##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 29, 2007
 o
    
    Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number: 1-32266
 POLYPORE INTERNATIONAL, INC.
  Delaware
    
    43-2049334(State or Other Jurisdiction of
    
    (IRS EmployerIncorporation or Organization)
    
    Identification No.)11430 North Community House Road, Suite 350Charlotte, North Carolina
    
    28277(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 587-8409  (Registrants Telephone Number, Including Area Code)
 þ o
  o o þ
 o þ
    1




---



##### 



Polypore International, Inc.
Index to Quarterly Report on Form 10-Q
For the Three Months Ended September 29, 2007
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    33PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    33Item 6.
    
    Exhibits
    
    
    34SIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



Forward-looking Statements
   
    
    the highly competitive nature of the markets in which we sell our products;
    
    the failure to continue to develop innovative products;
    
    the loss of our customers;
    
    the vertical integration by our customers of the production of our products into
their own manufacturing process;
    
    increases in prices for raw materials or the loss of key supplier contracts;
    
    our substantial indebtedness;
    
    interest rate risk related to our variable rate indebtedness;
    
    our inability to generate cash;
    
    restrictions related to the senior secured credit facilities;
    
    employee slowdowns, strikes or similar actions;
    
    product liability claims exposure;
    
    risks in connection with our operations outside the United States;
    
    the incurrence of substantial costs to comply with, or as a result of violations of,
or liabilities under, environmental laws;
    
    the failure to protect our intellectual property;
    
    the failure to replace lost senior management;
    
    the incurrence of additional debt, contingent liabilities and expenses in connection
with future acquisitions;
    
    the adverse impact on our financial condition from past restructuring activities;
    
    the failure to effectively integrate newly acquired operations;
    
    the absence of expected returns from the amount of intangible assets we have
recorded; and
    
    natural disasters, epidemics, terrorist acts and other events beyond our control.
  3




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Polypore International, Inc.
Condensed Consolidated Balance Sheets
 September 29, 2007
    
    December 30, 2006*(in thousands)
    
    (unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    60,701
    
    
    $
    54,712Accounts receivable, net
    
    
    109,018
    
    
    
    102,110Inventories
    
    
    62,892
    
    
    
    67,741Refundable income taxes
    
    
    2,009
    
    
    
    Prepaid and other
    
    
    12,402
    
    
    
    13,386Total current assets
    
    
    247,022
    
    
    
    237,949Property, plant and equipment, net
    
    
    384,053
    
    
    
    363,526Goodwill
    
    
    568,879
    
    
    
    567,587Intangibles and loan acquisition costs, net
    
    
    191,834
    
    
    
    204,645Environmental indemnification receivable
    
    
    16,171
    
    
    
    15,236Other
    
    
    1,161
    
    
    
    917Total assets
    
    $
    1,409,120
    
    
    $
    1,389,860Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    26,722
    
    
    $
    25,494Accrued liabilities
    
    
    63,611
    
    
    
    55,883Income taxes payable
    
    
    
    
    
    
    3,689Current portion of debt
    
    
    4,533
    
    
    
    3,938Current portion of capital lease obligation
    
    
    1,420
    
    
    
    1,377Total current liabilities
    
    
    96,286
    
    
    
    90,381Debt, less current portion
    
    
    805,954
    
    
    
    1,038,837Capital lease obligation, less current portion
    
    
    3,684
    
    
    
    4,754Pension and postretirement benefits
    
    
    68,599
    
    
    
    61,219Postemployment benefits
    
    
    3,988
    
    
    
    4,451Environmental reserve, less current portion
    
    
    24,387
    
    
    
    22,935Deferred income taxes
    
    
    71,789
    
    
    
    94,347Other
    
    
    16,060
    
    
    
    3,274Commitments and contingenciesShareholders equity:Common stock, $.01 par value  200,000,000 shares authorized,
40,306,928 and 25,347,470 shares issued and outstanding at
September 29, 2007 and December 30, 2006, respectively
    
    
    403
    
    
    
    253Paid-in capital
    
    
    390,038
    
    
    
    125,234Retained deficit
    
    
    (65,551
    )
    
    
    (51,776
    )Accumulated other comprehensive loss
    
    
    (6,517
    )
    
    
    (4,049
    )318,373
    
    
    
    69,662Total liabilities and shareholders equity
    
    $
    1,409,120
    
    
    $
    1,389,860
 
 *
    
    Derived from audited consolidated financial statements See notes to condensed consolidated financial statements
 4




---



##### Table of Contents



Polypore International, Inc .  Condensed Consolidated Statements of Operations (Unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,(in thousands, except share data)
    
    2007
    
    2006
    
    2007
    
    2006Net sales
    
    $
    130,419
    
    
    $
    116,384
    
    
    $
    391,936
    
    
    $
    354,771Cost of goods sold
    
    
    84,404
    
    
    
    78,296
    
    
    
    249,739
    
    
    
    231,737Gross profit
    
    
    46,015
    
    
    
    38,088
    
    
    
    142,197
    
    
    
    123,034Selling, general and administrative expenses
    
    
    23,165
    
    
    
    19,973
    
    
    
    70,020
    
    
    
    64,489Business restructuring
    
    
    223
    
    
    
    36,333
    
    
    
    358
    
    
    
    37,658Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Operating income (loss)
    
    
    22,627
    
    
    
    (18,218
    )
    
    
    71,819
    
    
    
    23,480Other (income) expense:Interest expense, net
    
    
    16,713
    
    
    
    22,880
    
    
    
    64,185
    
    
    
    68,642Costs related to purchase of 10.50%
senior discount notes
    
    
    30,038
    
    
    
    
    
    
    
    30,038
    
    
    
    Write-off of loan acquisition costs
associated with refinancing of senior
secured credit facilities
    
    
    7,173
    
    
    
    
    
    
    
    7,173
    
    
    
    Foreign currency and other
    
    
    390
    
    
    
    284
    
    
    
    764
    
    
    
    2,26554,314
    
    
    
    23,164
    
    
    
    102,160
    
    
    
    70,907Loss before income taxes
    
    
    (31,687
    )
    
    
    (41,382
    )
    
    
    (30,341
    )
    
    
    (47,427
    )Income taxes
    
    
    (17,107
    )
    
    
    (17,264
    )
    
    
    (16,820
    )
    
    
    (20,375
    )Loss before the cumulative effect of a
change in accounting principle
    
    
    (14,580
    )
    
    
    (24,118
    )
    
    
    (13,521
    )
    
    
    (27,052
    )Cumulative effect of a change in accounting
principle related to stock compensation,
net of income taxes of $139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Net loss
    
    $
    (14,580
    )
    
    $
    (24,118
    )
    
    $
    (13,521
    )
    
    $
    (26,821
    )Net loss per share  basic and diluted:Loss before cumulative effect of a change
in accounting principle
    
    $
    (0.36
    )
    
    $
    (0.95
    )
    
    $
    (0.44
    )
    
    $
    (1.07
    )Cumulative effect of a change in
accounting principle related to stock
compensation, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net loss
    
    $
    (0.36
    )
    
    $
    (0.95
    )
    
    $
    (0.44
    )
    
    $
    (1.06
    )Weighted average shares outstanding  basic
and diluted
    
    
    40,306,928
    
    
    
    25,347,470
    
    
    
    30,483,644
    
    
    
    25,301,683
 See notes to condensed consolidated financial statements
 5




---



##### Table of Contents



Polypore International, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 Nine Months Ended(in thousands)
    
    September 29, 2007
    
    September 30, 2006Operating activities:Net loss
    
    $
    (13,521
    )
    
    $
    (26,821
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation expense
    
    
    23,119
    
    
    
    30,689Amortization expense
    
    
    13,408
    
    
    
    13,259Amortization of loan acquisition costs
    
    
    2,154
    
    
    
    2,246Amortization of debt discount
    
    
    13,297
    
    
    
    17,990Stock compensation
    
    
    460
    
    
    
    230Loss on disposal of property, plant and equipment
    
    
    1,153
    
    
    
    842Foreign currency (gain) loss
    
    
    (25
    )
    
    
    538Deferred income taxes
    
    
    (25,881
    )
    
    
    (29,122
    )Business restructuring
    
    
    358
    
    
    
    37,658Costs related to purchase of 10.50% senior discount notes
    
    
    30,038
    
    
    
    Write-off of loan acquisition costs associated with refinancing of senior
secured credit facilities
    
    
    7,173
    
    
    
    Change in accounting principle related to postemployment benefits
    
    
    
    
    
    
    (2,593
    )Cumulative effect of change in accounting principle related to
stock compensation
    
    
    
    
    
    
    (370
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,403
    )
    
    
    (5,913
    )Inventories
    
    
    8,262
    
    
    
    (3,259
    )Prepaid and other current assets
    
    
    1,153
    
    
    
    (562
    )Accounts payable and accrued liabilities
    
    
    5,206
    
    
    
    10,025Income taxes payable
    
    
    (778
    )
    
    
    1,420Other, net
    
    
    (1,007
    )
    
    
    4,147Net cash provided by operating activities
    
    
    62,166
    
    
    
    50,404Investing activities:Purchases of property, plant and equipment
    
    
    (16,282
    )
    
    
    (15,862
    )Acquisition of business
    
    
    (5,475
    )
    
    
    Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    61Net cash used in investing activities
    
    
    (21,757
    )
    
    
    (15,801
    )Financing activities:Proceeds from the senior secured credit facility
    
    
    370,000
    
    
    
    Principal payments on debt
    
    
    (371,201
    )
    
    
    (1,116
    )Purchase of the 10.50% senior discount notes
    
    
    (293,648
    )
    
    
    Proceeds from initial public offering, net of underwriting fees and other offering related costs
    
    
    264,814
    
    
    
    Loan acquisition costs
    
    
    (8,672
    )
    
    
    (15
    )Repurchase of common stock
    
    
    (320
    )
    
    
    Issuance of common stock
    
    
    
    
    
    
    399Net cash used in financing activities
    
    
    (39,027
    )
    
    
    (732
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    4,607
    
    
    
    1,864Net increase in cash and cash equivalents
    
    
    5,989
    
    
    
    35,735Cash and cash equivalents at beginning of period
    
    
    54,712
    
    
    
    28,060Cash and cash equivalents at end of the period
    
    $
    60,701
    
    
    $
    63,795
 See notes to condensed consolidated financial statements
 6




---



##### Table of Contents



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




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Fair Value Measurement
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and
132(R)
 Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement 109
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Initial Public Offering and Related Transactions
   4. Inventories
  (in thousands)
    
    September 29, 2007
    
    December 30, 2006Raw materials
    
    $
    22,596
    
    
    $
    21,714Work-in-process
    
    
    10,682
    
    
    
    10,679Finished goods
    
    
    29,614
    
    
    
    35,348Total
    
    $
    62,892
    
    
    $
    67,741
 8




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 5. Debt
  (in thousands)
    
    September 29, 2007
    
    December 30, 2006Senior secured credit facility:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    372,548
    
    
    
    369,1638.75% senior subordinated notes
    
    
    437,805
    
    
    
    422,55010.50% senior discount notes, net of unamortized original issue discount of
$49,153 at December 30, 2006
    
    
    
    
    
    
    250,847Other
    
    
    134
    
    
    
    215810,487
    
    
    
    1,042,775Less current maturities
    
    
    4,533
    
    
    
    3,938Long-term debt
    
    $
    805,954
    
    
    $
    1,038,837
 
  6. Employee Benefit Plans
  Pension PlansThree Months Ended
    
    Nine Months Ended(in thousands)
    
    September 29, 2007
    
    September 30, 2006
    
    September 29, 2007
    
    September 30, 2006Service cost
    
    $
    815
    
    
    $
    807
    
    
    $
    2,416
    
    
    $
    2,285Interest cost
    
    
    842
    
    
    
    854
    
    
    
    2,496
    
    
    
    2,422Expected return on plan assets
    
    
    (245
    )
    
    
    (211
    )
    
    
    (725
    )
    
    
    (603
    )Recognized net actuarial loss
    
    
    94
    
    
    
    9
    
    
    
    278
    
    
    
    26Net periodic benefit cost
    
    $
    1,506
    
    
    $
    1,459
    
    
    $
    4,465
    
    
    $
    4,130
 Other Postretirement BenefitsThree Months Ended
    
    Nine Months Ended(in thousands)
    
    September 29, 2007
    
    September 30, 2006
    
    September 29, 2007
    
    September 30, 2006Service cost
    
    $
    8
    
    
    $
    7
    
    
    $
    25
    
    
    $
    23Interest cost
    
    
    28
    
    
    
    29
    
    
    
    83
    
    
    
    86Recognized net actuarial loss
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    6Net periodic benefit cost
    
    $
    36
    
    
    $
    38
    
    
    $
    108
    
    
    $
    115
 9




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 7. Environmental Matters
      10




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 8. Business Restructuring
 2006 Restructuring Plan
  2005 Restructuring Plan
  2004 Restructuring Plan
   Balance at
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atDecember 30,
    
    Restructuring
    
    Cash
    
    Currency
    
    September 29,(in thousands)
    
    2006
    
    Charges
    
    Payments
    
    Translation
    
    20072006 Restructuring Plan:Severance and benefit costs
    
    $
    11,559
    
    
    $
    
    
    
    $
    (7,201
    )
    
    $
    461
    
    
    $
    4,819Other
    
    
    5,684
    
    
    
    
    
    
    
    (4,476
    )
    
    
    174
    
    
    
    1,38217,243
    
    
    
    
    
    
    
    (11,677
    )
    
    
    635
    
    
    
    6,2012005 Restructuring Plan:Severance and benefit costs
    
    
    876
    
    
    
    148
    
    
    
    (586
    )
    
    
    43
    
    
    
    481Other
    
    
    
    
    
    
    210
    
    
    
    (210
    )
    
    
    
    
    
    
    876
    
    
    
    358
    
    
    
    (796
    )
    
    
    43
    
    
    
    4812004 Restructuring Plan:Severance and benefit costs
    
    
    1,152
    
    
    
    
    
    
    
    (730
    )
    
    
    43
    
    
    
    465Total
    
    $
    19,271
    
    
    $
    358
    
    
    $
    (13,203
    )
    
    $
    721
    
    
    $
    7,147
 11




---



##### Table of Contents



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




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 11. Comprehensive Loss
  Three Months Ended
    
    Nine Months Ended(in thousands)
    
    September 29, 2007
    
    September 30, 2006
    
    September 29, 2007
    
    September 30, 2006Net loss
    
    $
    (14,580
    )
    
    $
    (24,118
    )
    
    $
    (13,521
    )
    
    $
    (26,821
    )Other comprehensive
income (loss),
primarily foreign
currency
translation
    
    
    (7,027
    )
    
    
    1,045
    
    
    
    (2,468
    )
    
    
    4,258Comprehensive loss
    
    $
    (21,607
    )
    
    $
    (23,073
    )
    
    $
    (15,989
    )
    
    $
    (22,563
    )
 12. Related Party Transactions
  13. Acquisition
 Business Combinations Goodwill and Other Intangible Assets
 13




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 14. Segment Information
    Three Months Ended
    
    Nine Months EndedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,(in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Net sales to external customers (by
major product group):Lead-acid battery separators
    
    $
    70,114
    
    
    $
    63,591
    
    
    $
    214,831
    
    
    $
    194,000Lithium battery separators
    
    
    24,265
    
    
    
    19,518
    
    
    
    65,918
    
    
    
    60,071Energy storage
    
    
    94,379
    
    
    
    83,109
    
    
    
    280,749
    
    
    
    254,071Healthcare
    
    
    22,820
    
    
    
    22,351
    
    
    
    72,178
    
    
    
    68,178Filtration and specialty
    
    
    13,220
    
    
    
    10,924
    
    
    
    39,009
    
    
    
    32,522Separations media
    
    
    36,040
    
    
    
    33,275
    
    
    
    111,187
    
    
    
    100,700Total net sales to external customers
    
    $
    130,419
    
    
    $
    116,384
    
    
    $
    391,936
    
    
    $
    354,771Operating income:Energy storage
    
    $
    19,992
    
    
    $
    17,746
    
    
    $
    59,756
    
    
    $
    53,225Separations media
    
    
    3,123
    
    
    
    453
    
    
    
    12,736
    
    
    
    5,482Corporate
    
    
    (265
    )
    
    
    (84
    )
    
    
    (315
    )
    
    
    (162
    )Segment operating income
    
    
    22,850
    
    
    
    18,115
    
    
    
    72,177
    
    
    
    58,545Business restructuring
    
    
    223
    
    
    
    36,333
    
    
    
    358
    
    
    
    37,658Change in accounting principle
related to postemployment benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Total operating income (loss)
    
    
    22,627
    
    
    
    (18,218
    )
    
    
    71,819
    
    
    
    23,480Reconciling items:Interest expense, net
    
    
    16,713
    
    
    
    22,880
    
    
    
    64,185
    
    
    
    68,642Costs related to purchase of
10.50% senior discount notes
    
    
    30,038
    
    
    
    
    
    
    
    30,038
    
    
    
    Write-off of loan acquisition
costs associated with refinancing
of senior secured credit
facilities
    
    
    7,173
    
    
    
    
    
    
    
    7,173
    
    
    
    Foreign currency and other
    
    
    390
    
    
    
    284
    
    
    
    764
    
    
    
    2,265Loss before income taxes
    
    $
    (31,687
    )
    
    $
    (41,382
    )
    
    $
    (30,341
    )
    
    $
    (47,427
    )Depreciation and amortization:Energy storage
    
    $
    8,024
    
    
    $
    7,785
    
    
    $
    24,387
    
    
    $
    23,511Separations media
    
    
    4,017
    
    
    
    7,021
    
    
    
    12,140
    
    
    
    20,437Total depreciation and amortization
    
    $
    12,041
    
    
    $
    14,806
    
    
    $
    36,527
    
    
    $
    43,948
 14




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors
   Condensed Consolidating Balance Sheet
 As of September 29, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    37,886
    
    
    $
    22,815
    
    
    $
    
    
    
    $
    60,701Accounts receivable, net
    
    
    38,334
    
    
    
    70,684
    
    
    
    
    
    
    
    
    
    
    
    109,018Inventories
    
    
    17,743
    
    
    
    45,149
    
    
    
    
    
    
    
    
    
    
    
    62,892Refundable income taxes
    
    
    580
    
    
    
    (2,064
    )
    
    
    3,493
    
    
    
    
    
    
    
    2,009Other
    
    
    2,393
    
    
    
    9,946
    
    
    
    (478
    )
    
    
    541
    
    
    
    12,402Total current assets
    
    
    59,050
    
    
    
    161,601
    
    
    
    25,830
    
    
    
    541
    
    
    
    247,022Due from affiliates
    
    
    228,985
    
    
    
    300,461
    
    
    
    285,745
    
    
    
    (815,191
    )
    
    
    Investment in subsidiaries
    
    
    236,310
    
    
    
    274,314
    
    
    
    242,846
    
    
    
    (753,470
    )
    
    
    Property, plant and equipment, net
    
    
    106,741
    
    
    
    277,312
    
    
    
    
    
    
    
    
    
    
    
    384,053Goodwill
    
    
    
    
    
    
    1,335
    
    
    
    567,544
    
    
    
    
    
    
    
    568,879Intangibles and loan acquisition
costs, net
    
    
    47
    
    
    
    
    
    
    
    191,787
    
    
    
    
    
    
    
    191,834Other
    
    
    763
    
    
    
    16,569
    
    
    
    
    
    
    
    
    
    
    
    17,332Total assets
    
    $
    631,896
    
    
    $
    1,031,592
    
    
    $
    1,313,752
    
    
    $
    (1,568,120
    )
    
    $
    1,409,120Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    33,685
    
    
    $
    41,181
    
    
    $
    15,467
    
    
    $
    
    
    
    $
    90,333Current portion of debt
    
    
    
    
    
    
    497
    
    
    
    4,036
    
    
    
    
    
    
    
    4,533Current portion of capital lease
obligation
    
    
    1,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420Total current liabilities
    
    
    35,105
    
    
    
    41,678
    
    
    
    19,503
    
    
    
    
    
    
    
    96,286Due to affiliates
    
    
    313,100
    
    
    
    282,791
    
    
    
    219,300
    
    
    
    (815,191
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    49,292
    
    
    
    756,662
    
    
    
    
    
    
    
    805,954Capital lease obligation, less
current portion
    
    
    3,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,684Pension and postretirement benefits
    
    
    2,442
    
    
    
    66,157
    
    
    
    
    
    
    
    
    
    
    
    68,599Postemployment benefits
    
    
    
    
    
    
    3,988
    
    
    
    
    
    
    
    
    
    
    
    3,988Environmental reserve, less
current portion
    
    
    
    
    
    
    24,387
    
    
    
    
    
    
    
    
    
    
    
    24,387Deferred income taxes and other
    
    
    70,724
    
    
    
    16,670
    
    
    
    (86
    )
    
    
    541
    
    
    
    87,849Shareholders equity
    
    
    206,841
    
    
    
    546,629
    
    
    
    318,373
    
    
    
    (753,470
    )
    
    
    318,373Total liabilities and
shareholders equity
    
    $
    631,896
    
    
    $
    1,031,592
    
    
    $
    1,313,752
    
    
    $
    (1,568,120
    )
    
    $
    1,409,120
 15




---



##### Table of Contents



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




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Operations
 For the three months ended September 29, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    47,252
    
    
    $
    83,167
    
    
    $
    
    
    
    $
    
    
    
    $
    130,419Cost of goods sold
    
    
    21,051
    
    
    
    63,353
    
    
    
    
    
    
    
    
    
    
    
    84,404Gross profit
    
    
    26,201
    
    
    
    19,814
    
    
    
    
    
    
    
    
    
    
    
    46,015Selling, general and
administrative expenses
    
    
    14,643
    
    
    
    8,258
    
    
    
    264
    
    
    
    
    
    
    
    23,165Business restructuring
    
    
    
    
    
    
    223
    
    
    
    
    
    
    
    
    
    
    
    223Operating income (loss)
    
    
    11,558
    
    
    
    11,333
    
    
    
    (264
    )
    
    
    
    
    
    
    22,627Costs related to purchase of
10.50% senior discount notes
    
    
    
    
    
    
    
    
    
    
    30,038
    
    
    
    
    
    
    
    30,038Write-off of loan acquisition
costs associated with refinancing
of senior secured credit
facilities
    
    
    
    
    
    
    
    
    
    
    7,173
    
    
    
    
    
    
    
    7,173Interest expense and other
    
    
    (1,831
    )
    
    
    3,012
    
    
    
    15,922
    
    
    
    
    
    
    
    17,103Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (16,440
    )
    
    
    16,440
    
    
    
    Income (loss) before income taxes
    
    
    13,389
    
    
    
    8,321
    
    
    
    (36,957
    )
    
    
    (16,440
    )
    
    
    (31,687
    )Income taxes
    
    
    6,935
    
    
    
    (1,665
    )
    
    
    (22,377
    )
    
    
    
    
    
    
    (17,107
    )Net income (loss)
    
    $
    6,454
    
    
    $
    9,986
    
    
    $
    (14,580
    )
    
    $
    (16,440
    )
    
    $
    (14,580
    )
 Condensed Consolidating Statement of Operations
 For the three months ended September 30, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    44,001
    
    
    $
    72,383
    
    
    $
    
    
    
    $
    
    
    
    $
    116,384Cost of goods sold
    
    
    19,584
    
    
    
    58,712
    
    
    
    
    
    
    
    
    
    
    
    78,296Gross profit
    
    
    24,417
    
    
    
    13,671
    
    
    
    
    
    
    
    
    
    
    
    38,088Selling, general and
administrative expenses
    
    
    12,678
    
    
    
    7,035
    
    
    
    260
    
    
    
    
    
    
    
    19,973Business restructuring
    
    
    
    
    
    
    36,333
    
    
    
    
    
    
    
    
    
    
    
    36,333Operating income (loss)
    
    
    11,739
    
    
    
    (29,697
    )
    
    
    (260
    )
    
    
    
    
    
    
    (18,218
    )Interest expense and other
    
    
    (1,233
    )
    
    
    1,735
    
    
    
    22,662
    
    
    
    
    
    
    
    23,164Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    12,663
    
    
    
    (12,663
    )
    
    
    Income (loss) before income taxes
    
    
    12,972
    
    
    
    (31,432
    )
    
    
    (35,585
    )
    
    
    12,663
    
    
    
    (41,382
    )Income taxes
    
    
    7,499
    
    
    
    (13,296
    )
    
    
    (11,467
    )
    
    
    
    
    
    
    (17,264
    )Net income (loss)
    
    $
    5,473
    
    
    $
    (18,136
    )
    
    $
    (24,118
    )
    
    $
    12,663
    
    
    $
    (24,118
    )
 17




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Operations
 For the nine months ended September 29, 2007
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    142,115
    
    
    $
    249,821
    
    
    $
    
    
    
    $
    
    
    
    $
    391,936Cost of goods sold
    
    
    62,762
    
    
    
    186,977
    
    
    
    
    
    
    
    
    
    
    
    249,739Gross profit
    
    
    79,353
    
    
    
    62,844
    
    
    
    
    
    
    
    
    
    
    
    142,197Selling, general and
administrative expenses
    
    
    43,995
    
    
    
    25,431
    
    
    
    594
    
    
    
    
    
    
    
    70,020Business restructuring
    
    
    
    
    
    
    358
    
    
    
    
    
    
    
    
    
    
    
    358Operating income (loss)
    
    
    35,358
    
    
    
    37,055
    
    
    
    (594
    )
    
    
    
    
    
    
    71,819Costs related to purchase of
10.50% senior discount notes
    
    
    
    
    
    
    
    
    
    
    30,038
    
    
    
    
    
    
    
    30,038Write-off of loan acquisition
costs associated with refinancing
of senior secured credit
facilities
    
    
    
    
    
    
    
    
    
    
    7,173
    
    
    
    
    
    
    
    7,173Interest expense and other
    
    
    (5,353
    )
    
    
    7,007
    
    
    
    63,295
    
    
    
    
    
    
    
    64,949Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (44,422
    )
    
    
    44,422
    
    
    
    Income (loss) before income taxes
    
    
    40,711
    
    
    
    30,048
    
    
    
    (56,678
    )
    
    
    (44,422
    )
    
    
    (30,341
    )Income taxes
    
    
    22,346
    
    
    
    3,991
    
    
    
    (43,157
    )
    
    
    
    
    
    
    (16,820
    )Net income (loss)
    
    $
    18,365
    
    
    $
    26,057
    
    
    $
    (13,521
    )
    
    $
    (44,422
    )
    
    $
    (13,521
    )
 Condensed Consolidating Statement of Operations
 For the nine months ended September 30, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    136,110
    
    
    $
    218,661
    
    
    $
    
    
    
    $
    
    
    
    $
    354,771Cost of goods sold
    
    
    61,524
    
    
    
    170,213
    
    
    
    
    
    
    
    
    
    
    
    231,737Gross profit
    
    
    74,586
    
    
    
    48,448
    
    
    
    
    
    
    
    
    
    
    
    123,034Selling, general and
administrative expenses
    
    
    39,355
    
    
    
    24,796
    
    
    
    338
    
    
    
    
    
    
    
    64,489Business restructuring
    
    
    
    
    
    
    37,658
    
    
    
    
    
    
    
    
    
    
    
    37,658Change in accounting principle
related to postemployment
benefits
    
    
    
    
    
    
    (2,593
    )
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Operating income (loss)
    
    
    35,231
    
    
    
    (11,413
    )
    
    
    (338
    )
    
    
    
    
    
    
    23,480Interest expense and other
    
    
    (2,267
    )
    
    
    3,674
    
    
    
    69,500
    
    
    
    
    
    
    
    70,907Equity in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (12,048
    )
    
    
    12,048
    
    
    
    Income (loss) before income taxes
    
    
    37,498
    
    
    
    (15,087
    )
    
    
    (57,790
    )
    
    
    (12,048
    )
    
    
    (47,427
    )Income taxes
    
    
    20,741
    
    
    
    (10,378
    )
    
    
    (30,738
    )
    
    
    
    
    
    
    (20,375
    )Net income (loss) before the
cumulative effect of a change in
accounting principle
    
    $
    16,757
    
    
    $
    (4,709
    )
    
    $
    (27,052
    )
    
    $
    (12,048
    )
    
    $
    (27,052
    )
 18




---



##### Table of Contents



Polypore International, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 15. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
 For the nine months ended September 29, 2007
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet cash
provided by operating activities
    
    $
    27,857
    
    
    $
    46,110
    
    
    $
    32,621
    
    
    $
    (44,422
    )
    
    $
    62,166Investing activities:Purchases of property, plant and equipment
    
    
    (7,069
    )
    
    
    (9,213
    )
    
    
    
    
    
    
    
    
    
    
    (16,282
    )Purchase of 60% share in manufacturing facility
    
    
    
    
    
    
    (5,475
    )
    
    
    
    
    
    
    
    
    
    
    (5,475
    )Net cash
used in investing activities
    
    
    (7,069
    )
    
    
    (14,688
    )
    
    
    
    
    
    
    
    
    
    
    (21,757
    )Financing activities:Proceeds from the new senior secured credit
facility
    
    
    
    
    
    
    42,551
    
    
    
    327,449
    
    
    
    
    
    
    
    370,000Principal payments on debt
    
    
    (1,027
    )
    
    
    (1,991
    )
    
    
    (368,183
    )
    
    
    
    
    
    
    (371,201
    )Purchase of the 10.50% senior discount notes
    
    
    
    
    
    
    
    
    
    
    (293,648
    )
    
    
    
    
    
    
    (293,648
    )Proceeds from initial public offering, net of
underwriting fees and other offering related
costs
    
    
    
    
    
    
    
    
    
    
    264,814
    
    
    
    
    
    
    
    264,814Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (8,672
    )
    
    
    
    
    
    
    (8,672
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    (320
    )Intercompany transactions, net
    
    
    (19,796
    )
    
    
    (69,475
    )
    
    
    44,849
    
    
    
    44,422
    
    
    
    Net cash
used in financing activities
    
    
    (20,823
    )
    
    
    (28,915
    )
    
    
    (33,711
    )
    
    
    44,422
    
    
    
    (39,027
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    35
    
    
    
    4,572
    
    
    
    
    
    
    
    
    
    
    
    4,607Net increase in cash and cash equivalents
    
    
    
    
    
    
    7,079
    
    
    
    (1,090
    )
    
    
    
    
    
    
    5,989Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    30,807
    
    
    
    23,905
    
    
    
    
    
    
    
    54,712Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    37,886
    
    
    $
    22,815
    
    
    $
    
    
    
    $
    60,701
 Condensed Consolidating Statement of Cash Flows
 For the nine months ended September 30, 2006
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    
    
    
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    The Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by (used in) operating
activities
    
    $
    33,145
    
    
    $
    40,847
    
    
    $
    (11,745
    )
    
    $
    (11,843
    )
    
    $
    50,404Investing activities:Purchases of property, plant and equipment
    
    
    (8,053
    )
    
    
    (7,809
    )
    
    
    
    
    
    
    
    
    
    
    (15,862
    )Proceeds from sale of property, plant and
equipment
    
    
    5
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    61Net cash
used in investing activities
    
    
    (8,048
    )
    
    
    (7,753
    )
    
    
    
    
    
    
    
    
    
    
    (15,801
    )Financing activities:Principal payments on debt
    
    
    (963
    )
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (1,116
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    (15
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    399Intercompany transactions, net
    
    
    (24,283
    )
    
    
    (16,697
    )
    
    
    29,137
    
    
    
    11,843
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (25,246
    )
    
    
    (16,850
    )
    
    
    29,521
    
    
    
    11,843
    
    
    
    (732
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (48
    )
    
    
    1,917
    
    
    
    (5
    )
    
    
    
    
    
    
    1,864Net increase (decrease) in cash and cash
equivalents
    
    
    (197
    )
    
    
    18,161
    
    
    
    17,771
    
    
    
    
    
    
    
    35,735Cash and cash equivalents at beginning of period
    
    
    20
    
    
    
    18,173
    
    
    
    9,867
    
    
    
    
    
    
    
    28,060Cash and cash equivalents at end of period
    
    $
    (177
    )
    
    $
    36,334
    
    
    $
    27,638
    
    
    $
    
    
    
    $
    63,795
 19




---



##### Table of Contents



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




---



##### Table of Contents



Initial Public Offering and Related Transactions
    
  Critical accounting policies
  Allowance for doubtful accounts
  Impairment of intangibles and goodwill
 Goodwill and Other Intangible Assets
 21




---



##### Table of Contents



Pension and other postretirement benefits
  Environmental matters
    22




---



##### Table of Contents



Results of Operations
  Percentage of Net SalesThree Months Ended
    
    Three Months EndedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,($s in millions)
    
    2007
    
    2006
    
    2007
    
    2006Net sales
    
    $
    130.4
    
    
    $
    116.4
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    46.0
    
    
    
    38.1
    
    
    
    35.3
    %
    
    
    32.7
    %Selling, general and administrative expenses
    
    
    23.2
    
    
    
    20.0
    
    
    
    17.8
    %
    
    
    17.2
    %Business restructuring
    
    
    0.2
    
    
    
    36.3
    
    
    
    0.2
    %
    
    
    31.2
    %Operating income (loss)
    
    
    22.6
    
    
    
    (18.2
    )
    
    
    17.3
    %
    
    
    (15.7
    )%Interest expense, net
    
    
    16.7
    
    
    
    22.9
    
    
    
    12.8
    %
    
    
    19.7
    %Costs related to purchase of 10.50% senior
discount notes
    
    
    30.0
    
    
    
    
    
    
    
    23.0
    %
    
    
    Write-off of loan acquisition costs
associated with refinancing of senior
secured credit facilities
    
    
    7.2
    
    
    
    
    
    
    
    5.5
    %
    
    
    Foreign currency and other
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.3
    %
    
    
    0.2
    %54.3
    
    
    
    23.2
    
    
    
    41.6
    %
    
    
    19.9
    %Loss before income taxes
    
    
    (31.7
    )
    
    
    (41.4
    )
    
    
    (24.3
    )%
    
    
    (35.6
    )%Income taxes
    
    
    (17.1
    )
    
    
    (17.3
    )
    
    
    (13.1
    )%
    
    
    (14.9
    )%Net loss
    
    $
    (14.6
    )
    
    $
    (24.1
    )
    
    
    (11.2
    )%
    
    
    (20.7
    )%
 Percentage of Net SalesNine Months Ended
    
    Nine Months EndedSeptember 29,
    
    September 30,
    
    September 29,
    
    September 30,($s in millions)
    
    2007
    
    2006
    
    2007
    
    2006Net sales
    
    $
    391.9
    
    
    $
    354.8
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    142.2
    
    
    
    123.0
    
    
    
    36.3
    %
    
    
    34.7
    %Selling,
general and administrative expenses
    
    
    70.0
    
    
    
    64.5
    
    
    
    17.9
    %
    
    
    18.2
    %Business restructuring
    
    
    0.4
    
    
    
    37.6
    
    
    
    0.1
    %
    
    
    10.6
    %Change in accounting
principle related to
postemployment benefits
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    (0.7
    )%Operating income
    
    
    71.8
    
    
    
    23.5
    
    
    
    18.3
    %
    
    
    6.6
    %Interest expense, net
    
    
    64.2
    
    
    
    68.6
    
    
    
    16.4
    %
    
    
    19.3
    %Costs related to purchase
of 10.50% senior discount
notes
    
    
    30.0
    
    
    
    
    
    
    
    7.7
    %
    
    
    Write-off of loan
acquisition costs
associated with
refinancing of senior
secured credit facilities
    
    
    7.2
    
    
    
    
    
    
    
    1.8
    %
    
    
    Foreign currency and other
    
    
    0.7
    
    
    
    2.3
    
    
    
    0.1
    %
    
    
    0.6
    %102.1
    
    
    
    70.9
    
    
    
    26.0
    %
    
    
    19.9
    %Loss before income taxes
    
    
    (30.3
    )
    
    
    (47.4
    )
    
    
    (7.7
    )%
    
    
    (13.3
    )%Income taxes
    
    
    (16.8
    )
    
    
    (20.4
    )
    
    
    (4.3
    )%
    
    
    (5.7
    )%Loss before the
cumulative effect of a
change in accounting
principle
    
    
    (13.5
    )
    
    
    (27.0
    )
    
    
    (3.4
    )%
    
    
    (7.6
    )%Cumulative effect of a
change in accounting
principle
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    %Net loss
    
    $
    (13.5
    )
    
    $
    (26.8
    )
    
    
    (3.4
    )%
    
    
    (7.5
    )%
 23




---



##### Table of Contents



Comparison of the three months ended September 29, 2007 with the three months ended September 30,
2006
 Net sales.
  Gross Profit.
 Selling, general and administrative expenses.
 Interest expense.
 Income taxes.
    24




---



##### Table of Contents



Three Months EndedSeptember 29, 2007
    
    September 30, 2006U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    (3.7
    )
    
    
    2.7Mix of income in taxing jurisdictions
    
    
    (19.1
    )
    
    
    7.9Export sales excluded from taxable income
    
    
    
    
    
    
    2.0Other permanent differences and valuation allowances
    
    
    6.3
    
    
    
    (5.9
    )Purchase of 10.50% senior discount notes and
write-off of loan acquisition costs associated with
refinancing of senior secured credit facility
    
    
    16.0
    
    
    
    Impact of German tax reform legislation
    
    
    19.4
    
    
    
    Total effective tax rate
    
    
    53.9
    %
    
    
    41.7
    %
 Comparison of the nine months ended September 29, 2007 with the nine months ended September 30,
2006
 Net sales.
  Gross Profit.
 Selling, general and administrative expenses.
 Interest expense.
 25




---



##### Table of Contents



Income taxes.
      Nine Months EndedSeptember 29, 2007
    
    September 30, 2006U.S. Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    (3.7
    )
    
    
    2.7Mix of income in taxing jurisdictions
    
    
    (19.1
    )
    
    
    7.9Export sales excluded from taxable income
    
    
    
    
    
    
    2.0Other permanent differences and valuation allowances
    
    
    6.9
    
    
    
    (4.6
    )Purchase of 10.50% senior discount notes and
write-off of loan acquisition costs associated with
refinancing of senior secured credit facility
    
    
    16.1
    
    
    
    Impact of German tax reform legislation
    
    
    20.2
    
    
    
    Total effective tax rate
    
    
    55.4
    %
    
    
    43.0
    %
 26




---



##### Table of Contents



Business Restructuring
  Balance at
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atDecember 30,
    
    Restructuring
    
    Cash
    
    Currency
    
    September 29,(in millions)
    
    2006
    
    Charges
    
    Payments
    
    Translation
    
    20072006 Restructuring Plan:Severance and benefit costs
    
    $
    11.5
    
    
    $
    
    
    
    $
    (7.2
    )
    
    $
    0.5
    
    
    $
    4.8Other
    
    
    5.7
    
    
    
    
    
    
    
    (4.5
    )
    
    
    0.2
    
    
    
    1.417.2
    
    
    
    
    
    
    
    (11.7
    )
    
    
    0.7
    
    
    
    6.22005 Restructuring Plan:Severance and benefit costs
    
    
    0.9
    
    
    
    0.2
    
    
    
    (0.6
    )
    
    
    
    
    
    
    0.5Other
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )
    
    
    
    
    
    
    0.9
    
    
    
    0.4
    
    
    
    (0.8
    )
    
    
    
    
    
    
    0.52004 Restructuring Plan:Severance and benefit costs
    
    
    1.2
    
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    0.5Total
    
    $
    19.3
    
    
    $
    0.4
    
    
    $
    (13.2
    )
    
    $
    0.7
    
    
    $
    7.2
  2006 Restructuring Plan.
 2005 Restructuring Plan.
 2004 Restructuring Plan.
 27




---



##### Table of Contents



Liquidity and Capital Resources
  Operating activities
  Investing activities
  Financing activities
  28




---



##### Table of Contents




    Twelve Months Ended(in millions)
    
    September 29, 2007Net loss
    
    $
    (16.3
    )Add:Depreciation
    
    
    34.9Amortization
    
    
    17.9Interest expense, net
    
    
    87.8Income taxes
    
    
    (19.5
    )Stock compensation expense
    
    
    0.8Foreign currency loss
    
    
    2.0Loss on disposal of property, plant and equipment
    
    
    1.2Business restructuring
    
    
    0.1Costs related to purchase of 10.50% senior discount notes
    
    
    30.0Write-off of loan acquisition costs associated with
refinancing of senior secured credit facilities
    
    
    7.2Other non-cash or non-recurring charges
    
    
    2.0Adjusted EBITDA
    
    $
    148.1
  Twelve MonthsEndedSeptember 29,(in millions)
    
    2007Indebtedness (1)
    
    $
    327.7Adjusted EBITDA
    
    
    148.1Actual leverage ratio
    
    
    2.21x
 
 (1)
    
    Calculated as the sum of outstanding borrowings under the term loan facility plus the capital
lease obligation of $5.1 million, less the amount of cash on hand (not to exceed $50.0
million).
  Period
    
    RatioJuly 3, 2007 through and including June 28, 2008
    
    3.25 to 1.00Thereafter
    
    
    3.00 to 1.00
   29




---



##### Table of Contents



Foreign Operations
  Seasonality
  30




---



##### Table of Contents



Environmental matters
      Off-Balance Sheet Arrangements
  New Accounting Standards
 Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early
Retirement Arrangements) Employers Accounting for Postretirement Benefits
 31




---



##### Table of Contents



Share-Based Payment Accounting for Stock Based Compensation
 Fair Value Measurement
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 The Fair Value Option for Financial Assets and
Financial Liabilities
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  32




---



##### Table of Contents



Currency risk
   September 29,
    
    September 30,2007
    
    2006Period end rate
    
    
    1.4187
    
    
    
    1.2688Period average rate for the three months ended
    
    
    1.3728
    
    
    
    1.2752Period average rate for the nine months ended
    
    
    1.3436
    
    
    
    1.2447
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  33




---



##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description3.1
    
    Certificate of Amendment to the Certificate of Incorporation of Polypore International, Inc.
(incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K, filed on
June 29, 2007)4.1
    
    Supplemental Indenture, dated as of July 3, 2007, between Polypore International, Inc. and The
Bank of New York, as Trustee, supplementing the Indenture dated as of October 18, 2004, between
Polypore International, Inc. and The Bank of New York, as Trustee, relating to Polypore
International Inc.s 10.50% Senior Discount Notes due 2012 (incorporated by reference to Exhibit
4.1 to the Companys Current Report on Form 8-K, filed on July 10, 2007)10.1
    
    Amended and Restated Credit Agreement, dated as of July 3, 2007, between PP Holding Corporation,
Polypore, Inc., Daramic Holding S.A.S., JPMorgan Chase Bank, N.A., as Administrative Agent, and
the other agents and lenders named therein (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed on July 10, 2007)10.2
    
    First Amendment and Reaffirmation Agreement, dated as of July 3, 2007, between PP Holding
Corporation, Polypore, Inc. and all of Polypore, Inc.s domestic restricted subsidiaries
(incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed on
July 10, 2007)10.3
    
    Second Supplemental Indenture, dated as of July 31, 2007, between Polypore International, Inc.,
the Guarantors (as defined therein) and The Bank of New York (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, filed on August 3, 2007)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 34




---



##### Table of Contents



SIGNATURES
  Date: November 6, 2007
    POLYPORE INTERNATIONAL, INC.
(Registrant)By:
    /s/  Robert B. TothRobert B. TothPresident and Chief Executive Officer
(principal executive officer) By:
    /s/    Lynn AmosLynn AmosChief Financial Officer
(principal financial officer and principal accounting officer)