##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 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.
  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 o þ
  o þ




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##### 



Polypore, Inc.
Index to Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 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
    
    
    31PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    31Item 6.
    
    Exhibits
    
    
    31SIGNATURESEX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
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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 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




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Polypore, Inc.
Condensed Consolidated Balance Sheets
 September 30, 2006
    
    December 31, 2005*(in thousands)
    
    (unaudited)AssetsCurrent assets:Cash and equivalents
    
    $
    63,232
    
    
    $
    27,580Accounts receivable, net
    
    
    98,131
    
    
    
    88,347Inventories
    
    
    66,434
    
    
    
    60,539Prepaid and other
    
    
    10,297
    
    
    
    8,937Total current assets
    
    
    238,094
    
    
    
    185,403Property, plant and equipment, net
    
    
    357,239
    
    
    
    370,871Goodwill
    
    
    567,587
    
    
    
    567,587Intangibles and loan acquisition costs, net
    
    
    208,340
    
    
    
    222,006Environmental indemnification receivable
    
    
    16,767
    
    
    
    16,366Other
    
    
    2,169
    
    
    
    1,105Total assets
    
    $
    1,390,196
    
    
    $
    1,363,338Liabilities and shareholders equityCurrent liabilities:Revolving credit obligations
    
    $
    
    
    
    $
    Accounts payable
    
    
    23,980
    
    
    
    23,209Accrued liabilities
    
    
    65,178
    
    
    
    31,873Income taxes payable
    
    
    6,337
    
    
    
    4,255Current portion of debt
    
    
    4,768
    
    
    
    1,224Current portion of capital lease obligation
    
    
    1,363
    
    
    
    1,326Total current liabilities
    
    
    101,626
    
    
    
    61,887Debt, less current portion
    
    
    780,330
    
    
    
    767,759Capital lease obligation, less current portion
    
    
    5,104
    
    
    
    6,018Pension and postretirement benefits
    
    
    56,335
    
    
    
    51,386Postemployment benefits
    
    
    4,579
    
    
    
    7,096Environmental reserve, less current portion
    
    
    22,783
    
    
    
    22,264Deferred income taxes
    
    
    113,355
    
    
    
    133,785Other
    
    
    3,862
    
    
    
    1,864Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock
    
    
    
    
    
    
    Paid-in capital
    
    
    321,692
    
    
    
    321,516Retained deficit
    
    
    (14,341
    )
    
    
    (850
    )Accumulated other comprehensive loss
    
    
    (5,129
    )
    
    
    (9,387
    )302,222
    
    
    
    311,279Total liabilities and shareholders equity
    
    $
    1,390,196
    
    
    $
    1,363,338
 
 *
    
    Derived from audited consolidated financial statements See notes to condensed consolidated financial statements
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Polypore, Inc .  Condensed Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Net sales
    
    $
    116,384
    
    
    $
    105,764
    
    
    $
    354,771
    
    
    $
    330,876Cost of goods sold
    
    
    78,296
    
    
    
    74,316
    
    
    
    231,737
    
    
    
    220,030Gross profit
    
    
    38,088
    
    
    
    31,448
    
    
    
    123,034
    
    
    
    110,846Selling, general and administrative expenses
    
    
    19,889
    
    
    
    17,546
    
    
    
    64,327
    
    
    
    54,138Business restructuring
    
    
    36,333
    
    
    
    1,453
    
    
    
    37,658
    
    
    
    6,855Operating income (loss)
    
    
    (18,134
    )
    
    
    12,449
    
    
    
    21,049
    
    
    
    49,853Other (income) expense:Interest expense, net
    
    
    16,796
    
    
    
    15,116
    
    
    
    50,582
    
    
    
    44,863Change in accounting principle related to
postemployment benefits
    
    
    
    
    
    
    
    
    
    
    (2,593
    )
    
    
    Foreign currency and other
    
    
    284
    
    
    
    (126
    )
    
    
    2,265
    
    
    
    (3,531
    )17,080
    
    
    
    14,990
    
    
    
    50,254
    
    
    
    41,332Income (loss) before income taxes
    
    
    (35,214
    )
    
    
    (2,541
    )
    
    
    (29,205
    )
    
    
    8,521Income taxes
    
    
    (14,365
    )
    
    
    (4,258
    )
    
    
    (15,714
    )
    
    
    (1,958
    )Net income (loss)
    
    $
    (20,849
    )
    
    $
    1,717
    
    
    $
    (13,491
    )
    
    $
    10,479
 See notes to condensed consolidated financial statements
 5




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##### Table of Contents



Polypore, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
 Nine Months Ended(in thousands)
    
    September 30, 2006
    
    October 1, 2005Operating activities:Net income (loss)
    
    $
    (13,491
    )
    
    $
    10,479Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation expense
    
    
    30,689
    
    
    
    28,947Amortization expense
    
    
    13,259
    
    
    
    13,307Amortization of loan acquisition costs
    
    
    2,176
    
    
    
    1,991Stock compensation
    
    
    176
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    842
    
    
    
    294Foreign currency and other
    
    
    538
    
    
    
    (3,860
    )Deferred income taxes
    
    
    (24,599
    )
    
    
    (2,284
    )Business restructuring
    
    
    37,658
    
    
    
    6,855Change in accounting principle related to postemployment benefits
    
    
    (2,593
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,913
    )
    
    
    6,181Inventories
    
    
    (3,259
    )
    
    
    3,294Prepaid and other current assets
    
    
    (702
    )
    
    
    (2,248
    )Accounts payable and accrued liabilities
    
    
    10,357
    
    
    
    (2,867
    )Income taxes payable
    
    
    1,420
    
    
    
    (811
    )Other, net
    
    
    4,147
    
    
    
    1,582Net cash provided by operating activities
    
    
    50,705
    
    
    
    60,860Investing activities:Purchases of property, plant and equipment
    
    
    (15,862
    )
    
    
    (9,994
    )Proceeds from sale of property, plant and equipment
    
    
    61
    
    
    
    24Net cash used in investing activities
    
    
    (15,801
    )
    
    
    (9,970
    )Financing activities:Principal payments on debt
    
    
    (1,116
    )
    
    
    (50,065
    )Loan acquisition costs
    
    
    
    
    
    
    (437
    )Net cash used in financing activities
    
    
    (1,116
    )
    
    
    ( 50,502
    )Effect of exchange rate changes on cash and equivalents
    
    
    1,864
    
    
    
    (2,692
    )Net increase (decrease) in cash and equivalents
    
    
    35,652
    
    
    
    (2,304
    )Cash and equivalents at beginning of period
    
    
    27,580
    
    
    
    31,684Cash and equivalents at end of the period
    
    $
    63,232
    
    
    $
    29,380
 See notes to condensed consolidated financial statements
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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




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Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Inventory Costs Inventory Pricing
 Share-Based
Payment
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 3. Inventories
  (in thousands)
    
    September 30, 2006
    
    December 31, 2005Raw materials
    
    $
    20,334
    
    
    $
    21,485Work-in-process
    
    
    10,908
    
    
    
    7,171Finished goods
    
    
    35,192
    
    
    
    31,883Total
    
    $
    66,434
    
    
    $
    60,539
 8




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Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 4. Debt
  (in thousands)
    
    September 30, 2006
    
    December 31, 2005Senior credit facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facilities
    
    
    368,574
    
    
    
    365,7358.75% senior subordinated notes
    
    
    415,320
    
    
    
    401,955Other
    
    
    1,204
    
    
    
    1,293785,098
    
    
    
    768,983Less current maturities
    
    
    4,768
    
    
    
    1,224Long-term debt
    
    $
    780,330
    
    
    $
    767,759
 5. Pension and Other Postretirement Benefits
   Pension PlansThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Service cost
    
    $
    807
    
    
    $
    533
    
    
    $
    2,285
    
    
    $
    1,763Interest cost
    
    
    854
    
    
    
    699
    
    
    
    2,422
    
    
    
    2,315Expected return on plan assets
    
    
    (211
    )
    
    
    (192
    )
    
    
    (603
    )
    
    
    (650
    )Recognized net actuarial loss
    
    
    9
    
    
    
    13
    
    
    
    26
    
    
    
    43Net periodic benefit cost
    
    $
    1,459
    
    
    $
    1,053
    
    
    $
    4,130
    
    
    $
    3,471
 Other Postretirement BenefitsThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Service cost
    
    $
    7
    
    
    $
    7
    
    
    $
    23
    
    
    $
    21Interest cost
    
    
    29
    
    
    
    29
    
    
    
    86
    
    
    
    86Recognized net actuarial loss
    
    
    2
    
    
    
    
    
    
    
    6
    
    
    
    1Net periodic benefit cost
    
    $
    38
    
    
    $
    36
    
    
    $
    115
    
    
    $
    108
 6. Environmental Matters
  9




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Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
     7. Business Restructuring
 2006 Restructuring Plan
   10




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##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 2005 Restructuring Plan
  Accounting for Costs Associated with Exit or Disposal Activities
 2004 Restructuring Plan
  ,
  Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atDecember 31,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    September(in thousands)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    30, 20062006 Restructuring Plan:Severance and benefit costs
    
    $
    
    
    
    $
    13,513
    
    
    $
    
    
    
    $
    (87
    )
    
    $
    (64
    )
    
    $
    13,362Asset impairment
    
    
    
    
    
    
    17,871
    
    
    
    (17,871
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    4,624
    
    
    
    
    
    
    
    (11
    )
    
    
    (22
    )
    
    
    4,591
    
    
    
    36,008
    
    
    
    (17,871
    )
    
    
    (98
    )
    
    
    (86
    )
    
    
    17,9532005 Restructuring Plan:Severance and benefit costs
    
    
    1,506
    
    
    
    272
    
    
    
    
    
    
    
    (1,024
    )
    
    
    111
    
    
    
    865Other
    
    
    
    
    
    
    807
    
    
    
    
    
    
    
    (807
    )
    
    
    
    
    
    
    1,506
    
    
    
    1,079
    
    
    
    
    
    
    
    (1,831
    )
    
    
    111
    
    
    
    8652004 Restructuring Plan:Severance and benefit costs
    
    
    4,069
    
    
    
    
    
    
    
    
    
    
    
    (2,944
    )
    
    
    178
    
    
    
    1,303Raw materials
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    1
    
    
    
    Other
    
    
    265
    
    
    
    571
    
    
    
    
    
    
    
    (844
    )
    
    
    8
    
    
    
    4,366
    
    
    
    571
    
    
    
    
    
    
    
    (3,821
    )
    
    
    187
    
    
    
    1,303Total
    
    $
    5,872
    
    
    $
    37,658
    
    
    $
    (17,871
    )
    
    $
    (5,750
    )
    
    $
    212
    
    
    $
    20,121
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Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
  8. Income Taxes
  9. Comprehensive Income (Loss)
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Net income (loss)
    
    $
    (20,849
    )
    
    $
    1,717
    
    
    $
    (13,491
    )
    
    $
    10,479Other comprehensive income (loss),
primarily foreign currency translation
    
    
    1,045
    
    
    
    195
    
    
    
    4,258
    
    
    
    (5,304
    )Comprehensive income (loss)
    
    $
    (19,804
    )
    
    $
    1,912
    
    
    $
    (9,233
    )
    
    $
    5,175
 10. Share-based Compensation Plan
   11. Related Party Transactions
  12




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Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 12. Segment Information
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Net sales to external customers:Energy storage
    
    $
    83,109
    
    
    $
    76,018
    
    
    $
    254,071
    
    
    $
    233,934Separations media
    
    
    33,275
    
    
    
    29,746
    
    
    
    100,700
    
    
    
    96,942Total net sales to external customers
    
    $
    116,384
    
    
    $
    105,764
    
    
    $
    354,771
    
    
    $
    330,876Operating income (loss):Energy storage
    
    $
    17,746
    
    
    $
    13,842
    
    
    $
    53,225
    
    
    $
    45,330Separations media
    
    
    453
    
    
    
    60
    
    
    
    5,482
    
    
    
    11,378Segment operating income
    
    
    18,199
    
    
    
    13,902
    
    
    
    58,707
    
    
    
    56,708Business restructuring
    
    
    36,333
    
    
    
    1,453
    
    
    
    37,658
    
    
    
    6,855Total operating income (loss)
    
    
    (18,134
    )
    
    
    12,449
    
    
    
    21,049
    
    
    
    49,853Reconciling items:Interest expense, net
    
    
    16,796
    
    
    
    15,116
    
    
    
    50,582
    
    
    
    44,863Change in accounting principle
related to postemployment benefits
    
    
    
    
    
    
    
    
    
    
    (2,593
    )
    
    
    Foreign currency and other
    
    
    284
    
    
    
    (126
    )
    
    
    2,265
    
    
    
    (3,531
    )Total consolidated income (loss)
before income taxes
    
    $
    (35,214
    )
    
    $
    (2,541
    )
    
    $
    (29,205
    )
    
    $
    8,521Depreciation and amortization:Energy storage
    
    $
    7,785
    
    
    $
    8,363
    
    
    $
    23,511
    
    
    $
    25,045Separations media
    
    
    7,021
    
    
    
    5,529
    
    
    
    20,437
    
    
    
    17,209Total depreciation and amortization
    
    $
    14,806
    
    
    $
    13,892
    
    
    $
    43,948
    
    
    $
    42,254
 13




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##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 13. Financial Statements of Guarantors
   Condensed Consolidating Balance Sheet
As of September 30, 2006
 CombinedCombined
    
    Non-
    
    
    
    
    
    ReclassificationsGuarantor
    
    Guarantor
    
    The
    
    and(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    Eliminations
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    (177
    )
    
    $
    36,334
    
    
    $
    27,075
    
    
    $
    
    
    
    $
    63,232Accounts receivable, net
    
    
    36,206
    
    
    
    61,925
    
    
    
    
    
    
    
    
    
    
    
    98,131Inventories
    
    
    16,409
    
    
    
    50,025
    
    
    
    
    
    
    
    
    
    
    
    66,434Other
    
    
    2,374
    
    
    
    7,734
    
    
    
    189
    
    
    
    
    
    
    
    10,297Total current assets
    
    
    54,812
    
    
    
    156,018
    
    
    
    27,264
    
    
    
    
    
    
    
    238,094Due from affiliates
    
    
    192,900
    
    
    
    228,725
    
    
    
    283,870
    
    
    
    (705,495
    )
    
    
    Investment in subsidiaries
    
    
    252,129
    
    
    
    304,592
    
    
    
    208,410
    
    
    
    (765,131
    )
    
    
    Property, plant and equipment,
net
    
    
    107,756
    
    
    
    249,483
    
    
    
    
    
    
    
    
    
    
    
    357,239Goodwill
    
    
    
    
    
    
    
    
    
    
    567,587
    
    
    
    
    
    
    
    567,587Intangibles and loan
acquisition costs, net
    
    
    60
    
    
    
    
    
    
    
    208,280
    
    
    
    
    
    
    
    208,340Other
    
    
    652
    
    
    
    18,277
    
    
    
    7
    
    
    
    
    
    
    
    18,936Total assets
    
    $
    608,309
    
    
    $
    957,095
    
    
    $
    1,295,418
    
    
    $
    (1,470,626
    )
    
    $
    1,390,196Liabilities and shareholders
equityAccounts payable and accrued
liabilities
    
    $
    10,547
    
    
    $
    53,407
    
    
    $
    25,204
    
    
    $
    
    
    
    $
    89,158Income taxes payable
    
    
    13,482
    
    
    
    (7,145
    )
    
    
    
    
    
    
    
    
    
    
    6,337Current portion of debt
    
    
    
    
    
    
    997
    
    
    
    3,771
    
    
    
    
    
    
    
    4,768Current portion of capital
lease obligation
    
    
    1,363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,363Total current liabilities
    
    
    25,392
    
    
    
    47,259
    
    
    
    28,975
    
    
    
    
    
    
    
    101,626Due to affiliates
    
    
    291,521
    
    
    
    229,877
    
    
    
    184,098
    
    
    
    (705,496
    )
    
    
    Debt, less current portion
    
    
    
    
    
    
    207
    
    
    
    780,123
    
    
    
    
    
    
    
    780,330Capital lease obligation, less
current portion
    
    
    5,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,104Pension and postretirement
benefits
    
    
    1,980
    
    
    
    54,355
    
    
    
    
    
    
    
    
    
    
    
    56,335Postemployment benefits
    
    
    
    
    
    
    4,579
    
    
    
    
    
    
    
    
    
    
    
    4,579Environmental reserve, less
current portion
    
    
    
    
    
    
    22,783
    
    
    
    
    
    
    
    
    
    
    
    22,783Deferred income taxes and other
    
    
    63,456
    
    
    
    53,761
    
    
    
    
    
    
    
    
    
    
    
    117,217Shareholders equity
    
    
    220,856
    
    
    
    544,274
    
    
    
    302,222
    
    
    
    (765,130
    )
    
    
    302,222Total liabilities and
shareholders equity
    
    $
    608,309
    
    
    $
    957,095
    
    
    $
    1,295,418
    
    
    $
    (1,470,626
    )
    
    $
    1,390,196
 14




---



##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 13. 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




---



##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
For the three months ended September 30, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    44,001
    
    
    $
    72,383
    
    
    $
    
    
    
    $
    
    
    
    $
    116,384Cost of goods sold
    
    
    19,584
    
    
    
    58,712
    
    
    
    
    
    
    
    
    
    
    
    78,296Gross profit
    
    
    24,417
    
    
    
    13,671
    
    
    
    
    
    
    
    
    
    
    
    38,088Selling, general and
administrative expenses
    
    
    12,678
    
    
    
    7,035
    
    
    
    176
    
    
    
    
    
    
    
    19,889Business restructuring
    
    
    
    
    
    
    36,333
    
    
    
    
    
    
    
    
    
    
    
    36,333Operating income (loss)
    
    
    11,739
    
    
    
    (29,697
    )
    
    
    (176
    )
    
    
    
    
    
    
    (18,134
    )Other (income) expense, net
    
    
    (1,233
    )
    
    
    1,735
    
    
    
    16,578
    
    
    
    
    
    
    
    17,080Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    12,663
    
    
    
    (12,663
    )
    
    
    Income (loss) before
income taxes
    
    
    12,972
    
    
    
    (31,432
    )
    
    
    (29,417
    )
    
    
    12,663
    
    
    
    (35,214
    )Income taxes
    
    
    7,499
    
    
    
    (13,296
    )
    
    
    (8,568
    )
    
    
    
    
    
    
    (14,365
    )Net income (loss)
    
    $
    5,473
    
    
    $
    (18,136
    )
    
    $
    (20,849
    )
    
    $
    12,663
    
    
    $
    (20,849
    )
 Condensed Consolidating Statement of Income
For the three months ended October 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    41,395
    
    
    $
    64,369
    
    
    $
    
    
    
    $
    
    
    
    $
    105,764Cost of goods sold
    
    
    19,348
    
    
    
    54,968
    
    
    
    
    
    
    
    
    
    
    
    74,316Gross profit
    
    
    22,047
    
    
    
    9,401
    
    
    
    
    
    
    
    
    
    
    
    31,448Selling, general and
administrative expenses
    
    
    11,179
    
    
    
    6,367
    
    
    
    
    
    
    
    
    
    
    
    17,546Business restructuring
    
    
    
    
    
    
    1,453
    
    
    
    
    
    
    
    
    
    
    
    1,453Operating income
    
    
    10,868
    
    
    
    1,581
    
    
    
    
    
    
    
    
    
    
    
    12,449Other (income) expense, net
    
    
    (536
    )
    
    
    459
    
    
    
    15,067
    
    
    
    
    
    
    
    14,990Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (6,578
    )
    
    
    6,578
    
    
    
    Income (loss) before
income taxes
    
    
    11,404
    
    
    
    1,122
    
    
    
    (8,489
    )
    
    
    (6,578
    )
    
    
    (2,541
    )Income taxes
    
    
    5,933
    
    
    
    15
    
    
    
    (10,206
    )
    
    
    
    
    
    
    (4,258
    )Net income
    
    $
    5,471
    
    
    $
    1,107
    
    
    $
    1,717
    
    
    $
    (6,578
    )
    
    $
    1,717
 16




---



##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Income
For the nine months ended September 30, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    136,110
    
    
    $
    218,661
    
    
    $
    
    
    
    $
    
    
    
    $
    354,771Cost of goods sold
    
    
    61,524
    
    
    
    170,213
    
    
    
    
    
    
    
    
    
    
    
    231,737Gross profit
    
    
    74,586
    
    
    
    48,448
    
    
    
    
    
    
    
    
    
    
    
    123,034Selling, general and
administrative expenses
    
    
    39,355
    
    
    
    24,796
    
    
    
    176
    
    
    
    
    
    
    
    64,327Business restructuring
    
    
    
    
    
    
    37,658
    
    
    
    
    
    
    
    
    
    
    
    37,658Operating income (loss)
    
    
    35,231
    
    
    
    (14,006
    )
    
    
    (176
    )
    
    
    
    
    
    
    21,049Other (income) expense, net
    
    
    (2,267
    )
    
    
    1,081
    
    
    
    51,440
    
    
    
    
    
    
    
    50,254Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (12,048
    )
    
    
    12,048
    
    
    
    Income (loss) before
income taxes
    
    
    37,498
    
    
    
    (15,087
    )
    
    
    (39,568
    )
    
    
    (12,048
    )
    
    
    (29,205
    )Income taxes
    
    
    20,741
    
    
    
    (10,378
    )
    
    
    (26,077
    )
    
    
    
    
    
    
    (15,714
    )Net income (loss)
    
    $
    16,757
    
    
    $
    (4,709
    )
    
    $
    (13,491
    )
    
    $
    (12,048
    )
    
    $
    (13,491
    )
 Condensed Consolidating Statement of Income
For the nine months ended October 1, 2005
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet sales
    
    $
    123,697
    
    
    $
    207,179
    
    
    $
    
    
    
    $
    
    
    
    $
    330,876Cost of goods sold
    
    
    60,892
    
    
    
    159,138
    
    
    
    
    
    
    
    
    
    
    
    220,030Gross profit
    
    
    62,805
    
    
    
    48,041
    
    
    
    
    
    
    
    
    
    
    
    110,846Selling, general and
administrative expenses
    
    
    33,205
    
    
    
    20,933
    
    
    
    
    
    
    
    
    
    
    
    54,138Business restructuring
    
    
    159
    
    
    
    6,696
    
    
    
    
    
    
    
    
    
    
    
    6,855Operating income
    
    
    29,441
    
    
    
    20,412
    
    
    
    
    
    
    
    
    
    
    
    49,853Other (income) expense, net
    
    
    (1,405
    )
    
    
    (190
    )
    
    
    42,927
    
    
    
    
    
    
    
    41,332Equity in earnings of
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (32,264
    )
    
    
    32,264
    
    
    
    Income (loss) before
income taxes
    
    
    30,846
    
    
    
    20,602
    
    
    
    (10,663
    )
    
    
    (32,264
    )
    
    
    8,521Income taxes
    
    
    15,290
    
    
    
    3,894
    
    
    
    (21,142
    )
    
    
    
    
    
    
    (1,958
    )Net income
    
    $
    15,556
    
    
    $
    16,708
    
    
    $
    10,479
    
    
    $
    (32,264
    )
    
    $
    10,479
 17




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##### Table of Contents



Polypore, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 13. Financial Statements of Guarantors (continued)
 Condensed Consolidating Statement of Cash Flows
For the nine months ended September 30, 2006
 CombinedCombined
    
    Non-Guarantor
    
    Guarantor
    
    The
    
    Reclassifications(in thousands)
    
    Subsidiaries
    
    Subsidiaries
    
    Company
    
    and Eliminations
    
    ConsolidatedNet cash provided by (used
in) operating activities
    
    $
    33,145
    
    
    $
    40,847
    
    
    $
    (11,444
    )
    
    $
    (11,843
    )
    
    $
    50,705Investing activities:Purchases of property, plant
and equipment
    
    
    (8,053
    )
    
    
    (7,809
    )
    
    
    
    
    
    
    
    
    
    
    (15,862
    )Proceeds from sale of
property, plant and equipment
    
    
    5
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    61Net cash used in investing
activities
    
    
    (8,048
    )
    
    
    (7,753
    )
    
    
    
    
    
    
    
    
    
    
    (15,801
    )Financing activities:Principal payments on debt
    
    
    (963
    )
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (1,116
    )Intercompany transactions, net
    
    
    (24,283
    )
    
    
    (16,697
    )
    
    
    29,137
    
    
    
    11,843
    
    
    
    Net cash provided by (used
in) financing activities
    
    
    (25,246
    )
    
    
    (16,850
    )
    
    
    29,137
    
    
    
    11,843
    
    
    
    (1,116
    )Effect of exchange rate
changes on cash and
equivalents
    
    
    (48
    )
    
    
    1,917
    
    
    
    (5
    )
    
    
    
    
    
    
    1,864Net increase (decrease) in
cash and equivalents
    
    
    (197
    )
    
    
    18,161
    
    
    
    17,688
    
    
    
    
    
    
    
    35,652Cash and equivalents at
beginning of period
    
    
    20
    
    
    
    18,173
    
    
    
    9,387
    
    
    
    
    
    
    
    27,580Cash and equivalents at end
of period
    
    $
    (177
    )
    
    $
    36,334
    
    
    $
    27,075
    
    
    $
    
    
    
    $
    63,232
 18




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##### Table of Contents



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




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our financial condition and results of operations should be read
together with our unaudited consolidated financial statements and the related notes included
elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2005.
 Overview
   Wards Motor Vehicles Facts and Figures,
     20




---



##### Table of Contents



Critical accounting policies
  Results of Operations
  Three months endedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,($s in millions)
    
    2006
    
    2005
    
    2006
    
    2005Net sales
    
    $
    116.4
    
    
    $
    105.8
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    38.1
    
    
    
    31.4
    
    
    
    32.7
    %
    
    
    29.7
    %Selling, general and
administrative expenses
    
    
    19.9
    
    
    
    17.5
    
    
    
    17.1
    %
    
    
    16.6
    %Business restructuring
    
    
    36.3
    
    
    
    1.5
    
    
    
    31.2
    %
    
    
    1.4
    %Operating income (loss)
    
    
    (18.1
    )
    
    
    12.4
    
    
    
    (15.6
    )%
    
    
    11.8
    %Interest expense, net
    
    
    16.8
    
    
    
    15.1
    
    
    
    14.4
    %
    
    
    14.3
    %Foreign currency and other
    
    
    0.3
    
    
    
    (0.1
    )
    
    
    0.2
    %
    
    
    (0.1
    )%17.1
    
    
    
    15.0
    
    
    
    14.7
    %
    
    
    14.2
    %Loss before income taxes
    
    
    (35.2
    )
    
    
    (2.5
    )
    
    
    (30.3
    )%
    
    
    (2.4
    )%Income taxes
    
    
    (14.4
    )
    
    
    (4.3
    )
    
    
    (12.3
    )%
    
    
    (4.0
    )%Net income (loss)
    
    $
    (20.8
    )
    
    $
    1.7
    
    
    
    (17.9
    )%
    
    
    1.6
    %
 Nine months endedSeptember 30,
    
    October 1,
    
    September 30,
    
    October 1,($s in millions)
    
    2006
    
    2005
    
    2006
    
    2005Net sales
    
    $
    354.8
    
    
    $
    330.9
    
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    123.0
    
    
    
    110.8
    
    
    
    34.7
    %
    
    
    33.5
    %Selling, general and administrative
expenses
    
    
    64.3
    
    
    
    54.1
    
    
    
    18.1
    %
    
    
    16.4
    %Business restructuring
    
    
    37.7
    
    
    
    6.9
    
    
    
    10.6
    %
    
    
    2.1
    %Operating income
    
    
    21.0
    
    
    
    49.9
    
    
    
    5.9
    %
    
    
    15.1
    %Interest expense, net
    
    
    50.6
    
    
    
    44.9
    
    
    
    14.3
    %
    
    
    13.6
    %Change in accounting principle related to
postemployment benefits
    
    
    (2.6
    )
    
    
    
    
    
    
    (0.7
    )%
    
    
    
    %Foreign currency and other
    
    
    2.3
    
    
    
    (3.5
    )
    
    
    0.6
    %
    
    
    (1.1
    )%50.3
    
    
    
    41.3
    
    
    
    14.2
    %
    
    
    12.5
    %Income (loss) before income taxes
    
    
    (29.2
    )
    
    
    8.5
    
    
    
    (8.2
    )%
    
    
    2.6
    %Income taxes
    
    
    (15.7
    )
    
    
    (2.0
    )
    
    
    (4.4
    )%
    
    
    (0.6
    )%Net income (loss)
    
    $
    (13.5
    )
    
    $
    10.5
    
    
    
    (3.8
    )%
    
    
    3.2
    %
 21




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##### Table of Contents



Comparison of the three months ended September 30, 2006 with the three months ended October 1, 2005
 Net sales
   Gross Profit
   Selling, general and administrative expenses
  Interest expense
  Income taxes
  22




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##### Table of Contents



Comparison of the nine months ended September 30, 2006 with the nine months ended October 1, 2005
 Net sales
   Gross Profit
   Selling, general and administrative expenses
  Interest expense
  Income taxes
  23




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##### Table of Contents



Business restructuring
 2006 Restructuring Plan
   2005 Restructuring Plan
  2004 Restructuring Plan
  24




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##### Table of Contents



Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Balance atDecember 31,
    
    Restructuring
    
    Non-cash
    
    Cash
    
    Currency
    
    September 30,(in millions)
    
    2005
    
    Charges
    
    Charges
    
    Payments
    
    Translation
    
    20062006 Restructuring Plan:Severance and benefit costs
    
    $
    
    
    
    $
    13.5
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    (0.1
    )
    
    $
    13.3Asset impairments
    
    
    
    
    
    
    17.9
    
    
    
    (17.9
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.6
    
    
    
    36.0
    
    
    
    (17.9
    )
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    17.92005 Restructuring Plan:Severance and benefit costs
    
    
    1.5
    
    
    
    0.3
    
    
    
    
    
    
    
    (1.0
    )
    
    
    0.1
    
    
    
    0.9Other
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    1.5
    
    
    
    1.1
    
    
    
    
    
    
    
    (1.8
    )
    
    
    0.1
    
    
    
    0.92004 Restructuring Plan:Severance and benefit costs
    
    
    4.1
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )
    
    
    0.2
    
    
    
    1.3Other
    
    
    0.3
    
    
    
    0.6
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    4.4
    
    
    
    0.6
    
    
    
    
    
    
    
    (3.8
    )
    
    
    0.2
    
    
    
    1.3Total
    
    $
    5.9
    
    
    $
    37.7
    
    
    $
    (17.9
    )
    
    $
    (5.8
    )
    
    $
    0.2
    
    
    $
    20.1
 Liquidity and Capital Resources
  Operating activities
  Investing activities
 25




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##### Table of Contents



Financing activities
     Twelve Months
    
    Three MonthsEnded
    
    Ended(in millions)
    
    September 30, 2006
    
    September 30, 2006Net loss
    
    $
    (10.0
    )
    
    $
    (20.8
    )Add:Depreciation and amortization
    
    
    55.8
    
    
    
    14.8Interest expense, net
    
    
    65.6
    
    
    
    16.8Provision for income taxes
    
    
    (15.8
    )
    
    
    (14.4
    )EBITDA
    
    
    95.6
    
    
    
    (3.6
    )Add:Foreign currency loss
    
    
    1.6
    
    
    
    0.5Operating lease payments on lease that was terminated (1)
    
    
    1.3
    
    
    
    Stock compensation costs
    
    
    0.2
    
    
    
    0.2Other non-cash charges (2)
    
    
    (2.2
    )
    
    
    (0.3
    )Business restructuring (3)
    
    
    18.5
    
    
    
    15.3Impairment of cellulosic buildings and equipment as
part of the 2006 business
restructuring
    
    
    17.9
    
    
    
    17.9Loss on disposal of property, plant, and equipment
    
    
    1.1
    
    
    
    Adjusted EBITDA
    
    $
    134.0
    
    
    $
    30.0
 
 (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)
    
    Relates primarily to the adoption of EITF 05-5, Accounting for
Early Retirement or Postemployment Programs with Specific Features
(Such As Terms Specified in Altersteilzeit Early Retirement
Arrangements) and other non-cash items.(3)
    
    The Credit Facility limits the add-back to Adjusted EBITDA for the cellulosic restructuring
(2006 Restructuring Plan) to $15.0 million. For the three and nine months ended September 30,
2006, the Company incurred cash charges of $18.1 million related to the cellulosics
restructuring. Thus, the business restructuring add-back for Adjusted EBITDA purposes for the
three and twelve months ended September 30, 2006 excludes $3.1 million of cellulosic
restructuring charges. The add-back also includes $0.3 million and $3.5 million for the three
and twelve months ended September 30, 2006, respectively, related to the 2005 and 2004
business restructurings. 26




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##### Table of Contents



Twelve MonthsEndedSeptember 30,(in millions)
    
    2006Adjusted EBITDA
    
    $
    134.0Consolidated interest expense, as defined in the Credit Agreement
    
    
    62.7Actual interest coverage ratio
    
    
    2.14
    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
  Twelve MonthsEndedSeptember 30,(in millions)
    
    2006Indebtedness, as defined in the Credit Agreement
    
    $
    791.6Adjusted EBITDA
    
    
    134.0Actual leverage ratio
    
    
    5.91
    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




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##### Table of Contents



Foreign Operations
  Seasonality
  Environmental matters
  28




---



##### Table of Contents



Off-Balance Sheet Arrangements
  New Accounting Standards
 Accounting Changes and Error
Corrections
 Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early
Retirement Arrangements)
 29




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##### Table of Contents



Inventory Costs Inventory Pricing
 Share-Based Payment
 Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement 109
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106,
and 132(R)
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  30




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##### Table of Contents



Currency risk
   September 30,
    
    October 1,2006
    
    2005Period end rate
    
    
    1.2688
    
    
    
    1.2225Period average rate for the three months ended
    
    
    1.2752
    
    
    
    1.2128Period average rate for the nine months ended
    
    
    1.2447
    
    
    
    1.2761
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description10.1
    
    Contract, dated as of July 27, 2006, by and between Membrana, GmbH and Stefan Geyler31.1
    
    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




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##### Table of Contents



SIGNATURES
  Date: November 14, 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)