##### 



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 October 1, 2005
  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: 333-119224
 POLYPORE, INC.
  Delaware
    
    57-1006871(State or Other Jurisdiction of
Incorporation or Organization)
    
    (IRS Employer
Identification No.)13800 South Lakes Drive
Charlotte, North Carolina
    
    28273(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 587-8409
 
   þ o
  o þ
 o þ




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##### 



Polypore, Inc.
Index to Quarterly Report on Form 10-Q
For the Quarter Ended October 1, 2005
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4.
    
    Controls and Procedures
    
    
    36PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    36Item 6.
    
    Exhibits
    
    
    37SIGNATURES
  2




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##### 



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 increased use of synthetic hemodialysis filtration membranes by our customers;
    
    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;
    
    employee slowdowns, strikes or similar actions;
    
    product liability claims exposure;
    
    risks in connection with our operations outside the United States;
    
    the incurrence of substantial costs to comply with, or as a result of violations of,
or liabilities under environmental laws;
    
    the failure to protect our intellectual property;
    
    the failure to replace lost senior management;
    
    the incurrence of additional debt, contingent liabilities and expenses in connection
with future acquisitions;
    
    the failure to effectively integrate newly acquired operations; and
    
    the absence of expected returns from the amount of intangible assets we have recorded.
  Additional Information
  3




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##### 



PART I
 FINANCIAL INFORMATION
 Item 1. Financial Statements
 Polypore, Inc.
Condensed Consolidated Balance Sheets
 October 1, 2005
    
    January 1, 2005*(in thousands)
    
    (Unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    29,380
    
    
    $
    31,684Accounts receivable, net
    
    
    94,260
    
    
    
    106,296Inventories
    
    
    54,205
    
    
    
    61,789Refundable income taxes
    
    
    9,858
    
    
    
    8,238Deferred income taxes
    
    
    3,403
    
    
    
    7,954Prepaid and other
    
    
    7,113
    
    
    
    5,288Total current assets
    
    
    198,219
    
    
    
    221,249Property, plant and equipment, net
    
    
    389,755
    
    
    
    441,350Goodwill
    
    
    537,517
    
    
    
    535,844Intangibles and loan acquisition costs, net
    
    
    226,369
    
    
    
    244,256Environmental indemnification receivable, less current portion
    
    
    17,285
    
    
    
    20,125Other
    
    
    1,093
    
    
    
    1,142Total assets
    
    $
    1,370,238
    
    
    $
    1,463,966Liabilities and shareholders equityCurrent liabilities:Revolving credit obligations
    
    $
    
    
    
    $
    Accounts payable
    
    
    21,312
    
    
    
    20,581Accrued liabilities
    
    
    48,367
    
    
    
    50,464Current portion of debt-optional prepayment
    
    
    
    
    
    
    25,000Current portion of debt
    
    
    88
    
    
    
    2,260Current portion of capital lease obligation
    
    
    1,312
    
    
    
    1,272Total current liabilities
    
    
    71,079
    
    
    
    99,577Debt, less current portion
    
    
    776,724
    
    
    
    824,939Capital lease obligation, less current portion
    
    
    6,355
    
    
    
    7,344Pension and postretirement benefits
    
    
    47,045
    
    
    
    48,652Post employment benefits
    
    
    7,895
    
    
    
    10,119Environmental reserve, less current portion
    
    
    22,570
    
    
    
    24,394Deferred income taxes
    
    
    124,850
    
    
    
    138,566Other
    
    
    1,203
    
    
    
    3,033Commitments and contingenciesShareholders equity:Common stock
    
    
    
    
    
    
    Paid-in capital
    
    
    321,516
    
    
    
    321,516Retained (deficit)
    
    
    (4,391
    )
    
    
    (14,870
    )Accumulated other comprehensive income (loss)
    
    
    (4,608
    )
    
    
    696312,517
    
    
    
    307,342Total liabilities and shareholders equity
    
    $
    1,370,238
    
    
    $
    1,463,966
 
 (*)
    
    Derived from audited consolidated financial statements. See notes to condensed consolidated financial statements
 4




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##### 



Polypore, Inc .  Condensed Consolidated Statements of Income (Unaudited)
 Pre-Post-Transactions
    
    TransactionsThree Months
    
    Three Months
    
    Nine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    Ended
    
    Ended
    
    through
    
    through(in thousands)
    
    October 1, 2005
    
    October 2, 2004
    
    October 1, 2005
    
    October 2, 2004
    
    May 1, 2004Net sales
    
    $
    105,764
    
    
    $
    117,496
    
    
    $
    330,876
    
    
    $
    206,225
    
    
    $
    179,273Cost of goods sold
    
    
    74,316
    
    
    
    91,833
    
    
    
    220,030
    
    
    
    149,983
    
    
    
    110,166Gross profit
    
    
    31,448
    
    
    
    25,663
    
    
    
    110,846
    
    
    
    56,242
    
    
    
    69,107Selling, general and administrative expenses
    
    
    17,546
    
    
    
    18,871
    
    
    
    54,138
    
    
    
    31,485
    
    
    
    23,381Business restructuring
    
    
    1,453
    
    
    
    13,581
    
    
    
    6,855
    
    
    
    13,581
    
    
    
    In process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,280
    
    
    
    Operating income (loss)
    
    
    12,449
    
    
    
    (6,789
    )
    
    
    49,853
    
    
    
    5,896
    
    
    
    45,726Other (income) expense:Interest expense, net
    
    
    15,116
    
    
    
    13,602
    
    
    
    44,863
    
    
    
    21,974
    
    
    
    6,048Foreign currency and other
    
    
    (126
    )
    
    
    506
    
    
    
    (3,531
    )
    
    
    876
    
    
    
    481Unrealized gain on derivative instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,321
    )14,990
    
    
    
    14,108
    
    
    
    41,332
    
    
    
    22,850
    
    
    
    5,208Income (loss) before income taxes
    
    
    (2,541
    )
    
    
    (20,897
    )
    
    
    8,521
    
    
    
    (16,954
    )
    
    
    40,518Income taxes
    
    
    (4,258
    )
    
    
    (8,694
    )
    
    
    (1,958
    )
    
    
    (7,392
    )
    
    
    13,685Net income (loss)
    
    $
    1,717
    
    
    $
    (12,203
    )
    
    $
    10,479
    
    
    $
    (9,562
    )
    
    $
    26,833
 See notes to condensed consolidated financial statements
 5




---



##### 



Polypore, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Post-Transactions
    
    Pre-TransactionsNine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    through
    
    through(in thousands)
    
    October 1, 2005
    
    October 2, 2004
    
    May 1, 2004Operating activities:Net income (loss)
    
    $
    10,479
    
    
    $
    (9,562
    )
    
    $
    26,833Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation expense
    
    
    28,947
    
    
    
    10,677
    
    
    
    14,409Amortization expense
    
    
    13,307
    
    
    
    7,287
    
    
    
    808Amortization of loan acquisition costs
    
    
    1,991
    
    
    
    1,066
    
    
    
    632Inventory purchase accounting
    
    
    
    
    
    
    18,505
    
    
    
    Loss (gain) on disposal of property, plant and
equipment
    
    
    294
    
    
    
    
    
    
    
    (1,432
    )Business restructuring
    
    
    6,855
    
    
    
    13,581
    
    
    
    Foreign currency and other
    
    
    (3,860
    )
    
    
    (2,056
    )
    
    
    (3,067
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    6,181
    
    
    
    (2,900
    )
    
    
    (13,189
    )Inventories
    
    
    3,294
    
    
    
    6,199
    
    
    
    (1,434
    )Prepaid and other current assets
    
    
    (2,248
    )
    
    
    (35
    )
    
    
    (107
    )Accounts payable and accrued liabilities
    
    
    (3,678
    )
    
    
    (11,009
    )
    
    
    4,160Other, net
    
    
    (702
    )
    
    
    (6,285
    )
    
    
    1,298Net cash provided by operating activities
    
    
    60,860
    
    
    
    25,468
    
    
    
    28,911Investing activities:Purchases of property, plant and equipment
    
    
    (9,994
    )
    
    
    (6,477
    )
    
    
    (5,497
    )Proceeds from sale of property, plant and equipment
    
    
    24
    
    
    
    62
    
    
    
    1,923Net cash used in investing activities
    
    
    (9,970
    )
    
    
    (6,415
    )
    
    
    (3,574
    )Financing activities:Proceeds from debt
    
    
    
    
    
    
    821,517
    
    
    
    610Principal payments on debt
    
    
    (50,065
    )
    
    
    (263,315
    )
    
    
    (7,923
    )Borrowings on revolving credit agreement
    
    
    
    
    
    
    1,500
    
    
    
    Payments on revolving credit agreement
    
    
    
    
    
    
    (11,500
    )
    
    
    Loan acquisition costs
    
    
    (437
    )
    
    
    (19,755
    )
    
    
    (59
    )Payments made for the change in ownership in
connection with the Transactions
    
    
    
    
    
    
    (867,368
    )
    
    
    Proceeds from equity investment
    
    
    
    
    
    
    321,516
    
    
    
    Net cash used in financing activities
    
    
    (50,502
    )
    
    
    (17,405
    )
    
    
    (7,372
    )Effect of exchange rate changes on cash and equivalents
    
    
    (2,692
    )
    
    
    (221
    )
    
    
    (2,156
    )Net increase (decrease) in cash and equivalents
    
    
    (2,304
    )
    
    
    1,427
    
    
    
    15,809Cash and equivalents at beginning of period
    
    
    31,684
    
    
    
    35,872
    
    
    
    20,063Cash and equivalents at end of period
    
    $
    29,380
    
    
    $
    37,299
    
    
    $
    35,872
 See notes to condensed consolidated financial statements
 6




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 1. Description of Business and Transactions
 Description of Business 
 Change
in Ownership
 Business Combinations Goodwill and
Other Intangible Assets
  (in thousands)Current assets
    
    $
    201,405Property, plant and equipment
    
    
    406,934Intangible assets
    
    
    253,005Goodwill
    
    
    537,517Other assets
    
    
    23,933Total assets acquired
    
    
    1,422,794Current liabilities
    
    
    85,830Debt, less current portion
    
    
    819,790Pension, postretirement and post employment benefits
    
    
    54,027Deferred income taxes
    
    
    120,298Other
    
    
    22,464Total liabilities assumed
    
    
    1,102,409Net assets acquired
    
    $
    320,385
  7




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
  Three Months
    
    Nine MonthsEnded
    
    Ended(in thousands)
    
    October 2, 2004
    
    October 2, 2004Net sales
    
    $
    117,496
    
    
    $
    385,498Net income (loss)
    
    $
    (6,746
    )
    
    $
    17,807
 2. Basis of Presentation
  3. Accounting Pronouncements
 Accounting Changes and Error Corrections
 Accounting for
Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in
Altersteilzeit Early Retirement Arrangements)
 8




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 Inventory Costs Inventory Pricing
 4. Inventories
   (in thousands)
    
    October 1, 2005
    
    January 1, 2005Raw materials
    
    $
    21,365
    
    
    $
    22,243Work-in-process
    
    
    7,378
    
    
    
    6,395Finished goods
    
    
    25,462
    
    
    
    33,151Total
    
    $
    54,205
    
    
    $
    61,789
 5. Debt
  (in thousands)
    
    October 1, 2005
    
    January 1, 2005Senior credit facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    367,099
    
    
    
    416,9418.75% senior subordinated notes
    
    
    408,375
    
    
    
    429,315Other
    
    
    1,338
    
    
    
    5,943776,812
    
    
    
    852,199Less optional prepayment
    
    
    
    
    
    
    25,000Less current maturities
    
    
    88
    
    
    
    2,260Long-term debt
    
    $
    776,724
    
    
    $
    824,939
 9




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
  6. Pension and Other Postretirement Benefits
   Pension PlansPost-Transactions
    
    Pre-TransactionsThree Months
    
    Three Months
    
    Nine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    Ended
    
    Ended
    
    through
    
    throughOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004
    
    May 1, 2004Service cost
    
    $
    533
    
    
    $
    453
    
    
    $
    1,763
    
    
    $
    755
    
    
    $
    604Interest cost
    
    
    699
    
    
    
    668
    
    
    
    2,315
    
    
    
    1,113
    
    
    
    891Expected return on plan assets
    
    
    (192
    )
    
    
    (196
    )
    
    
    (650
    )
    
    
    (327
    )
    
    
    (261
    )Amortization of prior service
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Recognized net actuarial loss
    
    
    13
    
    
    
    36
    
    
    
    43
    
    
    
    60
    
    
    
    48Net periodic benefit cost
    
    $
    1,053
    
    
    $
    961
    
    
    $
    3,471
    
    
    $
    1,601
    
    
    $
    1,339
 Other Postretirement BenefitsPost-Transactions
    
    Pre-TransactionsThree Months
    
    Three Months
    
    Nine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    Ended
    
    Ended
    
    through
    
    throughOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004
    
    May 1, 2004Service cost
    
    $
    7
    
    
    $
    7
    
    
    $
    21
    
    
    $
    12
    
    
    $
    9Interest cost
    
    
    29
    
    
    
    29
    
    
    
    86
    
    
    
    48
    
    
    
    38Amortization of prior service
cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Recognized net actuarial loss
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1Net periodic benefit cost
    
    $
    36
    
    
    $
    37
    
    
    $
    108
    
    
    $
    62
    
    
    $
    33
 10




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 7. Income Taxes
     8. Segment Information
   11




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##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
  Pre-Post-Transactions
    
    TransactionsThree Months
    
    Three Months
    
    Nine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    Ended
    
    Ended
    
    through
    
    through(in thousands)
    
    October 1, 2005
    
    October 2, 2004
    
    October 1, 2005
    
    October 2, 2004
    
    May 1, 2004Net sales to external
customers:Energy storage
    
    $
    76,018
    
    
    $
    78,608
    
    
    $
    233,934
    
    
    $
    138,812
    
    
    $
    119,436Separations media
    
    
    29,746
    
    
    
    38,888
    
    
    
    96,942
    
    
    
    67,413
    
    
    
    59,837Total net sales to
external customers
    
    $
    105,764
    
    
    $
    117,496
    
    
    $
    330,876
    
    
    $
    206,225
    
    
    $
    179,273Operating income:Energy storage
    
    $
    13,842
    
    
    $
    15,215
    
    
    $
    45,330
    
    
    $
    33,504
    
    
    $
    35,146Separations media
    
    
    60
    
    
    
    3,380
    
    
    
    11,378
    
    
    
    11,546
    
    
    
    10,580Segment operating
income
    
    
    13,902
    
    
    
    18,595
    
    
    
    56,708
    
    
    
    45,050
    
    
    
    45,726Business restructuring
    
    
    (1,453
    )
    
    
    (15,369
    )
    
    
    (6,855
    )
    
    
    (15,369
    )
    
    
    In-process research
and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,280
    )
    
    
    Inventory purchase
accounting
    
    
    
    
    
    
    (10,015
    )
    
    
    
    
    
    
    (18,505
    )
    
    
    Total operating
income (loss)
    
    
    12,449
    
    
    
    (6,789
    )
    
    
    49,853
    
    
    
    5,896
    
    
    
    45,726Reconciling items:Interest expense
    
    
    15,116
    
    
    
    13,602
    
    
    
    44,863
    
    
    
    21,974
    
    
    
    6,048Other
    
    
    (126
    )
    
    
    506
    
    
    
    (3,531
    )
    
    
    876
    
    
    
    (840
    )Total consolidated
income (loss) before
income taxes
    
    $
    (2,541
    )
    
    $
    (20,897
    )
    
    $
    8,521
    
    
    $
    (16,954
    )
    
    $
    40,518Depreciation and
amortization:Energy storage
    
    $
    8,363
    
    
    $
    6,531
    
    
    $
    25,045
    
    
    $
    10,869
    
    
    $
    7,208Separations media
    
    
    5,529
    
    
    
    4,301
    
    
    
    17,209
    
    
    
    7,095
    
    
    
    8,009Total depreciation
and amortization
    
    $
    13,892
    
    
    $
    10,832
    
    
    $
    42,254
    
    
    $
    17,964
    
    
    $
    15,217
 12




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 9. Related Party Transactions
   10. Comprehensive Income
  Pre-Post-Transactions
    
    TransactionsThree Months
    
    Three Months
    
    Nine months
    
    May 2, 2004
    
    January 4, 2004Ended
    
    Ended
    
    Ended
    
    through
    
    throughOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004
    
    May 1, 2004Net income (loss)
    
    $
    1,717
    
    
    $
    (12,203
    )
    
    $
    10,479
    
    
    $
    (9,562
    )
    
    $
    26,833Other comprehensive
income (loss),
primarily foreign
currency
translation
    
    
    195
    
    
    
    2,669
    
    
    
    (5,304
    )
    
    
    7,847
    
    
    
    (19,848
    )Comprehensive
income (loss)
    
    $
    1,912
    
    
    $
    (9,534
    )
    
    $
    5,175
    
    
    $
    (1,715
    )
    
    $
    6,985
 11. Environmental Matters
   13




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
     12. Business Restructuring
 2005 Restructuring Plan
    14




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Accounting for Costs Associated with Exit or Disposal Activities
 2004 Restructuring Plan
    Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atJanuary 1,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    October 1,(in thousands)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    20052004 Restructuring PlanSeverance and benefit costs
    
    $
    14,944
    
    
    $
    (112
    )
    
    $
    
    
    
    $
    (8,950
    )
    
    $
    (921
    )
    
    $
    4,961Raw materials
    
    
    1,256
    
    
    
    
    
    
    
    
    
    
    
    (881
    )
    
    
    (129
    )
    
    
    246Other
    
    
    
    
    
    
    1,530
    
    
    
    
    
    
    
    (1,151
    )
    
    
    
    
    
    
    3792005 Restructuring PlanSeverance and benefit costs
    
    
    
    
    
    
    3,938
    
    
    
    
    
    
    
    (186
    )
    
    
    (116
    )
    
    
    3,636Asset disposals and impairments
    
    
    
    
    
    
    1,278
    
    
    
    (1,278
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    (221
    )
    
    
    
    
    
    
    Total
    
    $
    16,200
    
    
    $
    6,855
    
    
    $
    (1,278
    )
    
    $
    (11,389
    )
    
    $
    (1,166
    )
    
    $
    9,222
  15




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors
   Condensed Consolidating Balance Sheet
As of October 1, 2005
 CombinedCombined
    
    Non-
    
    
    
    
    
    ReclassificationsGuarantor
    
    Guarantor
    
    The
    
    and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    Eliminations
    
    ConsolidatedAssetsCash and equivalents
    
    $
    83
    
    
    $
    23,667
    
    
    $
    5,630
    
    
    $
    
    
    
    $
    29,380Accounts receivable, net
    
    
    34,213
    
    
    
    60,047
    
    
    
    
    
    
    
    
    
    
    
    94,260Inventories
    
    
    15,390
    
    
    
    38,815
    
    
    
    
    
    
    
    
    
    
    
    54,205Other
    
    
    5,232
    
    
    
    7,876
    
    
    
    7,266
    
    
    
    
    
    
    
    20,374Total current assets
    
    
    54,918
    
    
    
    130,405
    
    
    
    12,896
    
    
    
    
    
    
    
    198,219Due from affiliates
    
    
    179,504
    
    
    
    210,630
    
    
    
    292,254
    
    
    
    (682,388
    )
    
    
    Investment in subsidiaries
    
    
    165,720
    
    
    
    205,521
    
    
    
    268,813
    
    
    
    (640,054
    )
    
    
    Property, plant and equipment,
net
    
    
    108,782
    
    
    
    280,973
    
    
    
    
    
    
    
    
    
    
    
    389,755Goodwill
    
    
    
    
    
    
    
    
    
    
    537,517
    
    
    
    
    
    
    
    537,517Intangibles and loan
acquisition costs, net
    
    
    73
    
    
    
    
    
    
    
    226,296
    
    
    
    
    
    
    
    226,369Other
    
    
    812
    
    
    
    17,566
    
    
    
    
    
    
    
    
    
    
    
    18,378Total assets
    
    $
    509,809
    
    
    $
    845,095
    
    
    $
    1,337,776
    
    
    $
    (1,322,442
    )
    
    $
    1,370,238Liabilities and shareholders
equityAccounts payable, accrued
liabilities and other
    
    $
    10,089
    
    
    $
    45,485
    
    
    $
    14,105
    
    
    $
    
    
    
    $
    69,679Current portion of debt
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Current portion of capital
lease obligation
    
    
    1,312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,312Total current liabilities
    
    
    11,489
    
    
    
    45,485
    
    
    
    14,105
    
    
    
    
    
    
    
    71,079Due to affiliates
    
    
    296,760
    
    
    
    214,249
    
    
    
    171,379
    
    
    
    (682,388
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    1,250
    
    
    
    775,474
    
    
    
    
    
    
    
    776,724Capital lease obligation, less
current portion
    
    
    6,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,355Pension and postretirement
benefits
    
    
    2,339
    
    
    
    44,706
    
    
    
    
    
    
    
    
    
    
    
    47,045Post employment benefits
    
    
    
    
    
    
    7,895
    
    
    
    
    
    
    
    
    
    
    
    7,895Environmental reserve, less
current portion
    
    
    
    
    
    
    22,570
    
    
    
    
    
    
    
    
    
    
    
    22,570Deferred income taxes and other
    
    
    3,360
    
    
    
    58,392
    
    
    
    64,301
    
    
    
    
    
    
    
    126,053Shareholders equity
    
    
    189,506
    
    
    
    450,548
    
    
    
    312,517
    
    
    
    (640,054
    )
    
    
    312,517Total liabilities and
shareholders equity
    
    $
    509,809
    
    
    $
    845,095
    
    
    $
    1,337,776
    
    
    $
    (1,322,442
    )
    
    $
    1,370,238
 16




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Balance Sheet
As of January 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and equivalents
    
    $
    2,263
    
    
    $
    20,244
    
    
    $
    9,177
    
    
    $
    
    
    
    $
    31,684Accounts receivable, net
    
    
    37,237
    
    
    
    69,059
    
    
    
    
    
    
    
    
    
    
    
    106,296Inventories
    
    
    19,265
    
    
    
    42,524
    
    
    
    
    
    
    
    
    
    
    
    61,789Other
    
    
    1,561
    
    
    
    9,985
    
    
    
    9,934
    
    
    
    
    
    
    
    21,480Total current assets
    
    
    60,326
    
    
    
    141,812
    
    
    
    19,111
    
    
    
    
    
    
    
    221,249Due from affiliates
    
    
    178,805
    
    
    
    253,225
    
    
    
    300,797
    
    
    
    (732,827
    )
    
    
    Investment in subsidiaries
    
    
    172,372
    
    
    
    212,563
    
    
    
    273,046
    
    
    
    (657,981
    )
    
    
    Property, plant and equipment, net
    
    
    113,048
    
    
    
    328,302
    
    
    
    
    
    
    
    
    
    
    
    441,350Goodwill
    
    
    
    
    
    
    
    
    
    
    535,844
    
    
    
    
    
    
    
    535,844Intangibles and loan acquisition
costs, net
    
    
    82
    
    
    
    
    
    
    
    244,174
    
    
    
    
    
    
    
    244,256Other
    
    
    797
    
    
    
    20,470
    
    
    
    
    
    
    
    
    
    
    
    21,267Total assets
    
    $
    525,430
    
    
    $
    956,372
    
    
    $
    1,372,972
    
    
    $
    (1,390,808
    )
    
    $
    1,463,966Liabilities and shareholders
equityAccounts payable, accrued
liabilities and other
    
    $
    8,857
    
    
    $
    54,561
    
    
    $
    7,627
    
    
    $
    
    
    
    $
    71,045Current portion of debt
    
    
    97
    
    
    
    2,163
    
    
    
    25,000
    
    
    
    
    
    
    
    27,260Current portion of capital lease
obligation
    
    
    1,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,272Total current liabilities
    
    
    10,226
    
    
    
    56,724
    
    
    
    32,627
    
    
    
    
    
    
    
    99,577Due to affiliates
    
    
    306,530
    
    
    
    281,718
    
    
    
    144,579
    
    
    
    (732,827
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    3,683
    
    
    
    821,256
    
    
    
    
    
    
    
    824,939Capital lease obligation, less
current portion
    
    
    7,344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,344Pension and postretirement
benefits
    
    
    2,231
    
    
    
    46,421
    
    
    
    
    
    
    
    
    
    
    
    48,652Post employment benefits
    
    
    
    
    
    
    10,119
    
    
    
    
    
    
    
    
    
    
    
    10,119Environmental reserve, less
current portion
    
    
    
    
    
    
    24,394
    
    
    
    
    
    
    
    
    
    
    
    24,394Deferred income taxes and other
    
    
    3,359
    
    
    
    71,072
    
    
    
    67,168
    
    
    
    
    
    
    
    141,599Shareholders equity
    
    
    195,740
    
    
    
    462,241
    
    
    
    307,342
    
    
    
    (657,981
    )
    
    
    307,342Total liabilities and
shareholders equity
    
    $
    525,430
    
    
    $
    956,372
    
    
    $
    1,372,972
    
    
    $
    (1,390,808
    )
    
    $
    1,463,966
 17




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
 For the three months ended October 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    41,395
    
    
    $
    64,369
    
    
    $
    
    
    
    $
    
    
    
    $
    105,764Cost of goods sold
    
    
    19,348
    
    
    
    54,968
    
    
    
    
    
    
    
    
    
    
    
    74,316Gross profit
    
    
    22,047
    
    
    
    9,401
    
    
    
    
    
    
    
    
    
    
    
    31,448Selling, general and
administrative expenses
    
    
    11,179
    
    
    
    6,367
    
    
    
    
    
    
    
    
    
    
    
    17,546Business restructuring
    
    
    
    
    
    
    1,453
    
    
    
    
    
    
    
    
    
    
    
    1,453Operating income
    
    
    10,868
    
    
    
    1,581
    
    
    
    
    
    
    
    
    
    
    
    12,449Other (income) expense, net
    
    
    (536
    )
    
    
    459
    
    
    
    15,067
    
    
    
    
    
    
    
    14,990Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (6,578
    )
    
    
    6,578
    
    
    
    Income (loss) before income
taxes
    
    
    11,404
    
    
    
    1,122
    
    
    
    (8,489
    )
    
    
    (6,578
    )
    
    
    (2,541
    )Income taxes
    
    
    5,933
    
    
    
    15
    
    
    
    (10,206
    )
    
    
    
    
    
    
    (4,258
    )Net income (loss)
    
    $
    5,471
    
    
    $
    1,107
    
    
    $
    1,717
    
    
    $
    (6,578
    )
    
    $
    1,717
 Condensed Consolidating Statement of Income
For the three months ended October 2, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    48,031
    
    
    $
    69,465
    
    
    $
    
    
    
    $
    
    
    
    $
    117,496Cost of goods sold
    
    
    30,661
    
    
    
    61,172
    
    
    
    
    
    
    
    
    
    
    
    91,833Gross profit
    
    
    17,370
    
    
    
    8,293
    
    
    
    
    
    
    
    
    
    
    
    25,663Selling, general and
administrative expenses
    
    
    10,314
    
    
    
    8,557
    
    
    
    
    
    
    
    
    
    
    
    18,871Business restructuring
    
    
    
    
    
    
    13,581
    
    
    
    
    
    
    
    
    
    
    
    13,581Operating income (loss)
    
    
    7,056
    
    
    
    (13,845
    )
    
    
    
    
    
    
    
    
    
    
    (6,789
    )Other (income) expense, net
    
    
    (409
    )
    
    
    3,395
    
    
    
    11,122
    
    
    
    
    
    
    
    14,108Equity in loss of subsidiaries
    
    
    
    
    
    
    
    
    
    
    10,790
    
    
    
    (10,790
    )
    
    
    Income (loss) before income
taxes
    
    
    7,465
    
    
    
    (17,240
    )
    
    
    (21,912
    )
    
    
    10,790
    
    
    
    (20,897
    )Income taxes
    
    
    4,893
    
    
    
    (3,878
    )
    
    
    (9,709
    )
    
    
    
    
    
    
    (8,694
    )Net income (loss)
    
    $
    2,572
    
    
    $
    (13,362
    )
    
    $
    (12,203
    )
    
    $
    10,790
    
    
    $
    (12,203
    )
 18




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
 For the nine months ended October 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    123,697
    
    
    $
    207,179
    
    
    $
    
    
    
    $
    
    
    
    $
    330,876Cost of goods sold
    
    
    60,892
    
    
    
    159,138
    
    
    
    
    
    
    
    
    
    
    
    220,030Gross profit
    
    
    62,805
    
    
    
    48,041
    
    
    
    
    
    
    
    
    
    
    
    110,846Selling, general and
administrative expenses
    
    
    33,205
    
    
    
    20,933
    
    
    
    
    
    
    
    
    
    
    
    54,138Business restructuring
    
    
    159
    
    
    
    6,696
    
    
    
    
    
    
    
    
    
    
    
    6,855Operating income
    
    
    29,441
    
    
    
    20,412
    
    
    
    
    
    
    
    
    
    
    
    49,853Other (income) expense, net
    
    
    (1,405
    )
    
    
    (190
    )
    
    
    42,927
    
    
    
    
    
    
    
    41,332Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (32,264
    )
    
    
    32,264
    
    
    
    Income (loss) before taxes
    
    
    30,846
    
    
    
    20,602
    
    
    
    (10,663
    )
    
    
    (32,264
    )
    
    
    8,521Income taxes
    
    
    15,290
    
    
    
    3,894
    
    
    
    (21,142
    )
    
    
    
    
    
    
    (1,958
    )Net income (loss)
    
    $
    15,556
    
    
    $
    16,708
    
    
    $
    10,479
    
    
    $
    (32,264
    )
    
    $
    10,479
 Condensed Consolidating Statement of Income
 For the period from May 2, 2004 through October 2, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    86,390
    
    
    $
    119,835
    
    
    $
    
    
    
    $
    
    
    
    $
    206,225Cost of goods sold
    
    
    54,032
    
    
    
    95,951
    
    
    
    
    
    
    
    
    
    
    
    149,983Gross profit
    
    
    32,358
    
    
    
    23,884
    
    
    
    
    
    
    
    
    
    
    
    56,242Selling, general and
administrative expenses
    
    
    17,578
    
    
    
    13,907
    
    
    
    
    
    
    
    
    
    
    
    31,485Business restructuring
    
    
    
    
    
    
    13,581
    
    
    
    
    
    
    
    
    
    
    
    13,581In process research and
development
    
    
    5,280
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,280Operating income (loss)
    
    
    9,500
    
    
    
    (3,604
    )
    
    
    
    
    
    
    
    
    
    
    5,896Other (income) expense, net
    
    
    (639
    )
    
    
    4,144
    
    
    
    19,345
    
    
    
    
    
    
    
    22,850Equity in loss of subsidiaries
    
    
    
    
    
    
    
    
    
    
    2,756
    
    
    
    (2,756
    )
    
    
    Income (loss) before income
taxes
    
    
    10,139
    
    
    
    (7,748
    )
    
    
    (22,101
    )
    
    
    2,756
    
    
    
    (16,954
    )Income taxes
    
    
    5,941
    
    
    
    (794
    )
    
    
    (12,539
    )
    
    
    
    
    
    
    (7,392
    )Net income (loss)
    
    $
    4,198
    
    
    $
    (6,954
    )
    
    $
    (9,562
    )
    
    $
    2,756
    
    
    $
    (9,562
    )
 19




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 Condensed Consolidating Statement of Income
 For the period January 4, 2004 through May 1, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    76,282
    
    
    $
    102,991
    
    
    $
    
    
    
    $
    
    
    
    $
    179,273Cost of goods sold
    
    
    34,796
    
    
    
    75,370
    
    
    
    
    
    
    
    
    
    
    
    110,166Gross profit
    
    
    41,486
    
    
    
    27,621
    
    
    
    
    
    
    
    
    
    
    
    69,107Selling, general and
administrative expenses
    
    
    13,105
    
    
    
    10,276
    
    
    
    
    
    
    
    
    
    
    
    23,381Operating income
    
    
    28,381
    
    
    
    17,345
    
    
    
    
    
    
    
    
    
    
    
    45,726Other (income) expense, net
    
    
    (367
    )
    
    
    971
    
    
    
    4,604
    
    
    
    
    
    
    
    5,208Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (30,056
    )
    
    
    30,056
    
    
    
    Income before taxes
    
    
    28,748
    
    
    
    16,374
    
    
    
    25,452
    
    
    
    (30,056
    )
    
    
    40,518Income taxes
    
    
    9,775
    
    
    
    5,291
    
    
    
    (1,381
    )
    
    
    
    
    
    
    13,685Net income (loss)
    
    $
    18,973
    
    
    $
    11,083
    
    
    $
    26,833
    
    
    $
    (30,056
    )
    
    $
    26,833
 20




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the nine months ended October 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by
operating activities
    
    $
    41,324
    
    
    $
    34,943
    
    
    $
    16,328
    
    
    $
    (31,735
    )
    
    $
    60,860Investing activities:Purchases of property, plant
and equipment
    
    
    (2,871
    )
    
    
    (7,123
    )
    
    
    
    
    
    
    
    
    
    
    (9,994
    )Proceeds from sale of
property, plant and equipment
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Net cash used in investing
activities
    
    
    (2,847
    )
    
    
    (7,123
    )
    
    
    
    
    
    
    
    
    
    
    (9,970
    )Financing activities:Principal payments on debt
    
    
    (949
    )
    
    
    (4,096
    )
    
    
    (45,020
    )
    
    
    
    
    
    
    (50,065
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (437
    )
    
    
    
    
    
    
    (437
    )Intercompany transactions, net
    
    
    (39,727
    )
    
    
    (17,590
    )
    
    
    25,582
    
    
    
    31,735
    
    
    
    Net cash provided by (used
in) financing activities
    
    
    (40,676
    )
    
    
    (21,686
    )
    
    
    (19,875
    )
    
    
    31,735
    
    
    
    (50,502
    )Effect of exchange rate
changes on cash and
equivalents
    
    
    19
    
    
    
    (2,711
    )
    
    
    
    
    
    
    
    
    
    
    (2,692
    )Net increase (decrease) in
cash and equivalents
    
    
    (2,180
    )
    
    
    3,423
    
    
    
    (3,547
    )
    
    
    
    
    
    
    (2,304
    )Cash and equivalents at
beginning of period
    
    
    2,263
    
    
    
    20,244
    
    
    
    9,177
    
    
    
    
    
    
    
    31,684Cash and equivalents at end
of period
    
    $
    83
    
    
    $
    23,667
    
    
    $
    5,630
    
    
    $
    
    
    
    $
    29,380
 21




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the period from May 2, 2004 through October 2, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating
activities
    
    $
    13,896
    
    
    $
    8,187
    
    
    $
    
    
    
    $
    3,385
    
    
    $
    25,468Investing activities:Purchases of property, plant
and equipment
    
    
    (3,346
    )
    
    
    (3,131
    )
    
    
    
    
    
    
    
    
    
    
    (6,477
    )Proceeds from sale of
property, plant, and equipment
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Net cash used in investing
activities
    
    
    (3,346
    )
    
    
    (3,069
    )
    
    
    
    
    
    
    
    
    
    
    (6,415
    )Financing activities:Proceeds from debt
    
    
    
    
    
    
    682
    
    
    
    820,835
    
    
    
    
    
    
    
    821,517Principal payments on debt
    
    
    (1,037
    )
    
    
    (344
    )
    
    
    (261,934
    )
    
    
    
    
    
    
    (263,315
    )Borrowings on revolving credit
agreement
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Payments on revolving credit
agreement
    
    
    
    
    
    
    
    
    
    
    (11,500
    )
    
    
    
    
    
    
    (11,500
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (19,755
    )
    
    
    
    
    
    
    (19,755
    )Payments made for the change
in ownership in connection
with the Transactions
    
    
    
    
    
    
    
    
    
    
    (867,368
    )
    
    
    
    
    
    
    (867,368
    )Proceeds from equity investment
    
    
    
    
    
    
    
    
    
    
    321,516
    
    
    
    
    
    
    
    321,516Payment of dividends
    
    
    4,140
    
    
    
    (4,140
    )
    
    
    
    
    
    
    
    
    
    
    Intercompany transactions, net
    
    
    (27,198
    )
    
    
    (3,098
    )
    
    
    33,681
    
    
    
    (3,385
    )
    
    
    Net cash provided by (used in)
financing activities
    
    
    (24,095
    )
    
    
    (6,900
    )
    
    
    16,975
    
    
    
    (3,385
    )
    
    
    (17,405
    )Effect of exchange rate
changes on cash and cash
equivalents
    
    
    19
    
    
    
    (240
    )
    
    
    
    
    
    
    
    
    
    
    (221
    )Net increase (decrease) in
cash and cash equivalents
    
    
    (13,526
    )
    
    
    (2,022
    )
    
    
    16,975
    
    
    
    
    
    
    
    1,427Cash and cash equivalents at
beginning of period
    
    
    11,788
    
    
    
    24,084
    
    
    
    
    
    
    
    
    
    
    
    35,872Cash
and cash equivalents at end of period
    
    $
    (1,738
    )
    
    $
    22,062
    
    
    $
    16,975
    
    
    $
    
    
    
    $
    37,299
 22




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
Nine months Ended October 1, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the period from January 4, 2004 through May 1, 2004
 CombinedCombined
    
    Non-
    
    
    
    
    
    ReclassificationsGuarantor
    
    Guarantor
    
    The
    
    and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    Eliminations
    
    ConsolidatedNet cash provided by
operating activities
    
    $
    14,891
    
    
    $
    16,640
    
    
    $
    
    
    
    $
    (2,620
    )
    
    $
    28,911Investing activities:Purchases of property, plant
and equipment
    
    
    (2,958
    )
    
    
    (2,539
    )
    
    
    
    
    
    
    
    
    
    
    (5,497
    )Proceeds from sale of
property, plant and equipment
    
    
    
    
    
    
    1,923
    
    
    
    
    
    
    
    
    
    
    
    1,923Net cash used in investing
activities
    
    
    (2,958
    )
    
    
    (616
    )
    
    
    
    
    
    
    
    
    
    
    (3,574
    )Financing activities:Proceeds from debt
    
    
    
    
    
    
    610
    
    
    
    
    
    
    
    
    
    
    
    610Principal payments on debt
    
    
    
    
    
    
    (3,778
    )
    
    
    (4,145
    )
    
    
    
    
    
    
    (7,923
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Intercompany transactions, net
    
    
    (6,028
    )
    
    
    (141
    )
    
    
    3,549
    
    
    
    2,620
    
    
    
    Net cash provided by (used
in) financing activities
    
    
    (6,028
    )
    
    
    (3,309
    )
    
    
    (655
    )
    
    
    2,620
    
    
    
    (7,372
    )Effect of exchange rate
changes on cash and
equivalents
    
    
    237
    
    
    
    (2,393
    )
    
    
    
    
    
    
    
    
    
    
    (2,156
    )Net increase (decrease) in
cash and equivalents
    
    
    6,142
    
    
    
    10,322
    
    
    
    (655
    )
    
    
    
    
    
    
    15,809Cash and equivalents at
beginning of period
    
    
    1,531
    
    
    
    13,762
    
    
    
    4,770
    
    
    
    
    
    
    
    20,063Cash and equivalents at end
of period
    
    $
    7,673
    
    
    $
    24,084
    
    
    $
    4,115
    
    
    $
    
    
    
    $
    35,872
 23




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 The following discussions 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 January
1, 2005.
 Overview
  Wards Motor Vehicles Facts and Figures,
     24




---



##### 




 Business Combinations Goodwill and
Other Intangible Assets
 Critical accounting policies
  Allowance for doubtful accounts
  Impairment of intangibles and goodwill
  Pension and other postretirement benefits
  25




---



##### 



Environmental matters
    Results of operations
  Three months ended
    
    Nine months endedOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,(in millions)
    
    2005
    
    2004
    
    2005
    
    2004(1)Net sales
    
    $
    105.8
    
    
    $
    117.5
    
    
    $
    330.9
    
    
    $
    385.5Gross profit
    
    
    31.4
    
    
    
    25.7
    
    
    
    110.8
    
    
    
    144.4Selling, general and administrative expenses
    
    
    17.5
    
    
    
    18.9
    
    
    
    54.1
    
    
    
    60.0Business restructuring
    
    
    1.5
    
    
    
    13.6
    
    
    
    6.9
    
    
    
    13.6Operating income (loss)
    
    
    12.4
    
    
    
    (6.8
    )
    
    
    49.8
    
    
    
    70.8Interest expense, net
    
    
    15.1
    
    
    
    13.6
    
    
    
    44.8
    
    
    
    40.8Foreign currency and other
    
    
    (0.1
    )
    
    
    0.5
    
    
    
    (3.5
    )
    
    
    1.3Income (loss) before income taxes
    
    
    (2.6
    )
    
    
    (20.9
    )
    
    
    8.5
    
    
    
    28.7Income taxes
    
    
    (4.3
    )
    
    
    (8.7
    )
    
    
    (2.0
    )
    
    
    10.9Net income (loss)
    
    $
    1.7
    
    
    $
    (12.2
    )
    
    $
    10.5
    
    
    $
    17.8
 26




---



##### 



Three months ended
    
    Nine months endedOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,2005
    
    2004
    
    2005
    
    2004(1)Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    29.7
    %
    
    
    21.9
    %
    
    
    33.5
    %
    
    
    37.5
    %Selling, general and administrative expenses
    
    
    16.5
    %
    
    
    16.1
    %
    
    
    16.3
    %
    
    
    15.6
    %Business restructuring
    
    
    1.4
    %
    
    
    11.6
    %
    
    
    2.1
    %
    
    
    3.5
    %Operating income (loss)
    
    
    11.7
    %
    
    
    (5.8
    )%
    
    
    15.0
    %
    
    
    18.4
    %Interest expense, net
    
    
    14.3
    %
    
    
    11.6
    %
    
    
    13.5
    %
    
    
    10.6
    %Foreign currency and other
    
    
    (0.1
    )%
    
    
    0.4
    %
    
    
    (1.1
    )%
    
    
    0.3
    %Income (loss) before income taxes
    
    
    (2.5
    )%
    
    
    (17.8
    )%
    
    
    2.6
    %
    
    
    7.4
    %Income taxes
    
    
    (4.1
    )%
    
    
    (7.4
    )%
    
    
    (0.6
    )%
    
    
    2.8
    %Net income (loss)
    
    
    1.6
    %
    
    
    (10.4
    )%
    
    
    3.2
    %
    
    
    4.6
    %
 
 (1)
    
    Unaudited pro forma financial information as if the Transactions had occurred on January 4,
2004, the first day of the nine month period ending October 2, 2004. Three month period ended October 1, 2005 with three month period ended October 2, 2004
 Net sales.
 Gross profit
 27




---



##### 



Selling, general and administrative expenses
 Interest expense, net
 Income taxes.
 Nine month period ended October 1, 2005 with the pro forma nine month period ended October 2, 2004
 Net sales.
 Gross profit
 28




---



##### 



Selling, general and administrative expenses
 Interest expense, net.
 Income taxes.
 Business restructuring
  2005 restructuring.
  Accounting for the
Impairment or Disposal of Long-Lived Assets
 Accounting for Costs Associated with Exit or Disposal Activities
 2004 restructuring.
 29




---



##### 



Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atJanuary 1,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    October 1,(in millions)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    20052004 Restructuring PlanSeverance and benefit costs
    
    $
    14.9
    
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    (8.9
    )
    
    $
    (0.9
    )
    
    $
    5.0Raw materials
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.1
    )
    
    
    0.3Other
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    (1.2
    )
    
    
    
    
    
    
    0.32005 Restructuring PlanSeverance and benefit costs
    
    
    
    
    
    
    3.9
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    3.6Asset disposals and impairments
    
    
    
    
    
    
    1.3
    
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    Total
    
    $
    16.2
    
    
    $
    6.8
    
    
    $
    (1.3
    )
    
    $
    (11.4
    )
    
    $
    (1.1
    )
    
    $
    9.2
 Liquidity and capital resources
 Operating activities
  Investing activities
 Financing activities
 30




---



##### 




     TwelveMonths
    
    Nine months
    
    Three MonthsEnded
    
    Ended
    
    EndedOctober 1,
    
    October 1,
    
    October 1,(in millions)
    
    2005
    
    2005
    
    2005Net income
    
    $
    5.2
    
    
    $
    10.5
    
    
    $
    1.7Add:Depreciation and amortization
    
    
    58.1
    
    
    
    42.3
    
    
    
    13.9Interest expense, net
    
    
    60.7
    
    
    
    44.8
    
    
    
    15.1Income taxes
    
    
    (1.3
    )
    
    
    (2.0
    )
    
    
    (4.3
    )EBITDA
    
    
    122.7
    
    
    
    95.6
    
    
    
    26.4Add:Foreign currency (gain) loss
    
    
    (1.2
    )
    
    
    (3.1
    )
    
    
    Inventory purchase accounting adjustments (1)
    
    
    .5
    
    
    
    
    
    
    
    Transactions costs (2)
    
    
    .4
    
    
    
    
    
    
    
    Operating lease payments on lease to be refinanced (3)
    
    
    2.8
    
    
    
    2.1
    
    
    
    .7Business restructuring (4)
    
    
    7.2
    
    
    
    6.9
    
    
    
    1.5Loss on disposal of property, plant, and equipment
    
    
    .8
    
    
    
    .3
    
    
    
    .3Adjusted EBITDA
    
    $
    133.2
    
    
    $
    101.8
    
    
    $
    28.9
 
 (1)
    
    Represents the write-off of the inventory purchase accounting adjustment for inventory that
was sold during the period.(2)
    
    Represents non-recurring costs incurred in connection with the Transactions.(3)
    
    Represents payments under an operating lease agreement that we intend to terminate and
purchase the equipment from the lessor. 31




---



##### 



(4)
    
    Represents business restructuring costs associated with the 2004 and 2005 restructuring,
including severance and benefit costs for employee layoffs, loss on an inventory purchase
commitment, asset impairment and other related expenses.  TwelveMonthsEndedOctober 1,(in millions)
    
    2005Adjusted EBITDA
    
    $
    133.2Consolidated interest expense, as defined in the Credit Agreement
    
    $
    58.1Actual interest coverage ratio
    
    
    2.29
    xPermitted minimum interest coverage ratio
    
    
    2.25
    x
  Date or Period
    
    RatioOctober 2, 2004 through July 1, 2006
    
    2.25 to 1.00September 30, 2006 through January 3, 2009
    
    2.50 to 1.00April 4, 2009 through January 2, 2010
    
    2.75 to 1.00April 3, 2010 and each fiscal quarter thereafter
    
    3.00 to 1.00
  TwelveMonthsEndedOctober 1,(in millions)
    
    2005Indebtedness, as defined in the Credit Agreement
    
    $
    784.5Adjusted EBITDA
    
    $
    133.2Actual leverage ratio
    
    
    5.89
    xPermitted maximum leverage ratio
    
    
    6.00
    x
  Date or Period
    
    RatioOctober 1, 2005
    
    
    6.00 to 1.00December 31, 2005 through July 1, 2006
    
    
    5.75 to 1.00September 30, 2006 through December 30, 2006
    
    
    5.50 to 1.00March 31, 2007 through June 30, 2007
    
    
    5.25 to 1.00September 29, 2007
    
    
    5.00 to 1.00December 29, 2007 through March 29, 2008
    
    
    4.75 to 1.00June 28, 2008 through September 27, 2008
    
    
    4.50 to 1.00January 3, 2009 through October 3, 2009
    
    
    4.25 to 1.00January 2, 2010 and each fiscal quarter thereafter
    
    
    4.00 to 1.00
  32




---



##### 



Foreign operations
  33




---



##### 



Seasonality
  Off-balance sheet arrangements
  New accounting standards
 Accounting Changes and Error Corrections
 Accounting for
Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in
Altersteilzeit Early Retirement Arrangements)
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 Inventory Costs Inventory Pricing
 34




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Accounting for Derivatives and Hedging Activity
   Currency risk
  35




---



##### 



Three Months Ended
    
    Nine months EndedOctober 1,
    
    October 2,
    
    October 1,
    
    October 2,2005
    
    2004
    
    2005
    
    2004Period end rate
    
    
    1.2225
    
    
    
    1.2245
    
    
    
    1.2225
    
    
    
    1.2245Period average rate
    
    
    1.2128
    
    
    
    1.2238
    
    
    
    1.2761
    
    
    
    1.2312
  Item 4. Controls and Procedures
   PART
II  OTHER INFORMATION
 Item 1. Legal Proceedings
   36




---



##### 



Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description10.1
    
    Employment Agreement, dated as of July 6, 2005, by and between
Polypore International, Inc. and Robert B. Toth10.2
    
    Employment Agreement, dated as of August 15, 2005, by and
between Polypore International, Inc. and Frank Nasisi31.1
    
    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
 37




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##### 



SIGNATURES
  Date: November 15, 2005
    
    POLYPORE, INC.
(Registrant)By:
    
    /s/ Robert B. TothRobert B. Toth
          President and Chief Executive Officer(principal executive officer)By:
    
    /s/ Lynn AmosLynn Amos
          Chief Financial Officer(principal
financial officer and principal
          accounting officer)
 38