##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended July 2, 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 DriveCharlotte, North Carolina
    
    28273(Address of Principal Executive Offices)
    
    (Zip Code)
 (704) 587-8409
 
   þ o
  o þ




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Polypore, Inc.
 Index to Quarterly Report on Form 10-Q
For the Quarter Ended July 2, 2005
 PagePART I FINANCIAL INFORMATIONItem 1.Financial Statements
    
    
    4Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4.Controls and Procedures
    
    
    35PART II OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    35Item 6.Exhibits
    
    
    35SIGNATURESEx-10.1Ex-31.1Ex-31.2Ex-32.1Ex-32.2
   2




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##### Table of Contents



Forward-looking Statements
  
    
    the highly competitive nature of the markets in which we sell our products;
    
    the failure to continue to develop innovative products;
    
    the 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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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Polypore, Inc.
 Condensed Consolidated Balance Sheets
 (in thousands)
    
    July 2, 2005(Unaudited)
    

January
1, 2005*AssetsCurrent assets:Cash and equivalents
    
    $
    31,163
    
    
    $
    31,684Accounts receivable, net
    
    
    90,455
    
    
    
    106,296Inventories
    
    
    59,831
    
    
    
    61,789Refundable income taxes
    
    
    5,036
    
    
    
    8,238Deferred income taxes
    
    
    3,252
    
    
    
    7,954Prepaid and other
    
    
    7,116
    
    
    
    5,288Total current assets
    
    
    196,853
    
    
    
    221,249Property, plant and equipment, net
    
    
    393,548
    
    
    
    441,350Goodwill
    
    
    537,517
    
    
    
    535,844Intangibles and loan acquisition costs, net
    
    
    231,185
    
    
    
    244,256Environmental indemnification receivable, less current portion
    
    
    17,894
    
    
    
    20,125Other
    
    
    1,589
    
    
    
    1,142Total assets
    
    $
    1,378,586
    
    
    $
    1,463,966Liabilities and shareholders equityCurrent liabilities:Revolving credit obligations
    
    $
    
    
    
    $
    Accounts payable
    
    
    19,586
    
    
    
    20,581Accrued liabilities
    
    
    40,315
    
    
    
    50,464Current portion of debt-optional prepayment
    
    
    
    
    
    
    25,000Current portion of debt
    
    
    4,390
    
    
    
    2,260Current portion of capital lease obligation
    
    
    1,299
    
    
    
    1,272Total current liabilities
    
    
    65,590
    
    
    
    99,577Debt, less current portion
    
    
    792,658
    
    
    
    824,939Capital lease obligations, less current portion
    
    
    6,688
    
    
    
    7,344Pension and postretirement benefits
    
    
    45,551
    
    
    
    48,652Post employment benefits
    
    
    8,212
    
    
    
    10,119Environmental reserve, less current portion
    
    
    23,115
    
    
    
    24,394Deferred income taxes
    
    
    124,627
    
    
    
    138,566Other
    
    
    1,540
    
    
    
    3,033Commitments and contingenciesShareholders equity:Common stock
    
    
    
    
    
    
    Paid-in capital
    
    
    321,516
    
    
    
    321,516Retained (deficit)
    
    
    (6,108
    )
    
    
    (14,870
    )Accumulated other comprehensive income (loss)
    
    
    (4,803
    )
    
    
    696310,605
    
    
    
    307,342Total liabilities and shareholders equity
    
    $
    1,378,586
    
    
    $
    1,463,966
  See notes to condensed consolidated financial statements
 4




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##### Table of Contents



Polypore, Inc .
 Condensed Consolidated Statements of Income (Unaudited)
 Pre-
    
    
    
    
    
    
    
    
    
    Pre-Post-Transactions
    
    Transactions
    
    Post-Transactions
    
    TransactionsThree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    January 4,Months
    
    May 2, 2004
    
    April 4, 2004
    
    Six Months
    
    May 2, 2004
    
    2004Ended
    
    through
    
    through
    
    Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Net sales
    
    $
    112,614
    
    
    $
    88,729
    
    
    $
    39,153
    
    
    $
    225,112
    
    
    $
    88,729
    
    
    $
    179,273Cost of goods sold
    
    
    72,105
    
    
    
    58,150
    
    
    
    23,905
    
    
    
    145,714
    
    
    
    58,150
    
    
    
    110,166Gross profit
    
    
    40,509
    
    
    
    30,579
    
    
    
    15,248
    
    
    
    79,398
    
    
    
    30,579
    
    
    
    69,107Selling, general and administrative expenses
    
    
    18,202
    
    
    
    12,614
    
    
    
    5,888
    
    
    
    36,592
    
    
    
    12,614
    
    
    
    23,381Business restructuring
    
    
    5,402
    
    
    
    
    
    
    
    
    
    
    
    5,402
    
    
    
    
    
    
    
    In process research and development
    
    
    
    
    
    
    5,280
    
    
    
    
    
    
    
    
    
    
    
    5,280
    
    
    
    Operating income
    
    
    16,905
    
    
    
    12,685
    
    
    
    9,360
    
    
    
    37,404
    
    
    
    12,685
    
    
    
    45,726Other (income) expense:Interest expense, net
    
    
    14,817
    
    
    
    8,372
    
    
    
    1,517
    
    
    
    29,747
    
    
    
    8,372
    
    
    
    6,048Foreign currency and other
    
    
    (1,834
    )
    
    
    370
    
    
    
    54
    
    
    
    (3,405
    )
    
    
    370
    
    
    
    481Unrealized gain on derivative instrument
    
    
    
    
    
    
    
    
    
    
    (1,308
    )
    
    
    
    
    
    
    
    
    
    
    (1,321
    )12,983
    
    
    
    8,742
    
    
    
    263
    
    
    
    26,342
    
    
    
    8,742
    
    
    
    5,208Income before income taxes
    
    
    3,922
    
    
    
    3,943
    
    
    
    9,097
    
    
    
    11,062
    
    
    
    3,943
    
    
    
    40,518Income taxes
    
    
    613
    
    
    
    1,302
    
    
    
    3,002
    
    
    
    2,300
    
    
    
    1,302
    
    
    
    13,685Net income
    
    $
    3,309
    
    
    $
    2,641
    
    
    $
    6,095
    
    
    $
    8,762
    
    
    $
    2,641
    
    
    $
    26,833
 See notes to condensed consolidated financial statements
 5




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Polypore, Inc.
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Pre-Post-Transactions
    
    TransactionsJanuary 4,Six Months
    
    May 2, 2004
    
    2004Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Operating activities:Net income
    
    $
    8,762
    
    
    $
    2,641
    
    
    $
    26,833Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation expense
    
    
    19,459
    
    
    
    4,224
    
    
    
    14,409Amortization expense
    
    
    8,903
    
    
    
    2,908
    
    
    
    808Amortization of loan acquisition costs
    
    
    1,319
    
    
    
    425
    
    
    
    632Gain on disposal of property, plant and equipment
    
    
    (18
    )
    
    
    
    
    
    
    (1,432
    )Business restructuring
    
    
    5,402
    
    
    
    
    
    
    
    Foreign currency and other
    
    
    (3,515
    )
    
    
    (2,038
    )
    
    
    (3,067
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    9,557
    
    
    
    (6,423
    )
    
    
    (13,189
    )Inventories
    
    
    (2,651
    )
    
    
    5,144
    
    
    
    (1,434
    )Prepaid and other current assets
    
    
    (2,284
    )
    
    
    (89
    )
    
    
    (107
    )Accounts payable and accrued liabilities
    
    
    (7,926
    )
    
    
    1,340
    
    
    
    4,160Other, net
    
    
    (283
    )
    
    
    (3,920
    )
    
    
    1,298Net cash provided by operating activities
    
    
    36,725
    
    
    
    4,212
    
    
    
    28,911Investing activities:Purchases of property, plant and equipment
    
    
    (6,617
    )
    
    
    (2,187
    )
    
    
    (5,497
    )Proceeds from sale of property, plant and equipment
    
    
    24
    
    
    
    
    
    
    
    1,923Net cash used in investing activities
    
    
    (6,593
    )
    
    
    (2,187
    )
    
    
    (3,574
    )Financing activities:Proceeds from debt
    
    
    
    
    
    
    819,335
    
    
    
    610Principal payments on debt
    
    
    (27,393
    )
    
    
    (262,015
    )
    
    
    (7,923
    )Borrowings on revolving credit agreement
    
    
    
    
    
    
    1,500
    
    
    
    Payments on revolving credit agreement
    
    
    
    
    
    
    (10,000
    )
    
    
    Loan acquisition costs
    
    
    (415
    )
    
    
    (19,405
    )
    
    
    (59
    )Payments made for the change in ownership in
connection with the Transactions
    
    
    
    

    
    
    (867,369
    )
    
    
    Proceeds from equity investment
    
    
    
    
    
    
    321,446
    
    
    
    Net cash used in financing activities
    
    
    (27,808
    )
    
    
    (16,508
    )
    
    
    (7,372
    )Effect of exchange rate changes on cash and equivalents
    
    
    (2,845
    )
    
    
    (563
    )
    
    
    (2,156
    )Net increase (decrease) in cash and equivalents
    
    
    (521
    )
    
    
    (15,046
    )
    
    
    15,809Cash and equivalents at beginning of period
    
    
    31,684
    
    
    
    35,872
    
    
    
    20,063Cash and equivalents at end of period
    
    $
    31,163
    
    
    $
    20,826
    
    
    $
    35,872
 See notes to condensed consolidated financial statements
 6




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Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 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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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
  Three Months Ended
    
    Six Months Ended(in thousands)
    
    July 3, 2004
    
    July 3, 2004Net sales
    
    $
    127,882
    
    
    $
    268,002Net income
    
    $
    12,730
    
    
    $
    25,608
 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)
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 8




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Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
  Inventory Costs Inventory Pricing
 4. Inventories
   (in thousands)
    
    July 2, 2005
    
    January 1, 2005Raw materials
    
    $
    20,720
    
    
    $
    22,243Work-in-process
    
    
    6,934
    
    
    
    6,395Finished goods
    
    
    32,177
    
    
    
    33,151Total
    
    $
    59,831
    
    
    $
    61,789
 5. Debt
  (in thousands)
    
    July 2, 2005
    
    January 1, 2005Senior credit facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    386,715
    
    
    
    416,9418.75% senior subordinated notes
    
    
    406,665
    
    
    
    429,315Other
    
    
    3,668
    
    
    
    5,943797,048
    
    
    
    852,199Less optional prepayment
    
    
    
    
    
    
    25,000Less current maturities
    
    
    4,390
    
    
    
    2,260Long-term debt
    
    $
    792,658
    
    
    $
    824,939
  9




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 6. Pension and Other Postretirement Benefits
   Pension PlansPre-
    
    
    
    
    
    
    
    
    
    Pre-Post-Transactions
    
    Transactions
    
    Post-Transactions
    
    TransactionsThree
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 2,
    
    January 4,Months
    
    May 2, 2004
    
    April 4, 2004
    
    Six Months
    
    2004
    
    2004Ended
    
    through
    
    through
    
    Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Service cost
    
    $
    652
    
    
    $
    302
    
    
    $
    151
    
    
    $
    1,230
    
    
    $
    302
    
    
    $
    604Interest cost
    
    
    857
    
    
    
    445
    
    
    
    223
    
    
    
    1,616
    
    
    
    445
    
    
    
    891Expected return on plan
assets
    
    
    (245
    )
    
    
    (131
    )
    
    
    (65
    )
    
    
    (458
    )
    
    
    (131
    )
    
    
    (261
    )Amortization of prior
service cost
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    57Recognized net actuarial
loss
    
    
    16
    
    
    
    24
    
    
    
    12
    
    
    
    30
    
    
    
    24
    
    
    
    48Net periodic benefit cost
    
    $
    1,280
    
    
    $
    640
    
    
    $
    335
    
    
    $
    2,418
    
    
    $
    640
    
    
    $
    1,339
 Other Postretirement BenefitsPre-
    
    
    
    
    
    
    
    
    
    Pre-Post-Transactions
    
    Transactions
    
    Post-Transactions
    
    TransactionsThree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    January 4,Months
    
    May 2, 2004
    
    April 4, 2004
    
    Six Months
    
    May 2, 2004
    
    2004Ended
    
    through
    
    through
    
    Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Service cost
    
    $
    7
    
    
    $
    5
    
    
    $
    2
    
    
    $
    14
    
    
    $
    5
    
    
    $
    9Interest cost
    
    
    29
    
    
    
    19
    
    
    
    9
    
    
    
    58
    
    
    
    19
    
    
    
    38Amortization of prior
service cost
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Recognized net actuarial
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net periodic benefit cost
    
    $
    36
    
    
    $
    24
    
    
    $
    8
    
    
    $
    72
    
    
    $
    24
    
    
    $
    33
 7. Income Taxes
    10




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Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
   8. Segment Information
    Pre-
    
    
    
    
    
    
    
    
    
    Pre-Post-Transactions
    
    Transactions
    
    Post-Transactions
    
    TransactionsThree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    January 4,Months
    
    May 2, 2004
    
    April 4, 2004
    
    Six Months
    
    May 2, 2004
    
    2004Ended
    
    through
    
    through
    
    Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Net sales to external
customers:Energy storage
    
    $
    81,657
    
    
    $
    60,204
    
    
    $
    24,513
    
    
    $
    157,916
    
    
    $
    60,204
    
    
    $
    119,436Separations media
    
    
    30,957
    
    
    
    28,525
    
    
    
    14,640
    
    
    
    67,196
    
    
    
    28,525
    
    
    
    59,837Total net sales to
external customers
    
    $
    112,614
    
    
    $
    88,729
    
    
    $
    39,153
    
    
    $
    225,112
    
    
    $
    88,729
    
    
    $
    179,273Operating income:Energy storage
    
    $
    13,426
    
    
    $
    6,217
    
    
    $
    6,693
    
    
    $
    26,340
    
    
    $
    6,217
    
    
    $
    35,146Separations media
    
    
    3,479
    
    
    
    6,468
    
    
    
    2,667
    
    
    
    11,064
    
    
    
    6,468
    
    
    
    10,580Total operating income
    
    
    16,905
    
    
    
    12,685
    
    
    
    9,360
    
    
    
    37,404
    
    
    
    12,685
    
    
    
    45,726Reconciling items:Interest expense
    
    
    14,817
    
    
    
    8,372
    
    
    
    1,517
    
    
    
    29,747
    
    
    
    8,372
    
    
    
    6,048Other
    
    
    (1,834
    )
    
    
    370
    
    
    
    (1,254
    )
    
    
    (3,405
    )
    
    
    370
    
    
    
    (840
    )Total consolidated
income before income
taxes
    
    $
    3,922
    
    
    $
    3,943
    
    
    $
    9,097
    
    
    $
    11,062
    
    
    $
    3,943
    
    
    $
    40,518Depreciation and
amortization:Energy storage
    
    $
    8,282
    
    
    $
    4,338
    
    
    $
    1,994
    
    
    $
    16,682
    
    
    $
    4,338
    
    
    $
    7,208Separations media
    
    
    5,764
    
    
    
    2,794
    
    
    
    1,683
    
    
    
    11,680
    
    
    
    2,794
    
    
    
    8,009Total depreciation
and amortization
    
    $
    14,046
    
    
    $
    7,132
    
    
    $
    3,677
    
    
    $
    28,362
    
    
    $
    7,132
    
    
    $
    15,217
 11




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 9. Related Party Transactions
  .
 10. Comprehensive Income
  Pre-
    
    
    
    
    
    
    
    
    
    Pre-Post-Transactions
    

    Transactions
    
    Post-Transactions
    
    TransactionsThree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    January 4,Months
    
    May 2, 2004
    
    April 4, 2004
    
    Six Months
    
    May 2, 2004
    
    2004Ended
    
    through
    
    through
    
    Ended
    
    through
    
    through(in thousands)
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004
    
    July 2, 2005
    
    July 3, 2004
    
    May 1, 2004Net income
    
    $
    3,309
    
    
    $
    2,641
    
    
    $
    6,095
    
    
    $
    8,762
    
    
    $
    2,641
    
    
    $
    26,833Other comprehensive
income (loss),
primarily foreign
currency
translation
    
    
    (3,127
    )
    
    
    4,875
    
    
    
    (8,155
    )
    
    
    (5,499
    )
    
    
    4,875
    
    
    
    (19,848
    )Comprehensive
income (loss)
    
    $
    182
    
    
    $
    7,516
    
    
    $
    (2,060
    )
    
    $
    3,263
    
    
    $
    7,516
    
    
    $
    6,985
 11. Environmental Matters
   12




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
     12. Business Restructuring
 2005 Restructuring Plan
   13




---



##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    ForeignJanuary 1,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    Balance at(in thousands)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    July 2, 20052004 Restructuring PlanSeverance and benefit costs
    
    $
    14,944
    
    
    $
    
    
    
    $
    
    
    
    $
    (7,649
    )
    
    $
    (1,082
    )
    
    $
    6,213Raw materials
    
    
    1,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )
    
    
    1,117Other
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    (254
    )
    
    
    
    
    
    
    2005 Restructuring PlanSeverance and benefit costs
    
    
    
    
    
    
    3,849
    
    
    
    
    
    
    
    (10
    )
    
    
    (149
    )
    
    
    3,690Asset disposals and impairments
    
    
    
    
    
    
    1,278
    
    
    
    (1,278
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    Total
    
    $
    16,200
    
    
    $
    5,402
    
    
    $
    (1,278
    )
    
    $
    (7,934
    )
    
    $
    (1,370
    )
    
    $
    11,020
  13. Financial Statements of Guarantors
  14




---



##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
  Condensed Consolidating Balance Sheet
As of July 2, 2005
 CombinedCombined
    
    Non-
    
    
    
    
    
    ReclassificationsGuarantor
    
    Guarantor
    
    The
    
    and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    Eliminations
    
    ConsolidatedAssetsCash and equivalents
    
    $
    416
    
    
    $
    17,483
    
    
    $
    13,264
    
    
    $
    
    
    
    $
    31,163Accounts receivable, net
    
    
    33,026
    
    
    
    57,429
    
    
    
    
    
    
    
    
    
    
    
    90,455Inventories
    
    
    17,116
    
    
    
    42,715
    
    
    
    
    
    
    
    
    
    
    
    59,831Other
    
    
    4,492
    
    
    
    4,986
    
    
    
    5,926
    
    
    
    
    
    
    
    15,404Total current assets
    
    
    55,050
    
    
    
    122,613
    
    
    
    19,190
    
    
    
    
    
    
    
    196,853Due from affiliates
    
    
    172,100
    
    
    
    207,954
    
    
    
    295,014
    
    
    
    (675,068
    )
    
    
    Investment in subsidiaries
    
    
    165,720
    
    
    
    205,521
    
    
    
    255,037
    
    
    
    (626,278
    )
    
    
    Property, plant and equipment,
net
    
    
    109,600
    
    
    
    283,948
    
    
    
    
    
    
    
    
    
    
    
    393,548Goodwill
    
    
    
    
    
    
    
    
    
    
    537,517
    
    
    
    
    
    
    
    537,517Intangibles and loan
acquisition costs, net
    
    
    76
    
    
    
    
    
    
    
    231,109
    
    
    
    
    
    
    
    231,185Other
    
    
    1,312
    
    
    
    18,171
    
    
    
    
    
    
    
    
    
    
    
    19,483Total assets
    
    $
    503,858
    
    
    $
    838,207
    
    
    $
    1,337,867
    
    
    $
    (1,301,346
    )
    
    $
    1,378,586Liabilities and shareholders
equityAccounts payable, accrued
liabilities and other
    
    $
    9,062
    
    
    $
    45,540
    
    
    $
    5,299
    
    
    $
    
    
    
    $
    59,901Current portion of debt
    
    
    92
    
    
    
    2,335
    
    
    
    1,963
    
    
    
    
    
    
    
    4,390Current portion of capital
lease obligation
    
    
    1,299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,299Total current liabilities
    
    
    10,453
    
    
    
    47,875
    
    
    
    7,262
    
    
    
    
    
    
    
    65,590Due to affiliates
    
    
    299,934
    
    
    
    210,338
    
    
    
    164,796
    
    
    
    (675,068
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    1,240
    
    
    
    791,418
    
    
    
    
    
    
    
    792,658Capital lease obligations,
less current portion
    
    
    6,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,688Pension and postretirement
benefits
    
    
    2,300
    
    
    
    43,251
    
    
    
    
    
    
    
    
    
    
    
    45,551Post employment benefits
    
    
    
    
    
    
    8,212
    
    
    
    
    
    
    
    
    
    
    
    8,212Environmental reserve, less
current portion
    
    
    
    
    
    
    23,115
    
    
    
    
    
    
    
    
    
    
    
    23,115Deferred income taxes and other
    
    
    3,356
    
    
    
    59,025
    
    
    
    63,786
    
    
    
    
    
    
    
    126,167Shareholders equity
    
    
    181,127
    
    
    
    445,151
    
    
    
    310,605
    
    
    
    (626,278
    )
    
    
    310,605Total liabilities and
shareholders equity
    
    $
    503,858
    
    
    $
    838,207
    
    
    $
    1,337,867
    
    
    $
    (1,301,346
    )
    
    $
    1,378,586
 15




---



##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 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
    
    
    10,266
    
    
    
    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 obligations, 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
 16




---



##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 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
    
    
    (352
    )
    
    
    (590
    )
    
    
    13,925
    
    
    
    
    
    
    
    12,983Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (9,793
    )
    
    
    9,793
    
    
    
    Income before income taxes
    
    
    11,238
    
    
    
    6,609
    
    
    
    (4,132
    )
    
    
    (9,793
    )
    
    
    3,922Income taxes
    
    
    5,146
    
    
    
    2,379
    
    
    
    (6,912
    )
    
    
    
    
    
    
    613Net income
    
    $
    6,092
    
    
    $
    4,230
    
    
    $
    2,780
    
    
    $
    (9,793
    )
    
    $
    3,309
 Condensed Consolidating Statement of Income
For the period from May 2, 2004 through July 3, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    38,359
    
    
    $
    50,370
    
    
    $
    
    
    
    $
    
    
    
    $
    88,729Cost of goods sold
    
    
    23,371
    
    
    
    34,779
    
    
    
    
    
    
    
    
    
    
    
    58,150Gross profit
    
    
    14,988
    
    
    
    15,591
    
    
    
    
    
    
    
    
    
    
    
    30,579Selling, general and
administrative expenses
    
    
    7,264
    
    
    
    5,350
    
    
    
    
    
    
    
    
    
    
    
    12,614In process research and
development
    
    
    5,280
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,280Operating income
    
    
    2,444
    
    
    
    10,241
    
    
    
    
    
    
    
    
    
    
    
    12,685Other expense, net
    
    
    (230
    )
    
    
    749
    
    
    
    8,223
    
    
    
    
    
    
    
    8,742Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (8,034
    )
    
    
    8,034
    
    
    
    Net income before income taxes
    
    
    2,674
    
    
    
    9,492
    
    
    
    (189
    )
    
    
    (8,034
    )
    
    
    3,943Income taxes
    
    
    1,048
    
    
    
    3,084
    
    
    
    (2,830
    )
    
    
    
    
    
    
    1,302Net income
    
    $
    1,626
    
    
    $
    6,408
    
    
    $
    2,641
    
    
    $
    (8,034
    )
    
    $
    2,641
 17




---



##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
For the period from April 4, 2004 through May 1, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    17,555
    
    
    $
    21,598
    
    
    $
    
    
    
    $
    
    
    
    $
    39,153Cost of goods sold
    
    
    7,845
    
    
    
    16,060
    
    
    
    
    
    
    
    
    
    
    
    23,905Gross profit
    
    
    9,710
    
    
    
    5,538
    
    
    
    
    
    
    
    
    
    
    
    15,248Selling, general and
administrative expenses
    
    
    3,241
    
    
    
    2,647
    
    
    
    
    
    
    
    
    
    
    
    5,888Operating income
    
    
    6,469
    
    
    
    2,891
    
    
    
    
    
    
    
    
    
    
    
    9,360Other expense, net
    
    
    (102
    )
    
    
    158
    
    
    
    207
    
    
    
    
    
    
    
    263Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (6,993
    )
    
    
    6,993
    
    
    
    Net income before taxes
    
    
    6,571
    
    
    
    2,733
    
    
    
    6,786
    
    
    
    (6,993
    )
    
    
    9,097Income taxes
    
    
    1,410
    
    
    
    901
    
    
    
    691
    
    
    
    
    
    
    
    3,002Net income
    
    $
    5,161
    
    
    $
    1,832
    
    
    $
    6,095
    
    
    $
    (6,993
    )
    
    $
    6,095
 Condensed Consolidating Statement of Income
For the six months ended July 2, 2005
 CombinedCombined
    
    Non-Guarantor
    
    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 expense, net
    
    
    (869
    )
    
    
    (649
    )
    
    
    27,860
    
    
    
    
    
    
    
    26,342Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (25,157
    )
    
    
    25,157
    
    
    
    Net income before taxes
    
    
    19,442
    
    
    
    19,480
    
    
    
    (2,703
    )
    
    
    (25,157
    )
    
    
    11,062Income taxes
    
    
    9,357
    
    
    
    3,879
    
    
    
    (10,936
    )
    
    
    
    
    
    
    2,300Net income
    
    $
    10,085
    
    
    $
    15,601
    
    
    $
    8,233
    
    
    $
    (25,157
    )
    
    $
    8,762
 18




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
For the period from May 2, 2004 through July 3, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    38,359
    
    
    $
    50,370
    
    
    $
    
    
    
    $
    
    
    
    $
    88,729Cost of goods sold
    
    
    23,371
    
    
    
    34,779
    
    
    
    
    
    
    
    
    
    
    
    58,150Gross profit
    
    
    14,988
    
    
    
    15,591
    
    
    
    
    
    
    
    
    
    
    
    30,579Selling, general and
administrative expenses
    
    
    7,264
    
    
    
    5,350
    
    
    
    
    
    
    
    
    
    
    
    12,614In process research and
development
    
    
    5,280
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,280Operating income
    
    
    2,444
    

    
    
    10,241
    
    
    
    
    
    
    
    
    
    
    
    12,685Other expense, net
    
    
    (230
    )
    
    
    749
    
    
    
    8,223
    
    
    
    
    
    
    
    8,742Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (8,034
    )
    
    
    8,034
    
    
    
    Net income before taxes
    
    
    2,674
    
    
    
    9,492
    
    
    
    (189
    )
    
    
    (8,034
    )
    
    
    3,943Income taxes
    
    
    1,048
    
    
    
    3,084
    
    
    
    (2,830
    )
    
    
    
    
    
    
    1,302Net income
    
    $
    1,626
    
    
    $
    6,408
    
    
    $
    2,641
    
    
    $
    (8,034
    )
    
    $
    2,641
 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 expense, net
    
    
    (367
    )
    
    
    971
    
    
    
    4,604
    
    
    
    
    
    
    
    5,208Equity earnings in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (30,056
    )
    
    
    30,056
    
    
    
    Net income before taxes
    
    
    28,748
    
    
    
    16,374
    
    
    
    25,452
    
    
    
    (30,056
    )
    
    
    40,518Income taxes
    
    
    9,775
    
    
    
    5,291
    
    
    
    (1,381
    )
    
    
    
    
    
    
    13,685Net income
    
    $
    18,973
    
    
    $
    11,083
    
    
    $
    26,833
    
    
    $
    (30,056
    )
    
    $
    26,833
 19




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 13. 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, net
    
    
    (28,119
    )
    
    
    (21,521
    )
    
    
    24,483
    
    
    
    25,157
    
    
    
    Net cash provided by (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 (decrease) increase 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
 20




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 2005
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the period from May 2, 2004 through July 3, 2004
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by operating
activities
    
    $
    (1,147
    )
    
    $
    4,082
    
    
    $
    
    
    
    $
    1,277
    
    
    $
    4,212Investing activities:Purchases of property, plant
and equipment
    
    
    (1,000
    )
    
    
    (1,187
    )
    
    
    
    
    
    
    
    
    
    
    (2,187
    )Net cash used in investing
activities
    
    
    (1,000
    )
    
    
    (1,187
    )
    
    
    
    
    
    
    
    
    
    
    (2,187
    )Financing activities:Proceeds from debt
    
    
    
    
    
    
    
    
    
    
    819,335
    
    
    
    
    
    
    
    819,335Principal payments on debt
    
    
    
    
    
    
    (81
    )
    
    
    (261,934
    )
    
    
    
    
    
    
    (262,015
    )Borrowings on revolving credit
agreement
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Payments on revolving credit
agreement
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (10,000
    )Loan acquisition costs
    
    
    
    
    
    
    
    
    
    
    (19,405
    )
    
    
    
    
    
    
    (19,405
    )Payments made for the change
in ownership in connection
with the Transactions
    
    
    
    
    
    
    
    
    
    
    (867,369
    )
    
    
    
    
    
    
    (867,369
    )Proceeds from equity investment
    
    
    
    
    
    
    
    
    
    
    321,446
    
    
    
    
    
    
    
    321,446Payment of dividends
    
    
    4,140
    
    
    
    (4,140
    )
    
    
    
    
    
    
    
    
    
    
    Intercompany transactions, net
    
    
    (8,397
    )
    
    
    (10,178
    )
    
    
    19,852
    
    
    
    (1,277
    )
    
    
    Net cash (used in) provided by
financing activities
    
    
    (4,257
    )
    
    
    (14,399
    )
    
    
    3,425
    
    
    
    (1,277
    )
    
    
    (16,508
    )Effect of exchange rate
changes on cash and cash
equivalents
    
    
    
    
    
    
    (563
    )
    
    
    
    
    
    
    
    
    
    
    (563
    )Net (decrease) increase in
cash and cash equivalents
    
    
    (6,404
    )
    
    
    (12,067
    )
    
    
    3,425
    
    
    
    
    
    
    
    (15,046
    )Cash and cash equivalents at
beginning of year
    
    
    11,788
    
    
    
    24,084
    
    
    
    
    
    
    
    
    
    
    
    35,872Cash and cash equivalents at
end of year
    
    $
    5,384
    
    
    $
    12,017
    
    
    $
    3,425
    
    
    $
    
    
    
    $
    20,826
 21




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##### Table of Contents



Polypore, Inc.
 Notes to Condensed Consolidated Financial Statements
Six Months Ended July 2, 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 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 (decrease) increase in
cash and equivalents
    
    
    6,142
    
    
    
    10,322
    
    
    
    (655
    )
    
    
    
    
    
    
    15,809Cash and equivalents at
beginning of year
    
    
    1,531
    
    
    
    13,762
    
    
    
    4,770
    
    
    
    
    
    
    
    20,063Cash and equivalents at end
of year
    
    $
    7,673
    
    
    $
    24,084
    
    
    $
    4,115
    
    
    $
    
    
    
    $
    35,872
 22




---



##### Table of Contents



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,
     23




---



##### Table of Contents




 Business Combinations Goodwill and
Other Intangible Assets
 Critical accounting policies
  Allowance for doubtful accounts
  Impairment of intangibles and goodwill
  Pension and other postretirement benefits
  24




---



##### Table of Contents



Environmental matters
    Results of operations
  Three months ended
    
    Six months endedJuly 3,
    
    
    
    
    
    July 3,(in millions)
    
    July 2, 2005
    
    2004(1)
    
    July 2, 2005
    
    2004(2)Net sales
    
    $
    112.6
    
    
    $
    127.9
    
    
    $
    225.1
    
    
    $
    268.0Gross profit
    
    
    40.5
    
    
    
    53.9
    
    
    
    79.4
    
    
    
    110.5Selling, general and administrative expenses
    
    
    18.2
    
    
    
    19.8
    
    
    
    36.6
    
    
    
    41.2Business restructuring
    
    
    5.4
    
    
    
    
    
    
    
    5.4
    
    
    
    Operating income
    
    
    16.9
    
    
    
    34.1
    
    
    
    37.4
    
    
    
    69.3Interest expense, net
    
    
    14.8
    
    
    
    13.1
    
    
    
    29.7
    
    
    
    27.1Foreign currency and other
    
    
    (1.8
    )
    
    
    0.5
    
    
    
    (3.4
    )
    
    
    0.9Income before income taxes
    
    
    3.9
    
    
    
    20.5
    
    
    
    11.1
    
    
    
    41.3Income taxes
    
    
    0.6
    
    
    
    7.8
    
    
    
    2.3
    
    
    
    15.7Net income
    
    $
    3.3
    
    
    $
    12.7
    
    
    $
    8.8
    
    
    $
    25.6
 25




---



##### Table of Contents



Three months ended
    
    Six months endedJuly 3,
    
    
    
    
    
    July 3,(in millions)
    
    July 2, 2005
    
    2004(1)
    
    July 2, 2005
    
    2004(2)Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    36.0
    %
    
    
    42.1
    %
    
    
    35.3
    %
    
    
    41.2
    %Selling, general and administrative expenses
    
    
    16.2
    %
    
    
    15.5
    %
    
    
    16.3
    %
    
    
    15.4
    %Business restructuring
    
    
    4.8
    %
    
    
    
    
    
    
    2.4
    %
    
    
    Operating income
    
    
    15.0
    %
    
    
    26.7
    %
    
    
    16.6
    %
    
    
    25.9
    %Interest expense, net
    
    
    13.1
    %
    
    
    10.2
    %
    
    
    13.2
    %
    
    
    10.1
    %Foreign currency and other
    
    
    (1.6
    )%
    
    
    0.4
    %
    
    
    (1.5
    )%
    
    
    0.3
    %Income before income taxes
    
    
    3.5
    %
    
    
    16.0
    %
    
    
    4.9
    %
    
    
    15.4
    %Income taxes
    
    
    0.5
    %
    
    
    6.1
    %
    
    
    2.3
    %
    
    
    5.9
    %Net income
    
    
    2.9
    %
    
    
    9.9
    %
    
    
    8.8
    %
    
    
    9.6
    %
  (1)
    
    Unaudited pro forma financial information as if the Transactions had occurred on April 4,
2004, the first day of the three month period ending July 3, 2004.(2)
    
    Unaudited pro forma financial information as if the Transactions had occurred on January
4, 2004, the first day of the six month period ending July 3, 2004. Three month period ended July 2, 2005 (Post-Transactions) with the pro forma three month period
ended July 3, 2004 (Pre-Transactions)
 Net sales.
 Gross profit
 26




---



##### Table of Contents



Selling, general and administrative expenses
 Interest expense, net
 Income taxes.
 Six month period ended July 2, 2005 (Post-Transactions) with the pro forma six month period ended
July 3, 2004 (Pre-Transactions)
 Net sales.
 Gross profit
 Selling, general and administrative expenses
 27




---



##### Table of Contents



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.
 28




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##### Table of Contents



Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atJanuary 1,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    July 2,(in thousands)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    20052004 Restructuring PlanSeverance and benefit costs
    
    $
    14.9
    
    
    $
    
    
    
    $
    
    
    
    $
    (7.6
    )
    
    $
    (1.0
    )
    
    $
    6.3Raw materials
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    1.1Other
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    2005 Restructuring PlanSeverance and benefit costs
    
    
    
    
    
    
    3.8
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    3.6Asset disposals and impairments
    
    
    
    
    
    
    1.3
    
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    16.2
    
    
    $
    5.4
    
    
    $
    (1.3
    )
    
    $
    (7.9
    )
    
    $
    (1.4
    )
    
    $
    11.0
 Liquidity and capital resources
 Operating activities
  Investing activities
 Financing activities
  29




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##### Table of Contents




     TwelveMonths
    
    Six Months
    
    Three MonthsEnded
    
    Ended
    
    Ended(in millions)
    
    July 2, 2005
    
    July 2, 2005
    
    July 2, 2005Net income (loss)
    
    $
    (8.7
    )
    
    $
    8.8
    
    
    $
    3.3Add:Depreciation and amortization
    
    
    55.1
    
    
    
    28.4
    
    
    
    14.1Interest expense, net
    
    
    59.1
    
    
    
    29.7
    
    
    
    14.8Income taxes
    
    
    (5.7
    )
    
    
    2.3
    
    
    
    0.6EBITDA
    
    
    99.8
    
    
    
    69.2
    
    
    
    32.8Add:Foreign currency (gain) loss
    
    
    (0.6
    )
    
    
    (3.1
    )
    
    
    (1.8
    )Inventory purchase accounting adjustments (1)
    
    
    10.5
    
    
    
    
    
    
    
    Transactions costs (2)
    
    
    0.9
    
    
    
    
    
    
    
    Operating lease payments on leases to be refinanced (3)
    
    
    3.2
    
    
    
    1.4
    
    
    
    0.7Business restructuring (4)
    
    
    21.1
    
    
    
    5.4
    
    
    
    5.4Loss on disposal of property, plant, and equipment
    
    
    0.5
    
    
    
    
    
    
    
    Adjusted EBITDA
    
    $
    135.4
    
    
    $
    72.9
    
    
    $
    37.1
 
 (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 two operating lease agreements that we intend to refinance. On
October 29, 2004, the Company refinanced one of the operating leases through a capital lease
agreement. We intend to terminate the other operating lease and purchase the equipment from
the lessor.(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. 30




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TwelveMonthsEnded(in millions)
    
    July 2, 2005Adjusted EBITDA
    
    $
    135.4Consolidated interest expense, as defined in the Credit Agreement
    
    $
    56.5Actual interest coverage ratio
    
    
    2.39xPermitted minimum interest coverage ratio
    
    
    2.25x
  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
  TwelveMonthsEnded(in millions)
    
    July 2, 2005Indebtedness, as defined in the Credit Agreement
    
    $
    805.0Adjusted EBITDA
    
    $
    135.4Actual leverage ratio
    
    
    5.95xPermitted maximum leverage ratio
    
    
    6.25x
  Date or Period
    
    RatioOctober 2, 2004 through July 2, 2005
    
    
    6.25 to 1.00October 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
    31




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Foreign operations
  Seasonality
  Off-balance sheet arrangements
  32




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##### Table of Contents



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
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  33




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Accounting for Derivatives and Hedging Activity
   Currency risk
  34




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJuly 2, 2005
    
    July 3, 2004
    
    July 2, 2005
    
    July 3, 2004Period end rate
    
    
    1.2111
    
    
    
    1.2087
    
    
    
    1.2111
    
    
    
    1.2087Period average rate
    
    
    1.2907
    
    
    
    1.2007
    
    
    
    1.3077
    
    
    
    1.2347
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description10.1
    
    Second Amendment to Credit Agreement31.1
    
    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
 35




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SIGNATURES
  Date: August 16, 2005
    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) 36