taxes payable
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    196Current portion of debt
    
    
    
    
    
    
    551
    
    
    
    3,229
    
    
    
    
    
    
    
    3,780Current portion of capital lease
obligation
    
    
    1,465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,465Total current liabilities
    
    
    37,173
    
    
    
    47,829
    
    
    
    7,338
    
    
    
    
    
    
    
    92,340Due to affiliates
    
    
    375,684
    
    
    
    343,943
    
    
    
    267,249
    
    
    
    (986,876
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    54,175
    
    
    
    778,508
    
    
    
    
    
    
    
    832,683Capital lease obligation, less
current portion
    
    
    2,579
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,579Pension and postretirement
benefits, less current portion
    
    
    2,670
    
    
    
    70,005
    
    
    
    
    
    
    
    
    
    
    
    72,675Postemployment benefits
    
    
    
    
    
    
    3,320
    
    
    
    
    
    
    
    
    
    
    
    3,320Environmental reserve, less
current portion
    
    
    
    
    
    
    24,256
    
    
    
    
    
    
    
    
    
    
    
    24,256Deferred income taxes and other
    
    
    66,247
    
    
    
    50,483
    
    
    
    3,875
    
    
    
    
    
    
    
    120,605Shareholders equity
    
    
    267,898
    
    
    
    586,952
    
    
    
    434,269
    
    
    
    (854,850
    )
    
    
    434,269Total liabilities and
shareholders equity
    
    $
    752,251
    
    
    $
    1,180,963
    
    
    $
    1,491,239
    
    
    $
    (1,841,726
    )
    
    $
    1,582,727
 13




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##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Condensed Consolidating Balance Sheet
As of December 29, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    40,055
    
    
    $
    14,879
    
    
    $
    
    
    
    $
    54,934Accounts receivable, net
    
    
    36,116
    
    
    
    79,503
    
    
    
    
    
    
    
    
    
    
    
    115,619Inventories
    
    
    20,360
    
    
    
    43,969
    
    
    
    
    
    
    
    
    
    
    
    64,329Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,808
    
    
    
    
    
    
    
    1,808Prepaid and other
    
    
    2,578
    
    
    
    10,242
    
    
    
    (155
    )
    
    
    
    
    
    
    12,665Total current assets
    
    
    59,054
    
    
    
    173,769
    
    
    
    16,532
    
    
    
    
    
    
    
    249,355Due from affiliates
    
    
    237,033
    
    
    
    324,314
    
    
    
    287,491
    
    
    
    (848,838
    )
    
    
    Investment in subsidiaries
    
    
    224,443
    
    
    
    283,721
    
    
    
    270,952
    
    
    
    (779,116
    )
    
    
    Property, plant and equipment, net
    
    
    111,379
    
    
    
    289,905
    
    
    
    
    
    
    
    
    
    
    
    401,284Goodwill
    
    
    
    
    
    
    1,240
    
    
    
    567,544
    
    
    
    
    
    
    
    568,784Intangibles and loan acquisition
costs, net
    
    
    44
    
    
    
    
    
    
    
    187,817
    
    
    
    
    
    
    
    187,861Other
    
    
    1,552
    
    
    
    17,659
    
    
    
    2,548
    
    
    
    
    
    
    
    21,759Total assets
    
    $
    633,505
    
    
    $
    1,090,608
    
    
    $
    1,332,884
    
    
    $
    (1,627,954
    )
    
    $
    1,429,043Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    30,548
    
    
    $
    47,206
    
    
    $
    6,800
    
    
    $
    
    
    
    $
    84,554Income taxes payable
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    424Current portion of debt
    
    
    
    
    
    
    513
    
    
    
    4,036
    
    
    
    
    
    
    
    4,549Current portion of capital lease
obligation
    
    
    1,435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,435Total current liabilities
    
    
    31,983
    
    
    
    47,719
    
    
    
    11,260
    
    
    
    
    
    
    
    90,962Due to affiliates
    
    
    315,847
    
    
    
    310,017
    
    
    
    222,974
    
    
    
    (848,838
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    50,661
    
    
    
    762,875
    
    
    
    
    
    
    
    813,536Capital lease obligation, less
current portion
    
    
    3,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,319Pension and postretirement
benefits, less current portion
    
    
    2,343
    
    
    
    63,436
    
    
    
    
    
    
    
    
    
    
    
    65,779Postemployment benefits
    
    
    
    
    
    
    3,673
    
    
    
    
    
    
    
    
    
    
    
    3,673Environmental reserve, less
current portion
    
    
    
    
    
    
    22,627
    
    
    
    
    
    
    
    
    
    
    
    22,627Deferred income taxes and other
    
    
    70,954
    
    
    
    22,418
    
    
    
    444
    
    
    
    
    
    
    
    93,816Shareholders equity
    
    
    209,059
    
    
    
    570,057
    
    
    
    335,331
    
    
    
    (779,116
    )
    
    
    335,331Total liabilities and
shareholders equity
    
    $
    633,505
    
    
    $
    1,090,608
    
    
    $
    1,332,884
    
    
    $
    (1,627,954
    )
    
    $
    1,429,043
 14




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Condensed Consolidating Statement of Income
For the three months ended June 28, 2008
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    61,550
    
    
    $
    103,115
    
    
    $
    
    
    
    $
    
    
    
    $
    164,665Cost of goods sold
    
    
    29,687
    
    
    
    75,783
    
    
    
    
    
    
    
    
    
    
    
    105,470Business interruption insurance
recovery
    
    
    (1,900
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )Gross profit
    
    
    33,763
    
    
    
    27,332
    
    
    
    
    
    
    
    
    
    
    
    61,095Selling, general and
administrative expenses
    
    
    18,798
    
    
    
    10,662
    
    
    
    287
    
    
    
    
    
    
    
    29,747Operating income (loss)
    
    
    14,965
    
    
    
    16,670
    
    
    
    (287
    )
    
    
    
    
    
    
    31,348Interest expense and other
    
    
    (2,221
    )
    
    
    3,177
    
    
    
    14,581
    
    
    
    
    
    
    
    15,537Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (17,365
    )
    
    
    17,365
    
    
    
    Income from continuing operations
before income taxes
    
    
    17,186
    
    
    
    13,493
    
    
    
    2,496
    
    
    
    (17,365
    )
    
    
    15,811Income taxes
    
    
    8,821
    
    
    
    4,493
    
    
    
    (8,677
    )
    
    
    
    
    
    
    4,637Income from continuing operations
    
    $
    8,365
    
    
    $
    9,000
    
    
    $
    11,174
    
    
    $
    (17,365
    )
    
    $
    11,174
 Condensed Consolidating Statement of Income
For the three months ended June 30, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    45,634
    
    
    $
    85,429
    
    
    $
    
    
    
    $
    
    
    
    $
    131,063Cost of goods sold
    
    
    20,336
    
    
    
    62,952
    
    
    
    
    
    
    
    
    
    
    
    83,288Gross profit
    
    
    25,298
    
    
    
    22,477
    
    
    
    
    
    
    
    
    
    
    
    47,775Selling, general and
administrative expenses
    
    
    13,827
    
    
    
    9,130
    
    
    
    145
    
    
    
    
    
    
    
    23,102Business restructuring
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    82Operating income (loss)
    
    
    11,471
    
    
    
    13,265
    
    
    
    (145
    )
    
    
    
    
    
    
    24,591Interest expense and other
    
    
    (1,805
    )
    
    
    2,346
    
    
    
    23,795
    
    
    
    
    
    
    
    24,336Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (13,148
    )
    
    
    13,148
    
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    13,276
    
    
    
    10,919
    
    
    
    (10,792
    )
    
    
    (13,148
    )
    
    
    255Income taxes
    
    
    7,606
    
    
    
    3,441
    
    
    
    (9,730
    )
    
    
    
    
    
    
    1,317Income (loss) from continuing
operations
    
    $
    5,670
    
    
    $
    7,478
    
    
    $
    (1,062
    )
    
    $
    (13,148
    )
    
    $
    (1,062
    )
 15




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Condensed Consolidating Statement of Income
For the six months ended June 28, 2008
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    115,434
    
    
    $
    194,560
    
    
    $
    
    
    
    $
    
    
    
    $
    309,994Cost of goods sold
    
    
    54,140
    
    
    
    141,699
    
    
    
    
    
    
    
    
    
    
    
    195,839Business interruption insurance
recovery
    
    
    (2,400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,400
    )Gross profit
    
    
    63,694
    
    
    
    52,861
    
    
    
    
    
    
    
    
    
    
    
    116,555Selling, general and
administrative expenses
    
    
    34,515
    
    
    
    19,997
    
    
    
    553
    
    
    
    
    
    
    
    55,065Operating income (loss)
    
    
    29,179
    
    
    
    32,864
    
    
    
    (553
    )
    
    
    
    
    
    
    61,490Interest expense and other
    
    
    (2,796
    )
    
    
    5,175
    
    
    
    29,001
    
    
    
    
    
    
    
    31,380Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (36,131
    )
    
    
    36,131
    
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    31,975
    
    
    
    27,689
    
    
    
    6,577
    
    
    
    (36,131
    )
    
    
    30,110Income taxes
    
    
    14,832
    
    
    
    8,701
    
    
    
    (15,149
    )
    
    
    
    
    
    
    8,384Income from continuing operations
    
    $
    17,143
    
    
    $
    18,988
    
    
    $
    21,726
    
    
    $
    (36,131
    )
    
    $
    21,726
 Condensed Consolidating Statement of Income
For the six months ended June 30, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    93,445
    
    
    $
    166,654
    
    
    $
    
    
    
    $
    
    
    
    $
    260,099Cost of goods sold
    
    
    40,554
    
    
    
    123,624
    
    
    
    
    
    
    
    
    
    
    
    164,178Gross profit
    
    
    52,891
    
    
    
    43,030
    
    
    
    
    
    
    
    
    
    
    
    95,921Selling, general and
administrative expenses
    
    
    29,130
    
    
    
    17,173
    
    
    
    334
    
    
    
    
    
    
    
    46,637Business restructuring
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135Operating income (loss)
    
    
    23,761
    
    
    
    25,722
    
    
    
    (334
    )
    
    
    
    
    
    
    49,149Interest expense and other
    
    
    (3,519
    )
    
    
    3,996
    
    
    
    47,369
    
    
    
    
    
    
    
    47,846Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (27,955
    )
    
    
    27,955
    
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    27,280
    
    
    
    21,726
    
    
    
    (19,748
    )
    
    
    (27,955
    )
    
    
    1,303Income taxes
    
    
    15,395
    
    
    
    5,656
    
    
    
    (20,780
    )
    
    
    
    
    
    
    271Income from continuing operations
    
    $
    11,885
    
    
    $
    16,070
    
    
    $
    1,032
    
    
    $
    (27,955
    )
    
    $
    1,032
 16




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Condensed Consolidating Statement of Cash Flows
For the six months ended June 28, 2008
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating activities
    
    $
    30,823
    
    
    $
    33,998
    
    
    $
    24,102
    
    
    $
    (46,128
    )
    
    $
    42,795Investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (86,783
    )
    
    
    
    
    
    
    (86,783
    )Purchases of property, plant and equipment
    
    
    (15,933
    )
    
    
    (12,376
    )
    
    
    
    
    
    
    
    
    
    
    (28,309
    )Proceeds from sale of synthetic paper business
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Net cash used in investing activities
    
    
    (11,933
    )
    
    
    (12,376
    )
    
    
    (86,783
    )
    
    
    
    
    
    
    (111,092
    )Financing activities:Proceeds from issuance of common stock, net of
underwriting fees and other offering related
costs
    
    
    
    
    
    
    
    
    
    
    84,949
    
    
    
    
    
    
    
    84,949Principal payments on debt
    
    
    (5,510
    )
    
    
    (10,078
    )
    
    
    (1,616
    )
    
    
    
    
    
    
    (17,204
    )Proceeds from stock option exercises
    
    
    
    
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    1,200Intercompany transactions, net
    
    
    (13,830
    )
    
    
    (35,787
    )
    
    
    3,489
    
    
    
    46,128
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (19,340
    )
    
    
    (45,865
    )
    
    
    88,022
    
    
    
    46,128
    
    
    
    68,945Effect of exchange rate changes on cash and
cash equivalents
    
    
    450
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    494Net increase (decrease) in cash and cash
equivalents
    
    
    
    
    
    
    (24,199
    )
    
    
    25,341
    
    
    
    
    
    
    
    1,142Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    40,055
    
    
    
    14,879
    
    
    
    
    
    
    
    54,934Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    15,856
    
    
    $
    40,220
    
    
    $
    
    
    
    $
    56,076
 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:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (5,475
    )
    
    
    
    
    
    
    
    
    
    
    (5,475
    )Purchases of property, plant and equipment
    
    
    (3,679
    )
    
    
    (6,298
    )
    
    
    
    
    
    
    
    
    
    
    (9,977
    )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 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
 17




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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
29, 2007 and Registration Statement No. 333-150754 on Form S-1 .
 Overview
      e.g.,
    18




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##### Table of Contents



Issuance of Common Stock and Related Transactions
   
  Recent
Developments
  Critical accounting policies
  19




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##### Table of Contents



Results of Operations
  Percentage of SalesThree Months Ended
    
    Three Months Ended($s in millions)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Net sales
    
    $
    164.7
    
    
    $
    131.1
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    61.1
    
    
    
    47.8
    
    
    
    37.1
    %
    
    
    36.5
    %Selling, general and
administrative expenses
    
    
    29.7
    
    
    
    23.1
    
    
    
    18.1
    %
    
    
    17.6
    %Business restructuring
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    %Operating income
    
    
    31.4
    
    
    
    24.6
    
    
    
    19.0
    %
    
    
    18.8
    %Interest expense, net
    
    
    16.1
    
    
    
    23.8
    
    
    
    9.8
    %
    
    
    18.2
    %Foreign currency and other
    
    
    (0.5
    )
    
    
    0.6
    
    
    
    (0.3
    )%
    
    
    0.4
    %Income from continuing
operations before income
taxes
    
    
    15.8
    
    
    
    0.2
    
    
    
    9.6
    %
    
    
    0.2
    %Income taxes
    
    
    4.6
    
    
    
    1.3
    
    
    
    2.8
    %
    
    
    1.0
    %Income (loss) from
continuing operations
    
    
    11.2
    
    
    
    (1.1
    )
    
    
    6.8
    %
    
    
    (0.8
    )%Discontinued operations,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    11.2
    
    
    $
    (1.1
    )
    
    
    6.8
    %
    
    
    (0.8
    )%
 Percentage of Net SalesSix Months Ended
    
    Six Months Ended($s in millions)
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008
    
    June 30, 2007Net sales
    
    $
    310.0
    
    
    $
    260.1
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    116.6
    
    
    
    95.9
    
    
    
    37.6
    %
    
    
    36.9
    %Selling, general and
administrative expenses
    
    
    55.1
    
    
    
    46.6
    
    
    
    17.8
    %
    
    
    17.9
    %Business restructuring
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    %Operating income
    
    
    61.5
    
    
    
    49.2
    
    
    
    19.8
    %
    
    
    18.9
    %Interest expense, net
    
    
    32.0
    
    
    
    47.5
    
    
    
    10.3
    %
    
    
    18.3
    %Foreign currency and other
    
    
    (0.6
    )
    
    
    0.4
    
    
    
    (0.2
    )%
    
    
    0.1
    %Income from continuing
operations before income
taxes
    
    
    30.1
    
    
    
    1.3
    
    
    
    9.7
    %
    
    
    0.5
    %Income taxes
    
    
    8.4
    
    
    
    0.3
    
    
    
    2.7
    %
    
    
    0.1
    %Income from continuing
operations
    
    
    21.7
    
    
    
    1.0
    
    
    
    7.0
    %
    
    
    0.4
    %Discontinued operations,
net of income taxes
    
    
    2.4
    
    
    
    
    
    
    
    0.8
    %
    
    
    Net income
    
    $
    24.1
    
    
    $
    1.0
    
    
    
    7.8
    %
    
    
    0.4
    %
 20




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##### Table of Contents



Comparison of the three months ended June 28, 2008 with the three months ended June 30, 2007
 Net sales.
  Gross Profit.
 Selling, general and administrative expenses.
 Interest expense.
 Income taxes.
   21




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##### Table of Contents



Three Months EndedJune 28, 2008
    
    June 30, 2007U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    0.3
    
    
    
    (3.7
    )Mix of income in taxing jurisdictions
    
    
    (8.5
    )
    
    
    8.0Other permanent differences and valuation allowances
    
    
    2.5
    
    
    
    12.1Change in estimate of 2007 annualized income as a
result of the refinancing of the credit facility
and purchase of the senior discount notes
    
    
    
    
    
    
    465.1Total effective tax rate
    
    
    29.3
    %
    
    
    516.5
    %
 Comparison of the six months ended June 28, 2008 with the six months ended June 30, 2007
 Net sales.
  Gross Profit.
 Selling, general and administrative expenses.
 Interest expense.
 Income taxes.
  22




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##### Table of Contents



Six Months EndedJune 28, 2008
    
    June 30, 2007U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    .3
    
    
    
    (3.7
    )Mix of income in taxing jurisdictions
    
    
    (8.5
    )
    
    
    (22.6
    )Other permanent differences and valuation allowances
    
    
    1.0
    
    
    
    12.1Total effective tax rate
    
    
    27.8
    %
    
    
    20.8
    %
 Discontinued operations
 Business Restructuring
  Balance at
    
    Restructuring
    
    
    
    
    
    Foreign Currency
    
    Balance at June 28,(in millions)
    
    December 29, 2007
    
    Charges
    
    Cash Payments
    
    Translation
    
    20082006 Restructuring Plan:Severance and benefit costs
    
    $
    3.5
    
    
    $
    
    
    
    $
    (0.4
    )
    
    $
    0.3
    
    
    $
    3.4Other
    
    
    1.3
    
    
    
    
    
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    1.04.8
    
    
    
    
    
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    4.42005 Restructuring Plan:Severance and benefit costs
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4Total
    
    $
    5.2
    
    
    $
    
    
    
    $
    (0.8
    )
    
    $
    0.4
    
    
    $
    4.8
  2006 restructuring plan
 2005 restructuring plan
 23




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##### Table of Contents



Liquidity and Capital Resources
 Operating activities
  Investing activities
    Financing activities
  
    24




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##### Table of Contents



Last Twelve Months(in millions)
    
    Ended June 28, 2008Net income
    
    $
    23.6Add/Subtract:Depreciation and amortization
    
    
    51.8Interest expense, net
    
    
    65.5Income taxes
    
    
    (7.9
    )Stock-based compensation expense
    
    
    0.9Foreign currency loss
    
    
    1.0Loss on disposal of property, plant, and equipment
    
    
    0.6Business restructuring
    
    
    (1.0
    )Costs related to purchase of 10.50% senior discount notes
    
    
    30.1Write-off of loan acquisition costs associated with refinancing senior secured credit facility
    
    
    7.2Pro forma results for Microporous acquisition
    
    
    5.0Pro forma results for Yurie-Wide acquisition
    
    
    (1.8
    )Income from discontinued operations
    
    
    (2.4
    )Other non-cash or non-recurring charges
    
    
    1.1Adjusted EBITDA
    
    $
    173.7
  (in millions)Indebtedness (1)
    
    $
    329.1Adjusted EBITDA
    
    
    173.7Actual leverage ratio
    
    
    1.89x
 
 (1)
    
    Calculated as the sum of outstanding borrowings under the senior secured credit facilities
and the capital lease obligation, less the amount of cash on hand (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
      25




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##### Table of Contents



Foreign Operations
  Environmental matters
     Off-Balance Sheet Arrangements
  26




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##### Table of Contents



New Accounting Standards
 Disclosures about Derivative Instruments and
Hedging Activities Accounting for Derivative Instruments and Hedging Activities
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Currency risk
   June 28, 2008
    
    June 30, 2007Period end rate
    
    
    1.5751
    
    
    
    1.3475Period average rate for the three months ended
    
    
    1.5624
    
    
    
    1.3488Period average rate for the six months ended
    
    
    1.5299
    
    
    
    1.3291
  
 Item 4. Controls and Procedures
  27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
     
 Item 4. Submission of Matters to a Vote of Security Holders
   Nominees
    
    Votes For
    
    Votes WithheldMichael Graff
    
    
    33,485,051
    
    
    
    4,543,599W. Nicholas Howley
    
    
    37,634,389
    
    
    
    394,261
  Number of SharesFor
    
    
    37,791,783Against
    
    
    235,797Abstain
    
    
    1,070
 
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description10.1
    
    Amended and Restated Employment Agreement of Robert B. Toth, dated April 28, 2008 (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 1, 2008)31.1
    
    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
 28




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##### Table of Contents



SIGNATURES
  Date: August 7, 2008
    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)