UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|For the quarterly period ended March 29, 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.(Exact Name of Registrant as Specified in Its Charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

43-2049334(IRS Employer
Identification No.)11430 North Community House Road, Suite 350
Charlotte, North Carolina(Address of Principal Executive Offices)

28277(Zip Code)


(704) 587-8409(Registrant's Telephone Number, Including Area Code)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

There were 40,328,410 shares of the registrant's common stock outstanding as of May 2, 2008.



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Polypore International, Inc.      Index to quarterly report on Form 10-Q      for the three months ended March 29, 2008

PagePART I

FINANCIAL INFORMATIONItem 1.

Financial Statements

5Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

24Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34Item 4.

Controls and Procedures

35PART II

OTHER INFORMATIONItem 1.

Legal Proceedings

36Item 1A.

Risk Factors

36Item 6.

Exhibits

37SIGNATURES


In this Quarterly Report on Form 10-Q, the words "Polypore International," "Company," "we," "us" and "our" refer to Polypore International, Inc. together with
its subsidiaries, unless the context indicates otherwise.

2

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Forward-looking statements

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this Quarterly Report on Form 10-Q that address activities, events or developments that we expect, believe or
anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about Polypore International's plans, objectives, strategies and prospects
regarding, among other things, the financial condition, results of operations and business of Polypore International and its subsidiaries. We have identified some of these forward-looking statements
with words like "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate" or "continue" and other words and terms of similar meaning. These forward-looking
statements may be contained under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" or "Controls and Procedures" or the Company's financial
statements or the notes thereto.

These
forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business environment,
all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q, including the risks
outlined under the caption entitled "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 29, 2007, will be important in
determining future results. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can
be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including with respect to Polypore International, the following, among other things:

3

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Because
our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements, we cannot give any assurance that any of the
events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on Polypore International's results of operations and financial condition. You are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation
to update these forward-looking statement to reflect new information, future events or otherwise, except as may be required under federal securities laws.

4

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Part I  Financial information

Item 1. Financial statements

Polypore International, Inc.      Condensed consolidated balance sheets

(in thousands, except share data)

March 29, 2008
(unaudited)

December 29, 2007*AssetsCurrent assets:Cash and cash equivalents

$
23,150

$
54,934Accounts receivable, net


124,763


115,619Inventories


74,465


64,329Deferred income taxes


1,482


1,808Prepaid and other


18,664


12,665Total current assets


242,524


249,355Property, plant and equipment, net


462,983


401,284Goodwill


590,122


568,784Intangibles and loan acquisition costs, net


203,059


187,861Environmental indemnification receivable


18,293


15,640Other


6,174


6,119Total assets

$
1,523,155

$
1,429,043Liabilities and shareholders' equityCurrent liabilities:Accounts payable

$
33,250

$
33,795Accrued liabilities


64,378


50,759Income taxes payable


1,377


424Current portion of debt


26,388


4,549Current portion of capital lease obligation


1,450


1,435Total current liabilities


126,843


90,962Debt, less current portion


833,448


813,536Capital lease obligation, less current portion


2,951


3,319Pension and postretirement benefits


71,791


65,779Postemployment benefits


3,627


3,673Environmental reserve, less current portion


24,378


22,627Deferred income taxes


93,161


74,833Other


28,288


18,983Commitments and contingenciesShareholders' equity:Preferred stock15,000,000 shares authorized, 0 issued and outstanding





Common stock, $.01 par value200,000,000 shares authorized, 40,328,410 and 40,326,537 issued and outstanding at March 29, 2008 and December 29, 2007, respectively


403


403Paid-in capital


390,578


390,337Retained deficit


(38,572
)

(51,484
)Accumulated other comprehensive loss


(13,741
)

(3,925
)338,668


335,331Total liabilities and shareholders' equity

$
1,523,155

$
1,429,043


See notes to condensed consolidated financial statements

5

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Polypore International, Inc.
Condensed consolidated statements of income (unaudited)

|                                                         |                           
|-------------------------------------------------------- | --------------------------
|
|
|                                                         |                           
|Net sales                                                |                           
|Cost of goods sold                                       |                           
|Business interruption insurance recovery                 |                           
|                                                         |                           
|Gross profit                                             |                           
|Selling, general and administrative expenses             |                           
|Business restructuring                                   |                           
|                                                         |                           
|Operating income                                         |                           
|Other (income) expense:                                  |                           
|                                                         | Interest expense, net     
|                                                         | Foreign currency and other
|                                                         |                           
|                                                         |                           
|                                                         |                           
|Income from continuing operations before income taxes    |                           
|Income taxes                                             |                           
|                                                         |                           
|Income from continuing operations                        |                           
|Income from discontinued operations, net of income taxes |                           
|                                                         |                           
|Net income                                               |                           
|                                                         |                           
|Net income per sharebasic and diluted:                  |                           
|                                                         | Continuing operations     
|                                                         | Discontinued operations   
|                                                         |                           
|                                                         | Net income per share      
|                                                         |                           
|Weighted average shares outstandingbasic                |                           
|Effect of dilutive stock options                         |                           
|                                                         |                           
|Weighted average shares outstandingdiluted              |                           
|                                                         |                           
|                                                         |                           

See notes to condensed consolidated financial statements

6

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Polypore International, Inc.  Condensed consolidated statements of cash flows (unaudited)

|                                                                                  |                                                                  
|--------------------------------------------------------------------------------- | -----------------------------------------------------------------
|
|
|                                                                                  |                                                                  
|Operating activities:                                                             |                                                                  
|Net income                                                                        |                                                                  
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                  
|                                                                                  | Depreciation expense                                             
|                                                                                  | Amortization expense                                             
|                                                                                  | Amortization of loan acquisition costs                           
|                                                                                  | Amortization of debt discount                                    
|                                                                                  | Stock-based compensation                                         
|                                                                                  | Loss on disposal of property, plant and equipment                
|                                                                                  | Foreign currency gain                                            
|                                                                                  | Deferred income taxes                                            
|                                                                                  | Business restructuring                                           
|                                                                                  | Gain on sale of synthetic paper business                         
|                                                                                  | Changes in operating assets and liabilities, net of acquisitions:
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  
|Net cash provided by operating activities                                         |                                                                  
|Investing activities:                                                             |                                                                  
|Proceeds from sale of synthetic paper business                                    |                                                                  
|Purchases of property, plant and equipment                                        |                                                                  
|Acquisitions, net of cash acquired                                                |                                                                  
|                                                                                  |                                                                  
|Net cash used in investing activities                                             |                                                                  
|Financing activities:                                                             |                                                                  
|Proceeds from revolving credit facility                                           |                                                                  
|Principal payments on debt                                                        |                                                                  
|Repurchase of common stock                                                        |                                                                  
|Loan acquisition costs                                                            |                                                                  
|                                                                                  |                                                                  
|Net cash provided by (used in) financing activities                               |                                                                  
|Effect of exchange rate changes on cash and cash equivalents                      |                                                                  
|                                                                                  |                                                                  
|Net increase (decrease) in cash and cash equivalents                              |                                                                  
|Cash and cash equivalents at beginning of period                                  |                                                                  
|                                                                                  |                                                                  
|Cash and cash equivalents at end of the period                                    |                                                                  
|                                                                                  |                                                                  
|                                                                                  |                                                                  

See notes to condensed consolidated financial statements

7

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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

Polypore International, Inc. (the "Company") is a leading global high technology filtration company that develops, manufactures and markets specialized
microporous membranes used in separation and filtration processes. The Company has a global presence in the major geographic markets of North America, South America, Western Europe and Asia.

On
June 27, 2007, the Company priced its initial public offering of 15,000,000 shares of its common stock.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting
principles for interim financial information. Accordingly, the unaudited condensed consolidated financial statements and notes do not contain certain information included in the Company's annual
financial statements. In the opinion of management, all normal and recurring adjustments that are necessary for a fair presentation have been made. Operating results for the three months ended
March 29, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending January 3, 2009. The unaudited condensed consolidated financial statements
should be read in conjunction with the annual audited financial statements for the fiscal year ended December 29, 2007.

2.    Recent accounting pronouncements

In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging
Activities("FAS 161"). FAS 161 requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments,
how derivative instruments and related hedged items are accounted for under Statement No. 133Accounting for Derivative Instruments and Hedging
Activitiesand how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. FAS 161 is effective for
financial statements issued for fiscal years beginning after November 15, 2008.

8

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

3.    Inventories

Inventories are carried at the lower of cost or market using the first-in, first-out ("FIFO") method of accounting and consist of:

(in thousands)

March 29, 2008

December 29, 2007Raw materials

$
27,399

$
23,545Work-in-process


13,875


11,544Finished goods


33,191


29,240Total

$
74,465

$
64,329


4.    Debt

Debt, in order of priority, consists of:

(in thousands)

March 29, 2008

December 29, 2007Senior credit facilities:Revolving credit facility

$
17,000

$
Term loan facilities


376,112


373,1228.75% senior subordinated notes


461,775


444,825Other


4,949


138859,836


818,085Less current maturities


26,388


4,549Long-term debt

$
833,448

$
813,536


In connection with the acquisition of Microporous Holding Corporation on February 29, 2008, the Company assumed $14,235,000 of debt, of which $9,435,000 was repaid in March
2008. In April 2008, the Company repaid the remaining $4,800,000 of assumed debt. At March 29, 2008, the $4,800,000 of debt was classified in "Current portion of debt" in the condensed
consolidated balance sheets.

In
January 2008, the Company entered into two interest rate swap agreements with notional principal amounts totaling $250,000,000. The swap agreement with a notional amount of $200,000,000 effectively
fixes the interest rate on that amount of debt at 5.54% and expires on December 31, 2009. The swap agreement with a notional amount of $50,000,000 effectively fixes the interest rate on that
amount of debt at 5.58% and expires on June 30, 2009. The swap agreements are accounted for under FASB Statement No. 133,Accounting for Derivative Instruments
and Hedging Activities("FAS 133"). In accordance with FAS 133, the Company designated these swap agreements as cash flow hedges with changes in fair value, net
of

9

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

4.    Debt (continued)

income
taxes, recorded to "Accumulated other comprehensive loss" in the condensed consolidated balance sheets. The fair value of the interest rate swap agreements, based on current settlement values,
was an obligation of $3,784,000 at March 29, 2008 and was included in "Other" non-current liabilities in the condensed consolidated balance sheets.

5.    Employee benefit plans

The Company and its subsidiaries sponsor multiple defined benefit pension plans and an other postretirement benefit plan. The following table provides the
components of net periodic benefit cost:

|                                  
|----------------------------------
|
|
|
|                                  
|Service cost                      
|Interest cost                     
|Expected return on plan assets    
|Amortization of prior service cost
|Recognized net actuarial loss     
|                                  
|Net periodic benefit cost         
|                                  
|                                  

6.    Environmental matters

The Company accrues for environmental obligations when such expenditures are probable and reasonably estimable. The amount of liability recorded is based on
currently available information, including the progress of remedial investigations, current status of discussions with regulatory authorities regarding the method and extent of remediation, presently
enacted laws and existing technology. Accruals for estimated losses from environmental obligations are adjusted as further information develops or circumstances change. Costs of future expenditures
for environmental obligations are not discounted to their present value. Recoveries of environmental costs from other parties are recognized as assets when their receipt is deemed probable.
Environmental reserves, which are predominately euro-denominated, were $31,030,000 and $29,153,000 as of March 29, 2008 and December 29, 2007, respectively.

The
environmental reserves are primarily related to the Wuppertal, Germany and Potenza, Italy facilities. In connection with the acquisition of Membrana in 2002, the Company recorded a reserve for
costs to remediate known environmental issues and operational upgrades at the Wuppertal, Germany facility. In 2004, the Company identified potential environmental

10

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

6.    Environmental matters (continued)

contamination
at its manufacturing facility in Potenza, Italy. The Company anticipates that expenditures will be made over the next seven to ten years.

In
2006, the Company identified instances of potential non-compliance with environmental operating permits at the Corydon, Indiana and Owensboro, Kentucky facilities. The Company recorded
its best estimate of potential penalties at that time. In March 2008, the Company reached agreement with the Indiana Department of Environmental Management and agreed to pay fines consistent with the
Company's original estimate. The Company does not believe that additional fines or penalties will be assessed.

The
Company has indemnification agreements for certain environmental matters from Acordis A.G. ("Acordis") and Akzo Nobel N.V. ("Akzo"), the prior owners of Membrana. Akzo originally provided
broad environmental protections to Acordis with the right to assign such indemnities to Acordis's successors. Akzo's indemnifications relate to conditions existing prior to December 1999, which is the
date that Membrana was sold to Acordis. The Akzo agreement provides indemnification of claims through December 2007, with the indemnification percentage decreasing each year during the coverage
period. Through December 2003, Akzo pays 75% of any approved claim. After that, Akzo pays 65% of claims reported through December 2006 and 50% of claims reported through December 2007. In addition to
the Akzo indemnification, Acordis provides separate indemnification of claims incurred from December 1999 through February 2002, the acquisition date. At March 29, 2008 and December 29,
2007, amounts receivable under the indemnification agreements were $21,490,000 and $19,952,000, respectively. The current portion of the indemnification receivable is included in other current assets.

7.    Business restructuring

2006 restructuring plan

In response to a significant decline in demand for cellulosic hemodialysis membranes driven by a shift in industry demand toward synthetic membranes, the
Company's separations media segment exited the production of cellulosic membranes and realigned its cost structure at its Wuppertal, Germany facility. On August 24, 2006, the Company announced
a layoff of approximately 150 employees. Production of cellulosic hemodialysis membranes ceased on December 27, 2006 and the majority of the employees were laid off effective January 1,
2007. The total cost of the plan is expected to be approximately $33,753,000, consisting of a $17,492,000 non-cash impairment charge for buildings and equipment used in the production of
cellulosic hemodialysis membranes, $10,466,000 for the employee layoffs and $5,795,000 for other costs related to the shutdown of portions of the Wuppertal facility that will no longer be

11

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

7.    Business restructuring (continued)

used.
The other costs included in the restructuring plan are related to local regulations surrounding complete or partial shutdowns of a facility. The Company expects to complete these activities by
the end of the 2010. The timing, scope and costs of these restructuring measures are subject to change as the Company proceeds with its restructuring plan and further evaluates its business needs and
costs.

2005 restructuring plan

In order to better accommodate customer growth and related demand for both lead-acid and lithium battery separators in the greater Asian market, the
Company's energy storage segment transferred certain assets from Europe and the United States to its facilities in Thailand and China. The capacity realignment plan included the closure of the
Company's facility in Feistritz, Austria, the downsizing of its Norderstedt, Germany facility and the relocation of certain assets from these two plants to the Company's facilities in Prachinburi,
Thailand. Additionally, finishing equipment from the Company's facility in Charlotte, North Carolina was relocated to its facility in Shanghai, China. The total cost of the realignment plan was
$9,117,000, including a non-cash impairment charge of $1,278,000 in 2005 for property, plant and equipment located at the Feistritz, Austria facility that was relocated to Prachinburi,
Thailand.

Restructuring
activity during the three months ended March 29, 2008 consisted of:

|                        
|------------------------
|
|                        
|2006 Restructuring Plan:
|                        
|                        
|                        
|                        
|2005 Restructuring Plan:
|                        
|                        
|Total                   
|                        
|                        

8.    Income taxes

The income tax provision for the interim periods presented is computed at the effective rate expected to be applicable in each respective full year using the
statutory rates on a country-by-country basis. Income tax expense recorded in the financial statements differs from the Federal statutory income tax rate due to a variety of
factors, including state income taxes, the mix of income between U.S. and foreign jurisdictions taxed at varying rates and various changes in estimates of permanent differences and valuation
allowances.

12

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

9.    Acquisitions

The Company accounts for acquisitions in conformity with FASB Statement No. 141,Business Combinationsand FASB Statement No. 142,Goodwill and Other Intangible Assets.

On
February 29, 2008, the Company purchased 100% of the stock of Microporous Holding Corporation, the parent company of Microporous Products L.P. ("Microporous"). The acquisition
broadens the Company's participation in the deep-cycle industrial battery market, adds to its membrane technology portfolio and product breadth, enhances service to common customers and
adds cost-effective production capacity. The results of Microporous operations are included in the Company's energy storage segment and have been included in the consolidated financial
statements since the date of acquisition.

The
purchase price for Microporous stock, including acquisition-related costs, was approximately $28,093,000 which the Company paid at closing. Also, at the time of closing, the Company repaid certain
indebtedness of Microporous in the aggregate amount of approximately $33,643,000 and assumed $14,235,000 of debt. The purchase price is subject to post-closing adjustments. The purchase
agreement provides for additional cash payments of up to an aggregate of $3,750,000 over the next three years beginning in 2008, contingent upon the acquired business meeting defined earnout
provisions.

The
excess of the purchase price over the fair value of the net assets purchased was approximately $21,180,000 and was allocated to goodwill. The goodwill is not deductible for income tax purposes.

The
following table summarizes the preliminary purchase price allocation based upon the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

(in thousands)Current assets

$
16,775Property, plant and equipment


42,756Intangible assets


18,600Goodwill


21,180Total assets acquired


99,311Current liabilities


5,593Debt assumed


14,235Deferred taxes and other liabilities


17,468Total liabilities assumed


37,296Net assets acquired

$
62,015


13

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

9.    Acquisitions (continued)

On March 20, 2008, the Company received a letter from the Federal Trade Commission (the "FTC") regarding the acquisition of Microporous. On April 7, 2008, Polypore and
its wholly-owned subsidiary, Daramic LLC, received a subpoena and interrogatories requesting substantially similar documents and information as were requested in the FTC's initial letter, as
well as additional documents and information. The Company is in the process of responding to this request. The Company cannot predict the outcome of the investigation at this time and does not believe
that the final resolution of this matter will have a material adverse impact on the business, financial condition or results of operations of the Company.

Effective
January 1, 2007, the Company purchased from Nippon Sheet Glass Company, Limited ("NSG") a 60% share in Daramic NSG Tianjin PE Separator Co., LTD ("DNPET") for an
aggregate purchase price of $5,475,000, of which $5,181,000 was paid in the three months ended March 30, 2007. DNPET is a lead-acid battery separator manufacturing facility located
in Tianjin, China and is included in the Company's energy storage segment. The acquisition supports the Company's strategy of expanding capacity in the high growth
Asia-Pacific region. Beginning January 1, 2007, DNPET's assets, liabilities, results of operations and cash flows are consolidated with those of the Company and NSG's interest in
DNPET is included in the Company's consolidated balance sheet as minority interest. The Company is entitled to all of the earnings and cash flow from DNPET for the first two years and after that,
earnings and cash flows are allocated based on ownership percentages. On January 1, 2009 and January 1, 2012, the Company can exercise a call option and NSG can exercise a put option for
the Company to purchase NSG's 40% ownership interest for $3,600,000. After 2012, the exercise price of the call and put options will be equal to the fair market value of the shares, as determined by
an independent appraiser. The excess of the purchase price over the fair value of the net assets purchased was approximately $946,000 and was allocated to goodwill.

10.    Business interruption insurance recovery

On September 30, 2007, a customer in the Company's energy storage segment experienced a fire at one of their facilities. The Company has filed a business
interruption insurance claim with its insurance provider and received a payment of $500,000 in the three months ended March 29, 2008. The remaining claim is still being negotiated with the
issuance provider.

14

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

11.    Comprehensive income

Comprehensive income is as follows:

Three months ended(in thousands)

March 29, 2008

March 31, 2007Net income

$
12,912

$
2,110Foreign currency translation adjustment


(7,172
)

3,883Net actuarial loss and prior service credit


(266
)

(60
)Unrealized loss on interest rate swap agreements


(2,378
)

Comprehensive income

$
3,096

$
5,933


12.    Related party transactions

The Company's German subsidiary has equity investments in two companies that provide patent, trademark and research services for the Company and other companies
that have invested in them. The Company's investments represent 25% ownership in each of the firms and are accounted for by the equity method of accounting. The Company's equity investment account
balance was $298,000 and $278,000 at March 29, 2008 and December 29, 2007, respectively. Charges from the affiliates for work performed were $268,000 and $347,000 for the three months
ended March 29, 2008 and March 31, 2007, respectively. Amounts due to the affiliates were approximately $114,000 and $112,000 at March 29, 2008 and December 29, 2007,
respectively.

13.    Segment information

The Company's operations are principally managed on a products basis and are comprised of three operating segments that have been aggregated into two reportable
segments: energy storage and separations media. The energy storage segment produces and markets membranes that provide the critical function of separating the cathode and anode in a variety of battery
markets, including lithium, industrial and transportation applications. The separations media segment produces and markets membranes used as the high technology filtration element in various medical
and industrial applications.

The
Company evaluates the performance of segments and allocates resources to segments based on operating income before interest, income taxes, depreciation and amortization. In addition, it evaluates
business segment performance before business restructuring charges and

15

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

13.    Segment information (continued)

the
impact of certain non-recurring costs. Financial information relating to the reportable operating segments is presented below:

Three months ended(in thousands)

March 29, 2008

March 31, 2007Net sales to external customers (by major product group):Lead-acid battery separators

$
80,591

$
71,846Lithium battery separators


23,370


21,307Energy storage


103,961


93,153Healthcare


27,300


23,193Filtration and specialty


14,068


12,690Separations media


41,368


35,883Total net sales to external customers

$
145,329

$
129,036Operating income:Energy storage

$
23,602

$
19,850Separations media


6,806


4,808Corporate


(266
)

(47
)Segment operating income


30,142


24,611Business restructuring





53Total operating income


30,142


24,558Reconciling items:Interest expense, net


15,940


23,643Foreign currency and other


(97
)

(133
)Income from continuing operations before income taxes

$
14,299

$
1,048Depreciation and amortization:Energy storage

$
8,608

$
8,185Separations media


4,522


3,928Total depreciation and amortization

$
13,130

$
12,113


16

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Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

14.    Discontinued operations

In January 2008, the Company sold a non-core synthetic paper business, a component of the energy storage segment, for $4,000,000, resulting in a
gain on sale of approximately $2,372,000, net of income taxes of $1,402,000. The results of operations and the gain on sale from the synthetic paper business are presented as discontinued operations
for all periods presented in the Company's condensed consolidated statements of income.

15.    Financial statements of guarantors

On July 31, 2007, Polypore, Inc. merged with and into the Company, and the Company assumed all of Polypore, Inc.'s obligations under the 8.75%
senior subordinated notes. The senior subordinated notes are unconditionally guaranteed, jointly and severally, on a senior basis by certain of the Company's wholly owned subsidiaries ("Guarantors").
Management has determined that separate complete financial statements of the Guarantors would not be material to users of the financial statements.

17

---



Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

The
following sets forth condensed consolidating financial statements of the Guarantors and non-Guarantor subsidiaries.

Condensed consolidating balance sheet
as of March 29, 2008

(in thousands)

Combined Guarantor Subsidiaries

Combined Non-Guarantor Subsidiaries

The Company

Reclassifications and Eliminations

ConsolidatedAssetsCash and cash equivalents

$


$
20,200

$
2,950

$


$
23,150Accounts receivable, net


47,830


76,933








124,763Inventories


26,569


47,896








74,465Deferred income taxes








1,482





1,482Prepaid and other


3,150


14,932


582





18,664Total current assets


77,549


159,961


5,014





242,524Due from affiliates


276,486


371,350


293,581


(941,417
)

Investment in subsidiaries


212,144


295,249


326,692


(834,085
)

Property, plant and equipment, net


139,123


323,860








462,983Goodwill








590,122





590,122Intangibles and loan acquisition costs, net


41





203,018





203,059Other


5,675


18,792








24,467Total assets

$
711,018

$
1,169,212

$
1,418,427

$
(1,775,502
)
$
1,523,155Liabilities and shareholders' equityAccounts payable and accrued liabilities

$
40,361

$
40,483

$
16,784

$


$
97,628Income taxes payable


(687
)

1,968


96





1,377Current portion of debt


4,800


552


21,036





26,388Current portion of capital lease obligation


1,450











1,450Total current liabilities


45,924


43,003


37,916





126,843Due to affiliates


344,811


336,604


260,002


(941,417
)

Debt, less current portion





54,429


779,019





833,448Capital lease obligation, less current portion


2,951











2,951Pension and postretirement benefits, less current portion


2,656


69,135








71,791Postemployment benefits





3,627








3,627Environmental reserve, less current portion





24,378








24,378Deferred income taxes and other


70,892


47,735


2,822





121,449Shareholder's equity


243,784


590,301


338,668


(834,085
)

338,668Total liabilities and shareholders' equity

$
711,018

$
1,169,212

$
1,418,427

$
(1,775,502
)
$
1,523,155


18

---



Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

Condensed consolidating balance sheet
as of December 29, 2007

(in thousands)

Combined Guarantor Subsidiaries

Combined Non-Guarantor Subsidiaries

The Company

Reclassifications 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


19

---





Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

Condensed consolidating statement of income  for the three months ended March 29, 2008

|                                                             | 
|------------------------------------------------------------ | 
|
|                                                             | 
|Net sales                                                    | 
|Cost of goods sold                                           | 
|Business interruption insurance recovery                     | 
|                                                             | 
|Gross profit                                                 | 
|Selling, general and administrative expenses                 | 
|                                                             | 
|Operating income (loss)                                      | 
|Interest expense and other                                   | 
|Equity in earnings of subsidiaries                           | 
|                                                             | 
|Income (loss) from continuing operations before income taxes | 
|Income taxes                                                 | 
|                                                             | 
|Income from continuing operations                            | 
|                                                             | 
|                                                             | 

20

---



Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

Condensed consolidating statement of income  for the three months ended March 31, 2007

|                                                             | 
|------------------------------------------------------------ | 
|
|                                                             | 
|Net sales                                                    | 
|Cost of goods sold                                           | 
|                                                             | 
|Gross profit                                                 | 
|Selling, general and administrative expenses                 | 
|Business restructuring                                       | 
|                                                             | 
|Operating income (loss)                                      | 
|Interest expense and other                                   | 
|Equity in earnings of subsidiaries                           | 
|                                                             | 
|Income (loss) from continuing operations before income taxes | 
|Income taxes                                                 | 
|                                                             | 
|Income from continuing operations                            | 
|                                                             | 
|                                                             | 

21

---



Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

Condensed consolidating statement of cash flows  for the three months ended March 29, 2008

|                                                             | 
|------------------------------------------------------------ | 
|
|                                                             | 
|Net cash provided by operating activities                    | 
|Investing activities:                                        | 
|Proceeds from sale of synthetic paper business               | 
|Purchases of property, plant and equipment                   | 
|Acquisitions, net of cash acquired                           | 
|                                                             | 
|Net cash used in investing activities                        | 
|Financing activities:                                        | 
|Proceeds from revolving credit facility                      | 
|Principal payments on debt                                   | 
|Intercompany transactions, net                               | 
|                                                             | 
|Net cash used in financing activities                        | 
|Effect of exchange rate changes on cash and cash equivalents | 
|                                                             | 
|Net increase in cash and cash equivalents                    | 
|Cash and cash equivalents at beginning of period             | 
|                                                             | 
|Cash and cash equivalents at end of period                   | 
|                                                             | 
|                                                             | 

22

---



Polypore International, Inc.

Notes to condensed consolidated financial statements (continued)

(unaudited)

15.    Financial statements of guarantors (continued)

Condensed consolidating statement of cash flows  for the three months ended March 31, 2007

|                                                             | 
|------------------------------------------------------------ | 
|
|                                                             | 
|Net cash provided by operating activities                    | 
|Investing activities:                                        | 
|Purchases of property, plant and equipment                   | 
|Acquisitions, net of cash acquired                           | 
|                                                             | 
|Net cash used in investing activities                        | 
|Financing activities:                                        | 
|Principal payments on debt                                   | 
|Loan acquisition costs                                       | 
|Repurchase of common stock                                   | 
|Intercompany transactions, net                               | 
|                                                             | 
|Net cash used in financing activities                        | 
|Effect of exchange rate changes on cash and cash equivalents | 
|                                                             | 
|Net increase in cash and cash equivalents                    | 
|Cash and cash equivalents at beginning of period             | 
|                                                             | 
|Cash and cash equivalents at end of period                   | 
|                                                             | 
|                                                             | 

23

---





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.

Overview

We are a leading global high technology filtration company that develops, manufactures and markets specialized microporous membranes used in separation and
filtration processes. In fiscal 2007, we generated total net sales of $534.7 million and net income of $0.5 million. We operate in two business segments: (i) the energy storage
segment, which accounted for approximately 71% of our fiscal 2007 net sales; and (ii) the separations media segment, which accounted for approximately 29% of our fiscal 2007 net sales. We
manufacture our products at facilities in North America, Europe and Asia. Net sales from foreign locations were approximately $349.4 million for fiscal 2007.

In
the energy storage segment, our membrane separators are a critical performance component in lithium batteries, which are used in consumer electronic applications, and lead-acid
batteries, which are used in transportation and industrial applications. The energy storage segment has benefited from the overall increase in demand by consumers for mobile power which we believe
will continue.

Lithium
batteries are the power source in a wide variety of electronics applications ranging from laptop computers and mobile phones to power tools. In addition, many new applications, such as
consumer power tools and electric bikes and developing applications such as hybrid electric vehicles incorporate large-format batteries that require much greater membrane separator volume per battery.
As a result, we believe that membrane separator growth will exceed battery unit sales growth. In September 2007, we started a lithium battery separator capacity expansion at our Charlotte, North
Carolina facility expected to be completed by the end of 2008.

In
the motor vehicle battery market, the high proportion of aftermarket sales and the steady growth of the worldwide fleet of motor vehicles provide us with a growing, recurring revenue base in
lead-acid battery membrane separators. We believe we will also benefit from the worldwide conversion of alternative separator materials to the higher-performance polyethylene-based
membrane separators such as those we produce. Growth is strongest in the Asia-Pacific region as a result of increasing per capita penetration of automobiles, growth in the industrial and
manufacturing sectors, and a high rate of conversion to polyethylene-based membrane separators. We have positioned ourselves to benefit from this growth by expanding capacity at our Prachinburi,
Thailand facility, acquiring a 60% share in a production facility in Tianjin, China and establishing an Asian Technical Center in Thailand. In September 2007, we started an additional capacity
expansion at our Prachinburi, Thailand facility expected to be completed by the end of 2008.

24

---



On
February 29, 2008, we purchased 100% of the stock of Microporous Holding Corporation, the parent company of Microporous Products L.P. ("Microporous"). The acquisition of Microporous
adds rubber-based battery separator technology to our product line. This acquisition broadens our participation in the deep-cycle industrial battery market
(e.g.,golf cart and stationary batteries), adds to our membrane technology portfolio and product breadth, enhances service to common customers
and adds cost-effective production capacity. The acquisition was funded with a combination of cash on hand, assumption of debt and borrowings under our existing credit facility.

In
the separations media segment, our filtration membranes and modules are used in healthcare and high-performance filtration and specialty applications. Healthcare applications include
hemodialysis, blood oxygenation, and plasmapheresis. Growth in demand for hemodialysis membranes is driven by the increasing worldwide population of end-stage renal disease patients. We
estimate that conversion to single-use dialyzers and increasing treatment frequency will result in additional dialyzer market growth.

We
produce a wide range of membranes and membrane-based elements for micro-, ultra- and nanofiltration and gasification/degasification of liquids. Micro-, ultra- and nanofiltration membrane element
market growth is being driven by several factors, including end-market growth in applications such as water treatment and pharmaceutical processing, displacement of conventional filtration
media by membrane filtration due to membranes' superior cost and performance attributes and increasing purity requirements in industrial and other applications.

In
separations media, we engaged in certain restructuring activities in 2006 in response to changing customer, industry and market demands. In 2005 and 2006, we experienced a significant decline in
demand for cellulosic hemodialysis membranes, primarily driven by a shift in industry demand toward higher performing synthetic membranes. In 2006, we ceased production of cellulosic hemodialysis
membranes and realigned the cost structure of our separations media segment at our Wuppertal, Germany facility.

Initial public offering and related transactions

On June 27, 2007, the Company completed its initial public offering by issuing 15,000,000 shares of its common stock at a price of $19.00 per share. Public trading of
our common stock commenced on June 28, 2007. The cash proceeds from this offering were approximately $267.9 million, net of underwriting fees of $17.1 million.

In
July 2007, we used the proceeds from the initial public offering and cash on hand to purchase and retire our outstanding 10.50% senior discount notes and pay other offering related costs of
$3.1 million. The purchase of the notes was accomplished by a tender offer and subsequent redemption of the notes not tendered. The total purchase price of the notes was $293.7 million,
consisting of principal of $264.1 million and tender and redemption premiums of $29.5 million. As a result of the purchase of the notes, we incurred a $30.1 million charge to
income, which was comprised of redemption and tender premiums of $29.5 million and the write-off of unamortized loan acquisition costs of $0.5 million.

On
July 3, 2007, we refinanced Polypore's senior secured credit facility with a new senior secured credit facility. The new credit facility provides for a $322.9 million term loan
facility and a €35.0 million term loan facility and a $90.0 million revolving credit facility. The term loans mature in July 2014 and the revolving credit facility
matures in July 2013. In connection

25

---



with
the refinancing, we capitalized loan acquisition costs of approximately $8.7 million and wrote-off loan acquisition costs of $7.2 million associated with the previous
senior secured credit facility.

Critical accounting policies

Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of
operations and that require the use of complex and subjective estimates based on past experience and management's judgment. Because of uncertainty inherent in such estimates, actual results may differ
from these estimates. These policies are critical to the understanding of our operating results and financial condition and include the policies related to the allowance for doubtful accounts, the
impairment of intangibles and goodwill, pension and other postretirement benefits and environmental matters. For a discussion of each of these policies, please see the discussion entitled "Critical
Accounting Policies" under Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
year ended December 29, 2007.

Results of operations

The following table sets forth, for the periods indicated, certain operating data in amount and as a percentage of net sales:

|                                                      | 
|----------------------------------------------------- | 
|
|
|                                                      | 
|Net sales                                             | 
|                                                      | 
|Gross profit                                          | 
|Selling, general and administrative expenses          | 
|Business restructuring                                | 
|                                                      | 
|Operating income                                      | 
|Interest expense, net                                 | 
|Foreign currency and other                            | 
|                                                      | 
|Income from continuing operations before income taxes | 
|Income taxes                                          | 
|                                                      | 
|Income from continuing operations                     | 
|Discontinued operations, net of income taxes          | 
|                                                      | 
|Net income                                            | 
|                                                      | 
|                                                      | 

Comparison of the three months ended March 29, 2008 with the three months ended March 31, 2007

Net sales.Net sales for the three months ended March 29, 2008 were $145.3 million, an increase of $16.3 million, or
12.6%, from the same period in the prior year. Energy storage sales for the three months ended March 29, 2008 were $104.0 million, an increase of $10.8 million, or 11.6%. The
increase in energy storage sales was due to higher lead-acid and

26

---



lithium
battery separator sales and the positive impact of dollar/euro exchange rate fluctuations of $5.8 million. Lead-acid separator sales growth of 12.2% was driven by higher
sales volume associated with the acquisition of Microporous, higher sales prices and the positive impact of dollar/euro exchange rate fluctuations. Average lead-acid separator sales prices
increased due to global price increases implemented to partially offset higher raw material and energy costs. Lithium battery separator sales increased by 9.7% due to demand for consumer electronic
products and expanding applications for lithium batteries.

Separations
media sales for the three months ended March 29, 2008 were $41.3 million, an increase of $5.5 million, or 15.3% from the same period in the prior year. The increase in
separations media sales was due to higher sales of hemodialysis membranes and industrial and filtration specialty products and the positive impact of dollar/euro exchange rate fluctuations of
$4.1 million. Healthcare product sales increased by 17.7% due to strong growth in sales of synthetic hemodialysis membranes combined with the positive impact of dollar/euro exchange rate
fluctuations, offset by the expected decline in sales of cellulosic hemodialysis membranes due to our exit of this product line. Filtration and specialty product sales increased by 10.9% driven by
continued demand for high performance filtration applications and the positive impact of dollar/euro exchange rate fluctuations.

Gross profit.Gross profit as a percent of net sales was 38.2% for the three months ended March 29, 2008, as compared to 37.3% in
the same period of the prior year. Energy storage gross profit as a percent of net sales was 39.2% for the three months ended March 29, 2008, which was comparable to the prior year percentage
of 39.5%. Raw material and energy cost increases were largely offset by internal cost saving actions and the global price increases for lead-acid battery separators. Separations media
gross profit as a percent of net sales increased to 35.4% for the three months ended March 29, 2008, from 31.5% in the same period of the prior year. The increase was due primarily to the
successful transformation of our hemodialysis membrane business from cellulosic to synthetic products and investments to enhance production efficiencies.

Selling, general and administrative expenses.Selling, general and administrative expenses as a percent of net sales was 17.4% for the
three months ended March 29, 2008, as compared to 18.2% for the same period in the prior year. The $1.8 million increase in selling, general and administrative expenses was predominantly
due to the impact of dollar/euro exchange rate fluctuations.

Interest expense.Interest expense for the three months ended March 29, 2008 decreased by $7.7 million from the same period
in the prior year. The decrease in interest expense was primarily driven by the purchase of our 10.50% senior discount notes in July 2007 and lower interest rates under our refinanced senior credit
facilities.

Income taxes.The income tax provision for the interim periods presented is computed at the effective rate expected to be applicable in
each respective full year using the statutory rates on a country-by-country basis. The effective tax rate on continuing operations was 26.2% for the three months ended
March 29, 2008, as compared to (99.8)% for the same period in the prior year. Our effective tax rate fluctuates due to a variety of factors, including state income taxes, the mix of income
between U.S. and foreign jurisdictions taxed at varying rates, various changes in estimates of permanent differences and valuation allowances, and the relative size of our consolidated income before
income taxes.

27

---



The
primary factor impacting our effective tax rate is the mix of earnings between the various tax jurisdictions in which we do business. Each tax jurisdiction has its own set of tax laws and tax
rates. The income earned by our subsidiaries in each jurisdiction is taxed independently by these various jurisdictions. Currently, the applicable statutory income tax rates in the jurisdictions that
we operate in range from 0% to 39%. Therefore, the amount of income tax expense in each jurisdiction as compared to our consolidated income (loss) before income taxes has a significant impact on our
annual effective tax rate.

Because
of the relatively small amount of pre-tax income in 2007 compared to 2008, fluctuations in income between different tax jurisdictions and small changes in permanent differences had
a more significant impact on the calculation of our overall effective tax rate in 2007.

The
effect of each of these items on our effective tax rate on continuing operations is quantified in the table below:

Three months endedMarch 29, 2008

March 31, 2007U.S. Federal statutory rate

35.0
%
35.0
%State income taxes

1.0

(43.0
)Mix of income in taxing jurisdictions

(11.2
)
(164.3
)Other permanent differences and valuation allowances

1.4

72.5Total effective tax rate

26.2
%
(99.8
)%


Discontinued operations.In January 2008, we sold our synthetic paper business, a component of the energy storage segment,
for $4.0 million, resulting in a gain of $2.4 million, net of income taxes of $1.4 million. The results of operations, which were not material, and the gain on sale from the
synthetic paper business are presented as discontinued operations for all periods presented.

Business restructuring

The pre-tax components of restructuring activity in the three months ended March 29, 2008 were as follows:

|                        
|------------------------
|
|                        
|2006 Restructuring Plan:
|                        
|                        
|                        
|                        
|2005 Restructuring Plan:
|                        
|                        
|Total                   
|                        
|                        

28

---



We expect to make payments against the restructuring reserve of approximately $2.1 million in fiscal year 2008.

2006 restructuring plan.In response to a significant decline in demand for cellulosic hemodialysis membranes driven by a shift in industry
demand toward synthetic membranes, our separations media segment exited the production of cellulosic membranes and realigned its cost structure at its Wuppertal, Germany facility. On August 24,
2006, we announced a layoff of approximately 150 employees. Production of cellulosic hemodialysis membranes ceased on December 27, 2006 and the majority of the employees were laid off effective
January 1, 2007. The total cost of the plan is expected to be approximately $33.8 million, consisting of a $17.5 million non-cash impairment charge for buildings and
equipment used in the production of cellulosic hemodialysis membranes, $10.5 million for the employee layoffs and $5.8 million for other costs related to the shutdown of portions of the
Wuppertal facility that will no longer be used. The other costs included in the restructuring plan are related to local regulations surrounding complete or partial shutdowns of a facility. We expect
to complete these activities by the end of 2010. The timing, scope and costs of these restructuring measures are subject to change as we proceed with our restructuring plans and further evaluate our
business needs and costs.

2005 restructuring plan.In order to better accommodate customer growth and related demand for both lead-acid and lithium
battery separators in the greater Asian market, our energy storage segment transferred certain assets from Europe and the United States to our facilities in Thailand and China. The capacity
realignment plan included the closure of our facility in Feistritz, Austria, the downsizing of our Norderstedt, Germany facility and the relocation of certain assets from these two plants to our
facilities in Prachinburi, Thailand. Additionally, finishing equipment from our facility in Charlotte, North Carolina was relocated to our facility in Shanghai, China. The total cost of the
realignment plan was $9.1 million, including a non-cash impairment charge of $1.3 million in 2005 for property, plant and equipment located at the Feistritz, Austria facility
that was relocated to Prachinburi, Thailand. In addition to the benefit of realigning capacity with market growth, we realized the full impact of cost savings in 2007.

Liquidity and capital resources

Cash and cash equivalents decreased from $54.9 million at December 29, 2007 to $23.2 million at March 29, 2008, primarily due to the
acquisition of Microporous and investments in production capacity in the energy storage segment.

Operating activities.Net cash provided by operations was $31.4 million in the three months ended March 29, 2008, as compared
to $22.9 million in the three months ended March 31, 2007. Cash provided by operations for the three months ended March 29, 2008 consisted of net income before
non-cash expenses of $23.8 million and an increase in working capital of $7.6 million, excluding the impact of the acquisition of Microporous and foreign exchange rate
fluctuations. Accounts receivable decreased approximately $2.9 million from December 29, 2007 to March 29, 2008 and days sales outstanding remained comparable to prior periods.
Inventories increased approximately $2.6 million due to planned inventory builds in anticipation of our seasonal European shutdowns. Accounts payable and accrued liabilities increased
approximately $5.5 million, primarily due to an increase in accrued interest on the

29

---



8.75%
senior subordinated notes. Interest for the 8.75% senior subordinated notes is paid semi-annually in the second and fourth quarters.

Net
cash provided by operations was $22.9 million in the three months ended March 31, 2007 and consisted of net income before non-cash expenses of $18.1 million and an
increase in working capital of $4.8 million, excluding the impact of foreign exchange rate fluctuations. Accounts receivable increased from December 30, 2006 to March 31, 2007 by
approximately $0.8 million and days sales outstanding remained comparable to prior periods. Inventories decreased approximately $2.4 million due to the reduction of cellulosic
hemodialysis membrane inventories as we began making final shipments out of inventory to our customers. During 2006, we built up cellulosic inventories in preparation for the shutdown of production on
December 27, 2006. Accounts payable and accrued liabilities increased approximately $1.2 million, primarily due to an increase in accrued interest on the 8.75% senior subordinated notes,
partially offset by a reduction in the restructuring accrual.

Investing activities.Capital expenditures in the three months ended March 29, 2008 related primarily to the $18 million
lithium capacity expansion in Charlotte, NC and the $19 million lead-acid capacity expansion in Prachinburi, Thailand that began in September 2007. We spent $7.1 million on
these expansion projects in fiscal 2007 and $7.4 million in the three months ended March 29, 2008. We expect these projects to be finished in late 2008. We estimate that total capital
expenditures in fiscal year 2008 will be approximately $52.0 million.

On
February 29, 2008, we purchased 100% of the stock of Microporous. The purchase price for Microporous stock, including acquisition related costs, was approximately $28.1 million which
we paid at closing. Also, at the time of closing, we repaid certain indebtedness of Microporous in the aggregate amount of approximately $33.6 million and assumed $14.2 million of debt.

Effective
January 1, 2007, we purchased a 60% share in a lead-acid battery separator manufacturing facility in Tianjin, China for an aggregate purchase price of $5.5 million,
of which $5.2 million was paid during the three months ended March 31, 2007.

In
January 2008, we sold a non-core synthetic paper business for $4.0 million.

Financing activities.Cash provided by financing activities was $5.9 million in the three months ended March 29, 2008,
consisting of $17.0 million of borrowings from our revolving credit facility associated with the acquisition of Microporous and payments on debt of $11.1 million, including the repayment
of $9.4 million of debt assumed in the Microporous acquisition. In April 2008, we repaid the remaining $4.8 million of debt assumed in the Microporous transaction with cash and
borrowings from our revolving credit facility.

We
intend to fund our ongoing operations through cash generated by operations and availability under the senior secured credit facility.

On
July 3, 2007, we refinanced Polypore, Inc.'s senior secured credit facility with a new senior secured credit facility that provides improved financial flexibility and lower interest
rate spreads. The new credit facility provides for a $322.9 million term loan facility ($321.3 million outstanding at March 29, 2008) and a €35.0 million
term loan facility ($54.8 million at March 29, 2008) and a $90.0 million revolving credit facility. Subject to certain terms and conditions, a maximum of $50.0 million of
the revolving credit facility may be used for letters of credit. At March 29, 2008, we had $17.0 million outstanding under the revolving credit

30

---



facility
and $10.3 million of undrawn standby letters of credit, resulting in $62.7 million of borrowing availability under the revolving credit facility.

On
July 31, 2007, Polypore, Inc. merged with and into Polypore International, and Polypore International assumed all of Polypore Inc.'s obligations under the new senior secured
credit facility. The term loans mature in July 2014 and the revolving credit facility matures in July 2013.

Interest
rates under the senior secured credit facility are, at our option, equal to either an alternate base rate plus a 1.25% margin or the Eurocurrency base rate plus a 2.25% margin. At
March 29, 2008, the interest rates on the U.S. dollar term loan, the Eurodollar term loan and
the revolving credit facility were 5.37%, 6.44% and 5.26%, respectively. In January 2008, the Company entered into interest rate swap agreements that effectively fix the interest rate on
$250.0 million of the Company's term loans. The interest rate swap agreement which terminates on June 30, 2009 fixes the interest rate on $50.0 million of the term loans at 5.58%.
The interest rate swap agreement which terminates on December 31, 2009 fixes the interest rate on $200.0 million of the term loans at 5.54%.

When
loans are outstanding under the revolving credit facility, the credit agreement requires us to meet a maximum senior leverage ratio based on a calculation of Adjusted EBITDA in which certain
items are added back to EBITDA.

Adjusted
EBITDA, as defined under the senior secured credit facility, was as follows:

(in millions)

Last twelve months
ended March 29, 2008Net income

$
11.3Add/Subtract:Depreciation and amortization


49.9Interest expense, net


73.3Income taxes


(11.3
)Stock-based compensation expense


0.8Foreign currency loss


1.9Loss on disposal of property, plant, and equipment


0.8Business restructuring


(0.9
)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


6.9Income from discontinued operations


(2.4
)Other non-cash or non-recurring charges


0.7Adjusted EBITDA

$
168.3


The calculation of the senior leverage ratio as defined under the senior credit facility as of March 29, 2008 is as follows:

(in millions)Indebtedness(1)

$
379.2Adjusted EBITDA


168.3Actual leverage ratio


2.25x


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When loans are outstanding under the revolving credit facility, we are required to maintain a ratio of not more than the following ratios of indebtedness to Adjusted EBITDA at the end of any quarter
ending during any of the following periods:

Period

RatioJuly 3, 2007 through and including June 28, 2008

3.25 to 1.00Thereafter

3.00 to 1.00


At March 29, 2008, we were in compliance with the senior leverage ratio and the remaining unused amount of the revolving credit facility was available for borrowing.

The
senior secured credit agreement contains certain restrictive covenants which, among other things, limit capital expenditures, the incurrence of additional indebtedness, investments, dividends,
transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances, and other matters customarily restricted in such
agreements. The facilities also contain certain customary events of default, subject to grace periods, as appropriate. We believe that annual capital expenditure limitations imposed by the senior
credit facilities will not significantly inhibit us from meeting our ongoing capital expenditure needs.

Future
principal and interest payments on long-term debt are expected to be paid out of cash flows from operations, borrowings on our revolving credit facility and future refinancing of
our debt. Our cash interest requirements for the next twelve months are estimated to be approximately $63.6 million.

The
8.75% senior subordinated notes ($461.8 million outstanding at March 29, 2008) will mature in 2012 and are guaranteed by most of our existing and future domestic restricted
subsidiaries, subject to certain exceptions. Except under certain circumstances, the 8.75% senior subordinated notes do not require principal payments prior to their maturity in 2012. Interest on the
8.75% senior subordinated notes is payable semi-annually in cash. The 8.75% senior subordinated notes contain customary covenants and events of default, including covenants that limit our
ability to incur debt, pay dividends and make investments.

We
believe we have sufficient liquidity to meet our cash requirements over both the short (next twelve months) and long term (in relation to our debt service requirements). In evaluating the
sufficiency of our liquidity for both the shorter and longer term, we considered the expected cash flow to be generated by our operations and the available borrowings under our senior secured credit
facility compared to our anticipated cash requirements for debt service, working capital, cash taxes and capital expenditures as well as funding requirements for long-term liabilities. We
anticipate that our operating cash flow, together with borrowings under the revolving credit facility, will be sufficient to meet our anticipated future operating expenses, capital expenditures and
debt service obligations as they become due for at least the next 12 months. However, our ability to make scheduled payments of principal, to pay interest on or to refinance our indebtedness
and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and
other factors beyond our control. See "Item 1A. Risk Factors" in our Annual Report on Form 10-K.

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From
time to time, we may explore additional financing methods and other means to lower our cost of capital, which could include stock issuance or debt financing and the application of the proceeds
therefrom to the repayment of bank debt or other indebtedness. In addition, in connection with any future acquisitions, we may require additional funding which may be provided in the form of
additional debt or equity financing or a combination thereof. There can be no assurance that any additional financing will be available to us on acceptable terms.

Foreign operations

We manufacture our products at 13 strategically located facilities in North America, Europe and Asia. Net sales from the foreign locations were approximately
$93.6 million and $81.2 million for the three months ended March 29, 2008 and March 31, 2007, respectively. Typically, we sell our products in the currency of the country
where the manufacturing facility that produces the product is located. Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations,
currency fluctuations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other action that would have
a direct or indirect adverse impact on our business or market opportunities within such governments' countries. Furthermore, there can be no assurance that the political, cultural and economic climate
outside the United States will be favorable to our operations and growth strategy.

Environmental matters

We accrue for environmental obligations when such expenditures are probable and reasonably estimable. The amount of liability recorded is based on currently
available information, including the progress of remedial investigations, current status of discussions with regulatory authorities regarding the method and extent of remediation, presently enacted
laws and existing technology. Accruals for estimated losses from environmental obligations are adjusted as further information develops or circumstances change. Costs of future expenditures for
environmental obligations are not discounted to their present value. Recoveries of environmental costs from other parties are recognized as assets when their receipt is deemed probable. Environmental
reserves, which are predominately euro-denominated, were $31.0 million and $29.2 million as of March 29, 2008 and December 29, 2007, respectively.

The
environmental reserves are primarily related to the Wuppertal, Germany and Potenza, Italy facilities. In connection with the acquisition of Membrana in 2002, we recorded a reserve for costs to
remediate known environmental issues and operational upgrades at the Wuppertal, Germany facility. In 2004, we identified potential environmental contamination at our manufacturing facility in Potenza,
Italy. We anticipate that expenditures will be made over the next seven to ten years.

In
2006, we identified instances of potential non-compliance with environmental operating permits at the Corydon, Indiana and Owensboro, Kentucky facilities. We recorded our best estimate
of potential penalties at that time. In March 2008, we reached agreement with the Indiana Department of Environmental Management and agreed to pay fines
consistent with our original estimate. We do not believe that additional fines or penalties will be assessed.

We
have indemnification agreements for certain environmental matters from Acordis A.G. ("Acordis") and Akzo Nobel N.V. ("Akzo"), the prior owners of Membrana. Akzo originally provided broad
environmental protections to Acordis with the right to assign such indemnities

33

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to
Acordis's successors. Akzo's indemnifications relate to conditions existing prior to December 1999, which is the date that Membrana was sold to Acordis. The Akzo agreement provides indemnification
of claims through December 2007, with the indemnification percentage decreasing each year during the coverage period. Through December 2003, Akzo pays 75% of any approved claim. After that, Akzo pays
65% of claims reported through December 2006 and 50% of claims reported through December 2007. In addition to the Akzo indemnification, Acordis provides separate indemnification of claims incurred
from December 1999 through February 2002, the acquisition date. At March 29, 2008 and December 29, 2007, amounts receivable under the indemnification agreements were $21.5 million
and $20.0 million, respectively. The current portion of the indemnification receivable is included in other current assets.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

New accounting standards

In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging
Activities("FAS 161"). FAS 161 requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments,
how derivative instruments and related hedged items are accounted for under Statement No. 133Accounting for Derivative Instruments and Hedging
Activitiesand how derivative instruments and related hedged items affect a company's financial position, financial performance and cash
flows. FAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008.

Item 3. Quantitative and qualitative disclosures about market risk

We are exposed to various market risks, which are potential losses arising from adverse changes in market rates and prices, such as interest rates and foreign
exchange fluctuations. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest rate risk

At March 29, 2008, we had fixed rate debt of approximately $466.7 million and variable rate debt of approximately $393.1 million. In January 2008, we
entered into interest rate swap agreements that effectively fix the interest rate on $250.0 million of our variable rate debt. The pre-tax earnings and cash flow impact resulting
from a 100 basis point change in interest rates on our variable rate debt not protected by interest rate swap agreements would be approximately $1.4 million per year.

Currency risk

Outside of the United States, we maintain assets and operations in Europe and Asia. The results of operations and financial position of our foreign operations are principally
measured in their respective currency and translated into U.S. dollars. As a result, exposure to foreign currency

34

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gains
and losses exists. The reported income of these subsidiaries will be higher or lower depending on a weakening or strengthening of the U.S. dollar against the respective foreign currency. Our
subsidiaries and affiliates also purchase and sell products and services in various currencies. As a result, we may be exposed to cost increases relative to the local currencies in the markets in
which we sell. Because a different percentage of our sales are in a foreign currency than our costs, a change in the relative value of the U.S. dollar could have a disproportionate impact on our sales
compared to our costs, which could impact our margins. A portion of our assets are based in our foreign locations and are translated into U.S. dollars at foreign currency exchange rates in effect as
of the end of each period, with the effect of such translation reflected in other comprehensive income (loss). We have a euro-denominated term loan and senior subordinated notes that
effectively hedge our net investment in foreign subsidiaries. Therefore, foreign currency gains and losses resulting from the translation of the euro-denominated debt are included in
accumulated other comprehensive income (loss). Accordingly, our consolidated shareholders' equity will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the respective
foreign currency, primarily the euro.

The
dollar/euro exchange rates used in our financial statements for the periods ended as set forth below were as follows:

Three months endedMarch 29, 2008

March 31, 2007Period end rate

1.5785

1.3335Period average rate

1.4974

1.3094


Our strategy for management of currency risk relies primarily on conducting our operations in a country's respective currency and may, from time to time, involve currency derivatives.
As of March 29, 2008, we did not have any foreign currency derivatives outstanding.

Item 4. Controls and procedures

An evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)
promulgated under the Exchange Act) was performed under the supervision, and with the participation of, the Company's management, including the Chief Executive Officer and Chief Financial Officer. The
Company's disclosure controls were designed to provide a reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon our evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as of March 29, 2008 to provide reasonable assurance that information required to be disclosed in the reports that
we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

During
the three months ended March 29, 2008, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) promulgated under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II  Other information

Item 1. Legal proceedings

In 2006, we identified instances of potential non-compliance with environmental operating permits at the Corydon, Indiana and Owensboro, Kentucky
facilities. We recorded our best estimate of potential penalties at that time. In March 2008, we reached agreement with the Indiana Department of Environmental Management and agreed to pay fines
consistent with our original estimate. We do not believe that additional fines or penalties will be assessed.

On
March 20, 2008, we received a letter from the Federal Trade Commission (the "FTC") requesting that the Company voluntarily provide certain documents and information to the FTC regarding our
acquisition of Microporous, which was completed on February 29, 2008. The letter stated that the FTC is conducting an investigation to determine whether the Microporous acquisition will
substantially lessen competition in any relevant market and thereby violate federal antitrust laws. We voluntarily responded to the letter in writing and through supplemental telephone conversations
and meetings.

On
April 7, 2008, we and our wholly owned subsidiary, Daramic LLC, each received from the FTC a subpoena and interrogatories requesting substantially similar documents and information as
were requested in the FTC's initial letter, as well as additional documents and information. We are in the process of responding to this request. We intend to continue to cooperate fully with this
investigation.

We
believe that the Microporous acquisition will be beneficial to our customers and the industry. Although we believe we will be successful in convincing the FTC to close its investigation, it is not
possible to predict with certainty the outcome of this matter. If the FTC were to reach a conclusion adverse to us, the FTC could seek remedies including divestiture of some or all of the assets
acquired in the Microporous acquisition through an administrative or judicial proceeding, which allows for a judicial appellate process. We believe that a final judicial resolution to a challenge by
the FTC to the Microporous acquisition, if any, could take several years.

We
believe that the final resolution of this matter will not have a material adverse impact on our business, financial condition or results of operations.

On
April 21, 2008, an estimated quantity of 70 liters of oil was released into the Wupper River, which appears to have emanated from the Membrana facility. German authorities have
commenced an investigation into the matter. We do not expect the outcome to be material.

Item 1A. Risk factors

With the exception of a material change to the following previously disclosed risk factor, there have been no other material changes in our risk factors from
those disclosed in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 29, 2007.

As we pursue acquisitions we are subject to added litigation and regulatory risks, integration risks, the possible disruption of our business and the incurrence of contingent
liabilities,

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expenses and additional debt. We have recently made certain acquisitions and may continue to do so in the future.

These
acquisitions subject us to added litigation and regulatory risks. On April 7, 2008, we and our wholly owned subsidiary, Daramic LLC, each received from the Federal Trade Commission
(the "FTC") a subpoena and interrogatories requesting substantially similar documents and information as were requested in the FTC's prior letter, as well as additional documents and
information. It is not possible to predict with certainty the outcome of this matter. If the FTC were to reach a conclusion adverse to us, the FTC could seek remedies including divestiture of some or
all of the assets acquired in the Microporous acquisition through an administrative or judicial proceeding, which allows for a judicial appellate process. We believe that a final judicial resolution
to a challenge by the FTC to the Microporous acquisition, if any, could take several years. Finally, this investigation, regardless of its outcome, will be expensive and time-consuming and
could divert management's attention and resources.

Acquisitions
also involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses
acquired will prove incorrect. Future acquisitions would likely result in the incurrence of debt and contingent liabilities. Such acquisitions could also increase our interest and amortization
expenses as well as periodic impairment charges related to goodwill and other intangible assets. Acquisitions could also result in significant charges relating to integration costs. We may not be able
to integrate successfully any business we acquire into our existing business. Any acquired businesses may not be profitable or as profitable as we had expected. The successful integration of new
businesses depends on our ability to manage these new businesses and cut excess costs. The successful integration of future acquisitions may also require substantial attention from our senior
management and the management of the acquired business. This could decrease the time that they have to service and attract customers and develop new products and services. In addition, because we may
actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays. Such expenses and delays could include difficulties in employing sufficient
staff and maintaining operational and management oversight. Our inability to complete the integration of new businesses in a timely and orderly manner could increase costs, reduce our profits and
ultimately disrupt our business.

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


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Signatures

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

|Date: May 8, 2008 |  |     |  | Polypore International, Inc.
(Registrant)                                                       
|----------------- |  | --- |  | ------------------------------------------------------------------------------------------------
|                  |  | By: |  | /s/ROBERT B. TOTH                                                                               
|                  |  |     |  | Robert B. Toth
President and Chief Executive Officer
(principal executive officer)              
|                  |  | By: |  | /s/LYNN AMOS                                                                                    
|                  |  |     |  | Lynn Amos
Chief Financial Officer
(principal financial officer and principal accounting officer)

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