##### 



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 July 1, 2006
 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.
 (Exact Name of Registrant as Specified in Its Charter)
 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 o þ
 o þ




---



##### 



Polypore, Inc.
Index to Quarterly Report on Form 10-Q
For the Quarter Ended July 1, 2006
 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
    
    
    30Item 4.Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    31Item 6.Exhibits
    
    
    31SIGNATURES
  2




---



##### 



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 failure to successfully manage the transition in hemodialysis from cellulosic to
synthetic filtration membranes;
    
    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.
  3




---



##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 Polypore, Inc.
Condensed Consolidated Balance Sheets
 July 1, 2006
    
    December 31, 2005*(in thousands)
    
    (unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    39,767
    
    
    $
    27,580Accounts receivable, net
    
    
    103,197
    
    
    
    88,347Inventories
    
    
    67,144
    
    
    
    60,539Prepaid and other
    
    
    9,634
    
    
    
    8,937Total current assets
    
    
    219,742
    
    
    
    185,403Property, plant and equipment, net
    
    
    380,867
    
    
    
    370,871Goodwill
    
    
    567,587
    
    
    
    567,587Intangibles and loan acquisition costs, net
    
    
    213,562
    
    
    
    222,006Environmental indemnification receivable
    
    
    17,720
    
    
    
    16,366Other
    
    
    1,166
    
    
    
    1,105Total assets
    
    $
    1,400,644
    
    
    $
    1,363,338Liabilities and shareholders equityCurrent liabilities:Revolving credit obligations
    
    $
    
    
    
    $
    Accounts payable
    
    
    26,555
    
    
    
    23,209Accrued liabilities
    
    
    39,307
    
    
    
    31,873Income taxes payable
    
    
    5,107
    
    
    
    4,255Current portion of debt
    
    
    3,048
    
    
    
    1,224Current portion of capital lease obligation
    
    
    1,349
    
    
    
    1,326Total current liabilities
    
    
    75,366
    
    
    
    61,887Debt, less current portion
    
    
    782,739
    
    
    
    767,759Capital lease obligation, less current portion
    
    
    5,449
    
    
    
    6,018Pension and postretirement benefits
    
    
    55,765
    
    
    
    51,386Postemployment benefits
    
    
    4,701
    
    
    
    7,096Environmental reserve, less current portion
    
    
    23,416
    
    
    
    22,264Deferred income taxes
    
    
    130,244
    
    
    
    133,785Other
    
    
    1,114
    
    
    
    1,864Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock
    
    
    
    
    
    
    Paid-in capital
    
    
    321,516
    
    
    
    321,516Retained earnings (deficit)
    
    
    6,508
    
    
    
    (850
    )Accumulated other comprehensive loss
    
    
    (6,174
    )
    
    
    (9,387
    )321,850
    
    
    
    311,279Total liabilities and shareholders equity
    
    $
    1,400,644
    
    
    $
    1,363,338
 
 *
    
    Derived from audited consolidated financial statements See notes to condensed consolidated financial statements
 4




---



##### 



Polypore, Inc . Condensed Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    Six Months Ended(in thousands)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Net sales
    
    $
    123,094
    
    
    $
    112,614
    
    
    $
    238,387
    
    
    $
    225,112Cost of goods sold
    
    
    78,461
    
    
    
    72,105
    
    
    
    153,441
    
    
    
    145,714Gross profit
    
    
    44,633
    
    
    
    40,509
    
    
    
    84,946
    
    
    
    79,398Selling, general and administrative expenses
    
    
    21,940
    
    
    
    18,202
    
    
    
    44,438
    
    
    
    36,592Business restructuring
    
    
    553
    
    
    
    5,402
    
    
    
    1,325
    
    
    
    5,402Operating income
    
    
    22,140
    
    
    
    16,905
    
    
    
    39,183
    
    
    
    37,404Other (income) expense:Interest expense, net
    
    
    17,503
    
    
    
    14,817
    
    
    
    33,786
    
    
    
    29,747Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    
    
    
    
    (2,593
    )
    
    
    Foreign currency and other
    
    
    1,282
    
    
    
    (1,834
    )
    
    
    1,981
    
    
    
    (3,405
    )18,785
    
    
    
    12,983
    
    
    
    33,174
    
    
    
    26,342Income before income taxes
    
    
    3,355
    
    
    
    3,922
    
    
    
    6,009
    
    
    
    11,062Income taxes
    
    
    (638
    )
    
    
    613
    
    
    
    (1,349
    )
    
    
    2,300Net income
    
    $
    3,993
    
    
    $
    3,309
    
    
    $
    7,358
    
    
    $
    8,762
 See notes to condensed consolidated financial statements
 5




---



##### 



Polypore, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 Six Months Ended(in thousands)
    
    July 1, 2006
    
    July 2, 2005Operating activities:Net income
    
    $
    7,358
    
    
    $
    8,762Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense
    
    
    20,319
    
    
    
    19,459Amortization expense
    
    
    8,823
    
    
    
    8,903Amortization of loan acquisition costs
    
    
    1,450
    
    
    
    1,319Loss (gain) on disposal of property, plant and equipment
    
    
    772
    
    
    
    (18
    )Foreign currency and other
    
    
    87
    
    
    
    (3,515
    )Deferred income taxes
    
    
    (6,466
    )
    
    
    (1,537
    )Business restructuring
    
    
    1,325
    
    
    
    5,402Change in accounting principle related to postemployment benefits
    
    
    (2,593
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (10,904
    )
    
    
    9,557Inventories
    
    
    (3,319
    )
    
    
    (2,651
    )Prepaid and other current assets
    
    
    (20
    )
    
    
    (2,284
    )Accounts payable and accrued liabilities
    
    
    6,339
    
    
    
    (11,713
    )Income taxes payable
    
    
    (1,245
    )
    
    
    3,787Other, net
    
    
    626
    
    
    
    1,254Net cash provided by operating activities
    
    
    22,552
    
    
    
    36,725Investing activities:Purchases of property, plant and equipment
    
    
    (11,128
    )
    
    
    (6,617
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    24Net cash used in investing activities
    
    
    (11,128
    )
    
    
    (6,593
    )Financing activities:Principal payments on debt
    
    
    (698
    )
    
    
    (27,393
    )Loan acquisition costs
    
    
    
    
    
    
    (415
    )Net cash used in financing activities
    
    
    (698
    )
    
    
    ( 27,808
    )Effect of exchange rate changes on cash and equivalents
    
    
    1,461
    
    
    
    (2,845
    )Net increase (decrease) in cash and equivalents
    
    
    12,187
    
    
    
    (521
    )Cash and equivalents at beginning of period
    
    
    27,580
    
    
    
    31,684Cash and equivalents at end of the period
    
    $
    39,767
    
    
    $
    31,163
 See notes to condensed consolidated financial statements
 6




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Description of Business and Basis of Presentation
 Description of Business
  Basis of Presentation
 2. 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)
 7




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Inventory Costs Inventory Pricing
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 3. Inventories
  (in thousands)
    
    July 1, 2006
    
    December 31, 2005Raw materials
    
    $
    21,770
    
    
    $
    21,485Work-in-process
    
    
    9,257
    
    
    
    7,171Finished goods
    
    
    36,117
    
    
    
    31,883Total
    
    $
    67,144
    
    
    $
    60,539
 4. Debt
  (in thousands)
    
    July 1, 2006
    
    December 31, 2005Senior credit facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    368,679
    
    
    
    365,7358.75% senior subordinated notes
    
    
    415,815
    
    
    
    401,955Other
    
    
    1,293
    
    
    
    1,293785,787
    
    
    
    768,983Less current maturities
    
    
    3,048
    
    
    
    1,224Long-term debt
    
    $
    782,739
    
    
    $
    767,759
 8




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 5. Pension and Other Postretirement Benefits
   Pension PlansThree Months Ended
    
    Six Months Ended(in thousands)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Service cost
    
    $
    759
    
    
    $
    652
    
    
    $
    1,478
    
    
    $
    1,230Interest cost
    
    
    805
    
    
    
    857
    
    
    
    1,568
    
    
    
    1,616Expected return on plan assets
    
    
    (200
    )
    
    
    (245
    )
    
    
    (392
    )
    
    
    (458
    )Recognized net actuarial loss
    
    
    8
    
    
    
    16
    
    
    
    17
    
    
    
    30Net periodic benefit cost
    
    $
    1,372
    
    
    $
    1,280
    
    
    $
    2,671
    
    
    $
    2,418Other Postretirement BenefitsThree Months Ended
    
    Six Months Ended(in thousands)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Service cost
    
    $
    8
    
    
    $
    7
    
    
    $
    16
    
    
    $
    14Interest cost
    
    
    28
    
    
    
    29
    
    
    
    57
    
    
    
    58Recognized net actuarial loss
    
    
    3
    
    
    
    
    
    
    
    4
    
    
    
    Net periodic benefit cost
    
    $
    39
    
    
    $
    36
    
    
    $
    77
    
    
    $
    72
 6. Environmental Matters
     9




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  7. Business Restructuring
 2005 Restructuring Plan
  Accounting for Costs Associated with Exit or Disposal Activities
 2004 Restructuring Plan
  , ,
 10




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Balance at
    
    
    
    
    
    
    
    
    
    ForeignDecember 31,
    
    Restructuring
    
    Cash
    
    Currency
    
    Balance at(in thousands)
    
    2005
    
    Charges
    
    Payments
    
    Translation
    
    July 1, 20062005 Restructuring Plan:Severance and benefit costs
    
    $
    1,506
    
    
    $
    338
    
    
    $
    (882
    )
    
    $
    114
    
    
    $
    1,076Other
    
    
    
    
    
    
    393
    
    
    
    (393
    )
    
    
    
    
    
    
    1,506
    
    
    
    731
    
    
    
    (1,275
    )
    
    
    114
    
    
    
    1,0762004 Restructuring Plan:Severance and benefit costs
    
    
    4,069
    
    
    
    
    
    
    
    (2,528
    )
    
    
    187
    
    
    
    1,728Raw materials
    
    
    32
    
    
    
    
    
    
    
    (33
    )
    
    
    1
    
    
    
    Other
    
    
    265
    
    
    
    594
    
    
    
    (806
    )
    
    
    8
    
    
    
    614,366
    
    
    
    594
    
    
    
    (3,367
    )
    
    
    196
    
    
    
    1,789Total
    
    $
    5,872
    
    
    $
    1,325
    
    
    $
    (4,642
    )
    
    $
    310
    
    
    $
    2,865
  Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    ForeignJanuary 1,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    Balance at(in thousands)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    July 2, 20052005 Restructuring Plan:Severance and benefit costs
    
    $
    
    
    
    $
    3,849
    
    
    $
    
    
    
    $
    (10
    )
    
    $
    (149
    )
    
    $
    3,690Asset disposals and
impairments
    
    
    
    
    
    
    1,278
    
    
    
    (1,278
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    5,148
    
    
    
    (1,278
    )
    
    
    (31
    )
    
    
    (149
    )
    
    
    3,6902004 Restructuring Plan:Severance and benefit costs
    
    
    14,944
    
    
    
    
    
    
    
    
    
    
    
    (7,649
    )
    
    
    (1,082
    )
    
    
    6,213Raw materials
    
    
    1,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )
    
    
    1,117Other
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    (254
    )
    
    
    
    
    
    
    16,200
    
    
    
    254
    
    
    
    
    
    
    
    (7,903
    )
    
    
    (1,221
    )
    
    
    7,330Total
    
    $
    16,200
    
    
    $
    5,402
    
    
    $
    (1,278
    )
    
    $
    (7,934
    )
    
    $
    (1,370
    )
    
    $
    11,020
 8. Income Taxes
  11




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 9. Comprehensive Income
  Three Months Ended
    
    Six Months Ended(in thousands)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Net income
    
    $
    3,993
    
    
    $
    3,309
    
    
    $
    7,358
    
    
    $
    8,762Other comprehensive income (loss),
primarily foreign currency translation
    
    
    1,673
    
    
    
    (3,127
    )
    
    
    3,213
    
    
    
    (5,499
    )Comprehensive income
    
    $
    5,666
    
    
    $
    182
    
    
    $
    10,571
    
    
    $
    3,263
 10. Related Party Transactions
  11. Segment Information
   12




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Three Months Ended
    
    Six Months EndedJuly 1,
    
    July 2,
    
    July 1,
    
    July 2,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Net sales to external customers:Energy storage
    
    $
    87,807
    
    
    $
    81,657
    
    
    $
    170,962
    
    
    $
    157,916Separations media
    
    
    35,287
    
    
    
    30,957
    
    
    
    67,425
    
    
    
    67,196Total net sales to external customers
    
    $
    123,094
    
    
    $
    112,614
    
    
    $
    238,387
    
    
    $
    225,112Operating income:Energy storage
    
    $
    20,122
    
    
    $
    18,574
    
    
    $
    35,479
    
    
    $
    31,488Separations media
    
    
    2,571
    
    
    
    3,733
    
    
    
    5,029
    
    
    
    11,318Segment operating income
    
    
    22,693
    
    
    
    22,307
    
    
    
    40,508
    
    
    
    42,806Business restructuring
    
    
    553
    
    
    
    5,402
    
    
    
    1,325
    
    
    
    5,402Total operating income
    
    
    22,140
    
    
    
    16,905
    
    
    
    39,183
    
    
    
    37,404Reconciling items:Interest expense, net
    
    
    17,503
    
    
    
    14,817
    
    
    
    33,786
    
    
    
    29,747Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    
    
    
    
    (2,593
    )
    
    
    Foreign currency and other
    
    
    1,282
    
    
    
    (1,834
    )
    
    
    1,981
    
    
    
    (3,405
    )Total consolidated income before income taxes
    
    $
    3,355
    
    
    $
    3,922
    
    
    $
    6,009
    
    
    $
    11,062Depreciation and amortization:Energy storage
    
    $
    7,720
    
    
    $
    8,282
    
    
    $
    15,726
    
    
    $
    16,682Separations media
    
    
    6,862
    
    
    
    5,764
    
    
    
    13,416
    
    
    
    11,680Total depreciation and amortization
    
    $
    14,582
    
    
    $
    14,046
    
    
    $
    29,142
    
    
    $
    28,362
 12. Financial Statements of Guarantors
   13




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Balance Sheet
As of July 1, 2006
 CombinedCombined
    
    Non-
    
    
    
    
    
    ReclassificationsGuarantor
    
    Guarantor
    
    The
    
    and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    105
    
    
    $
    24,267
    
    
    $
    15,395
    
    
    $
    
    
    
    $
    39,767Accounts receivable, net
    
    
    36,485
    
    
    
    66,712
    
    
    
    
    
    
    
    
    
    
    
    103,197Inventories
    
    
    16,191
    
    
    
    50,953
    
    
    
    
    
    
    
    
    
    
    
    67,144Other
    
    
    4,166
    
    
    
    5,280
    
    
    
    188
    
    
    
    
    
    
    
    9,634Total current assets
    
    
    56,947
    
    
    
    147,212
    
    
    
    15,583
    
    
    
    
    
    
    
    219,742Due from affiliates
    
    
    189,194
    
    
    
    226,809
    
    
    
    310,402
    
    
    
    (726,405
    )
    
    
    Investment in subsidiaries
    
    
    260,922
    
    
    
    324,360
    
    
    
    193,230
    
    
    
    (778,512
    )
    
    
    Property, plant and equipment,
net
    
    
    109,183
    
    
    
    271,684
    
    
    
    
    
    
    
    
    
    
    
    380,867Goodwill
    
    
    
    
    
    
    
    
    
    
    567,587
    
    
    
    
    
    
    
    567,587Intangibles and loan
acquisition costs, net
    
    
    63
    
    
    
    
    
    
    
    213,499
    
    
    
    
    
    
    
    213,562Other
    
    
    957
    
    
    
    17,929
    
    
    
    
    
    
    
    
    
    
    
    18,886Total assets
    
    $
    617,266
    
    
    $
    987,994
    
    
    $
    1,300,301
    
    
    $
    (1,504,917
    )
    
    $
    1,400,644Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    8,941
    
    
    $
    39,681
    
    
    $
    17,240
    
    
    $
    
    
    
    $
    65,862Income taxes payable
    
    
    1,157
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    5,107Current portion of debt
    
    
    
    
    
    
    219
    
    
    
    2,829
    
    
    
    
    
    
    
    3,048Current portion of capital
lease obligation
    
    
    1,349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,349Total current liabilities
    
    
    11,447
    
    
    
    43,850
    
    
    
    20,069
    
    
    
    
    
    
    
    75,366Due to affiliates
    
    
    319,280
    
    
    
    230,408
    
    
    
    176,717
    
    
    
    (726,405
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    1,074
    
    
    
    781,665
    
    
    
    
    
    
    
    782,739Capital lease obligation, less
current portion
    
    
    5,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,449Pension and postretirement
benefits
    
    
    2,161
    
    
    
    53,604
    
    
    
    
    
    
    
    
    
    
    
    55,765Postemployment benefits
    
    
    
    
    
    
    4,701
    
    
    
    
    
    
    
    
    
    
    
    4,701Environmental reserve, less
current portion
    
    
    
    
    
    
    23,416
    
    
    
    
    
    
    
    
    
    
    
    23,416Deferred income taxes and other
    
    
    63,456
    
    
    
    67,902
    
    
    
    
    
    
    
    
    
    
    
    131,358Shareholders equity
    
    
    215,473
    
    
    
    563,039
    
    
    
    321,850
    
    
    
    (778,512
    )
    
    
    321,850Total liabilities and
shareholders equity
    
    $
    617,266
    
    
    $
    987,994
    
    
    $
    1,300,301
    
    
    $
    (1,504,917
    )
    
    $
    1,400,644
 14




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Balance Sheet
As of December 31, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    20
    
    
    $
    18,173
    
    
    $
    9,387
    
    
    $
    
    
    
    $
    27,580Accounts receivable, net
    
    
    31,049
    
    
    
    57,298
    
    
    
    
    
    
    
    
    
    
    
    88,347Inventories
    
    
    17,248
    
    
    
    43,291
    
    
    
    
    
    
    
    
    
    
    
    60,539Other
    
    
    4,523
    
    
    
    4,396
    
    
    
    18
    
    
    
    
    
    
    
    8,937Total current assets
    
    
    52,840
    
    
    
    123,158
    
    
    
    9,405
    
    
    
    
    
    
    
    185,403Due from affiliates
    
    
    177,296
    
    
    
    220,628
    
    
    
    294,385
    
    
    
    (692,309
    )
    
    
    Investment in subsidiaries
    
    
    244,560
    
    
    
    317,381
    
    
    
    169,117
    
    
    
    (731,058
    )
    
    
    Property, plant and equipment,
net
    
    
    107,009
    
    
    
    263,862
    
    
    
    
    
    
    
    
    
    
    
    370,871Goodwill
    
    
    
    
    
    
    
    
    
    
    567,587
    
    
    
    
    
    
    
    567,587Intangibles and loan
acquisition costs, net
    
    
    70
    
    
    
    
    
    
    
    221,936
    
    
    
    
    
    
    
    222,006Other
    
    
    900
    
    
    
    16,571
    
    
    
    
    
    
    
    
    
    
    
    17,471Total assets
    
    $
    582,675
    
    
    $
    941,600
    
    
    $
    1,262,430
    
    
    $
    (1,423,367
    )
    
    $
    1,363,338Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    13,689
    
    
    $
    36,653
    
    
    $
    4,740
    
    
    $
    
    
    
    $
    55,082Income taxes payable
    
    
    1,321
    
    
    
    2,934
    
    
    
    
    
    
    
    
    
    
    
    4,255Current portion of debt
    
    
    86
    
    
    
    203
    
    
    
    935
    
    
    
    
    
    
    
    1,224Current portion of capital
lease obligation
    
    
    1,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,326Total current liabilities
    
    
    16,422
    
    
    
    39,790
    
    
    
    5,675
    
    
    
    
    
    
    
    61,887Due to affiliates
    
    
    296,605
    
    
    
    216,983
    
    
    
    178,721
    
    
    
    (692,309
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    1,004
    
    
    
    766,755
    
    
    
    
    
    
    
    767,759Capital lease obligations,
less current portion
    
    
    6,018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,018Pension and postretirement
benefits
    
    
    2,112
    
    
    
    49,274
    
    
    
    
    
    
    
    
    
    
    
    51,386Post employment benefits
    
    
    
    
    
    
    7,096
    
    
    
    
    
    
    
    
    
    
    
    7,096Environmental reserve, less
current portion
    
    
    
    
    
    
    22,264
    
    
    
    
    
    
    
    
    
    
    
    22,264Deferred income taxes and other
    
    
    63,456
    
    
    
    72,193
    
    
    
    
    
    
    
    
    
    
    
    135,649Shareholders equity
    
    
    198,062
    
    
    
    532,996
    
    
    
    311,279
    
    
    
    (731,058
    )
    
    
    311,279Total liabilities and
shareholders equity
    
    $
    582,675
    
    
    $
    941,600
    
    
    $
    1,262,430
    
    
    $
    (1,423,367
    )
    
    $
    1,363,338
 15




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
 For the three months ended July 1, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    46,262
    
    
    $
    76,832
    
    
    $
    
    
    
    $
    
    
    
    $
    123,094Cost of goods sold
    
    
    19,483
    
    
    
    58,978
    
    
    
    
    
    
    
    
    
    
    
    78,461Gross profit
    
    
    26,779
    
    
    
    17,854
    
    
    
    
    
    
    
    
    
    
    
    44,633Selling, general and
administrative expenses
    
    
    13,080
    
    
    
    8,860
    
    
    
    
    
    
    
    
    
    
    
    21,940Business restructuring
    
    
    
    
    
    
    553
    
    
    
    
    
    
    
    
    
    
    
    553Operating income
    
    
    13,699
    
    
    
    8,441
    
    
    
    
    
    
    
    
    
    
    
    22,140Other (income) expense, net
    
    
    (399
    )
    
    
    974
    
    
    
    18,210
    
    
    
    
    
    
    
    18,785Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (11,299
    )
    
    
    11,299
    
    
    
    Income (loss) before
income taxes
    
    
    14,098
    
    
    
    7,467
    
    
    
    (6,911
    )
    
    
    (11,299
    )
    
    
    3,355Income taxes
    
    
    6,617
    
    
    
    3,649
    
    
    
    (10,904
    )
    
    
    
    
    
    
    (638
    )Net income
    
    $
    7,481
    
    
    $
    3,818
    
    
    $
    3,993
    
    
    $
    (11,299
    )
    
    $
    3,993
 Condensed Consolidating Statement of Income
For the three months ended July 2, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    41,910
    
    
    $
    70,704
    
    
    $
    
    
    
    $
    
    
    
    $
    112,614Cost of goods sold
    
    
    19,849
    
    
    
    52,256
    
    
    
    
    
    
    
    
    
    
    
    72,105Gross profit
    
    
    22,061
    
    
    
    18,448
    
    
    
    
    
    
    
    
    
    
    
    40,509Selling, general and
administrative expenses
    
    
    11,016
    
    
    
    7,186
    
    
    
    
    
    
    
    
    
    
    
    18,202Business restructuring
    
    
    159
    
    
    
    5,243
    
    
    
    
    
    
    
    
    
    
    
    5,402Operating income
    
    
    10,886
    
    
    
    6,019
    
    
    
    
    
    
    
    
    
    
    
    16,905Other (income) expense, net
    
    
    (87
    )
    
    
    (326
    )
    
    
    13,396
    
    
    
    
    
    
    
    12,983Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (9,793
    )
    
    
    9,793
    
    
    
    Income (loss) before
income taxes
    
    
    10,973
    
    
    
    6,345
    
    
    
    (3,603
    )
    
    
    (9,793
    )
    
    
    3,922Income taxes
    
    
    5,146
    
    
    
    2,379
    
    
    
    (6,912
    )
    
    
    
    
    
    
    613Net income
    
    $
    5,827
    
    
    $
    3,966
    
    
    $
    3,309
    
    
    $
    (9,793
    )
    
    $
    3,309
 16




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
 For the six months ended July 1, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    92,109
    
    
    $
    146,278
    
    
    $
    
    
    
    $
    
    
    
    $
    238,387Cost of goods sold
    
    
    41,941
    
    
    
    111,500
    
    
    
    
    
    
    
    
    
    
    
    153,441Gross profit
    
    
    50,168
    
    
    
    34,778
    
    
    
    
    
    
    
    
    
    
    
    84,946Selling, general and
administrative expenses
    
    
    26,677
    
    
    
    17,761
    
    
    
    
    
    
    
    
    
    
    
    44,438Business restructuring
    
    
    
    
    
    
    1,325
    
    
    
    
    
    
    
    
    
    
    
    1,325Operating income
    
    
    23,491
    
    
    
    15,692
    
    
    
    
    
    
    
    
    
    
    
    39,183Other (income) expense, net
    
    
    (1,035
    )
    
    
    (654
    )
    
    
    34,863
    
    
    
    
    
    
    
    33,174Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (24,711
    )
    
    
    24,711
    
    
    
    Income (loss) before
income taxes
    
    
    24,526
    
    
    
    16,346
    
    
    
    (10,152
    )
    
    
    (24,711
    )
    
    
    6,009Income taxes
    
    
    13,243
    
    
    
    2,918
    
    
    
    (17,510
    )
    
    
    
    
    
    
    (1,349
    )Net income
    
    $
    11,283
    
    
    $
    13,428
    
    
    $
    7,358
    
    
    $
    (24,711
    )
    
    $
    7,358
 Condensed Consolidating Statement of Income
For the six months ended July 2, 2005
 Combined
    
    CombinedGuarantor
    
    Non-Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    82,302
    
    
    $
    142,810
    
    
    $
    
    
    
    $
    
    
    
    $
    225,112Cost of goods sold
    
    
    41,544
    
    
    
    104,170
    
    
    
    
    
    
    
    
    
    
    
    145,714Gross profit
    
    
    40,758
    
    
    
    38,640
    
    
    
    
    
    
    
    
    
    
    
    79,398Selling, general and
administrative expenses
    
    
    22,026
    
    
    
    14,566
    
    
    
    
    
    
    
    
    
    
    
    36,592Business restructuring
    
    
    159
    
    
    
    5,243
    
    
    
    
    
    
    
    
    
    
    
    5,402Operating income
    
    
    18,573
    
    
    
    18,831
    
    
    
    
    
    
    
    
    
    
    
    37,404Other (income) expense, net
    
    
    (604
    )
    
    
    (385
    )
    
    
    27,331
    
    
    
    
    
    
    
    26,342Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (25,157
    )
    
    
    25,157
    
    
    
    Income (loss) before
income taxes
    
    
    19,177
    
    
    
    19,216
    
    
    
    (2,174
    )
    
    
    (25,157
    )
    
    
    11,062Income taxes
    
    
    9,357
    
    
    
    3,879
    
    
    
    (10,936
    )
    
    
    
    
    
    
    2,300Net income
    
    $
    9,820
    
    
    $
    15,337
    
    
    $
    8,762
    
    
    $
    (25,157
    )
    
    $
    8,762
 17




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the six months ended July 1, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by
operating activities
    
    $
    21,794
    
    
    $
    10,781
    
    
    $
    14,689
    
    
    $
    (24,712
    )
    
    $
    22,552Investing activities:Purchases of property, plant
and equipment
    
    
    (7,106
    )
    
    
    (4,022
    )
    
    
    
    
    
    
    
    
    
    
    (11,128
    )Net cash used in investing
activities
    
    
    (7,106
    )
    
    
    (4,022
    )
    
    
    
    
    
    
    
    
    
    
    (11,128
    )Financing activities:Principal payments on debt
    
    
    (631
    )
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    (698
    )Intercompany transactions, net
    
    
    (14,019
    )
    
    
    (2,012
    )
    
    
    (8,681
    )
    
    
    24,712
    
    
    
    Net cash (used in) financing
activities
    
    
    (14,650
    )
    
    
    (2,079
    )
    
    
    (8,681
    )
    
    
    24,712
    
    
    
    (698
    )Effect of exchange rate
changes on cash and
equivalents
    
    
    47
    
    
    
    1,414
    
    
    
    
    
    
    
    
    
    
    
    1,461Net increase in cash and
equivalents
    
    
    85
    
    
    
    6,094
    
    
    
    6,008
    
    
    
    
    
    
    
    12,187Cash and equivalents at
beginning of period
    
    
    20
    
    
    
    18,173
    
    
    
    9,387
    
    
    
    
    
    
    
    27,580Cash and equivalents at end
of period
    
    $
    105
    
    
    $
    24,267
    
    
    $
    15,395
    
    
    $
    
    
    
    $
    39,767
 18




---



##### 



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the six months ended July 2, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating
activities
    
    $
    28,350
    
    
    $
    28,494
    
    
    $
    5,038
    
    
    $
    (25,157
    )
    
    $
    36,725Investing activities:Purchases of property, plant
and equipment
    
    
    (1,513
    )
    
    
    (5,104
    )
    
    
    
    
    
    
    
    
    
    
    (6,617
    )Proceeds from sale of
property, plant and equipment
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Net cash used in investing
activities
    
    
    (1,489
    )
    
    
    (5,104
    )
    
    
    
    
    
    
    
    
    
    
    (6,593
    )Financing activities:Principal payments on debt
    
    
    (629
    )
    
    
    (1,745
    )
    
    
    (25,019
    )
    
    
    
    
    
    
    (27,393
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (415
    )
    
    
    
    
    
    
    (415
    )Intercompany transactions, nets
    
    
    (28,119
    )
    
    
    (21,521
    )
    
    
    24,483
    
    
    
    25,157
    
    
    
    Net cash (used in) financing
activities
    
    
    (28,748
    )
    
    
    (23,266
    )
    
    
    (951
    )
    
    
    25,157
    
    
    
    (27,808
    )Effect of exchange rate
changes on cash and
equivalents
    
    
    40
    
    
    
    (2,885
    )
    
    
    
    
    
    
    
    
    
    
    (2,845
    )Net increase (decrease) in
cash and equivalents
    
    
    (1,847
    )
    
    
    (2,761
    )
    
    
    4,087
    
    
    
    
    
    
    
    (521
    )Cash and equivalents at
beginning of period
    
    
    2,263
    
    
    
    20,244
    
    
    
    9,177
    
    
    
    
    
    
    
    31,684Cash and equivalents at end of
period
    
    $
    416
    
    
    $
    17,483
    
    
    $
    13,264
    
    
    $
    
    
    
    $
    31,163
 
 19




---



##### 



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
31, 2005.
 Overview
   Wards Motor Vehicles Facts and Figures,
     20




---



##### 



Critical accounting policies
  Results of Operations
  Three months ended
    
    Three months ended($s in millions)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Net sales
    
    $
    123.1
    
    
    $
    112.6
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    44.6
    
    
    
    40.5
    
    
    
    36.3
    %
    
    
    36.0
    %Selling, general and
administrative expenses
    
    
    21.9
    
    
    
    18.2
    
    
    
    17.8
    %
    
    
    16.2
    %Business restructuring
    
    
    0.6
    
    
    
    5.4
    
    
    
    0.5
    %
    
    
    4.8
    %Operating income
    
    
    22.1
    
    
    
    16.9
    
    
    
    18.0
    %
    
    
    15.0
    %Interest expense, net
    
    
    17.5
    
    
    
    14.8
    
    
    
    14.2
    %
    
    
    13.1
    %Foreign currency and other
    
    
    1.3
    
    
    
    (1.8
    )
    
    
    1.1
    %
    
    
    (1.6
    )%18.8
    
    
    
    13.0
    
    
    
    15.3
    %
    
    
    11.5
    %Income before income taxes
    
    
    3.4
    
    
    
    3.9
    
    
    
    2.7
    %
    
    
    3.5
    %Income taxes
    
    
    (0.6
    )
    
    
    0.6
    
    
    
    (0.5
    )%
    
    
    0.5
    %Net income
    
    $
    4.0
    
    
    $
    3.3
    
    
    
    3.2
    %
    
    
    2.9
    %Six months ended
    
    Six months ended($s in millions)
    
    July 1, 2006
    
    July 2, 2005
    
    July 1, 2006
    
    July 2, 2005Net sales
    
    $
    238.4
    
    
    $
    225.1
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    84.9
    
    
    
    79.4
    
    
    
    35.6
    %
    
    
    35.3
    %Selling, general and administrative
expenses
    
    
    44.4
    
    
    
    36.6
    
    
    
    18.6
    %
    
    
    16.3
    %Business restructuring
    
    
    1.3
    
    
    
    5.4
    
    
    
    0.6
    %
    
    
    2.4
    %Operating income
    
    
    39.2
    
    
    
    37.4
    
    
    
    16.4
    %
    
    
    16.6
    %Interest expense, net
    
    
    33.8
    
    
    
    29.7
    
    
    
    14.2
    %
    
    
    13.2
    %Change in accounting principle related to
postemployment benefits
    
    
    (2.6
    )
    
    
    
    
    
    
    (1.1
    )%
    
    
    
    %Foreign currency and other
    
    
    2.0
    
    
    
    (3.4
    )
    
    
    0.8
    %
    
    
    (1.5
    )%33.2
    
    
    
    26.3
    
    
    
    13.9
    %
    
    
    11.7
    %Income before income taxes
    
    
    6.0
    
    
    
    11.1
    
    
    
    2.5
    %
    
    
    4.9
    %Income taxes
    
    
    (1.4
    )
    
    
    2.3
    
    
    
    (0.6
    )%
    
    
    1.0
    %Net income
    
    $
    7.4
    
    
    $
    8.8
    
    
    
    3.1
    %
    
    
    3.9
    %
 21




---



##### 



Comparison of the three months ended July 1, 2006 with the three months ended July 2, 2005
 Net sales
   Gross Profit
   Selling, general and administrative expenses
  Interest expense
  Income taxes
  22




---



##### 



Comparison
of the six months ended July 1, 2006 with the six months ended July 2, 2005
 Net sales
   Gross Profit
   Selling, general and administrative expenses
  Interest expense
  Income taxes
  23




---



##### 



Business restructuring
 2005 Restructuring Plan
  2004 Restructuring Plan
   Balance at
    
    
    
    
    
    
    
    
    
    ForeignDecember 31,
    
    Restructuring
    
    Cash
    
    Currency
    
    Balance at(in millions)
    
    2005
    
    Charges
    
    Payments
    
    Translation
    
    July 1, 20062005 Restructuring Plan:Severance and benefit costs
    
    $
    1.5
    
    
    $
    0.3
    
    
    $
    (0.9
    )
    
    $
    0.1
    
    
    $
    1.1Other
    
    
    
    
    
    
    0.4
    
    
    
    (0.4
    )
    
    
    
    
    
    
    1.5
    
    
    
    0.7
    
    
    
    (1.3
    )
    
    
    
    
    
    
    1.12004 Restructuring Plan:Severance and benefit costs
    
    
    4.1
    
    
    
    
    
    
    
    (2.5
    )
    
    
    0.2
    
    
    
    1.7Other
    
    
    0.3
    
    
    
    0.6
    
    
    
    (0.8
    )
    
    
    
    
    
    
    0.14.4
    
    
    
    0.6
    
    
    
    (3.4
    )
    
    
    0.2
    
    
    
    1.8Total
    
    $
    5.9
    
    
    $
    1.3
    
    
    $
    (4.6
    )
    
    $
    0.3
    
    
    $
    2.9
  ForeignBalance at
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    Balance at(in millions)
    
    January 1, 2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    July 2, 20052005 Restructuring Plan:Severance and benefit costs
    
    $
    
    
    
    $
    3.8
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    3.7Asset disposals and impairments
    
    
    
    
    
    
    1.3
    
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.1
    
    
    
    (1.3
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    3.72004 Restructuring Plan:Severance and benefit costs
    
    
    14.9
    
    
    
    
    
    
    
    
    
    
    
    (7.6
    )
    
    $
    (1.1
    )
    
    $
    6.2Raw materials
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    1.1Other
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    16.2
    
    
    
    0.3
    
    
    
    
    
    
    
    (7.9
    )
    
    $
    (1.2
    )
    
    $
    7.3Total
    
    $
    16.2
    
    
    $
    5.4
    
    
    $
    (1.3
    )
    
    $
    (7.9
    )
    
    $
    (1.4
    )
    
    $
    11.0
 24




---



##### 



Liquidity and Capital Resources
  Operating activities
  Investing activities
 Financing activities
    25




---



##### 



Twelve Months
    
    Three MonthsEnded
    
    Ended(in millions)
    
    July 1, 2006
    
    July 1, 2006Net income
    
    $
    12.5
    
    
    $
    4.0Add:Depreciation and amortization
    
    
    54.9
    
    
    
    14.6Interest expense, net
    
    
    64.0
    
    
    
    17.5Provision for income taxes
    
    
    (5.7
    )
    
    
    (0.6
    )EBITDA
    
    
    125.7
    
    
    
    35.5Add:Foreign currency loss
    
    
    1.1
    
    
    
    1.1Operating lease payments on lease that was terminated (1)
    
    
    2.0
    
    
    
    Other non-cash charges (2)
    
    
    (1.9
    )
    
    
    0.3Business restructuring
    
    
    4.7
    
    
    
    0.6Loss on disposal of property, plant, and equipment
    
    
    1.3
    
    
    
    0.7Adjusted EBITDA
    
    $
    132.9
    
    
    $
    38.2
 
 (1)
    
    Represents payments under an operating lease agreement that the Company terminated during the
second quarter of 2006 and purchased the equipment from the lessor.(2)
    
    Represents other income of $2.6 million resulting from a reduction of the postemployment
benefits accrual upon adoption of EITF 05-5 and compensation expense recorded under EITF 05-5
of $0.3 million and $0.7 million during the three and twelve months periods ended July 1,
2006, respectively.  Twelve MonthsEnded(in millions)
    
    July 1, 2006Adjusted EBITDA
    
    $
    132.9Consolidated interest expense, as defined in the Credit Agreement
    
    
    61.1Actual interest coverage ratio
    
    
    2.18
    xPermitted minimum interest coverage ratio
    
    
    1.70
    x
  Date or Period
    
    RatioApril 1, 2006 through March 31, 2007
    
    
    1.70 to 1.00June 30, 2007
    
    
    1.75 to 1.00September 29, 2007 through June 28, 2008
    
    
    1.90 to 1.00September 27, 2008 through January 3, 2009
    
    
    2.00 to 1.00January 4, 2009 through January 2, 2010
    
    
    2.75 to 1.00April 3, 2010 and each fiscal quarter thereafter
    
    
    3.00 to 1.00
 26




---



##### 



Twelve MonthsEnded(in millions)
    
    July 1, 2006Indebtedness, as defined in the Credit Agreement
    
    $
    792.6Adjusted EBITDA
    
    
    132.9Actual leverage ratio
    
    
    5.96
    xPermitted maximum leverage ratio
    
    
    6.90
    x
  Date or Period
    
    RatioApril 1, 2006 through March 31, 2007
    
    
    6.90 to 1.00June 30, 2007
    
    
    6.75 to 1.00September 29, 2007
    
    
    6.50 to 1.00December 29, 2007
    
    
    6.25 to 1.00March 29, 2008
    
    
    6.00 to 1.00June 28, 2008
    
    
    5.75 to 1.00September 27, 2008 through January 3, 2009
    
    
    5.50 to 1.00January 4, 2009 through October 3, 2009
    
    
    4.25 to 1.00January 2, 2010 and each fiscal quarter thereafter
    
    
    4.00 to 1.00
      27




---



##### 



Foreign Operations
  Environmental matters
      Off-Balance Sheet Arrangements
  28




---



##### 



New Accounting Standards
 Accounting Changes and Error
Corrections
  Inventory Costs Inventory Pricing
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 29




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Currency risk
   July 1, 2006
    
    July 2, 2005Period end rate
    
    
    1.2721
    
    
    
    1.2111Period average rate for the three months ended
    
    
    1.2561
    
    
    
    1.2907Period average rate for the six months ended
    
    
    1.2295
    
    
    
    1.3077
  Item 4. Controls and Procedures
   30




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description10.1
    
    Employment Agreement, dated as of April 17, 2006, by and between Polypore, Inc. and Mitchell J. Pulwer10.2
    
    Agreement and Release, dated as of April 17, 2006, by and between Celgard, LLC, a subsidiary of Polypore, Inc. and Bradley W. Reed10.3
    
    Employment Agreement, dated as of April 4, 2006, by and between Membrana, GmbH, a subsidiary of Polypore, Inc. and Josef Sauer10.4
    
    Polypore International, Inc. 2006 Stock Option Plan10.5
    
    Form of Option Agreement pursuant to the Polypore International, Inc. 2006 Stock Option Plan31.1
    
    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
 31




---



##### 



SIGNATURES
  Date: August 15, 2006
    POLYPORE, 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) 32