UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

Form 10-K

|ý                                                        | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|-------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 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 1-32266

Polypore International, Inc.(Exact Name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization)                                        |  | 43-2049334(IRS Employer
Identification No.)
|------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------
|11430 North Community House Road, Suite 350
Charlotte, North Carolina(Address of Principal Executive Offices) |  | 28277(Zip Code)                            
|Registrant's Telephone Number, Including Area Code
(704) 587-8409                                            

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    o Yes ý No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    ý Yes o No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.    ý Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large
accelerated filer o                Accelerated
filer o                Non-accelerated filer ý

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    o Yes ý No

The Company currently has 171,938 shares of common stock outstanding, all of which are directly or indirectly owned by Warburg Pincus and certain members of
management. Because no public market exists for such shares, the aggregate market value of the common stock held by non-affiliates of the Company is not determinable.



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Polypore International, Inc.  Index to Annual Report on Form 10-KFor the Fiscal Year Ended December 30, 2006

|           |  |                                                                                                              |  | Page
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|Part I     |  |                                                                                                              |  |     
|Item 1.    |  | Business                                                                                                     |  | 5   
|Item 1A.   |  | Risk Factors                                                                                                 |  | 14  
|Item 1B.   |  | Unresolved Staff Comments                                                                                    |  | 21  
|Item 2.    |  | Properties                                                                                                   |  | 21  
|Item 3.    |  | Legal Proceedings                                                                                            |  | 21  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 21  
|Part II    |  |                                                                                                              |  |     
|Item 5.    |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 22  
|Item 6.    |  | Selected Financial Data                                                                                      |  | 22  
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 24  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 40  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 40  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 74  
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 74  
|Item 9B.   |  | Other Information                                                                                            |  | 74  
|Part III   |  |                                                                                                              |  |     
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 75  
|Item 11.   |  | Executive Compensation                                                                                       |  | 78  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 86  
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 88  
|Item 14.   |  | Principal Accounting Fees and Services                                                                       |  | 90  
|Part IV    |  |                                                                                                              |  |     
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 91  
|Signatures |  | 95                                                                                                          

In
this Annual Report on Form 10-K, the words "Polypore International," "Company," "we," "us" and "our" refer to Polypore International, Inc. together with its
subsidiaries, including Polypore, Inc., unless the context indicates otherwise. References to "fiscal year" mean the 52 or 53 week period ending on the Saturday that is closest to
December 31. The fiscal years ended December 30, 2006, or "fiscal 2006," and December 31, 2005, or "fiscal 2005," each included 52 weeks. The period from January 4, 2004
through May 1, 2004 included 17 weeks and the period from May 2, 2004 through January 1, 2005 included 35 weeks (together, 52 weeks), or "fiscal 2004." The fiscal year ended
January 3, 2004, or "fiscal 2003," included 53 weeks. The fiscal year ended December 28, 2002, or "fiscal 2002," included 52 weeks. References to the "senior secured credit facilities"
are to the term loan facility and revolving loan facility of Polypore, Inc.

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Forward-looking Statements

This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this Annual Report on Form 10-K that address activities, events or developments that we expect, believe or
anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about Polypore International's plans, objectives, strategies and prospects
regarding, among other things, the financial condition, results of operations and business of Polypore International and its subsidiaries. We have identified some of these forward-looking statements
with words like "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate" or "continue" and other words and terms of similar meaning. These forward-looking
statements may be contained under the captions entitled "Business," "Properties," "Controls and Procedures," "Management's Discussion and Analysis of Financial Condition and Results of Operations" or
"Risk Factors," or the Company's financial statements or the notes thereto.

These
forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business
environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Annual Report on Form 10-K, including
the risks outlined under the caption below entitled "Item 1A. Risk Factors," will be important in determining future results. Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties,
including with respect to Polypore International, the following, among other things:

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Because
our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements, we cannot give any assurance that
any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on Polypore International's results of operations and financial condition.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We do not undertake any
obligation to update these forward-looking statements or the factors set forth in the caption below entitled "Risk Factors" to reflect new information, future events or otherwise, except as may be
required under federal securities laws.

We
have filed this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and will file or
furnish other reports pursuant to Section 13(a) or 15(d) under the Exchange Act, with the Securities and Exchange Commission ("Commission" or "SEC"). You may inspect a copy of any of our
filings without
charge at the Public Reference Room of the SEC at 100 F Street, NE, Washington, DC 20549. You may obtain copies of our filings from such office at prescribed rates. You may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers, including Polypore International, Inc., that file electronically with the SEC. Our reports are available on the SEC
website as soon as reasonably practicable after we electronically file such materials with the SEC. The reports are also available in print to any stockholder who requests them by contacting our
corporate secretary at the address above for the Company's principal executive offices. Our website address is http://www.polypore.net.

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Item 1. Business

General

Overview

Polypore International, Inc., a Delaware corporation, is a leading global high technology filtration company that develops, manufactures and markets
specialized microporous membranes used in separation and filtration processes. The microporous membranes we produce are highly engineered polymeric structures which contain millions of pores per
square inch, enabling the management of ions, gases and particles that range in size from the cellular to the nano or molecular level.

Our
products and technologies are used in two primary segments, energy storage and separations media. The energy storage segment accounted for approximately 72% of our fiscal 2006 net
sales. Primary applications for our membranes in this segment are lithium batteries and lead-acid batteries. Lithium batteries are the power source in a wide variety of electronics applications
ranging from laptop computers and mobile phones to power tools, and are emerging in applications such as hybrid electric vehicles (HEVs). Lead-acid batteries are used in transportation and industrial
applications. The
separations media segment accounted for approximately 28% of our fiscal 2006 net sales. Primary applications for our membranes and membrane modules in this segment are hemodialysis, blood oxygenation,
plasmapheresis and various high-performance microfiltration, ultrafiltration and gasification/degasification applications.

Information
concerning segments and geographic information appears under "Note 17Segment Information" in the Notes to Consolidated Financial Statements for the year
ended December 30, 2006 included in Item 8 of this Report which is incorporated herein by reference.

Products and markets

Our business segments are energy storage and separations media. The following table describes our key products and end-markets served:

|Segment           |  | Applications                                     |  | Major brands                       |  | End-markets                                                                                                                       
|----------------- |  | ------------------------------------------------ |  | ---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Energy storage    |  | Lead-acid batteries                              |  | DARAK®
Daramic®                    |  | Transportation and industrial batteries                                                                                           
|                  |  | Rechargeable and disposable lithium batteries    |  | CELGARD®                           |  | Consumer electronics devices such as mobile phones, portable audio/visual devices, laptop computers, PDAs, cameras and power tools
|Separations media |  | Hemodialysis                                     |  | PUREMA®
DIAPES®                    |  | Hemodialysis dialyzers which replicate function of healthy kidneys                                                                
|                  |  | Blood oxygenation                                |  | CELGARD®
HEXPET®
OXYPHAN®
OXYPLUS® |  | Heart-lung machine oxygenation unit for open-heart surgical procedures                                                            
|                  |  | Plasmapheresis                                   |  | MicroPES®
PLASMAPHAN®              |  | Blood cell and plasma separation equipment                                                                                        
|                  |  | Industrial and specialty filtration applications |  | Liqui-Flux®                        |  | Potable water treatment, beverage filtration, and prefiltration for reverse osmosis                                               
|                  |  |                                                  |  |                                    |  |                                                                                                                                   

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| |  |  |  | Accurel®           |  | Specialty filtration applications including chemical filtration for microelectronics manufacturing, vent and process air, industrial wastewater treatment, and pharmaceutical processing
| |  |  |  | ------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | Liqui-Cel®         |  | Liquid gasification/degasification for beverage processing and pharmaceutical, semiconductor and flat panel display manufacturing                                                       
| |  |  |  | MicroPES®
DuraPES® |  | Specialty filtration applications including ultrapure water, cold sterile filtration of beverages and pharmaceutical processing                                                         
| |  |  |  | SuperPhobic®       |  | Solvent/ink deaeration for ink jet printers and semiconductor manufacturing                                                                                                             

Energy storage

In the energy storage segment, our membrane separators are a critical performance component in lithium and lead-acid batteries, performing the core
function of regulating ion exchange, allowing the charge and discharge process to occur between a battery's positive and negative electrodes. These membrane separators require specialized technical
engineering and must be manufactured to extremely demanding requirements and specifications including thickness, porosity, mechanical strength and chemical and electrical resistance. For example,
membrane pores must be large enough to allow ions to pass through, but small enough to prevent contamination from conductive particles which cause short circuits. During fiscal 2006, fiscal 2005 and
pro forma 2004, our energy storage businesses accounted for 72%, 72% and 68% of our net sales, respectively.

Electronics applications.We develop, manufacture and market a broad line of patented polypropylene and polyethylene
monolayer and multilayer membrane separators for lithium batteries. Lithium batteries are used in consumer electronics products such as mobile phones and other handheld devices, laptop computers, MP3
players, cameras and, increasingly, power tools. According to the Institute of Information Technology, unit sales of lithium batteries are expected to experience average annual growth of 10% through
2011. Lithium batteries provide critical performance advantages, relative to alternative battery technologies, such as faster charging rates, improved battery life and higher power
density, which results in more compact, lightweight batteries. These advantages create the potential for expansion by lithium batteries into additional electronic appliances and portable consumer
devices. Because many new applications are incorporating large-format batteries that require much greater membrane separator volume per battery, we believe that membrane separator growth will exceed
battery unit sales growth. For example, large-format lithium batteries are displacing nickel-based batteries in new applications such as consumer power tools and electric bikes and are currently in
development for use in HEVs.

We
are one of the top three lithium battery membrane separator providers, serving the entire breadth of lithium battery applications, and have been among the top three since the market's
first development in the early 1990s. We believe the top three providers supply approximately 85% of the membrane separator requirements for the global lithium battery market. Major lithium battery
manufacturers include Sanyo Electric Company Limited, Matsushita Battery Industrial Company Limited (Panasonic brand), Sony Corporation, Samsung Electronics Co. Ltd., Duracell International

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Incorporated,
BYD Company Limited, Tianjin Lishen Battery Joint Stock Co., Ltd., LG Electronics, Inc. and Saft SA.

Transportation and industrial applications.We develop, manufacture and market a complete line of high-performance
polymer-based membrane separators for lead-acid batteries. Approximately 80% of our lead-acid battery separators are used in batteries for automobiles and other motor vehicles.
The remaining approximately 20% are used in industrial battery applications such as forklifts, submarines and uninterruptible power supply systems, which provide backup power for applications such as
computers, mobile phone towers and hospitals. We believe that over 80% of lead-acid battery unit sales for motor vehicles are aftermarket batteries. Aftermarket sales are primarily driven
by the size of the worldwide vehicle fleet rather than by new motor vehicle sales. According to WardsAuto.com, the worldwide fleet of motor vehicles has increased in 22 of the past 23 years,
averaging 3% annual growth, providing us with a growing recurring revenue base. We believe another factor contributing to market growth is the worldwide conversion from alternative separator materials
to the higher performance polyethylene-based membrane separators such as those we produce. Currently, membrane separator market growth is strongest in the Asia Pacific region due, we believe, to
increasing per capita penetration of automobiles, growth in the industrial and manufacturing sectors, and a high rate of conversion to polyethylene-based membrane separators.

We
believe we are the global market leader in the lead-acid battery separator market, with a market share more than twice that of our nearest competitor, and the only
supplier serving both the automotive and industrial segments. We supply all of the world's major lead-acid battery manufacturers. Major lead-acid battery manufacturers include
Exide Technologies, Johnson Controls Inc., East Penn Manufacturing Co., Inc. and Fiamm Group.

Separations media

In the separations media segment, our filtration membranes and modules are used in healthcare and high-performance industrial and specialty filtration
applications. These membranes perform the critical function of removing sub-micron particulates from fluids and introducing or removing gases (gasification/degasification) within liquids.
Both healthcare and specialty filtration applications require membranes with precisely controlled pore size, structure, distribution and uniformity. Our supply relationships with customers in
healthcare and certain filtration applications such as pharmaceutical manufacturing are reinforced by the rigorous testing, clinical studies and/or regulatory approval that our membranes undergo prior
to end-product commercialization. In some cases, several years of development and qualification are required. During fiscal 2006, fiscal 2005 and pro forma 2004, our separations media
business accounted for 28%, 28% and 32% of our sales, respectively.

Hemodialysis.We develop, manufacture and market a complete line of patented polyethersulfone membranes for the hemodialysis
market. Hemodialysis is the artificial process that performs the function of a healthy kidney for patients with permanent kidney failure, a condition known as ESRD. In a healthy person, the kidney
carries out certain excretory and endocrine functions, including filtering toxins from the blood and controlling blood pressure. For an ESRD patient on dialysis, the dialyzer membrane performs these
critical filtering functions. The membranes consist of thousands of fibers that resemble hollow straws slightly larger than a human hair. These fibers have nanopores in their walls at a density of
millions of pores per square inch. The size and distribution of these nanopores are designed to separate harmful toxins from the healthy blood passing through the dialyzer. Growth in demand for
dialyzers and dialyzer membranes is driven by several factors, including the aging population in developed countries, longer life-expectancy of treated ESRD patients, improving access to
treatment in developing countries and the trend in the United States towards single-use rather than multiple-use dialyzers. According to the European Renal
AssociationEuropean Dialysis and Transplant Association, the number of worldwide ESRD patients has historically grown by approximately 6% per year. We estimate that continued patient
population growth combined with

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conversion
to single-use dialyzers and increasing treatment frequency will result in overall annual dialyzer market growth in excess of 6%.

In
2005, we introduced PUREMA®, our next generation synthetic dialysis membrane. We believe that PUREMA® is superior in performance compared to all other
synthetic membranes on the market. Dialyzers containing PUREMA® have been classified in the highest level (category 5) of Japan's dialyzer reimbursement rate system, reflecting the
efficacy of our PUREMA® membrane. We believe one example of the increasing customer acceptance of PUREMA® is our recent entry into a long-term supply agreement with
a medical device company that develops, manufactures and markets proprietary systems for in-home treatment of ESRD and acute kidney failure. We are currently marketing
PUREMA®'s performance advantages, such as by co-branding our customers' dialyzers with the PUREMA® logo.

We
believe we are uniquely positioned as the leading independent supplier (i.e., not a supplier of dialyzers) of synthetic hemodialysis membranes. Major
dialyzer manufacturers include Fresenius Medical Care, Gambro AG, Asahi Medical Corporation, Nipro Corp., and Sorin Group Italia S.r.l.

Blood oxygenation.We develop, manufacture and market polypropylene and methypentene membranes for the blood oxygenation
market. As a component of heart-lung machines, blood oxygenators temporarily replace the functions of the lungs during on-pump open-heart surgery. The oxygenator
contains highly specialized membranes which remove carbon dioxide from the blood while oxygen is diffused into the blood. We estimate that the blood oxygenation market is flat as a result of the use
of less-invasive alternative heart treatments. However, we believe that the market could grow as the number of patients receiving on-pump open heart surgery increases due to
the saturation of alternative heart treatments. Because blood oxygenators are designed to utilize a specific membrane technology and require regulatory approval, an oxygenator manufacturer's
relationship with its membrane supplier is vital and switching costs can be substantial. We believe we are the world's leading supplier of membranes for blood oxygenation. Major blood oxygenator
producers include Sorin Group S.r.l., Medtronic, Inc., Terumo Medical Corp. and Marquet Cardiopulmonary AG.

Plasmapheresis.We develop, manufacture and market polypropylene and polyethersulfone membranes for the plasmapheresis
market. In plasmapheresis, plasma is separated from the blood and either retained for the production of therapeutic proteins or filtered and returned to the blood as a treatment for various autoimmune
disorders. We believe that the plasmapheresis market is growing and that new treatment methodologies based on blood filtration may lead to additional growth. We believe we are a leading supplier of
extracorporeal therapeutic plasmapheresis membranes. Major manufacturers of plasmapheresis equipment include Asahi Kasei Corporation, Fresenius Medical Care, Sorin Group Italia S.r.l., Gambro
Dialysatoren GmbH, and Kuraray Company, Ltd.

Industrial and specialty filtration applications.We produce a wide range of membranes and membrane-based elements for
microfiltration, ultrafiltration and gasification/degasification of liquids, covering a broad range of applications in the filtration market. According to Frost & Sullivan, the U.S. ultrafiltration
and microfiltration membrane element market is approximately $1.2 billion and growing in excess of 8.0% annually. Market growth is being driven by several factors, including
end-market growth in applications such as water treatment and pharmaceutical processing, displacement of conventional filtration media by membrane filtration due to membranes' superior
cost and performance attributes and increasing purity requirements in industrial and other applications. We currently serve a variety of filtration end-markets, including water treatment,
food and beverage processing and pharmaceutical, semiconductor and flat panel display manufacturing, and we are working closely with current and potential customers to develop innovative new products
based on our technology and capabilities.

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The
following are descriptions of certain of our industrial and specialty filtration products:



We
believe that we are the world leader in membrane gasification/degasification for liquids, and that we are uniquely positioned as the leading independent supplier of polyethersulfone
flat sheet membranes.

New product development

We have focused our research and development efforts on developing products for new markets based on existing technologies and developing new process technologies
to enhance existing businesses and allow entry into new businesses. We spent approximately $13.1 million (3% of our net sales), $12.1 million (3% of our net sales) and
$13.6 million (3% of our net sales) in fiscal 2006, fiscal 2005 and pro forma 2004, respectively, on research and development.

Our
energy storage research and development is performed at technical centers at our plants in Owensboro, Kentucky; Prachinburi, Thailand; Selestat, France; and Charlotte, North
Carolina. Our separations media research and development is performed at technical centers at our plants in Wuppertal, Germany and Charlotte, North Carolina. All of the products that we develop are
subject to multiple levels of extensive and rigorous testing. The qualification of membrane separators for use in transportation and industrial applications, for instance, may require one or more
years of testing by our staff and battery manufacturers.

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Sales and marketing

We sell our products and services to customers in both the domestic and international marketplace. We sell primarily to manufacturers and converters that
incorporate our products into their finished goods.

We
employ a direct worldwide sales force and utilize approximately 55 experienced people who manage major customer relationships. Many of our sales representatives are engineers or
similarly trained technical personnel who have advanced knowledge of our products and the applications for which they are used. Our sales representatives are active in new product development efforts
and are strategically located in the major geographic regions in which our products are sold. In certain geographic areas, we use distributors or other agents.

We
typically seek to enter into long-term supply contracts with our major customers. These contracts typically describe the volume and selling price and can last up to
10 years. In addition, these contracts reflect our close collaborative relationship with our customers, which is driven by our customers' need to develop new separators and membranes directly
with us.

In
fiscal 2006, net sales to our top five customers represented approximately 33% of our total net sales. Exide Technologies represented approximately 13% of our net sales in fiscal
2006.

Manufacturing and operations

General

We have manufacturing facilities in the major geographic markets of North America, Europe and Asia. We manufacture our lead-acid battery membrane
separators at our facilities in Owensboro, Kentucky; Corydon, Indiana; Selestat, France; Norderstedt, Germany; Potenza, Italy; Prachinburi, Thailand; and Tianjin, China. During 2005, we closed our
Feistritz, Austria facility, downsized our Norderstedt, Germany, facility and relocated certain assets from these two plants to our facility in Prachinburi, Thailand. We manufacture our lithium
battery membrane separators at our facility in Charlotte, North Carolina, and have a finishing operation at our facility in Shanghai, China. We manufacture our healthcare membranes and industrial and
specialty filtration membranes and membrane modules at facilities in Wuppertal, Germany, and Charlotte, North Carolina.

In
fiscal 2006, fiscal 2005 and pro forma 2004, we generated sales from customers outside the United States of approximately 81%, 74% and 77%, respectively. We typically sell our
products in the currency of the country in which the products are manufactured rather than the local currency of our customers.

Our
manufacturing facilities in North America accounted for 39% of total sales for fiscal 2006, with facilities in Europe accounting for 52% and facilities in Asia accounting for 9%. Our
foreign operations are, and any future foreign operations will be, subject to certain risks that could materially affect our sales, profits, cash flows and financial position. These risks include
fluctuations in foreign currency exchange rates, inflation, economic or political instability, shipping delays, changes in applicable laws and regulatory policies and various trade restrictions, all
of which could have a significant impact on our ability to deliver products on a competitive and timely basis. The future imposition of, or significant increases in the level of, customs duties,
import quotas or other trade restrictions could also have a material adverse effect on our business, financial condition and results of operations.

Manufacturing processes

All of our manufacturing processes involve an extrusion process. To produce our flat sheet and hollow fiber membranes, we use one of three basic membrane
processes that begin with an extrusion

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step.
These include phase separation (thermally-induced, solvent-induced, or reaction-induced), "dry stretch" ("Celgard" process), and composite extrusion/extraction ("Daramic" process) processes.
Each process, and its resulting product properties, is well suited to the various membrane requirements for our target markets. To produce Liqui-Cel® membrane contactors and
Liqui-Flux® membrane modules, hollow fibers are bonded together into a cartridge form by extruding either a polyolefin resin or using an epoxy or polyurethane adhesive before
final assembly into a finished module.

Membrane separators for batteries.We manufacture Daramic®, our principal lead-acid battery separator
used in industrial and automotive applications, using a composite extrusion/extraction process. The process stages are fully automated, although the process requires some handling as material is
transferred from stage to stage. Initially, an ultra-high molecular weight polyethylene is mixed with porous silica and oil, which are heated and extruded into a film. The film is passed
through an extraction bath to remove the excess oil from the silica pores to create the proper microporosity and film stiffness prior to drying. We manufacture our DARAK® industrial
separator using a patented manufacturing process that begins by saturating a polyester fleece with a modified phenolic resin, which is then cross-linked, washed, dried, cured and cut into single
pieces in a continuous one-step process. The reaction step produces the final microporous structure.

Similar
to our Daramic® product, we begin the manufacture of lithium battery separators with an extrusion step. However, no solvents or other additives are used in
conjunction with the polymer at extrusion (hence the "dry" stretch process description). The same "Celgard" process is used for producing patented CELGARD® flat sheet monolayer and
trilayer separators. Membrane microporosity is created during a thermal stretching process. Some special coated and non-woven laminate products are also manufactured for specialty battery
and other applications.

Hemodialysis, blood oxygenation, plasmapheresis and filtration membranes.Membranes for hemodialysis, blood oxygenation,
plasmapheresis, and filtration are produced using phase separation processes. For these phase separation processes, the polymer spinning solution is prepared by dissolving the polymer in a solvent
prior to extrusion. A porous membrane is formed by separating the solvent and polymer phases using temperature (thermally-induced), or a "non-solvent" (solvent-induced), then the solvent
phase is extracted and the porous polymer membrane is dried. For the blood oxygenation market and certain filtration markets, hollow fiber and flat sheet membranes are also produced using our "dry
stretch" ("Celgard") process. We rely on the molecular behavior of semi-crystalline polymers (polyolefins) to create the microporous structure. By controlling the extrusion process under
which the film or fiber is formed, we create a crystalline structure that allows the formation of microvoids in a subsequent stretching step. Although we use different equipment for the flat sheet and
fiber products, the operating conditions of temperature, stress, and line speed are similar for both. After extrusion, our products can be stored or immediately processed on annealing and stretching
lines that create the final porous form.

Competition

Our markets are highly competitive. Our primary competitors in the market for membrane separators used in transportation and industrial batteries are Entek
International LLC ("Entek") in North America and Europe and Nippon Sheet Glass Co., Ltd. in Japan. In addition, we have a number of smaller competitors in South Korea, Indonesia, China, and
North America. In the market for membrane separators used in lithium batteries, we compete with Asahi Kasei Corporation, Tonen Corporation (a subsidiary of ExxonMobil) and Ube Industries Limited. In
addition, we have a number of smaller competitors elsewhere in Asia. For membranes used in dialysis, we compete primarily with Fresenius Medical Care, Gambro AG, Asahi Medical Corporation and Toyobo
Co. Ltd. In the blood oxygenation market, we compete primarily with Terumo Medical Corp., and in plasmapheresis our competitors are Asahi Kasei Corporation and Fresenius Medical Care. The
industrial and specialty filtration segment competes across multiple markets and applications; principal competitors include Pall

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Corporation,
Millipore Corporation, Koch Membrane Systems (a division of Koch Industries), Norit B.V., and Dainippon Ink and Chemicals, Inc. Product innovation and performance, quality,
service, utility and cost are the primary competitive factors, with technical support being highly valued by the largest customers.

We
believe that we are well positioned in our end-markets for the following reasons:



Raw materials

We employ a global purchasing strategy to achieve pricing leverage on our purchases of major raw materials. The major polyethylene and polypropylene resins we use
are very specialized petroleum-based products that are less affected by commodity pricing cycles than other petroleum-based products. In the event of future price increases for these major raw
materials, we believe that we will generally be able to pass these increases on to our customers. The primary raw materials we use to manufacture

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most
of our products are polyethylene and polypropylene resins, silica, paper, and oil. Our major supplier of polyethylene resins is Ticona LLC and our major suppliers of polypropylene resins are
Total Petrochemicals USA, Inc., Performance Polymers, Inc. and Bamberger Polymers, Inc. Our major suppliers of silica are PPG Industries, Inc., Degussa A.G. and United
Silica (Siam), Ltd., while our major suppliers of oil are Calumet Lubricants, Shell Chemical LP and Shell Company of Thailand (subsidiaries of Royal Dutch/Shell) and ExxonMobil Lubricants (a
subsidiary of Exxon Mobil).

We
believe that the loss of any one or more of our suppliers would not have a long-term material adverse effect on us because other manufacturers with whom we conduct
business or have conducted business in the past would be able to fulfill our requirements. However, the loss of one of our key suppliers could, in the short term, adversely affect our business until
we secure alternative supply arrangements. In addition, we cannot assure you that any new supply arrangements we enter will have terms as favorable as those contained in current supply arrangements.
We have never experienced any significant disruptions in supply as a result of shortages in raw materials.

Seasonality

Operations at our European production facilities are traditionally subject to shutdowns during the month of August each year for employee vacations. As a result,
net income during the third quarter of fiscal 2006 was, and during the third quarter of any fiscal year in the future may be, lower than net income in other quarters during the same fiscal year. In
view of the seasonal fluctuations, we believe that comparisons of our operating results for the third quarter of any fiscal year with those of the other quarters during the same fiscal year may be of
limited relevance in predicting our future financial performance.

Employees

At December 30, 2006, we had approximately 1,800 employees worldwide. Hourly employees at seven of our 10 facilities are unionized and account for
approximately 59% of our total employees. These facilities were unionized prior to our ownership; no facility has been unionized under our ownership. We have historically had good relationships with
our unions, with no occurrences of any work stoppages. The following summarizes those employees represented by unions as of December 30, 2006:

|Location             |       | Number of
unionized
employees |       | % of
total |  | Date of contract
renegotiation
|-------------------- | ----- | ----------------------------- | ----- | ---------- |  | ------------------------------
|Corydon, Indiana     |       | 83                            |       | 81         |  | January 2010                  
|Obernberg, Germany   |       | 17                            |       | 74         |  | Annual                        
|Owensboro, Kentucky  |       | 167                           |       | 68         |  | April 2008                    
|Potenza, Italy       |       | 137                           |       | 100        |  | Annual                        
|Selestat, France     |       | 137                           |       | 77         |  | Annual                        
|Wuppertal, Germany   |       | 471                           |       | 92         |  | Annual                        
|Norderstedt, Germany |       | 49                            |       | 82         |  | Annual                        
|                     |       |                               |       |            |  |                               
|                     | Total |                               | 1,061 |            |  |                               
|                     |       |                               |       |            |  |                               

Environmental matters

We are subject to a broad range of federal, state, local and foreign environmental laws and regulations which govern, among other things, air emissions,
wastewater discharges and the handling, storage disposal and release of wastes and hazardous substances. It is our policy to comply with applicable environmental requirements at all of our facilities.
We are also subject to laws, such as the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), that may

13

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impose
liability retroactively and without fault for releases or threatened releases of hazardous substances at on-site or off-site locations. From time to time, we have
identified environmental compliance issues at our facilities. For more information, see "Item 3. Legal Proceedings" below.

We
have conducted some cleanup of on-site releases at some facilities and we will be conducting additional cleanups of on-site contamination at other facilities
under regulatory supervision or voluntarily. Costs for such work and related measures (such as eliminating sources of contamination) could be substantial, particularly at our Wuppertal, Germany and
Potenza, Italy facilities. We have established reserves for environmental liabilities of approximately $28.0 million as of December 30, 2006. However, we do not anticipate that the
remediation activities will disrupt
operations at our facilities or have a material adverse effect on our business, financial condition or results of operations. In addition, we have asserted claims under an indemnity from Akzo Nobel
("Akzo"), the prior owners of Membrana, GmbH ("Membrana") that is expected to provide indemnification of a substantial percentage of anticipated environmental costs at Wuppertal. The amount receivable
under the indemnification agreement at December 30, 2006 was $18.7 million. To date we have not had any significant disagreement with Akzo over its environmental indemnity obligations to
us.

Intellectual property rights

We consider our patents, patent licenses and trademarks, in the aggregate, to be important to our business and seek to protect this proprietary
know-how in part through United States and foreign patent and trademark registrations. Certain of our patents are also important individually. In addition, we maintain certain trade
secrets for which, in order to maintain the confidentiality of such trade secrets, we have not sought patent protection.

Item 1A. Risk Factors

Our business faces many risks. As such, prospective investors and shareholders should carefully consider and evaluate all of the risk factors described below.
These risk factors may change from time to time and may be amended, supplemented, or superseded by updates to the risk factors contained in periodic reports on Form 10-Q and
Form 10-K that we file with the SEC in the future. These risks include the following:

Risks Related to Our Business

Because the specialized markets in which we sell our products are highly competitive, we may have difficulty growing our business year
after year.

The
markets in which we sell our products are highly competitive. Many of these markets require highly specialized products that are time and cost intensive to design and develop. In
addition, innovative products, quality, service, utility, cost and technical support are the primary competitive factors in the separation and filtration membrane industry. While we only compete
against a small number of competitors in each of our markets, some of these competitors are much larger companies that have greater financial, technological, manufacturing and marketing resources than
we do. Many of these competitors are also better established as suppliers to the markets that we serve. As a result, a reduction in overall demand or increased costs to design and produce our products
within these
markets would likely further increase competition between us and other producers of membranes. This increased competition could cause us to reduce our prices, which could lower our profit margins and
impair our ability to grow our business year after year.

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We must continue to invest significant resources in developing innovative products in order to maintain a competitive edge in the highly specialized markets in
which we operate.

Our
continued success depends, in part, upon our ability to maintain our technological capabilities and to continue to identify, develop and commercialize innovative products for the
separation and filtration membrane industry. For example, products for some consumer electronics applications have a short lifecycle and require constant development. If we fail to continue to develop
products for those markets or keep pace with technological developments by our competitors generally, we may lose market share, which could result in reduced sales and impair our financial condition.

The loss of large volume customers could impact our sales and our profits.

Our
products are often sold to a relatively small number of large volume customers. For example, one of our customers, Exide Technologies, represented approximately 13% of our net sales
in fiscal 2006. As a result, a decrease in business from, or the loss of, large volume customers such as Exide could impact our sales and our profits.

Vertical integration by our customers of the production of our products into their own manufacturing processes could reduce our sales and our
profits.

Our
future sales and profits will depend to a significant extent upon whether our customers choose in the future to manufacture the separation and filtration membranes used in their
products instead of purchasing these components from us. If any of our existing customers choose to vertically integrate the production of their products in such a manner, the loss of sales to these
customers could reduce our sales and our profits.

Increases in prices for raw materials or the loss of key supplier contracts could reduce our profit margins.

The
primary raw materials we use in the manufacture of most of our products are polyethylene and polypropylene resins, silica, paper and oil. In fiscal 2006, raw materials accounted for
approximately 46% of our cost of sales. Although our major customer contracts generally allow us to pass increased costs on to our customers, we may not be able to pass on all raw material price
increases to our
customers in each case or without delay. The loss of any of our key suppliers could disrupt our business until we secure alternative supply arrangements. Furthermore, any new supply agreement we enter
into may not have terms as favorable as those contained in our current supply arrangements.

Our substantial indebtedness could harm our ability to react in changes to our business or to market developments and prevent us from fulfilling our obligations
under our indebtedness.

As
a result of the transactions related to the purchase of Polypore, Inc. by PP Acquisition Corporation, our indirect, wholly owned subsidiary (the "Transactions"), we have
incurred a significant amount of indebtedness. As of December 30, 2006, our consolidated indebtedness outstanding, including capital lease obligations, was approximately
$1,048.9 million, excluding unused commitments of $90.0 million under our revolving loan facility, and our other liabilities were approximately $271.3 million. For fiscal 2006,
our interest expense was $92.3 million.

Our
substantial level of current indebtedness, as well as any additional borrowings we may make under the unused portions of the senior secured credit facilities, increases the
possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. Our substantial debt could increase
our vulnerability to general economic downturns and adverse competitive and industry conditions by limiting our flexibility to plan for, or to react to, changes in our business and in the industry in
which we operate. This limitation could place us at a competitive disadvantage compared to competitors that have less debt and more cash to insulate their operations from market downturns and to
finance new business opportunities.

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Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.

At
December 30, 2006, Polypore had variable rate debt of approximately $369.2 million and we are not a party to any interest rate hedging agreements. As a result, a modest
interest rate increase could result in a substantial increase in interest expense. Our earnings may not be sufficient to allow us to meet any such increases in interest rate expense and to pay
principal and interest on our debt and meet our other obligations. If we do not have sufficient earnings, we may be required to refinance all or part of our existing debt, sell assets, borrow more
money or sell more securities, none of which we can guarantee we will be able to do.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our
control.

Our
ability to make payments on and to refinance our indebtedness and to fund our operations will depend on our ability to generate cash in the future. However, our business may not
generate sufficient cash flow from operations for a variety of reasons, including those mentioned elsewhere in this "Risk Factors" section. Without sufficient cash flow, future borrowings may not be
available to us under the senior secured credit facilities in amounts sufficient to enable us to service our indebtedness or to fund our other liquidity or capital needs. If we cannot generate
sufficient cash to service our debt, we will have to take such actions as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity
capital. Any of these actions may not be effected on commercially reasonable terms, or at all. In addition, the indentures (the "Indentures") for the 83/4% senior subordinated notes and
our 101/2% senior discount notes (collectively, the "Notes") and the credit agreement for the senior secured credit facilities may restrict us from adopting any of these alternatives.

The terms of the senior secured credit facilities and the Indentures may restrict our current and future operations, particularly our ability to respond to market
changes or to take certain actions.

Polypore's
senior secured credit facilities and the indentures contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit
our ability to engage in acts that may be in our long-term best interests. For example, the senior secured credit facilities include covenants restricting, among other things, our ability
to incur, assume or permit to exist additional indebtedness or guarantees; engage in mergers, acquisitions and other business combinations; or amend or otherwise alter terms of our indebtedness,
including our Notes, and other material agreements. The senior secured credit facilities also include financial covenants, including requirements that we maintain a minimum interest coverage ratio and
a maximum leverage ratio.

The
indentures also contains numerous negative covenants including, among other things, restrictions on our ability to: incur or guarantee additional debt; issue preferred stock of
restricted subsidiaries; pay dividends or make other equity distributions; or purchase or redeem capital stock.

A
breach of any of these covenants or the inability to comply with financial covenants could result in a default under the senior secured credit facilities or the Notes. If any such
default occurs, the lenders and the holders of the Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and
payable. The lenders also have the right in these circumstances to terminate any commitments they have to provide further borrowings and to proceed against all collateral granted to them to secure the
debt. If collateral (such as available cash) is repossessed by the lenders or holders of the Notes, we will be unable to access the capital and other resources necessary to operate our business and we
could incur immediate and significant losses.

16

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Polypore International is the sole obligor of the 10.5% senior discount notes and our subsidiaries do not guarantee the obligations under, and do not have any
obligation with respect to, such indebtedness.

Polypore
International is a holding company and does not have any material business assets or operations. All of our operations are conducted through our subsidiaries and, therefore, we
are and will continue to be dependent on the cash flow of our subsidiaries to meet our obligations. Furthermore, we are the sole obligor of the 10.5% senior discount notes, and our subsidiaries do not
guarantee our obligations under, and do not have any obligation with respect to, such indebtedness. Also, the terms of the senior secured credit facilities and the indenture governing the 8.75% senior
subordinating notes significantly restrict our subsidiaries from paying dividends and otherwise transferring assets to us. In addition, the 10.5% senior discount notes are effectively subordinated to
all existing and future indebtedness and liabilities of our subsidiaries (including trade credit, the 8.75% senior subordinated notes and any indebtedness incurred under the secured credit
facilities). The agreements governing the current and future indebtedness of our subsidiaries and our dependence on their cash flow may impede us from funding scheduled interest and principal payments
on the 10.5% senior discount notes when due, which could in turn impair our financial condition.

Because a majority of our employees are represented under collective bargaining agreements, any employee slowdowns, strikes or failure to renew our collective
bargaining agreements could disrupt our business.

Approximately
59% of our employees are represented under collective bargaining agreements. A majority of those employees are located in Italy, France and Germany and are represented
under industry-wide agreements that are subject to national and local government regulations. Many of these collective bargaining agreements must be renewed annually. Labor unions also
represent our employees in Owensboro, Kentucky and Corydon, Indiana. The collective bargaining agreement covering the workers at the Owensboro facility expires in April 2008 and the agreement
covering workers at the Corydon facility expires in January 2010.

We
may not be able to maintain constructive relationships with these labor unions. We may not be able to successfully negotiate new collective bargaining agreements on satisfactory terms
in the future. The loss of a substantial number of these employees or a prolonged labor dispute could disrupt our business. Any such disruption could in turn reduce our sales, increase our costs to
bring products to market and result in significant losses.

We generate most of our sales from manufacturing products that are used in a wide variety of industries and the potential for product liability exposure for our
products could be significant.

We
manufacture a wide variety of products that are used in healthcare and consumer applications. Several of these products are used in medical devices that some consumers require in
order to sustain their lives. As a result, we may face exposure to product liability claims in the event that the failure of our products results, or is alleged to result, in bodily injury and/or
death. In addition, if any of our
products are, or are alleged to be, defective, we may be required to make warranty payments or to participate in a recall involving those products.

Consequently,
end-users of our products may look to us for contribution when faced with product recalls, product liability or warranty claims. The future costs associated
with defending product liability claims or providing product warranties could be material and we may experience material losses in the future as a result. A successful product liability claim brought
against us in excess of available insurance coverage or a requirement to participate in any product recall could substantially reduce our available cash from operations. Reduced cash could in turn
reduce our profits or impair our financial condition.

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Our operations outside the United States pose risks to our business that are not present with our domestic business.

Our
manufacturing facilities in North America accounted for 39% of total net sales for fiscal 2006, with facilities in Europe accounting for 52% and facilities in Asia accounting for 9%.
Typically, we sell our products in the currency of the country where the manufacturing facility that produced the products is located. In addition, as part of our growth and acquisition strategy, we
may expand our operations in these or other foreign countries. Our foreign operations are, and any future foreign operations will be, subject to certain risks that are unique to doing business in
foreign countries. These risks include fluctuations in foreign currency exchange rates, inflation, economic or political instability, shipping delays, changes in applicable laws and regulatory
policies and various trade restrictions. All of these risks could have a negative impact on our ability to deliver products to customers on a competitive and timely basis. This could reduce or impair
our sales, profits, cash flows and financial position. The future imposition of, or significant increases in the level of, customs duties, import quotas or other trade restrictions could also increase
our costs and reduce our profits.

We could incur substantial costs to comply with environmental laws and violations of such laws may increase our costs or require us to change certain business
practices.

We
use and generate a variety of chemicals and other hazardous by-products in our manufacturing operations. As a result, we are subject to a broad range of federal, state,
local and foreign environmental laws and regulations. These environmental laws govern, among other things, air emissions, wastewater discharges and the handling, storage and release of wastes and
hazardous substances. Such laws and regulations can be complex and change often. We regularly incur costs to comply with environmental requirements, and such costs could increase significantly with
changes in legal requirements or their interpretation or enforcement. Some of our manufacturing facilities have been the subject of actions to enforce environmental requirements. We could incur
substantial costs, including clean-up costs, fines and sanctions and third-party property damage or
personal injury claims, as a result of violations of environmental laws. Failure to comply with environmental requirements could also result in enforcement actions that materially limit or otherwise
affect the operations of the facilities involved.

Under
certain environmental laws, a current or previous owner or operator of an environmentally contaminated site may be held liable for the entire cost of investigation, removal or
remediation of hazardous materials at such property. This liability could result whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials.

Contaminants
have been detected at some of our present facilities, principally in connection with historical operations. Investigations and/or clean-ups of these contaminants
have been undertaken by us or by former owners of the sites. The costs of investigating and remediating environmental conditions at some of our facilities may be substantial. Although we believe we
are entitled to contractual indemnification for a portion of these costs, if we do not receive expected indemnification payments, or if our remediation costs are higher than expected, our exposure to
these costs would increase. This exposure could reduce our cash available for operations, consume valuable management time, and reduce our profits or impair our financial condition.

We
anticipate additional investigations and clean-ups of onsite contamination under regulatory supervision or voluntarily at some of our sites. In addition, the imposition of
more stringent clean-up requirements, the discovery of additional contaminants or the discovery of offsite contamination at or from one or more of our facilities could result in
significant additional costs to us.

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If we are unable to adequately protect our intellectual property, we could lose a significant competitive advantage.

Our
success with our products depends, in part, on our ability to protect our unique technologies and products against competitive pressure and to defend our intellectual property
rights. If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours. We may not receive patents for any of our patent
applications and our existing or future patents that we receive or license may not provide competitive advantages for our products. Our competitors may challenge, invalidate or avoid the application
of any existing or future patents, trademarks, or other intellectual property rights that we receive or license. In addition, patent rights may not prevent our competitors from developing, using or
selling products that are similar or functionally equivalent to our products. The loss of protection for our intellectual property could reduce the market value of our products, reduce product sales,
and lower our profits or impair our financial condition.

We
intend to enforce our intellectual property rights vigorously, and from time to time we may initiate claims against third parties that we believe are infringing our intellectual
property rights if we are unable to resolve matters satisfactorily through negotiation. Litigation brought to protect and enforce our intellectual property rights could be costly,
time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Our failure to secure, protect and enforce our
intellectual property rights could seriously harm our business.

Due to the unique products that we produce and the particular industry in which we operate, the loss of our senior management could disrupt our
business.

Our
senior management is important to the success of our business. There is significant competition for executive personnel with unique experience in the separation and filtration
membrane industry. As a result of this unique need and the competition for a limited pool of industry-based executive experience, we may not be able to retain our existing senior management. In
addition, we may not be able to fill new positions or vacancies created by expansion or turnover or attract additional senior management personnel. All of our executive officers are free to pursue
other business opportunities (other than our chief executive officer, who is bound by a non-compete provision of his employment agreement), including those that may compete with us. The
loss of any member of our senior management without retaining a suitable replacement (either from inside or outside our existing management team) could disrupt our business.

We may pursue future acquisitions. If we incur contingent liabilities and expenses or additional debt in connection with future acquisitions or if we cannot
effectively integrate newly acquired operations, our business could be disrupted.

We
may enter into acquisitions in the future. Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments
concerning the value, strengths and weaknesses of businesses acquired will prove incorrect. Future acquisitions would likely result in the incurrence of debt and contingent liabilities. Such
acquisitions could also increase our interest and amortization expenses as well as periodic impairment charges related to goodwill and other intangible assets. Acquisitions could also result in
significant charges relating to integration costs.

We
may not be able to integrate successfully any business we acquire into our existing business. Any acquired businesses may not be profitable or as profitable as we had expected. The
successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs. The successful integration of future acquisitions may also require substantial
attention from our senior management and the management of the acquired business. This could decrease the time that they have to service and attract customers and develop new products and services. In
addition, because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen

19

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expenses,
complications and delays. Such expenses and delays could include difficulties in employing sufficient staff and maintaining operational and management oversight. Our inability to complete
the integration of new businesses in a timely and orderly manner could increase costs, reduce our profits and ultimately disrupt our business.

We have recorded a significant amount of intangible assets, which may never generate the returns we expect.

As
a result of our acquisitions, our net identifiable intangible assets at December 30, 2006 were approximately 14% of our total assets. Such assets include trademarks and trade
names, license agreements and technology acquired in acquisitions. Goodwill, which relates to the excess of cost over the fair value of the net assets of the businesses acquired, was approximately 41%
of our total assets at December 30, 2006. Both goodwill and identifiable intangible assets increased substantially as a result of the Transactions. Goodwill and identifiable intangible assets
are recorded at fair value on the date of acquisition and, under FASB Statement No. 142,Goodwill and Other Intangible Assets,are reviewed at
least annually for impairment. Impairment may result from, among other things, deterioration in the performance of the acquired business, adverse market conditions, and adverse changes in applicable
laws or regulations. These changes include changes that restrict the activities of the acquired business and a variety of other circumstances. The amount of any impairment must be written off. We may
never realize the full value of our intangible assets. Any future determination requiring the write-off of a significant portion of intangible assets would reduce our profits for the
fiscal period in which the write-off occurs.

Our operations are vulnerable to interruption or loss due to natural disasters, epidemics, terrorist acts and other events beyond our control, which would adversely affect our
business.

Our
operations may be subject to significant interruption if any of our facilities is damaged or destroyed. For example, certain of our products are manufactured at a single facility
location for which we do not maintain a backup manufacturing facility. A natural or other disaster, such as a fire or flood, could significantly disrupt our operations, delay or prevent product
manufacture and shipment for the time required to repair, rebuild or replace our manufacturing facilities, which could be lengthy, and result in large expenses to repair or replace the facilities. In
addition, concerns about terrorism or an outbreak of epidemic diseases such as avian influenza or severe acute respiratory syndrome, especially in our major markets of North America, Europe and Asia
could have a negative effect on travel and our business operations, and result in adverse consequences on our sales and financial performance.

Warburg Pincus controls us.

Affiliates and designees of Warburg Pincus Private Equity VIII, L.P. and Warburg Pincus International Partners, L.P. (collectively, "Warburg Pincus") control
Polypore International. Warburg Pincus is able to cause the election of all of the members of our board of directors, cause the appointment of new management and cause the approval of any action
requiring the approval of our stockholders, including amendment of our certificate of incorporation and mergers or sales of substantially all of our assets. The directors elected by Warburg Pincus are
able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends. In addition, our equity
holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions
might involve risks to other equity holders or debt holders. Furthermore, Warburg Pincus may in the future own businesses that directly compete with ours. For information concerning the composition of
our management team, see "Item 10. Directors, Executive Officers and Corporate Governance."

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are located in leased office space in Charlotte, North Carolina. Our manufacturing facilities are strategically located to serve our
customers globally:

|Location(1)(5)            |  | Floor area
(sq. ft.) |  | Business segment                     |  | Certification      
|------------------------- |  | -------------------- |  | ------------------------------------ |  | -------------------
|Owensboro, Kentucky       |  | 256,000              |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Corydon, Indiana          |  | 161,000              |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Selestat, France          |  | 110,000              |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Norderstedt, Germany      |  | 124,000              |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Potenza, Italy            |  | 143,000              |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Prachinburi, Thailand     |  | 42,000               |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Charlotte, North Carolina |  | 142,000              |  | Energy Storage and Separations Media |  | ISO 14001, ISO 9001
|Shanghai, China(2)        |  | 29,000               |  | Energy Storage                       |  | ISO 14001, ISO 9001
|Wuppertal, Germany(3)     |  | 1,503,000            |  | Separations Media                    |  |                   
|Obernberg, Germany(2)     |  | 23,000               |  | Separations Media                    |  | ISO 9001           
|Tianjin, China(4)         |  | 47,000               |  | Energy Storage                       |  |                   

---

Between
the existing capacity at the facilities listed in the table above, planned productivity gains and planned capital expenditures for fiscal 2007, we believe we will have sufficient
capacity available to meet our needs for fiscal 2007.

Item 3. Legal Proceedings

As part of an internal self-audit of our Corydon, Indiana and Owensboro, Kentucky facilities, we recently identified instances of potential
non-compliance with its environmental operating permits at these facilities. We self-reported these issues to the proper state and federal agencies and are taking steps to
resolve these issues. Although the agencies
have the authority and discretion to issue substantial fines that could be material, based upon management's analysis of facts and circumstances, in consideration of recent cases addressed by the
agencies involved, and based upon advice from third-party advisors, we do not believe that the maximum penalty will be assessed and that penalties, if any, resulting from this matter will not have a
material adverse effect on our business, financial condition or results of operations.

We
received a Finding of Violation, dated March 28, 2005 from the EPA alleging a noncompliance with the Title V Air Operating Permit at our Corydon, Indiana facility
relating to the control of fugitive emissions at the facility. We recorded a reserve in 2005 for our best estimate of potential penalties. During the three months ended April 1, 2006, we
finalized an agreement with the EPA that was consistent with our original estimate. We have completed the work required under the agreement, and are awaiting the EPA's final resolution of the matter.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Warburg Pincus certain members of management and a director own, directly or indirectly, all of the equity securities of Polypore International. There is no
established public trading market for our equity securities.

We
did not declare or pay any dividends on our common stock in fiscal 2006, and we do not expect to pay any such dividends in 2007. The indenture relating to our $300.0 million
aggregate principal amount of 10.5% senior discount notes due 2012 contains negative covenants that restrict or limit our ability to among other things, declare dividends, make payments on or redeem
or repurchase capital stock.

Item 6. Selected Financial Data

The following table presents selected historical consolidated financial data of Polypore International for the years ended December 30, 2006 and
December 31, 2005 (Successor), the period from May 2, 2004 through January 1, 2005 (Successor) and the period from January 4, 2004 through May 1, 2004 (Predecessor),
and each of the preceding two years ended January 3, 2004 (Predecessor). The selected historical consolidated financial data has been derived from Polypore International's audited consolidated
financial statements.

On
May 13, 2004, Polypore, Inc. and its shareholders consummated a stock purchase agreement with PP Acquisition Corporation, our indirect, wholly owned subsidiary, pursuant
to which PP Acquisition Corporation purchased all of the outstanding shares of Polypore, Inc.'s capital stock. At the time of the closing of the acquisition, PP Acquisition merged with and into
Polypore, Inc. with Polypore, Inc. as the
surviving corporation. For more information on this transaction, see "Item 8. Financial Statements and Supplementary Data" below.

22

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The
information presented below should be read together with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the notes thereto included in "Item 8. Financial Statements and Supplementary Data."

|                                                                               |         | Successor |         | Predecessor |  
|------------------------------------------------------------------------------ | ------- | --------- | ------- | ----------- | -
|
|
|                                                                               |        
|Statement of operations data:                                                  |         |           |         |             |  
|Net sales                                                                      |         | $         | 479.7   |             | $
|                                                                               |         |           |        
|Gross profit                                                                   |         |           | 164.9   |             |  
|Selling, general and administrative expenses                                   |         |           | 87.9    |             |  
|Business restructuring                                                         |         |           | 37.0    |             |  
|In process research and development                                            |         |           |        |             |  
|Other                                                                          |         |           |        |             |  
|                                                                               |         |           |        
|Operating income                                                               |         |           | 40.0    |             |  
|Interest expense, net                                                          |         |           | 92.3    |             |  
|Foreign currency and other                                                     |         |           | 3.2     |             |  
|Change in accounting principle related to postemployment benefits              |         |           | (2.6    | )           |  
|Unrealized (gain) loss on derivative instrument                                |         |           |        |             |  
|                                                                               |         |           |        
|Income (loss) before income taxes                                              |         |           | (52.9   | )           |  
|Income taxes                                                                   |         |           | (23.1   | )           |  
|                                                                               |         |           |        
|Income (loss) before the cumulative effect of a change in accounting principle |         |           | (29.8   | )           |  
|Cumulative effect of change in accounting principle, net of income taxes       |         |           | 0.2     |             |  
|                                                                               |         |           |        
|Net income (loss)                                                              |         |           | (29.6   | )           |  
|Redeemable preferred stock dividends                                           |         |           |        |             |  
|Redemption premium on Class C preferred stock                                  |         |           |        |             |  
|                                                                               |         |           |        
|Net income (loss) applicable to common stock                                   |         | $         | (29.6   | )           | $
|                                                                               |         |           |        
|Net income (loss) per common share-basic                                       |         | $         | (172.21 | )           | $
|Net income (loss) per common shared diluted                                    |         | $         | (172.21 | )           | $
|Weighted average shares outstanding:                                           |         |           |         |             |  
|                                                                               | Basic   |           |         | 171,701     |  
|                                                                               | Diluted |           |         | 171,701     |  

23

---



|                                                                    |  | Successor |         | Predecessor
|------------------------------------------------------------------- |  | --------- | ------- | -----------
|
|                                                                   
|Balance sheet data (at end of period):                              |  |           |         |            
|Total assets                                                        |  | $         | 1,389.9 |            
|Total debt and capital lease obligations, including current portion |  |           | 1,048.9 |            
|Redeemable preferred stock and cumulative dividends payable         |  |           |        |            
|Shareholders' equity                                                |  |           | 69.7    |            

|                                |                      | Successor |      | Predecessor |  
|------------------------------- | -------------------- | --------- | ---- | ----------- | -
|
|
|
|                                |                     
|Other financial data:           |                      |           |      |             |  
|Depreciation and amortization   |                      | $         | 60.2 |             | $
|Capital expenditures            |                      |           | 24.0 |             |  
|Net cash provided by (used in): |                      |           |      |             |  
|                                | Operating activities |           |      | 50.0        |  
|                                | Investing activities |           |      | (23.9       | )
|                                | Financing activities |           |      | (3.0        | )

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion should be read in conjunction with our consolidated financial statements included elsewhere in this report. Some of the information contained in this discussion
and analysis or included elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and
uncertainties. Please see "Forward-looking statements" for more information. You should review the "Risk factors" for a discussion of important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking statements.

Overview

We are a leading global high technology filtration company that develops, manufactures and markets specialized microporous membranes used in separation and
filtration processes. We believe that we are among the top three in terms of market share in products comprising a total of approximately 80% of our fiscal 2006 net sales. The microporous membranes we
produce are highly engineered polymeric structures which contain millions of pores per square inch, enabling the management of ions, gases and particles that range in size from the cellular to the
nano or molecular level. We believe that membrane performance will increasingly be the key product differentiator in the applications we serve. Our expertise spans multiple membrane configurations,
polymers, coatings and process technologies and addresses a wide array of market requirements. We believe our membrane technology platform is one of the broadest in the industries in which we compete.
We believe that our differentiated membranes and market-focused organization will enable us to meet increasing end-market performance requirements, grow with our current customers and
application base and pursue new, high-value added markets and applications.

Our
products and technologies are used in two primary segments, energy storage and separations media. The energy storage segment accounted for approximately 72% of our fiscal 2006 net
sales. Primary applications for our membranes in this segment are lithium batteries and lead-acid batteries. Lithium batteries are the power source in a wide variety of electronics applications
ranging from laptop

24

---



computers
and mobile phones to power tools, and are emerging in applications such as hybrid electric vehicles (HEVs). Lead-acid batteries are used in transportation and industrial applications. Growth
in the energy storage segment is being driven by the increasing demand for mobile power. The separations media segment accounted for approximately 28% of our fiscal 2006 net sales. Primary
applications for our membranes and membrane modules in this segment are hemodialysis, blood oxygenation, plasmapheresis and various high-performance microfiltration, ultrafiltration and
gasification/degasification applications. Growth in the separations media segment is being driven by increasing demand for membrane-based medical treatments and by increasing needs for purity in
end-markets such as water treatment, food and beverage processing and pharmaceutical, semiconductor and flat panel display manufacturing.

We
serve a diverse set of customers globally with strategically located manufacturing facilities in North America, Europe and Asia.

On
May 13, 2004, Polypore, Inc. and its shareholders consummated a stock purchase agreement with PP Acquisition Corporation, our indirect, wholly owned subsidiary, pursuant
to which PP Acquisition Corporation purchased all of the outstanding shares of Polypore, Inc.'s capital stock. At the time of the closing of the acquisition, PP Acquisition Corporation merged
with and into Polypore, Inc. with Polypore, Inc. as the surviving corporation.

Critical accounting policies

Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of
operations, and that require the use of complex and subjective estimates based on past experience and management's judgment. Because of uncertainty inherent in such estimates, actual results may
differ from these estimates. Below are those policies that we believe are critical to the understanding of our operating results and financial condition. Management has discussed the development and
selection of these critical accounting policies with the Audit Committee of our board of directors. For additional accounting policies, see Note 2 of the consolidated financial statements
included elsewhere in this Annual Report on Form 10K.

Allowance for doubtful accounts

Accounts receivable are primarily composed of amounts owed to us through our operating activities and are presented net of an allowance for doubtful accounts. We
establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. We charge accounts receivables off against
our allowance for doubtful accounts when we deem them to be uncollectible on a specific identification basis. The determination of the amount of the allowance for doubtful accounts is subject to
judgment and estimated by management. If circumstances or economic conditions deteriorate, we may need to increase the allowance for doubtful accounts.

Impairment of intangibles and goodwill

Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In
accordance with FASB Statement No. 142,Goodwill and Other Intangible Assets, goodwill and indefinite-lived intangible assets not amortized, but
are subject to an annual impairment test based on cash flow projections and fair value estimates. The determination of undiscounted cash flows is based on our strategic plans and historical results
adjusted to reflect current and anticipated operating conditions. Estimating future cash flows requires significant judgment by us in such areas as future economic conditions, industry-specific
conditions, product pricing and necessary capital expenditures. The use of different assumptions would

25

---



increase
or decrease the estimated value of future cash flows and recognition of an impairment loss might be required.

Pension and other postretirement benefits

Certain assumptions are used in the calculation of the actuarial valuation of our defined benefit pension plans and other postretirement benefits. These
assumptions include the weighted average discount rate, rates of increase in compensation levels, expected long-term rates of return on assets and increases or trends in healthcare costs.
If actual results are less favorable than those projected by management, we may be required to recognize additional expense and liabilities.

Environmental matters

In connection with the Transactions, we identified and accrued for potential environmental contamination at our manufacturing facility in Potenza, Italy. In
connection with the acquisition of Membrana in 2002, we recorded a reserve for environmental obligations for costs to remediate known environmental issues and operational upgrades as a matter of good
manufacturing practices or in order to remain in compliance with local regulations.

We
accrue for environmental obligations when such expenditures are probable and reasonably estimable. The amount of liability recorded is based on currently available information,
including the progress of remedial investigations, current status of discussions with regulatory authorities regarding the method and extent of remediation, presently enacted laws and existing
technology. Accruals for estimated losses from environmental obligations are adjusted as further information develops or circumstances change. If actual results are less favorable than those projected
by management, we may be required to recognize additional expense and liabilities.

We
have indemnification agreements for certain environmental matters from Acordis A.G. ("Acordis") and Akzo, the prior owners of Membrana. Recoveries of environmental costs from other
parties are recognized as assets when their receipt is deemed probable. We have recorded a receivable with regard to the Akzo indemnification agreement. If indemnification claims cannot be enforced
against Acordis and Akzo, we may be required to reduce the amount of indemnification receivables recorded.

Results of operations

The information presented below for the pro forma fiscal year 2004 has been derived by combining the statement of operations for the period from January 4,
2004 through May 1, 2004 with the period from May 2, 2004 through January 1, 2005 and applying the pro forma adjustments for the Transactions. The pro forma results of operations
for the fiscal year 2004 include adjustments for depreciation, amortization and interest expense associated with the Transaction and the related income tax effects of these adjustments. The pro forma
results exclude non-recurring costs of $5.3 million for the write-off of in-process research and development costs and $19.0 million for the sale of
inventory that was written up in purchase accounting for the Transactions.

26

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The
following table sets forth, for the periods indicated, certain historical and pro forma operating data of Polypore in amount and as a percentage of net sales (in millions):

|                                                                                                |  | Fiscal Year |      
|----------------------------------------------------------------------------------------------- |  | ----------- | -----
|
|                                                                                                | 
|Net sales                                                                                       |  | $           | 479.7
|                                                                                                |  |             |      
|Gross profit                                                                                    |  |             | 164.9
|Selling, general and administrative expenses                                                    |  |             | 87.9 
|Business restructuring                                                                          |  |             | 37.0 
|Other                                                                                           |  |             |     
|                                                                                                |  |             |      
|Operating income                                                                                |  |             | 40.0 
|Interest expense, net                                                                           |  |             | 92.3 
|Foreign currency and other                                                                      |  |             | 3.2  
|Change in accounting principle related to postemployment benefits                               |  |             | (2.6 
|                                                                                                |  |             |      
|Income (loss) before income taxes and the cumulative effect of a change in accounting principle |  |             | (52.9
|Income taxes                                                                                    |  |             | (23.1
|Cumulative effect of a change in accounting principle, net of income taxes                      |  |             | 0.2  
|                                                                                                |  |             |      
|Net income (loss)                                                                               |  | $           | (29.6
|                                                                                                |  |             |      

|                                                                                                |  | Fiscal Year |   
|----------------------------------------------------------------------------------------------- |  | ----------- | --
|
|                                                                                                | 
|Net sales                                                                                       |  | 100.0       | % 
|                                                                                                |  |             |   
|Gross profit                                                                                    |  | 34.4        |   
|Selling, general and administrative expenses                                                    |  | 18.3        |   
|Business restructuring                                                                          |  | 7.7         |   
|Other                                                                                           |  |            |   
|                                                                                                |  |             |   
|Operating income                                                                                |  | 8.4         |   
|Interest expense, net                                                                           |  | 19.2        |   
|Foreign currency and other                                                                      |  | 0.7         |   
|Change in accounting principle related to postemployment benefits                               |  | (0.5        | ) 
|                                                                                                |  |             |   
|Income (loss) before income taxes and the cumulative effect of a change in accounting principle |  | (11.0       | ) 
|Income taxes                                                                                    |  | (4.8        | ) 
|Cumulative effect of a change in accounting principle, net of income taxes                      |  | 0.0         |   
|                                                                                                |  |             |   
|Net income (loss)                                                                               |  | (6.2        | )%
|                                                                                                |  |             |   

---

27

---



Fiscal 2006 compared with fiscal 2005

Net sales.Net sales for fiscal 2006 were $479.7 million, an increase of $47.2 million, or 10.9%, from fiscal
2005. Energy storage net sales for fiscal 2006 were $343.0 million, an increase of $33.6 million, or 10.9%, from fiscal 2005. The increase in energy storage sales was primarily due to
higher lead acid and lithium battery separator sales volume, higher average sales prices for lead acid battery separators and the positive impact of dollar/euro exchange rate fluctuations of
$0.8 million. Lead-acid separator volume
growth of 6.7% was driven by the increasing size of the automotive market, particularly in Asia, and the trend of conversion from alternative separator materials to superior performing
polyethylene-based separators. Average selling prices for lead acid battery separators increased 1.6%. This increase was the result of a combination of the global price increase implemented in the
fourth quarter of 2005 to offset higher raw material and energy costs, offset by the impact of a change in product mix. The increase in sales volume of 30.5% for lithium battery separators was driven
by strong demand for consumer electronic products and expanding applications for lithium ion batteries.

Separations
media net sales for fiscal 2006 were $136.7 million, an increase of $13.6 million, or 11.0%, from fiscal 2005 due to higher sales of industrial and specialty
filtration products and hemodialysis membranes. The 34.6% growth in sales of industrial and specialty filtration products was due to continued growth in demand for high performance filtration
applications. The 4.8% increase in hemodialysis membrane sales was due to a 17.1% increase in sales volumes of synthetic membranes, partially offset by a 10.5% decline in average selling prices. The
growth in synthetic membrane sales was due to a significant industry shift in demand from cellulosic to synthetic membranes. The decline in average selling prices was due to a higher portion of sales
being made to our larger customers who receive lower average selling prices. In response to the decline in demand for cellulosic membranes, we obtained firm sales commitments from our customers for
their future cellulosic membrane needs. During 2006, we produced sufficient quantities of cellulosic membranes to meet our customer needs and ceased production of cellulosic membranes. Remaining sales
of cellulosic membranes are expected to be approximately $16.0 million over the next two years, with the majority of these sales occurring in 2007.

Gross Profit.Gross profit for fiscal 2006 was $164.9 million, an increase of $14.7 million, or 9.8%, from
fiscal 2005. Gross profit as a percent of sales decreased to 34.4% in fiscal 2006 from 34.7% in the prior year. For the energy storage segment, gross profit for fiscal 2006 was $132.5 million,
an increase of $17.4 million, or 15.1% from fiscal 2005. Energy storage gross profit as a percent of sales increased to 38.6% in fiscal 2006 from 37.2% due to lower production costs per unit as
increased production volumes resulted in fixed costs being applied to higher production volumes.Raw material and energy cost increases were largely
offset by internal cost saving actions and the global price increase for lead-acid battery separators.

For
the separations media segment, gross profit for fiscal 2006 was $32.4 million, a decrease of $2.7 million, or 7.7%, from fiscal 2005. Gross profit in the separations
media segment as a percent of sales decreased to 23.7% in fiscal 2006 from 28.5% due to production inefficiencies associated with the exit of cellulosic production, lower average selling prices of
hemodialysis membranes and higher energy costs.

Selling, general and administrative expenses.Selling, general and administrative expenses for fiscal 2006 were
$87.9 million, an increase of $12.4 million, or 16.4%, from fiscal 2005. The increase was due primarily to increased costs aimed at driving growth, including personnel costs and the
accrual of performance-based incentive compensation plan costs.

Interest expense, net.Interest expense, net was $92.3 million for fiscal 2006, an increase of $10.3 million
from fiscal 2005. The increase in interest expense was attributable to higher interest rates

28

---



on
our variable rate term loans, partially offset by the impact of lower debt balances due to $45.0 million in prepayments on our term loans during 2005. The increase in interest rates on our
variable rate debt was driven by increases in the underlying base rates and an increase in our interest rate margin percentage by 75 basis points in connection with the amendment to the credit
agreement relating to Polypore, Inc.'s senior secured credit facility in December 2005.

Income taxes, net.Income taxes as a percentage of income before income taxes for fiscal 2006 was 43.7% as compared to 74.6%
for fiscal 2005. The income tax expense recorded in the financial statements fluctuates between years due to a variety of factors, including state income taxes, the mix of income between U.S. and
foreign jurisdictions taxed at varying rates, certain export sales which are excluded from taxable income, various changes in estimates of permanent differences and valuation allowances, and the
relative size of our consolidated income or loss before income taxes.

Fiscal 2005 compared with pro forma fiscal 2004

Net sales.Net sales for fiscal 2005 were $432.5 million, a decrease of $57.9 million, or 11.8%, from pro forma
fiscal 2004. For the energy storage segment, net sales for fiscal 2005 were $309.4 million, a decrease of $23.5 million, or 7.1%, from pro forma fiscal 2004. Lithium battery separator
sales for fiscal 2005 decreased from pro forma 2004 due to lower sales volume and average sales prices. The decline in lithium battery separator volumes was due to unusually strong demand in China
that occurred during the first half of 2004. In the second half of 2004 and early 2005, demand in China slowed down and we experienced a decline in ordering patterns. We saw an improvement in lithium
battery market conditions, especially in China, beginning late in the first quarter of 2005. We also experienced a decline in lithium separator sales volumes for military applications as the need for
armed force troop mobility declined from 2004. Average sales prices declined in 2005 due to increased capacity in the lithium battery separator market and a higher portion of sales to our larger
customers, who receive lower average prices. Lead-acid battery separator sales increased slightly from the prior year. The increase was due to a 3.4% increase in sales volume and favorable foreign
currency movements, offset somewhat by a 2% decrease in the average selling price of lead-acid batteries due to normal fluctuations in customer and product mix. The positive impact of the dollar/euro
exchange rate contributed $1.6 million to the increase in sales. During the fourth quarter of 2005, the Company implemented a global price increase to offset continuing raw material and energy
cost increases.

For
the separations media segment, net sales for fiscal 2005 were $123.1 million, a decrease of $34.4 million, or 21.8%, from pro forma fiscal 2004. The decrease in
separations media sales was due to
the loss of a hemodialysis customer during the third quarter of 2004 and a decline in cellulosic membrane demand. Synthetic membrane sales increased slightly from the prior year, as higher sales
volumes were offset by lower average selling prices. Sales volumes of synthetic membranes increased 21% as we expanded our customer base and product offerings. The decline in average sales prices was
due to a higher portion of sales to our larger customers, who receive lower average prices. Separations media net sales include $1.3 million from the positive impact of the dollar/euro exchange
rate.

Gross Profit.Gross profit for fiscal 2005 was $150.2 million, a decrease of $26.6 million, or 15.0%, from pro
forma fiscal 2004. Gross profit as a percent of sales decreased to 34.7% in fiscal 2005 from 36.1% in the prior year. For the energy storage segment, gross profit for fiscal 2005 was
$115.1 million, a decrease of $11.4 million, or 9.0%, from pro forma fiscal 2004. Gross profit in the energy storage segment as a percent of sales decreased to 37.2% in fiscal 2005 from
38.0%. The decrease was the result of lower production volumes of lithium separators, a change in product mix and higher depreciation expense. The decrease in production volumes for lithium battery
separators resulted in higher production costs per unit as fixed costs were applied to lower production volumes. Raw material and energy cost increases were largely offset by internal cost saving
actions.

29

---



For
the separations media segment, gross profit for fiscal 2005 was $35.1 million, a decrease of $15.2 million, or 30.2%, from pro forma fiscal 2004. Gross profit in the
separations media segment as a percent of sales decreased to 28.5% in fiscal 2005 from 31.9%. The decline was due to the decrease in production volumes, resulting in higher production costs per unit
as fixed costs were applied to lower production volumes.

Selling, general and administrative expenses.Selling, general and administrative expenses for fiscal 2005 were
$75.5 million, a decrease of $4.7 million, or 5.9%, from pro forma fiscal year 2004. The decrease was due primarily to lower expenses in connection with cost reduction measures.

Interest expense, net.Interest expense, net was $82.0 million for fiscal 2005, an increase of $21.1 million
from pro forma fiscal 2004. The increase in interest expense was attributable to the issuance of the 101/2% senior discount notes in October 2004 and the higher interest rates on
our variable rate term loans, offset somewhat by the impact of lower debt balances due to the $45.0 million in prepayments on our term loans during 2005. On December 19, 2005, interest
rates on our variable rate term loans were increased in connection with an amendment to the credit agreement relating to Polypore, Inc.'s senior secured credit facility.

Income taxes, net.Income taxes as a percentage of income before income taxes for fiscal 2005 was 74.6%, as compared to the
statutory rate of 38.0% for pro forma fiscal 2004. The income tax expense recorded in the financial statements differs from the Federal statutory income tax rate due to a variety of factors, including
state income taxes, the mix of income between U.S. and foreign jurisdictions taxed
at varying rates, certain export sales which are excluded from taxable income and various changes in estimates of permanent differences and valuation allowances. In 2005, the impact of permanent
differences on the effective tax rate was exacerbated by the relatively low consolidated income before income taxes.

Business restructuring

For 2006, 2005 and 2004, our results have included business restructuring charges that significantly affected operating results. All restructuring charges, except
for the asset impairments, will result in cash outflows which will be funded by cash from operations. The pre-tax components of restructuring activity in 2006 were as follows:

|(in millions)            |                             | Balance at
December 31,
2005 |     | Restructuring
charges |   | Non-cash
charges |      | Cash
payments |       | Foreign
currency
translation |   | Balance at
December 30,
2006
|------------------------ | --------------------------- | ---------------------------- | --- | --------------------- | - | ---------------- | ---- | ------------- | ----- | ---------------------------- | - | ----------------------------
|2006 Restructuring Plan: |                             |                              |     |                       |   |                  |      |               |       |                              |   |                             
|                         | Severance and benefit costs |                              | $   |                      |   | $                | 11.4 |               | $     |                             |   | $                           
|                         | Asset impairments           |                              |     |                      |   |                  | 17.5 |               |       | (17.5                        | ) |                             
|                         | Other                       |                              |     |                      |   |                  | 5.6  |               |       |                             |   |                             
|                         |                             |                             
|                         |                             |                              |    |                       |   | 34.5             |      |               | (17.5 | )                            |   | (0.4                        
|2005 Restructuring Plan: |                             |                              |     |                       |   |                  |      |               |       |                              |   |                             
|                         | Severance and benefit costs |                              |     | 1.5                   |   |                  | 0.6  |               |       |                             |   |                             
|                         | Other                       |                              |     |                      |   |                  | 1.3  |               |       |                             |   |                             
|                         |                             |                             
|                         |                             |                              | 1.5 |                       |   | 1.9              |      |               |      |                              |   | (2.7                        
|2004 Restructuring Plan: |                             |                              |     |                       |   |                  |      |               |       |                              |   |                             
|                         | Severance and benefit costs |                              |     | 4.1                   |   |                  |     |               |       |                             |   |                             
|                         | Other                       |                              |     | 0.3                   |   |                  | 0.6  |               |       |                             |   |                             
|                         |                             |                             
|                         |                             |                              | 4.4 |                       |   | 0.6              |      |               |      |                              |   | (4.0                        
|                         |                             |                             
|Total                    |                             | $                            | 5.9 |                       | $ | 37.0             |      | $             | (17.5 | )                            | $ | (7.1                        
|                         |                             |                             

30

---



The pre-tax components of restructuring activity in 2005 were as follows:

|(in millions)            |                                 | Balance at
January 1,
2005 |      | Restructuring
charges |   | Non-cash
charges |      | Cash
payments |      | Foreign
currency
translation |   | Balance at
December 31,
2005
|------------------------ | ------------------------------- | -------------------------- | ---- | --------------------- | - | ---------------- | ---- | ------------- | ---- | ---------------------------- | - | ----------------------------
|2005 Restructuring Plan: |                                 |                            |      |                       |   |                  |      |               |      |                              |   |                             
|                         | Severance and benefit costs     |                            | $    |                      |   | $                | 4.9  |               | $    |                             |   | $                           
|                         | Asset disposals and impairments |                            |      |                      |   |                  | 1.3  |               |      | (1.3                         | ) |                             
|                         | Other                           |                            |      |                      |   |                  | 0.7  |               |      |                             |   |                             
|                         |                                 |                           
|                         |                                 |                            |     |                       |   | 6.9              |      |               | (1.3 | )                            |   | (3.9                        
|2004 Restructuring Plan: |                                 |                            |      |                       |   |                  |      |               |      |                              |   |                             
|                         | Severance and benefit costs     |                            |      | 14.9                  |   |                  | (0.1 | )             |      |                             |   |                             
|                         | Raw materials                   |                            |      | 1.3                   |   |                  | (0.2 | )             |      |                             |   |                             
|                         | Other                           |                            |      |                      |   |                  | 2.1  |               |      |                             |   |                             
|                         |                                 |                           
|                         |                                 |                            | 16.2 |                       |   | 1.8              |      |               |     |                              |   | (12.4                       
|                         |                                 |                           
|Total                    |                                 | $                          | 16.2 |                       | $ | 8.7              |      | $             | (1.3 | )                            | $ | (16.3                       
|                         |                                 |                           

We expect to make payments against the restructuring reserve of approximately $17.2 million in 2007, with the remaining payments expected
to be made in 2008 and 2009.

2006 Restructuring plan.In response to a significant decline in demand for cellulosic hemodialysis membranes driven by a
shift in industry demand toward synthetic membranes, we decided to exit the production of cellulosic membranes and realign the cost structure of our separations media segment at our Wuppertal, Germany
facility. On August 24, 2006, we announced a layoff of 150 employees. Production of cellulosic hemodialysis membranes ceased on December 27, 2006 and the majority of the employees were
laid off effective January 1, 2007. The total cost of the plan is expected to be approximately $17.0 million, consisting of $11.4 million for the employee layoffs and
$5.6 million for other costs related to the shutdown of portions of the Wuppertal facility that will no longer be used. The
other costs included in the restructuring plan are related to local regulations surrounding complete or partial shutdowns of a facility. We expect to complete these activities by the end of the second
quarter of 2008. The timing, scope and costs of these restructuring measures are subject to change as we proceed with our restructuring plans and further evaluate our business needs and costs. The
restructuring charge also included a non-cash impairment charge of $17.5 million for buildings and equipment used in the production of cellulosic hemodialysis membranes. Remaining
sales of cellulosic membranes are expected to be approximately $16.0 million over the next two years, with the majority of these sales occurring in 2007.

2005 Restructuring plan.In order to better accommodate customer growth and related demand for both lead-acid and
lithium battery separators in the greater Asian market, we transferred certain assets of our energy storage segment from Europe and the United States to our facilities in Thailand and China. The
capacity realignment plan included the closure of our facility in Feistritz, Austria, the downsizing of our Norderstedt, Germany facility and the relocation of certain assets from these two plants to
our facilities in Prachinburi, Thailand. During 2006, we completed installation and started production with the assets relocated to Thailand. Additionally, finishing equipment from our facility in
Charlotte, North Carolina was relocated to our facility in Shanghai, China. The total cost of the realignment plan is expected to be approximately $8.8 million, of which $8.7 million has
been recognized through December 30, 2006, and the remaining expenses will be recognized in 2007. In addition to the benefit of realigning capacity with market growth, we expect to realize
costs savings, with the full impact expected to be realized in 2007. The timing and scope of these restructuring measures are subject to change as we further evaluate our business needs and costs.

31

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As part of this realignment plan, we announced on June 16, 2005 layoffs of 110 employees at our Feistritz, Austria, Norderstedt, Germany and Charlotte, North Carolina facilities.
The total cost of the employee layoffs and ATZ early retirement program is expected to be approximately $5.5 million, of which $5.4 million has been recognized through
December 30, 2006, and the remaining expenses will be recognized in 2007.

We
recorded a non-cash impairment charge of $1.3 million in the three months ended July 2, 2005 for property, plant and equipment located at the Feistritz,
Austria facility that will not be relocated to Prachinburi, Thailand.

We
also incurred approximately $2.0 million of disassembly, moving, and legal expenses.

2004 Restructuring plan.In an effort to manage costs and in response to the decision of a customer to outsource its dialyzer
production, we implemented a number of cost reduction measures in 2004 relating to the separations media segment, including employee layoffs, the relocation of certain research and development
operations conducted in a leased facility in Europe to facilities where the related manufacturing operations are conducted and other cost reductions.

On
September 3, 2004, we announced a layoff of approximately 200 employees at our Wuppertal, Germany facility. We recorded a charge for severance and benefit costs related
to the employee layoffs of $13.9 million during the period ended January 1, 2005. In connection with a customer's outsourcing of its dialyzer production, we also recorded a charge for
raw materials, a portion of which we were obligated to purchase under an existing purchase commitment, of $1.8 million in cost of goods sold during the period ended January 1, 2005.
Finally, we incurred expenses of approximately $2.7 million in connection with the relocation of our research and development operations. All activities and charges relating to the 2004
restructuring plan have been completed as of December 30, 2006.

Foreign Operations

We manufacture our products at 11 strategically located facilities in North America, Europe and Asia. Net sales from the foreign locations were approximately
$298.2 million for fiscal 2006, $272.7 million for fiscal 2005 and $289.0 million for pro forma fiscal 2004. Typically, we sell our products in the currency of the country where
the manufacturing facility that produces the product is located. Sales to foreign
customers are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. There
can be no assurance that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on our business or market opportunities within such
governments' countries. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to our operations and growth strategy.

Seasonality

Operations at our European production facilities are traditionally subject to shutdowns during the month of August each year for employee vacations. As a result,
sales and net income during the third quarter of fiscal 2006 were, and during the third quarter of any fiscal year in the future may be, lower than sales and net income in other quarters during the
same fiscal year. In view of the seasonal fluctuations, we believe that comparisons of our operating results for the third quarter of any fiscal year with those of the other quarters during the same
fiscal year may be of limited relevance in predicting our future financial performance.

32

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Liquidity and capital resources

The information presented below for pro forma fiscal 2004 has been derived by combining our cash flow activity for the period from January 4, 2004 through
May 1, 2004 with the period from May 2, 2004 through January 1, 2005 and applying the pro forma adjustments for the Transactions.

Cash
and cash equivalents increased to $54.7 million at December 30, 2006 from $28.1 million at December 31, 2005, due to cash flow from operations of
$50.0 million and the positive impact of exchange rate changes on cash and cash equivalents of $3.6 million, offset by capital expenditures of $24.0 million and debt repayments of
$3.4 million.

Operating activities.Net cash provided by operating activities was $50.0 million in fiscal 2006, as compared to
$64.2 million in fiscal 2005. Cash provided by operating activities in fiscal 2006 included net income before non-cash expenses of $60.6 million, offset to some extent by an
increase in working capital of $10.7 million, excluding the impact of foreign exchange rate fluctuations. Accounts receivable increased by approximately $7.7 million (excluding the
$6.1 million increase due to movements in the dollar/euro exchange rate) due to the increase in sales during the fourth quarter of 2006 as compared to the same period last year. Days sales
outstanding decreased by approximately 6%
at December 30, 2006 and were impacted by normal fluctuations in the mix of sales by country and customer. Inventories increased approximately $2.7 million (excluding the
$4.5 million increase due to movements in the dollar/euro exchange rate) due to the build-up of cellulosic inventories in connection with the shutdown of cellulosic production on
December 27, 2006, offset by the decline in lithium inventories that were built up during 2005 in preparation for equipment upgrades that occurred in the first quarter of 2006. Cellulosic
inventory will decline as we make final shipments to our customers. Accounts payable and accrued liabilities increased by approximately $20.0 million (excluding the $5.4 million increase
due to movements in the dollar/euro exchange rate) primarily due to the 2006 business restructuring plan and performance-based incentive costs.

Net
cash provided by operating activities was $64.2 million in fiscal 2005, as compared to $54.9 million in pro forma fiscal 2004. Cash provided by operating activities in
fiscal 2005 consisted of net income before non-cash expenses of $65.3 million, offset to some extent by an increase in working capital of $1.1 million, excluding the impact
of foreign exchange rate fluctuations. Accounts receivable increased by $10.4 million (excluding the $7.5 million decrease due to the dollar/euro exchange rate) and days sales
outstanding decreased 14%, due to the timing of payments from customers and the collection of a receivable in 2005 due from a customer that decided to outsource its dialyzer production in 2004.
Inventory increased by $4.3 million (excluding the $5.6 million decrease due to the dollar/euro exchange rate) due primarily to higher production of lithium battery separators in
preparation for equipment upgrades in the first quarter of 2006 and production of cellulosic hemodialysis membranes as we began to produce for customer sales commitments. Accounts payable and accrued
liabilities decreased by $19.4 million (net of a $3.6 million decrease due to the dollar/euro exchange rate). The decrease is predominantly due to cash payments of $16.3 million
made in connection with the 2004 and 2005 business restructurings.

Investing activities.Capital expenditures were $24.0 million, $13.0 million and $15.4 million in fiscal
2006, fiscal 2005 and pro forma 2004, respectively. We are currently evaluating a number of growth opportunities which could result in higher levels of capital spending in 2007.

Financing activities.Cash used in financing activities was $3.0 million for fiscal 2006, $52.8 million for
fiscal 2005 and $842.4 million for pro forma fiscal 2004. During fiscal 2005, we made optional prepayments totaling $45.0 million on the term loans under the credit agreement for the
senior secured credit facilities. After giving effect to the 2005 optional prepayments, the term loans did not require quarterly principal payments until December 29, 2006.

33

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We
intend to fund our ongoing operations through cash generated by operations and availability under the credit agreement relating to the senior secured credit facilities. As part of the
2004 Transactions, Polypore, Inc. incurred substantial debt under the credit agreement and from the issuance of the 83/4% senior subordinated notes, with interest payments on
this indebtedness substantially increasing our liquidity requirements. As of December 30, 2006, Polypore Inc.'s cash interest requirements for the next 12 months are expected to
be approximately $67.4 million.

The
credit agreement for the senior secured credit facilities is comprised of a $370.0 million term loan ($327.3 million outstanding at December 30, 2006) and a
€36.0 million term loan facility ($41.9 million outstanding at December 30, 2006) each due in 2011 and a $90.0 million revolving credit facility due in 2010
(no amounts were outstanding as December 30, 2006). The credit agreement permits Polypore, Inc. to incur additional senior secured debt at the option of participating lenders, subject to the
satisfaction of certain conditions.

Borrowings
under the credit agreement bear interest at our choice of the Eurodollar rate or adjusted base rate, in each case, plus an applicable margin, subject to adjustment based on a
pricing grid. At December 30, 2006, the applicable margin percentage was 2.00% for alternate base rate loans and 3.00% for adjusted LIBO rate loans. At December 30, 2006, the interest
rates on our U.S. dollar term loan and Eurodollar term loan facilities were 8.32% and 6.49%, respectively.

The
credit agreement requires Polypore, Inc. to meet a minimum interest coverage ratio, a maximum leverage ratio and a maximum capital expenditures limitation. Under the credit
agreement, compliance with the minimum interest coverage ratio and maximum leverage ratio tests is determined based on a calculation of Adjusted EBITDA in which certain items are added back to EBITDA.

Adjusted
EBITDA for Polypore, Inc., as defined in the credit agreement for the senior secured credit facilities, is calculated as follows:

|                  |                                                                 | Fiscal Year |      
|----------------- | --------------------------------------------------------------- | ----------- | -----
|
|                  |                                                                
|Net income (loss) |                                                                 | $           | (12.7
|Add/Subtract:     |                                                                 |             |      
|                  | Depreciation and amortization                                   |             |      
|                  | Interest expense, net                                           |             |      
|                  | Income taxes                                                    |             |      
|                  | Operating lease payments(1)                                     |             |      
|                  | Stock compensation expense from Polypore International, Inc.(2) |             |      
|                  | Foreign currency (gain) loss                                    |             |      
|                  | Loss on disposal of property, plant, and equipment              |             |      
|                  | Environmental expenses(3)                                       |             |      
|                  | Asset impairment(4)                                             |             |      
|                  | Business restructuring(5)                                       |             |      
|                  | Other non-cash charges(6)                                       |             |      
|                  |                                                                 |             |      
|Adjusted EBITDA   |                                                                 | $           | 139.8
|                  |                                                                 |             |      

---

34

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The
calculation of the minimum interest coverage ratio for Polypore, Inc. is as follows:

|(in millions)                                                     |  | Twelve Months Ended
December 30, 2006
|----------------------------------------------------------------- |  | -------------------------------------
|Adjusted EBITDA                                                   |  | $                                    
|Consolidated interest expense, as defined in the credit agreement |  | $                                    
|Actual interest coverage ratio                                    |  |                                      
|Permitted minimum interest coverage ratio                         |  |                                      

Under
the credit agreement for the senior secured credit facilities, Polypore, Inc. is required to maintain a ratio of Adjusted EBITDA to interest expense for any four consecutive
fiscal quarters ending during any of the following periods or on any of the following dates of at least the following ratios:

|Date or period                                   |  | Ratio       
|------------------------------------------------ |  | ------------
|April 1, 2006 through March 31, 2007             |  | 1.70 to 1.00
|June 30, 2007                                    |  | 1.75 to 1.00
|September 29, 2007 through June 28, 2008         |  | 1.90 to 1.00
|September 27, 2008 through January 3, 2009       |  | 2.00 to 1.00
|January 4, 2009 through January 2, 2010          |  | 2.75 to 1.00
|April 3, 2010 and each fiscal quarter thereafter |  | 3.00 to 1.00

The
calculation of the maximum leverage ratio for Polypore, Inc. is as follows:

|(in millions)                                    |  | Twelve Months Ended
December 30, 2006
|------------------------------------------------ |  | -------------------------------------
|Indebtedness, as defined in the credit agreement |  | $                                    
|Adjusted EBITDA                                  |  | $                                    
|Actual leverage ratio                            |  |                                      
|Permitted maximum leverage ratio                 |  |                                      

35

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Under
the credit agreement, Polypore, Inc. is required to maintain a ratio of total indebtedness to Adjusted EBITDA at the end of any quarter ending during any of the following
periods or on any of the following dates of not more than the following ratios:

|Date or period                                     |  | Ratio       
|-------------------------------------------------- |  | ------------
|April 1, 2006 through March 31, 2007               |  | 6.90 to 1.00
|June 30, 2007                                      |  | 6.75 to 1.00
|September 29, 2007                                 |  | 6.50 to 1.00
|December 29, 2007                                  |  | 6.25 to 1.00
|March 29, 2008                                     |  | 6.00 to 1.00
|June 28, 2008                                      |  | 5.75 to 1.00
|September 27, 2008 through January 3, 2009         |  | 5.50 to 1.00
|January 4, 2009 through October 3, 2009            |  | 4.25 to 1.00
|January 2, 2010 and each fiscal quarter thereafter |  | 4.00 to 1.00

In
addition, the credit agreement contains certain restrictive covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions
with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The
facilities also contain certain customary events of defaults, subject to grace periods, as appropriate. We believe that annual capital expenditure limitations imposed by the senior credit facilities
will not significantly inhibit us from meeting our ongoing capital expenditure needs.

Future
principal debt payments are expected to be paid out of cash flows from operations, borrowings on our revolving credit facility and future refinancing of our debt.

Polypore, Inc.'s
83/4% senior subordinated notes ($422.6 million outstanding at December 30, 2006) will mature in 2012 and are guaranteed by most of
our existing and future domestic restricted subsidiaries, subject to certain exceptions. Except under certain circumstances, the 83/4% senior subordinated notes do not require principal
payments prior to their maturity in 2012. Interest on the 83/4% senior subordinated notes is payable semi-annually in cash. The 83/4% senior subordinated
notes contain
customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments.

Our
101/2% senior discount notes will mature in 2012 and, except under certain circumstances, such notes do not require principal payments prior to their maturity in 2012.
Interest on the 101/2% senior discount notes will be payable on April 1 and October 1 of each year, commencing on April 1, 2009 in cash. The 101/2%
senior discount notes contain customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments. Polypore International is the
sole obligor of the 101/2% senior discount notes and, although, as a holding company, we are dependent on the cash flow (and possibly the assets) of our subsidiaries to meet our debt
obligations, our subsidiaries have no obligation under the 101/2% senior discount notes.

We
believe we have sufficient liquidity to meet our cash requirements over both the short (next 12 months) and long term (in relation to our debt service requirements). In
evaluating the sufficiency of our liquidity for both the shorter and longer term, we considered the expected cash flow to be generated by our operations and the available borrowings under the credit
agreement for Polypore, Inc.'s senior secured credit facilities compared to our anticipated cash requirements for debt service, working capital (including restructuring payments), cash taxes and
capital expenditures as well as funding requirements for long-term liabilities. We anticipate that our operating cash flow, together with borrowings under the revolving credit facility,
will be sufficient to meet our anticipated future operating expenses, capital expenditures and debt service obligations as they become due for at least the next 12 months. However, our ability
to make scheduled payments of principal, to pay interest on or to

36

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refinance
our indebtedness and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative,
regulatory, business and other factors beyond our control. See "Item 1A. Risk factors" in this Annual Report on Form 10-K.

From
time to time, we may explore additional financing methods and other means to lower our cost of capital, which could include stock issuance or debt financing and the application of
the proceeds therefrom to the repayment of bank debt or other indebtedness. In addition, in connection with any future acquisitions, we may require additional funding which may be provided in the form
of additional debt or equity financing or a combination thereof. There can be no assurance that any additional financing will be available to us on acceptable terms.

Contractual Obligations

The following table sets forth our contractual obligations at December 30, 2006. Some of the amounts included in this table are based on management's
estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other actions. Because these estimates and assumptions are necessarily subjective,
the timing and amount of payments under these obligations may vary from those reflected in this table. For more information on these obligations, see the notes to consolidated financial statements
included in "Item 8. Financial Statements and Supplementary Data."

|                                                |  | Payment due by Period
|----------------------------------------------- |  | ---------------------
|
|
|Long-term debt, including current portion(1)(2) |  | $                    
|83/4% Notes(3)(4)                               |  |                      
|101/2% senior discount notes(5)                 |  |                      
|Capital lease obligation(6)                     |  |                      
|Operating lease obligations(7)                  |  |                      
|Business restructuring                          |  |                      
|                                                |  |                      
|                                                |  | $                    
|                                                |  |                      

---

37

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Off Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the
Company's financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

New Accounting Standards

In June 2005, the FASB issued Statement No. 154,Accounting Changes and Error Corrections("FAS 154"). This statement establishes new standards on accounting for changes in accounting principles. Pursuant to the new rules, all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is impracticable to do so. FAS 154 completely replaces APB Opinion No. 20 and FAS 3, though it carries forward the
guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity and the correction of errors. The impact of this standard, if any, will depend
upon accounting changes or corrections of errors that may occur in future periods. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after
December 15, 2005.

On
January 1, 2006, the Company adopted EITF Issue No. 05-5,Accounting for Early Retirement or Postemployment Programs with Specific
Features (Such As Terms Specified in Altersteilzeit Early Retirement Arrangements)("EITF 05-5"). The EITF agreed with FASB staff observations that the salary
components of Type I and Type II ATZ arrangements (excluding the bonus and additional contributions into the German government pension scheme) should be recognized over the period from the point at
which the ATZ period begins until the end of the active service period. Additionally, the portion of the salary that is deferred under a Type II arrangement should be discounted if payment is expected
to be deferred for a period longer than one year. In addition, the EITF reached a consensus that the bonus feature and the additional contributions into the German government pension scheme
(collectively, the

38

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additional
compensation) under a Type II ATZ arrangement should be accounted for as a postemployment benefit under Statement 112. An entity should recognize the additional compensation over the period
from the point at which the employee signs the ATZ contract until the end of the active service period. The EITF also concluded that the employer should recognize the government subsidy when it meets
the necessary criteria and is entitled to the subsidy. As a result of adopting this consensus, which was treated as a change in accounting estimate effected by a change in accounting principle, the
Company is required to recognize the bonus feature of its ATZ arrangements over the remaining active service period of the employees that have signed ATZ contracts. The Company had previously accrued
for the bonus feature of its ATZ arrangements through purchase accounting in connection with an acquisition in 2002. As a result of the adoption of EITF 05-5, the Company reduced the
accrual for postemployment benefits and recognized $2.6 million in other income. The reduction in the accrual decreased the 2006 net loss by $1.6 million, or $9.51 per share. As a result
of adopting EITF 05-5, the Company's loss before income taxes and net loss increased by $1.2 million and $0.8 million, respectively, for the year ended December 30,
2006. Additionally, basic and diluted loss per share increased by $4.53.

On
January 1, 2006, we adopted FASB Statement No. 123 (R),Share-Based Payment("FAS 123(R)") using the modified
prospective transition method, which does not require the restatement of prior periods. Prior to adopting FAS 123(R), we accounted for employee share-based compensation using the fair value
method under FASB Statement No. 123,Accounting for Stock Based Compensation("FAS 123"). FAS 123(R) requires forfeitures to be
estimated at the time of grant and the estimate should be revised, if necessary, in subsequent periods if actual forfeitures differ materially from those estimates. Prior to the adoption of
FAS 123(R), we accounted for forfeitures as they occurred as allowed under FAS 123. The change in accounting for forfeitures under FAS 123(R) resulted in a $0.2 million
charge, net of applicable income taxes, that was recorded as a cumulative effect of a change in accounting principle. As a result of adopting FAS 123(R), our loss before income taxes and net
loss decreased by $0.1 million for the year ended December 30, 2006. Additionally, basic and diluted loss per share decreased by $0.47. The adoption of FAS 123(R) did not have a
significant impact on cash flows from operations or financing activities.

In
June 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement
109("FIN 48"), which clarifies the accounting for uncertain tax positions. This Interpretation allows the tax effects from an uncertain tax position to be recognized in a
company's financial statements if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are
currently evaluating the impact of adopting FIN 48 will have on our consolidated financial statements.

In
September 2006, the FASB issued FASB Statement No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)("FAS 158"). FAS 158 requires an employer to recognize the funded status of a
defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in that funded status through comprehensive income in the year in which the changes occur.
This requirement will be effective for fiscal years ending after June 15, 2007. SFAS 158 also requires an employer to measure defined benefit plan assets and obligations as of the date
of its fiscal year-end, with limited exceptions. This requirement is effective for fiscal years ending after December 15, 2008. We are currently evaluating the impact the adoption
of FAS 158 will have on our consolidated financial statements.

39

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, which are potential losses arising from adverse changes in market rates and prices, such as interest rates and foreign
exchange fluctuations. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest rate risk

At December 30, 2006, we had fixed rate debt of approximately $673.6 million and variable rate debt of approximately $369.2 million. The
pre-tax earnings and cash flow impact resulting from a 100 basis point increase in interest rates on our variable rate debt, holding other variables constant, would be approximately
$3.7 million per year. We currently are not a party to any interest rate hedging arrangements.

Currency risk

Outside of the United States, we maintain assets and operations in Europe and, to a lesser extent, Asia. The results of operations and financial position of our
foreign operations are principally measured in their respective currency and translated into U.S. dollars. As a result, exposure to foreign currency gains and losses exists. The reported income of
these subsidiaries will be higher or lower depending on a weakening or strengthening of the U.S. dollar against the respective foreign currency. Our subsidiaries and affiliates also purchase and sell
products and services in various currencies. As a result, we may be exposed to cost increases relative to the local currencies in the markets in which we sell. Because a different percentage of our
sales are in a foreign currency than our costs, a change in the relative value of the U.S. dollar could have a disproportionate impact on our sales compared to our costs, which could impact our
margins. A portion of our assets are based in our foreign locations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the effect of
such translation reflected in other comprehensive income (loss). In connection with the Transactions, we obtained euro-denominated senior secured and senior subordinated notes that
effectively hedge the Company's net investment in foreign subsidiaries. Therefore, foreign currency gains and losses resulting from the translation of the euro-denominated debt is included
in accumulated other comprehensive income (loss). Accordingly, our consolidated shareholders' equity will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency, primarily the euro.

The
dollar/euro exchange rates used in our financial statements for the periods ended as set forth below were as follows:

|                    |  | Fiscal Year
|------------------- |  | -----------
|
|Period end rate     |  | 1.3170     
|Period average rate |  | 1.2552     

Our
strategy for management of currency risk relies primarily on conducting our operations in a country's respective currency and may, from time to time, involve currency derivatives. As
of December 30, 2006, we did not have any foreign currency derivatives outstanding.

Item 8. Financial Statements and Supplementary Data

The Company's report of independent registered public accounting firm and consolidated financial statements and related notes appear on the following pages of
this Annual Report on Form 10-K.

40

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Report of Independent Registered Public Accounting Firm

The
Board of Directors
Polypore International, Inc.

We
have audited the accompanying consolidated balance sheets of Polypore International, Inc. as of December 30, 2006 and December 31, 2005, and the related
consolidated statements of operations, shareholders' equity, and cash flows for the years ended December 30, 2006 and December 31, 2005, and for the period from May 2, 2004 to
January 1, 2005 (Successor), and the consolidated statement of operations, shareholders' equity, and cash flows for the period January 4, 2004 to May 1, 2004 (Predecessor). Our
audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Polypore International, Inc. at
December 30, 2006 and December 31, 2005, and the consolidated results of its operations and its cash flows for the years ended December 30, 2006 and December 31, 2005, and
for the period from May 2, 2004 to January 1, 2005 (Successor), and the consolidated results of its operations and cash flows for the period January 4, 2004 to May 1, 2004
(Predecessor), in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the information set forth therein.

As
discussed in Note 2 to the consolidated financial statements, the Company adopted Emerging Issues Task Force No. 05-5, "Accounting
for Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early Retirement Arrangements)" and changed its method of
accounting for share-based compensation.

|Charlotte, North Carolina
March 9, 2007 |  | /s/ERNST & YOUNG LLP
|--------------------------------------- |  | --------------------

41

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Polypore International, Inc.
Consolidated balance sheets

|(in thousands, except share data)              |                                                                                                                                                             | December 30, 2006 |           | December 31, 2005 |  
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | --------- | ----------------- | -
|Assets                                         |                                                                                                                                                             |                   |           |                   |  
|Current assets:                                |                                                                                                                                                             |                   |           |                   |  
|                                               | Cash and cash equivalents                                                                                                                                   |                   | $         | 54,712            |  
|                                               | Accounts receivable, net                                                                                                                                    |                   |           | 102,110           |  
|                                               | Inventories                                                                                                                                                 |                   |           | 67,741            |  
|                                               | Deferred income taxes                                                                                                                                       |                   |           |                  |  
|                                               | Prepaid and other                                                                                                                                           |                   |           | 13,386            |  
|                                               |                                                                                                                                                             |                   |          
|Total current assets                           |                                                                                                                                                             |                   | 237,949   |                   |  
|Property, plant and equipment, net             |                                                                                                                                                             |                   | 363,526   |                   |  
|Goodwill                                       |                                                                                                                                                             |                   | 567,587   |                   |  
|Intangibles and loan acquisition costs, net    |                                                                                                                                                             |                   | 204,645   |                   |  
|Environmental indemnification receivable       |                                                                                                                                                             |                   | 15,236    |                   |  
|Other                                          |                                                                                                                                                             |                   | 917       |                   |  
|                                               |                                                                                                                                                             |                   |          
|Total assets                                   |                                                                                                                                                             | $                 | 1,389,860 |                   | $
|                                               |                                                                                                                                                             |                   |          
|Liabilities and shareholders' equity           |                                                                                                                                                             |                   |           |                   |  
|Current liabilities:                           |                                                                                                                                                             |                   |           |                   |  
|                                               | Accounts payable                                                                                                                                            |                   | $         | 25,494            |  
|                                               | Accrued liabilities                                                                                                                                         |                   |           | 55,883            |  
|                                               | Income taxes payable                                                                                                                                        |                   |           | 3,689             |  
|                                               | Current portion of debt                                                                                                                                     |                   |           | 3,938             |  
|                                               | Current portion of capital lease obligation                                                                                                                 |                   |           | 1,377             |  
|                                               |                                                                                                                                                             |                   |          
|Total current liabilities                      |                                                                                                                                                             |                   | 90,381    |                   |  
|Debt, less current portion                     |                                                                                                                                                             |                   | 1,038,837 |                   |  
|Capital lease obligation, less current portion |                                                                                                                                                             |                   | 4,754     |                   |  
|Pension and postretirement benefits            |                                                                                                                                                             |                   | 61,219    |                   |  
|Postemployment benefits                        |                                                                                                                                                             |                   | 4,451     |                   |  
|Environmental reserve, less current portion    |                                                                                                                                                             |                   | 22,935    |                   |  
|Deferred income taxes                          |                                                                                                                                                             |                   | 94,347    |                   |  
|Other                                          |                                                                                                                                                             |                   | 3,274     |                   |  
|Commitments and contingencies                  |                                                                                                                                                             |                   |           |                   |  
|Shareholders' equity:                          |                                                                                                                                                             |                   |           |                   |  
|                                               | Common stock, $.01 par value350,000 shares authorized, 171,938 and 171,421 issued and outstanding at December 30, 2006 and December 31, 2005, respectively |                   |           | 2                 |  
|Paid-in capital                                |                                                                                                                                                             |                   | 125,485   |                   |  
|Retained deficit                               |                                                                                                                                                             |                   | (51,776   | )                 |  
|Accumulated other comprehensive loss           |                                                                                                                                                             |                   | (4,049    | )                 |  
|                                               |                                                                                                                                                             |                   |          
|                                               |                                                                                                                                                             |                   | 69,662    |                   |  
|                                               |                                                                                                                                                             |                   |          
|Total liabilities and shareholders' equity     |                                                                                                                                                             | $                 | 1,389,860 |                   | $
|                                               |                                                                                                                                                             |                   |          

See
notes to consolidated financial statements

42

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Polypore International, Inc.
Consolidated statements of operations

|                                                                                                                 |                                                                                                          | Successor |         | Predecessor |  
|---------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | --------- | ------- | ----------- | -
|
|
|Net sales                                                                                                        |                                                                                                          | $         | 479,677 |             | $
|Cost of goods sold                                                                                               |                                                                                                          |           | 314,736 |             |  
|                                                                                                                 |                                                                                                          |           |        
|Gross profit                                                                                                     |                                                                                                          |           | 164,941 |             |  
|Selling, general and administrative expenses                                                                     |                                                                                                          |           | 87,900  |             |  
|Business restructuring                                                                                           |                                                                                                          |           | 37,027  |             |  
|In process research and development                                                                              |                                                                                                          |           |        |             |  
|Other                                                                                                            |                                                                                                          |           |        |             |  
|                                                                                                                 |                                                                                                          |           |        
|Operating income                                                                                                 |                                                                                                          |           | 40,014  |             |  
|Other (income) expense:                                                                                          |                                                                                                          |           |         |             |  
|                                                                                                                 | Interest expense, net                                                                                    |           |         | 92,287      |  
|                                                                                                                 | Foreign currency and other                                                                               |           |         | 3,207       |  
|                                                                                                                 | Change in accounting principle related to postemployment benefits                                        |           |         | (2,593      | )
|                                                                                                                 | Unrealized gain on derivative instrument                                                                 |           |         |            |  
|                                                                                                                 |                                                                                                          |           |        
|                                                                                                                 |                                                                                                          |           | 92,901  |             |  
|                                                                                                                 |                                                                                                          |           |        
|Income (loss) before income taxes                                                                                |                                                                                                          |           | (52,887 | )           |  
|Income taxes                                                                                                     |                                                                                                          |           | (23,087 | )           |  
|                                                                                                                 |                                                                                                          |           |        
|Income (loss) before the cumulative effect of a change in accounting principle                                   |                                                                                                          |           | (29,800 | )           |  
|Cumulative effect of a change in accounting principle related to stock compensation, net of income taxes of $139 |                                                                                                          |           | 231     |             |  
|                                                                                                                 |                                                                                                          |           |        
|Net income (loss)                                                                                                |                                                                                                          |           | (29,569 | )           |  
|Redeemable preferred stock dividends                                                                             |                                                                                                          |           |        |             |  
|                                                                                                                 |                                                                                                          |           |        
|Net income (loss) applicable to common stock                                                                     |                                                                                                          | $         | (29,569 | )           | $
|                                                                                                                 |                                                                                                          |           |        
|Net income (loss) per sharebasic and diluted:                                                                   |                                                                                                          |           |         |             |  
|                                                                                                                 | Income (loss) before the cumulative effect of a change in accounting principle                           |           | $       | (173.56     | )
|                                                                                                                 | Cumulative effect of a change in accounting principle related to stock compensation, net of income taxes |           |         | 1.35        |  
|                                                                                                                 |                                                                                                          |           |        
|                                                                                                                 | Net income (loss) per share                                                                              |           | $       | (172.21     | )
|                                                                                                                 |                                                                                                          |           |        
|Weighted average shares outstandingbasic and diluted                                                            |                                                                                                          |           | 171,701 |             |  

See notes to consolidated financial statements

43

---



Polypore International, Inc.
Consolidated statements of shareholders' equity

|(In thousands, except per share data)                                        |  | Common
Stock |   | Paid-in
Capital |   | Retained
Earnings
(deficit) |   | Accumulated
Other
Comprehensive
Income (Loss) |         | Total |   | Comprehensive
Income (Loss) |  
|---------------------------------------------------------------------------- |  | ------------ | - | --------------- | - | --------------------------- | - | --------------------------------------------- | ------- | ----- | - | --------------------------- | -
|
|Predecessor                                                                  |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Balance at January 3, 2004                                                   |  | $            | 2 |                 | $ | 1,718                       |   | $                                             | 124,519 |       | $ | 63,518                      |  
|Net income for the period from January 4, 2004 through May 1, 2004           |  |              |  |                 |   |                            |   |                                               | 26,833  |       |   |                            |  
|Foreign currency translation adjustment, net of income tax expense of $0     |  |              |  |                 |   |                            |   |                                               |        |       |   | (19,883                     | )
|Additional minimum pension liability, net of income tax benefit of $18       |  |              |  |                 |   |                            |   |                                               |        |       |   | 35                          |  
|Cumulative dividends on Class A Preferred Stock$30.27 per share             |  |              |  |                 |   |                            |   |                                               | (424    | )     |   |                            |  
|                                                                             |  |              |  
|Balance at May 1, 2004                                                       |  | $            | 2 |                 | $ | 1,718                       |   | $                                             | 150,928 |       | $ | 43,670                      |  
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Comprehensive income for the period from January 4, 2004 through May 1, 2004 |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Successor                                                                    |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Issuance of common stock in connection with the Transactions                 |  | $            | 2 |                 | $ | 170,383                     |   | $                                             |        |       | $ |                            |  
|Issuance of common stock                                                     |  |              |  |                 |   | 1,036                       |   |                                               |        |       |   |                            |  
|Net loss for the period from May 2, 2004 through January 1, 2005             |  |              |  |                 |   |                            |   |                                               | (19,265 | )     |   |                            |  
|Stock compensation                                                           |  |              |  |                 |   | 239                         |   |                                               |        |       |   |                            |  
|Dividends on Series A Common Stock$275.29 per share                         |  |              |  |                 |   | (47,190                     | ) |                                               |        |       |   |                            |  
|Foreign currency translation adjustment, net of income tax expense of $0     |  |              |  |                 |   |                            |   |                                               |        |       |   | 696                         |  
|                                                                             |  |              |  
|Balance at January 1, 2005                                                   |  |              | 2 |                 |   | 124,468                     |   |                                               | (19,265 | )     |   | 696                         |  
|Comprehensive loss for the period from May 2, 2004 through January 1, 2005   |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Net loss for the year ended December 31, 2005                                |  |              |  |                 |   |                            |   |                                               | (2,942  | )     |   |                            |  
|Stock compensation                                                           |  |              |  |                 |   | 456                         |   |                                               |        |       |   |                            |  
|Foreign currency translation adjustment, net of income tax expense of $0     |  |              |  |                 |   |                            |   |                                               |        |       |   | (6,630                      | )
|Additional minimum pension liability, net of income tax benefit of $2,304    |  |              |  |                 |   |                            |   |                                               |        |       |   | (3,453                      | )
|                                                                             |  |              |  
|Balance at December 31, 2005                                                 |  |              | 2 |                 |   | 124,924                     |   |                                               | (22,207 | )     |   | (9,387                      | )
|Comprehensive loss for the year ended December 31, 2005                      |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Net loss for the year ended December 30, 2006                                |  |              |  |                 |   |                            |   |                                               | (29,569 | )     |   |                            |  
|Stock compensation                                                           |  |              |  |                 |   | 162                         |   |                                               |        |       |   |                            |  
|Issuance of common stock                                                     |  |              |  |                 |   | 399                         |   |                                               |        |       |   |                            |  
|Foreign currency translation adjustment, net of income tax expense of $0     |  |              |  |                 |   |                            |   |                                               |        |       |   | 6,786                       |  
|Additional minimum pension liability, net of income tax benefit of $956      |  |              |  |                 |   |                            |   |                                               |        |       |   | (1,448                      | )
|                                                                             |  |              |  
|Balance at December 30, 2006                                                 |  | $            | 2 |                 | $ | 125,485                     |   | $                                             | (51,776 | )     | $ | (4,049                      | )
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|Comprehensive loss for the year ended December 30, 2006                      |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  
|                                                                             |  |              |   |                 |   |                             |   |                                               |         |       |   |                             |  

See notes to consolidated financial statements

44

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Polypore International, Inc.
Consolidated statements of cash flows

|                                                                                         |                                                                                     | Successor                                |         | Predecessor |       
|---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------- | ------- | ----------- | ------
|
|                                                                                         |                                                                                    
|Operating activities:                                                                    |                                                                                     |                                          |         |             |       
|Net income (loss)                                                                        |                                                                                     | $                                        | (29,569 | )           | $     
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                                     |                                          |         |             |       
|                                                                                         | Depreciation expense                                                                |                                          |         | 42,512      |       
|                                                                                         | Amortization expense                                                                |                                          |         | 17,700      |       
|                                                                                         | Amortization of loan acquisition costs                                              |                                          |         | 2,994       |       
|                                                                                         | Amortization of debt discount                                                       |                                          |         | 24,336      |       
|                                                                                         | Stock compensation                                                                  |                                          |         | 532         |       
|                                                                                         | Inventory purchase accounting                                                       |                                          |         |            |       
|                                                                                         | (Gain) loss on disposal of property, plant and equipment                            |                                          |         | 1,297       |       
|                                                                                         | Foreign currency (gain) loss                                                        |                                          |         | 1,678       |       
|                                                                                         | Unrealized gain on derivative instrument                                            |                                          |         |            |       
|                                                                                         | Deferred income taxes                                                               |                                          |         | (34,908     | )     
|                                                                                         | Business restructuring                                                              |                                          |         | 37,027      |       
|                                                                                         | Change in accounting principle related to postemployment benefits                   |                                          |         | (2,593      | )     
|                                                                                         | Cumulative effect of a change in accounting principle related to stock compensation |                                          |         | (370        | )     
|                                                                                         | Changes in operating assets and liabilities:                                        |                                          |         |             |       
|                                                                                         |                                                                                     | Accounts receivable                      |         |             | (7,659
|                                                                                         |                                                                                     | Inventories                              |         |             | (2,652
|                                                                                         |                                                                                     | Prepaid and other current assets         |         |             | (3,735
|                                                                                         |                                                                                     | Accounts payable and accrued liabilities |         |             | (20   
|                                                                                         |                                                                                     | Income taxes payable                     |         |             | (1,025
|                                                                                         |                                                                                     | Other, net                               |         |             | 4,420 
|                                                                                         |                                                                                     |                                          |        
|Net cash provided by operating activities                                                |                                                                                     |                                          | 49,965  |             |       
|Investing activities:                                                                    |                                                                                     |                                          |         |             |       
|Purchases of property, plant and equipment                                               |                                                                                     |                                          | (23,973 | )           |       
|Proceeds from sale of property, plant and equipment                                      |                                                                                     |                                          | 61      |             |       
|Acquisitions, net of cash acquired                                                       |                                                                                     |                                          |         |             |       
|                                                                                         |                                                                                     |                                          |        
|Net cash used in investing activities                                                    |                                                                                     |                                          | (23,912 | )           |       
|Financing activities:                                                                    |                                                                                     |                                          |         |             |       
|Proceeds from debt                                                                       |                                                                                     |                                          |        |             |       
|Principal payments on debt                                                               |                                                                                     |                                          | (3,433  | )           |       
|Borrowings on revolving credit agreement                                                 |                                                                                     |                                          |        |             |       
|Payments on revolving credit agreement                                                   |                                                                                     |                                          |        |             |       
|Loan acquisition costs                                                                   |                                                                                     |                                          | (15     | )           |       
|Issuance of common stock                                                                 |                                                                                     |                                          | 399     |             |       
|Issuance of nonconvertible preferred stock                                               |                                                                                     |                                          |        |             |       
|Redemption of nonconvertible preferred stock                                             |                                                                                     |                                          |        |             |       
|Payment of dividends                                                                     |                                                                                     |                                          |        |             |       
|                                                                                         |                                                                                     |                                          |        
|Net cash provided by (used in) financing activities                                      |                                                                                     |                                          | (3,049  | )           |       
|Effect of exchange rate changes on cash and cash equivalents                             |                                                                                     |                                          | 3,648   |             |       
|                                                                                         |                                                                                     |                                          |        
|Net increase (decrease) in cash and cash equivalents                                     |                                                                                     |                                          | 26,652  |             |       
|Cash and cash equivalents at beginning of period                                         |                                                                                     |                                          | 28,060  |             |       
|                                                                                         |                                                                                     |                                          |        
|Cash and cash equivalents at end of period                                               |                                                                                     | $                                        | 54,712  |             | $     
|                                                                                         |                                                                                     |                                          |        
|Supplemental cash flow information                                                       |                                                                                     |                                          |         |             |       
|Cash paid for interest                                                                   |                                                                                     | $                                        | 65,944  |             | $     
|Cash paid (refunds received) for income taxes                                            |                                                                                     |                                          | 12,985  |             |       
|Supplemental non-cash financing activities                                               |                                                                                     |                                          |         |             |       
|Unpaid dividends on preferred stock                                                      |                                                                                     |                                          |        |             |       
|Equipment financed under capital lease                                                   |                                                                                     |                                          |        |             |       
|Acquisition                                                                              |                                                                                     |                                          |         |             |       
|Fair value of assets acquired                                                            |                                                                                     |                                          |        |             |       
|Liabilities assumed and incurred                                                         |                                                                                     |                                          |        |             |       
|Cash paid                                                                                |                                                                                     |                                          |        |             |       

See notes to consolidated financial statements

45

---





Polypore International, Inc.        Notes to consolidated financial statements

1.    Description of Business and Transactions

Description of Business

Polypore International, Inc. (the "Company" or "Successor") is a leading global high technology filtration company that develops, manufactures and markets
specialized microporous membranes used in separation and filtration processes. The Company has a global presence in the major geographic markets of North America, South America, Western Europe and
Asia.

Change in Ownership

On May 13, 2004, the Company acquired 100% of the outstanding common stock of PP Holding Corporation and its wholly owned subsidiary, PP Acquisition
Corporation ("PP Acquisition"), for $320,385,000 in cash. On May 13, 2004, PP Acquisition purchased the outstanding capital stock of Polypore, Inc. ("Polypore"). The aggregate purchase
price, including acquisition related costs, was approximately $1,150,073,000 in cash. In connection with the acquisition, PP Acquisition obtained a new credit facility with initial borrowings of
approximately $414,920,000 and issued 8.75% senior subordinated notes with a face amount of $405,915,000. PP Acquisition used the net proceeds from the new credit facility, the issuance of senior
subordinated debt and equity contributions to pay the net purchase price to the existing shareholders, repay all outstanding indebtedness under Polypore's existing credit facility and pay transaction
related fees and expenses. At the time of closing of the acquisition,
PP Acquisition merged with and into Polypore, with Polypore as the surviving corporation. These events are hereinafter referred to as the "Transactions".

The
acquisition of Polypore by PP Acquisition was accounted for as a purchase in conformity with FASB Statement No. 141,Business Combinations.The total cost of the acquisition has been allocated as a
change in basis to the tangible and intangible assets acquired and liabilities assumed based on their respective fair
values as of May 13, 2004, the date of the Transactions. For accounting purposes, the acquisition was accounted for as if it occurred on the last day of the Company's fiscal month ended
May 1, 2004, which is the closest fiscal month end to May 13, 2004, the closing date of the acquisition.

2.    Accounting Policies

Basis of Presentation and Use of Estimates

For purposes of presentation, the accompanying consolidated statements of operations and cash flows for the years ended December 30, 2006 and
December 31, 2005 and the period from May 2, 2004 through January 1, 2005 reflect the operating results and cash flows of the Company subsequent to the Transactions ("Successor").
The consolidated statements of operations and cash flows for the period from January 4, 2004 through May 1, 2004 reflect the operating results and cash flows of the Company prior to the
Transactions ("Predecessor").

The
accompanying consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles and include the accounts of the Company
and its subsidiaries. All material intercompany accounts are eliminated in consolidation. Certain amounts previously presented in the consolidated financial statements for prior periods have been
reclassified to conform to current classifications. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

46

---



Accounting Period

The Company's fiscal year is the 52 or 53-week period ending the Saturday nearest to December 31. The fiscal years ended December 30,
2006 (Successor) and December 31, 2005 (Successor) include 52 weeks. The period from May 2, 2004 through January 1, 2005 (Successor) includes 35 weeks, and the period from
January 4, 2004 through May 1, 2004 (Predecessor) includes 17 weeks (together, 52 weeks).

Revenue Recognition

Revenue from product sales is recognized at the time ownership of goods transfers to the customer and the earnings process is complete. Amounts billed to
customers for shipping and handling are recorded in "Net sales" in the accompanying consolidated statements of operations. Shipping and handling costs incurred by the Company for the delivery of goods
to customers are included in "Cost of goods sold" in the accompanying consolidated statements of operations. Estimates for sales returns and allowances and product returns are recognized in the period
in which the revenue is recorded. Product returns and warranty expenses were not material for all periods presented.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Inventories

Inventories are carried at the lower of cost or market using the first-in, first-out ("FIFO") method of accounting and consist of:

(in thousands)

December 30, 2006

December 31, 2005Raw materials

$
21,714

$
21,485Work-in-process


10,679


7,171Finished goods


35,348


31,883$
67,741

$
60,539


In
connection with the Transactions, the value of inventory on hand at May 1, 2004 was increased by $19,007,000 to reflect the fair value of such inventory, less cost to sell.
Operating results for the period from May 2, 2004 through January 1, 2005 include an increase in cost of goods sold of $19,007,000, representing the write-off of the
inventory purchase accounting adjustment as this inventory was sold.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed for financial reporting purposes on the straight-line method over the
estimated useful lives of the related assets. The estimated useful lives established for buildings and land improvements range from 20 to 39.5 years and the estimated useful lives established
for machinery and equipment range from 5 to 15 years.

47

---



Intangibles and Loan Acquisition Costs

Identified intangible assets subject to amortization consist of a supply agreement, customer relationships and technology and patents. Loan acquisition costs are
amortized over the term of the related debt. Amortization expense for loan acquisition costs is classified as interest expense. Indefinite lived intangible assets consist of trade names and are not
amortized, but are subject to an annual impairment test.

Impairment of Long-Lived Assets

Property, plant and equipment and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the
difference between the fair value and carrying value of the asset or group of assets. In 2006 and 2005, the Company recorded impairment charges of $17,492,000 and $1,278,000, respectively, for
property, plant and equipment in connection with the restructuring plans described in Footnote 12. The impairment charges are included in "Business Restructuring" in the accompanying consolidated
statements of operations. There were no impairments of long-lived assets in 2004.

Goodwill

In accordance with FASB Statement No. 142,Goodwill and Other Intangible Assets,goodwill is not amortized,
but is subject to an annual impairment test. The impairment test consists of a comparison of the fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its fair
value, an impairment loss will be recognized in an amount equal to that excess. The Company performs its annual impairment assessment as of the first day of the fourth quarter of each fiscal year,
unless circumstances dictate more frequent assessments.

Asset Retirement Obligations

In accordance with FASB Statement No. 143"Accounting for Asset Retirement Obligations"and FIN 47, "Accounting for Conditional Asset Retirement Obligations",the Company has completed its analysis to identify asset retirement obligations and to
estimate the associated fair value. As of December 30, 2006
the Company did not identify any material asset retirement obligations. If the Company had identified and estimated material asset retirement obligations it would then initially measure the obligation
at fair value and record it as a liability with a corresponding increase in the carrying amount of the underlying property. Subsequently, the asset retirement obligation would accrete until the time
the retirement obligation is expected to settle while the asset retirement cost is amortized over the useful life of the underlying property.

Research and Development

The cost of research and development by the Company is charged to expense as incurred and is included in "Selling, general and administrative expenses" in the
consolidated statements of operations. Research and development expense, excluding the write-off of in-process research and development, was $13,135,000 in 2006, $12,137,000 in
2005, $9,528,000 for the period from May 2, 2004 to January 1, 2005 and $4,116,000 for the period from January 4, 2004 through May 1, 2004.

48

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In
connection with the Transactions, $5,250,000 was allocated to in-process research and development ("IPR&D") and expensed during the period from May 2, 2004 through
January 1, 2005 in accordance with FASB Interpretation No. 4,Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase
Method.

Stock Compensation

On January 1, 2006, the Company adopted FASB Statement No. 123 (R),Share-Based Payment("FAS 123(R)") using the modified
prospective transition method, which does not require the restatement of prior periods. Prior to adopting FAS 123(R), the
Company accounted for employee share-based compensation using the fair value method under FASB Statement No. 123,Accounting for Stock Based Compensation("FAS 123"). FAS 123(R) requires
forfeitures to be estimated at the time of grant and the estimate should be revised, if necessary, in subsequent periods if
actual forfeitures differ materially from those estimates. Prior to the adoption of FAS 123(R), the Company accounted for forfeitures as they occurred as allowed under FAS 123. The
change in accounting for forfeitures under FAS 123(R) resulted in a $231,000 charge, net of applicable income taxes, that was recorded as a cumulative effect of a change in accounting
principle. As a result of adopting FAS 123(R), the Company's loss before income taxes and net loss decreased by $128,000 and $80,000, respectively, for the year ended December 30, 2006.
Additionally, basic and diluted loss per share decreased by $0.47. The adoption of FAS 123(R) did not have a significant impact on cash flows from operations or financing activities.

Income Taxes

The provision for income taxes and corresponding balance sheet accounts are determined in accordance with FASB Statement No. 109, Accounting for Income Taxes("FAS 109"). Under FAS 109, the deferred tax liabilities and assets are determined based on temporary
differences between the basis of certain assets and liabilities for income tax and financial reporting purposes. A valuation allowance is recognized if it is more likely than not that a portion of the
deferred tax assets will not be realized in the future.

Foreign Currency Translation

The local currencies of the Company's foreign subsidiaries are the functional currencies in accordance with FASB Statement No. 52, Foreign Currency
Translation.Assets and liabilities of the Company's foreign subsidiaries are translated into United States dollars at current exchange
rates and resulting translation adjustments are reported in accumulated other comprehensive income. Income statement amounts are translated at weighted average exchange rates prevailing during the
period. Transaction gains and losses are included in the determination of net income.

In
connection with the Transactions, the Company obtained euro-denominated senior secured and senior subordinated notes that effectively hedge the Company's net investment in
foreign subsidiaries. Foreign currency losses of $24,969,000 and gains of $33,546,000 resulting from the translation of the euro-denominated debt at December 30, 2006 and
December 31, 2005, respectively, have been recorded in accumulated other comprehensive loss.

49

---



Net Income (Loss) Per Share

Basic income (loss) per common share is based on the weighted-average number of common shares outstanding in each year and after preferred stock dividend
requirements. Diluted income (loss) per common share considers the impact of dilution from stock options and convertible preferred stock. Potential common shares that would increase net income per
share amounts or decrease net loss per share amounts are antidilutive and are, therefore, excluded from the net income (loss) per common share computation.

Accounts Receivable and Concentrations of Credit Risk

Accounts receivable potentially expose the Company to concentrations of credit risk, as defined by FASB Statement No. 105, Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk.The Company provides credit in the normal course of business and performs ongoing credit evaluations on certain of
its customers' financial condition, but generally does not
require collateral to support such receivables. Accounts receivable, net of allowance for doubtful accounts, are carried at cost, which approximates fair value. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. The allowance for doubtful accounts was $8,610,000 and $6,815,000
at December 30, 2006 and December 31, 2005, respectively, which management believes is adequate to provide for credit losses in the normal course of business, as well as losses for
customers who filed for protection under bankruptcy law. The Company charges accounts receivables off against the allowance for doubtful accounts when it deems them to be uncollectible on a specific
identification basis. Exide Corporation, a customer of the Company's energy storage segment, accounted for approximately 13%, 17% and 14% of the Company's sales in 2006, 2005 and 2004, respectively.

Derivatives

The Company accounts for derivative instruments in accordance with FASB Statement No. 133,Accounting for Derivatives and Hedging
Activity("FAS 133"). Under FAS 133, all derivative instruments are recorded at fair value on the balance sheet and all changes in fair value are recorded to
earnings or to shareholders' equity through other comprehensive income.

Fair Value of Financial Instruments

The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and debt. The carrying amount of
borrowings under the senior secured credit facilities approximates fair value because the interest rate adjusts to market interest rates. The fair value of the 8.75% senior subordinated notes and the
10.5% senior discount notes, based on a quoted market price, was $419,450,000 and $238,500,000, respectively, at December 30, 2006. The carrying values of all of the other financial instruments
approximate their fair values.

Recent Accounting Pronouncements

In June 2005, the FASB issued Statement No. 154,Accounting Changes and Error Corrections("FAS 154"). This statement
establishes new standards on accounting for changes in accounting principles. Pursuant to the new rules, all such changes must be accounted
for by retrospective application to the financial statements of prior periods unless it is impracticable to do so. FAS 154

50

---



completely
replaces APB Opinion No. 20 and FAS 3, though it carries forward the guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting
entity and the correction of errors. The impact of this standard, if any, will depend upon accounting changes or corrections of errors that may occur in future periods. This Statement is effective for
accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

On
January 1, 2006, the Company adopted EITF Issue No. 05-5, Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms
Specified in Altersteilzeit Early Retirement Arrangements) ("EITF 05-5"). The EITF agreed with FASB staff observations that the salary components of Type I and Type II ATZ arrangements
(excluding the bonus and additional contributions into the German government pension scheme) should be recognized over the period from the point at which the ATZ period begins until the end of the
active service period. Additionally, the portion of the salary that is deferred under a Type II arrangement should be discounted if payment is expected to be deferred for a period longer than one
year. In addition, the EITF reached a consensus that the bonus feature and the additional contributions into the German government pension scheme (collectively, the additional compensation) under a
Type II ATZ arrangement should be accounted for as a postemployment benefit under Statement 112. An entity should recognize the additional compensation over the period from the point at which the
employee signs the ATZ contract until the end of the active service period. The EITF also concluded that the employer should recognize the government subsidy when it meets the necessary criteria and
is entitled to the subsidy. As a result of adopting this consensus, which was treated as a change in accounting estimate effected by a change in accounting principle, the Company is required to
recognize the bonus feature of its ATZ arrangements over the remaining active service period of the employees that have signed ATZ contracts. The Company had previously accrued for the bonus feature
of its ATZ arrangements through purchase accounting in connection with an acquisition in 2002. As a result of the adoption of EITF 05-5, the Company reduced the accrual for postemployment
benefits and recognized $2,593,000 in other income. The reduction in the accrual decreased the 2006 net loss by $1,634,000, or $9.51 per share. As a result of adopting EITF 05-5, the
Company's loss before income taxes and net loss increased by $1,235,000 and $778,000, respectively, for the year ended December 30, 2006. Additionally, basic and diluted loss per share
increased by $4.53.

In
June 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxesan Interpretation of FASB
Statement 109("FIN 48"), which clarifies the accounting for uncertain tax positions. This Interpretation allows the tax effects from an uncertain tax position to
be recognized in the Company's financial statements if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. FIN 48 also provides
guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.
The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In
September 2006, the FASB issued FASB Statement No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)("FAS 158"). FAS 158 requires an employer to recognize the funded status of a
defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in that funded status through comprehensive income in the year in which the changes occur.
This requirement will be effective for fiscal years ending after June 15, 2007. FAS 158 also requires an employer to measure defined benefit plan assets and obligations as of the date of
its fiscal year-end, with limited exceptions.

51

---



This
requirement is effective for fiscal years ending after December 15, 2008. The Company is currently evaluating the impact the adoption of FAS 158 will have on its consolidated
financial statements.

3.    Property, Plant and Equipment

Property,
plant and equipment consist of:

|(in thousands)                  |  | December 30, 2006 |         | December 31, 2005
|------------------------------- |  | ----------------- | ------- | -----------------
|Land                            |  | $                 | 15,866  |                  
|Buildings and land improvements |  |                   | 99,226  |                  
|Machinery and equipment         |  |                   | 335,999 |                  
|Construction in progress        |  |                   | 12,345  |                  
|                                |  |                  
|                                |  |                   | 463,436 |                  
|Less accumulated depreciation   |  |                   | 99,910  |                  
|                                |  |                  
|                                |  | $                 | 363,526 |                  
|                                |  |                  

4.    Intangibles, Loan Acquisition and Other Costs

Intangibles, loan acquisition and other costs consist of:

|                                                     |                        |  |            | December 30, 2006 |         | December 31, 2005
|---------------------------------------------------- | ---------------------- |  | ---------- | ----------------- | ------- | -----------------
|
|Intangible and other assets subject to amortization: |                        |  |            |                   |         |                  
|                                                     | Supply agreement       |  | 5          |                   | $       | 9,070            
|                                                     | Customer relationships |  | 16         |                   |         | 180,132          
|                                                     | Technology and patents |  | 8          |                   |         | 37,085           
|                                                     | Loan acquisition costs |  | 8          |                   |         | 22,807           
|Intangible assets not subject to amortization:       |                        |  |            |                   |         |                  
|                                                     | Trade names            |  | Indefinite |                   |         | 10,549           
|                                                     |                        |  |            |                   |         |                  
|                                                     |                        |  |            | $                 | 259,643 |                  
|                                                     |                        |  |            |                   |         |                  

The
change in the gross carrying amount of intangible assets resulted from changes in foreign currency translation rates. Amortization expense, including amortization of loan acquisition
costs classified as interest expense, was $20,694,000 in 2006, $20,458,000 in 2005, $13,497,000 for the period from May 2, 2004 through January 1, 2005 and $1,441,000 for the period from
January 4, 2004 through

52

---



May 1,
2004. The Company's estimate of amortization expense for the five succeeding years is as follows:

(in thousands)2007

$
20,5462008


20,4912009


18,7922010


18,5912011


18,207


5.    Goodwill

There were no changes to the carrying amount of goodwill during 2006. The changes in carrying amount of goodwill during 2005 were as follows:

(in thousands)

Energy
Storage

Separations
Media

TotalBalance as of January 1, 2005

$
388,956

$
176,958

$
565,914Purchase accounting adjustments related to the
Transactions


1,673





1,673Purchase accounting adjustments to finalize allocation of goodwill between segments


(34,456
)

34,456


Balance as of December 31, 2005

$
356,173

$
211,414

$
567,587


During
2005, the Company finalized the purchase price allocation for the Transactions and made related purchase accounting adjustments, including adjustments for the final allocation of
goodwill between segments.

6.    Accrued Liabilities

Accrued liabilities consist of:

(in thousands)

December 30,
2006

December 31,
2005Compensation expense and other fringe benefits

$
19,216

$
10,104Current portion of business restructuring


17,154


5,150Accrued interest


4,697


4,480Current portion of environmental reserve


5,060


3,304Taxes other than income


852


1,037Other


8,904


8,729$
55,883

$
32,804


53

---



7.    Debt

Debt, in order of priority, consists of:

(in thousands)

December 30, 2006

December 31, 2005Senior credit facilities:Revolving credit facility

$


$
Term loan facilities


369,163


365,7358.75% senior subordinated notes


422,550


401,95510.50% senior discount notes, net of unamortized original issue discount of $49,153 and $73,489, respectively


250,847


226,511Other


215


1,2931,042,775


995,494Less current maturities


3,938


1,224Long-term debt

$
1,038,837

$
994,270


In
connection with the Transactions, Polypore obtained a new senior secured credit agreement and repaid all indebtedness under its former credit agreement. The new senior secured credit
agreement provides for senior secured financing consisting of a $370,000,000 term loan facility, €36,000,000 term loan facility and a $90,000,000 revolving loan facility. The term
loans mature in November 2011 and the revolving credit facility matures in May 2010. Interest rates under the new senior secured credit facilities are, at Polypore's option, equal to
either an alternate base rate or an adjusted LIBO rate, plus an applicable margin percentage. At December 30, 2006, the applicable margin percentage was 2.00% for alternate base rate loans and
3.00% for adjusted LIBO rate loans.

Polypore
used cash generated from operations to make optional prepayments on the term loans of $20,000,000 and $25,000,000 on September 30, 2005 and March 1, 2005,
respectively. In accordance with the credit agreement, the prepayments were applied first to the quarterly principal payments due for the next twelve months and second, pro rata against the remaining
scheduled principal payments. After giving effect to the 2005 optional prepayments, the term loans require quarterly payments of principal at the end of each fiscal quarter beginning on
December 29, 2006.

Polypore's
immediate parent, PP Holding Corporation, and Polypore's domestic subsidiaries guarantee indebtedness under the credit agreement. Substantially all assets of Polypore and its
domestic subsidiaries and a first priority pledge of 66% of the voting capital stock of its foreign subsidiaries secure indebtedness under the credit agreement. The senior secured credit agreement is
subject to covenants customary for financings of this type, including maximum leverage ratio, minimum interest
coverage ratio and limitations on capital spending. Polypore may not pay dividends on its common stock. Polypore was in compliance with all financial covenants as of December 30, 2006.

In
connection with the Transactions, Polypore issued $225,000,000 8.75% senior subordinated dollar notes due 2012 and €150,000,000 8.75% senior subordinated euro notes
due 2012 (collectively, the "Notes"). Interest is payable semi-annually on May 15 and November 15. The Notes are subordinated to all of the Company's existing and future
senior debt, rank equally with all of its other senior subordinated debt and rank senior to all of its existing and future subordinated debt. Polypore's domestic subsidiaries, subject to certain
exceptions, guarantee the Notes.

54

---



On October 18, 2004, the Company issued $300,000,000 10.5% senior discount notes due 2012 with net proceeds of $200,190,000. The net proceeds from the issuance of the discount
notes were used to redeem the Series A nonconvertible preferred stock for $150,000,000 and pay a dividend to the common shareholders of $47,190,000.

Prior
to October 1, 2008, interest accrues on the notes in the form of an increase in the accreted value of the discount notes. The accreted value of the notes will increase from
the date of issuance until October 1, 2008 at a rate of 10.5% per annum, reflecting the accrual of non-cash interest, such that the accreted value will equal the principal amount at
maturity of $300,000,000 on October 1, 2008. Beginning on October 1, 2008, cash interest on the notes will accrue at a rate of 10.5% per annum and will be payable
semi-annually beginning in April 2009. The notes mature on October 1, 2012. The discount notes are senior unsecured obligations of the Company and are not guaranteed by
Polypore and its subsidiaries. Polypore's credit agreement and the indenture governing the 8.75% senior subordinated notes significantly restrict Polypore and its subsidiaries from paying dividends
and otherwise transferring assets to the Company.

Minimum
scheduled principal repayments of debt (undiscounted) are as follows:

(in thousands)2007

$
3,9382008


3,8502009


3,7862010


3,7862011


354,018Thereafter


722,550$
1,091,928


8.    Commitments and Contingencies

Leases

The Company leases certain equipment and facilities under operating leases. Rent expense was $1,877,000 in 2006, $3,839,000 in 2005, $3,687,000 for the period
from May 2, 2004 through January 1, 2005 and $1,633,000 for the period from January 4, 2004 through May 1, 2004.

The
Company leases certain machinery and equipment under a capital lease agreement. The capital lease agreement expires in February 2011 and has an early buyout option in
October 2009. Assets recorded under the capital lease are included in property, plant and equipment. At December 30, 2006 and December 31, 2005, the cost of assets under the
capital lease agreement was $8,823,000 and accumulated depreciation was $3,059,000 and $1,647,000, respectively. Amortization of assets under the capital lease is included in depreciation expense.

55

---



Future
minimum capital and operating lease payments at December 30, 2006 are:

(in thousands)

Capital Leases

Operating Leases2007

$
1,604

$
1,0522008


1,604


4182009


1,604


1492010


1,604


332011


268


126,684

$
1,664Less amounts representing interest


553Present value of minimum lease payments


6,131Less current portion


1,377$
4,754


Raw Materials

The Company employs a global purchasing strategy to achieve pricing leverage on its purchases of major raw materials. Accordingly, the Company purchases the
majority of each type of raw material from one primary supplier with additional suppliers having been qualified to supply the Company if an interruption in supply were to occur. The Company believes
that alternative sources of raw materials are readily available and the loss of any particular supplier would not have a material impact on the
results of the Company's operations. However, the loss of raw material supply sources could, in the short term, adversely affect the Company's business until alternative supply arrangements were
secured.

Collective Bargaining Agreements

At December 30, 2006, the Company had approximately 1,800 employees worldwide. In the United States, approximately 250 employees are represented by labor
unions which have entered into separate collective bargaining agreements with the Company.

Other

The Company is from time to time subject to various claims and other matters arising out of the normal conduct of business. The amount recorded for identified
contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional information that becomes available. Actual costs to be incurred in future
periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating future contingent liability costs, the Company believes
that based on present information, it is unlikely that a liability, if any, exists that would have a materially adverse effect on the consolidated operating results, financial position or cash flows
of the Company.

56

---



9.    Income Taxes

Significant components of deferred tax assets and liabilities consist of:

(in thousands)

December 30, 2006

December 31, 2005Deferred tax assets:Pension and postretirement benefits

$
19,651

$
17,666Vacation pay


515


603Foreign tax credits


1,850


1,850State tax credits


1,719


941Net operating loss carryforwards


16,192


6,220Environmental reserve


5,151


4,546Interest expense


17,776


9,201Other


4,631


4,294Total deferred tax assets


67,485


45,321Valuation allowance


(6,200
)

(4,037
)Net deferred tax assets


61,285


41,284Deferred tax liabilities:Property, plant and equipment


(90,012
)

(94,315
)Intangibles


(61,832
)

(68,731
)Other


(3,788
)

(3,329
)Total deferred tax liabilities


(155,632
)

(166,375
)Net deferred taxes

$
(94,347
)
$
(125,091
)


The
valuation allowance increased approximately $2,163,000 in 2006. At December 30, 2006, the valuation allowance was $6,200,000, of which $769,000 relates to periods prior to the
Transactions. Therefore, any reversal of these pre-Transaction amounts would result in a reduction to goodwill.

Deferred
taxes are reflected in the consolidated balance sheet as follows:

(in thousands)

December 30, 2006

December 31, 2005Current deferred tax asset

$


$
410Non-current deferred tax liability


(94,347
)

(125,501
)Net deferred taxes

$
(94,347
)
$
(125,091
)


57

---



For
financial reporting purposes, income (loss) before income taxes and cumulative effect of a change in accounting principle includes the following components:

Successor

Predecessor(in thousands)

Year ended December 30, 2006

Year ended December 31, 2005

May 2, 2004 through January 1, 2005

January 4, 2004 through May 1, 2004Pretax income (loss):United States

$
(39,635
)
$
(37,652
)
$
(28,293
)
$
22,706Foreign


(13,252
)

26,084


375


17,812$
(52,887
)
$
(11,568
)
$
(27,918
)
$
40,518


Income
tax expense (benefit) consists of:

Successor

Predecessor(in thousands)

Year ended December 30, 2006

Year ended December 31, 2005

May 2, 2004 through January 1, 2005

January 4, 2004 through May 1, 2004Current:U.S. taxes on domestic income

$
1,631

$
(721
)
$
(12,071
)
$
10,805Foreign taxes


10,329


9,692


(2,449
)

4,960Total current


11,960


8,971


(14,520
)

15,765Deferred:U.S. taxes on domestic income


(14,492
)

(13,234
)

3,736


(3,145
)Foreign taxes


(20,416
)

(4,363
)

2,131


1,065Total deferred


(34,908
)

(17,597
)

5,867


(2,080
)$
(22,948
)
$
(8,626
)
$
(8,653
)
$
13,685


The
Company has total German net operating loss carryforwards of approximately $33,002,000. During 2006, the Company utilized $1,021,000 of the German net operating loss carryforwards at
its Norderstedt facility. The carryforwards in Germany do not expire but are subject to certain limitations in their use. The Company has net operating loss carryforwards in Austria of approximately
$3,570,000. The carryforwards in Austria do not expire but are subject to certain limitations in their use. Since the Company has closed its facility in Austria, a full valuation allowance has been
provided for these carryforwards. The Company has net operating loss carryforwards in the United States of approximately $13,607,000 that expire beginning in 2026.

58

---



Income
taxes at the Company's effective tax rate differed from income taxes at the statutory rate as follows:

Successor

Predecessor(in thousands)

Year ended December 30, 2006

Year ended December 31, 2005

May 2, 2004 through January 1, 2005

January 4, 2004 through May 1, 2004Computed income taxes at the expected statutory rate

$
(18,381
)
$
(4,049
)
$
(9,771
)
$
14,181In process research and development








1,953


Extraterritorial income exclusion


(1,361
)

(1,300
)

(1,256
)

(688
)State and local taxes


(1,525
)

(1,562
)

(1,082
)

681Foreign taxes


(5,738
)

(4,654
)

584


(1,306
)Subpart F income inclusion





337





Interest expense disallowed


1,232


1,154





Valuation allowance


2,163


1,792


334


1,774Provisions for uncertain tax positions


1,235








Other


(573
)

(344
)

585


(957
)Income tax provision (benefit)

$
(22,948
)
$
(8,626
)
$
(8,653
)
$
13,685


Income
tax expense recorded in the financial statements differs from the Federal statutory income tax rate due to a variety of factors, including state income taxes, the mix of income
between U.S. and foreign jurisdictions taxed at varying rates, certain export sales which are excluded from taxable income and various changes in estimates of permanent differences and valuation
allowances.

Taxes
have been provided on earnings distributed and expected to be distributed by the Company's foreign subsidiaries. All other foreign earnings are undistributed and considered to be
indefinitely reinvested and, accordingly, no provision for U.S. Federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not
practicable because of the complexities associated with its hypothetical calculations; however, unrecognized foreign tax credit carryforwards would be available to reduce some portion of the U.S.
liability.

The
Company has entered into an agreement with the Board of Investment in Thailand under which the Company's Thailand subsidiary is exempt from that country's corporate income tax on
income derived from manufacturing activities. Subject to certain limitations, this agreement provides for 100% of the Company's income from manufacturing activities in Thailand to be
tax-free through 2010 and 50% of the income to be tax-free for another five years. The benefit
recognized from this tax holiday in 2006 and 2005 was approximately $1,300,000 and $1,600,000, respectively.

59

---



Although the outcome of tax audits is uncertain, management believes that adequate provisions for income taxes have been made for potential liabilities resulting from such matters. As of
December 30, 2006, the Company has total provisions of approximately $7,500,000 for uncertain tax positions, as compared to $6,300,000 as of December 31, 2005. Of this reserve,
approximately $6,000,000 relates to periods prior to the Transactions. Therefore, any reversal of these pre-Transaction amounts will result in a reduction to goodwill. Management is not
aware of any issues for open tax years that upon final resolution are expected to have a material adverse effect on the Company's consolidated results of operations, cash flows or financial position.

10.    Employee Benefit Plans

Pension and Other Postretirement Benefits

The Company and its subsidiaries sponsor multiple defined benefit pension plans and an other postretirement benefit plan. The Company uses its
year-end as a measurement date for the majority of these plans. The following table sets forth the funded status of the defined benefit pension plans and the postretirement plan.

|                                                 |  | Pension Plans |         | Other Postretirement Benefits |  
|------------------------------------------------ |  | ------------- | ------- | ----------------------------- | -
|
|
|Change in Benefit Obligation                     |  |               |         |                               |  
|Benefit obligation at beginning of period        |  | $             | (75,114 | )                             | $
|Service cost                                     |  |               | (2,981  | )                             |  
|Interest cost                                    |  |               | (3,180  | )                             |  
|Plan amendments                                  |  |               |        |                               |  
|Participant contributions                        |  |               |        |                               |  
|Actuarial gain (loss)                            |  |               | (1,529  | )                             |  
|Benefit payments                                 |  |               | 2,291   |                               |  
|Settlements                                      |  |               | 3,299   |                               |  
|Foreign currency translation and other           |  |               | (8,492  | )                             |  
|                                                 |  |               |        
|Projected benefit obligation at end of period    |  |               | (85,706 | )                             |  
|Change in Plan Assets                            |  |               |         |                               |  
|Fair value of plan assets at beginning of period |  |               | 20,256  |                               |  
|Actual return on plan assets                     |  |               | 16      |                               |  
|Company contributions                            |  |               | 3,917   |                               |  
|Participant contributions                        |  |               |        |                               |  
|Benefit payments                                 |  |               | (2,291  | )                             |  
|Settlements                                      |  |               | (3,299  | )                             |  
|Foreign currency translation and other           |  |               | 2,802   |                               |  
|                                                 |  |               |        
|Fair value of plan assets at end of period       |  |               | 21,401  |                               |  
|Funded Status                                    |  |               |         |                               |  
|Funded status at end of period                   |  |               | (64,305 | )                             |  
|Unrecognized net actuarial (gain) loss           |  |               | 13,219  |                               |  
|Unrecognized prior service cost                  |  |               |        |                               |  
|                                                 |  |               |        
|Net amount recognized                            |  | $             | (51,086 | )                             | $
|                                                 |  |               |        

60

---



Amounts
recognized in the consolidated balance sheets consist of:

|                                                |  | Pension Plans |         | Other Postretirement Benefits |  
|----------------------------------------------- |  | ------------- | ------- | ----------------------------- | -
|
|
|Net amount recognized                           |  | $             | (51,086 | )                             | $
|Accumulated other comprehensive loss            |  |               | (8,161  | )                             |  
|                                                |  |               |        
|Pension and postretirement benefits liabilities |  | $             | (59,247 | )                             | $
|                                                |  |               |        

At
December 30, 2006, the Company's pension plans were based in subsidiaries located outside of the United States. The accumulated benefit obligation for all
defined pension plans was $79,518,000 at December 30, 2006. In 2007, the Company expects to contribute $1,229,000 and $149,000 to its pension and postretirement benefit plans, respectively.

On
December 31, 2005, the Company terminated its only U.S. pension plan. The liabilities of the U.S. pension plan were settled during 2006, resulting in a settlement charge of
$436,000. In addition, the liabilities of the pension plan at the Company's Austrian facility, which was closed in connection with the 2005 restructuring plan, were settled during 2006 and resulted in
a settlement gain of $1,380,000.

The
2005 actuarial loss was impacted by the decrease in the discount rates used in our foreign plans.

The
following table provides the components of net periodic benefit cost:

|                                   |  | Pension Plans |      
|---------------------------------- |  | ------------- | -----
|
|
|
|
|
|Service cost                       |  | $             | 2,981
|Interest cost                      |  |               | 3,180
|Expected return on plan assets     |  |               | (75  
|Amortization of prior service cost |  |               | 16   
|Recognized net actuarial loss      |  |               | 343  
|Settlement gain, net               |  |               | (944 
|                                   |  |               |      
|Net periodic benefit cost          |  | $             | 5,501
|                                   |  |               |      

|                                   |  | Other Postretirement Benefits |    
|---------------------------------- |  | ----------------------------- | ---
|
|
|
|Service cost                       |  | $                             | 34 
|Interest cost                      |  |                               | 111
|Amortization of prior service cost |  |                               |   
|Recognized net actuarial loss      |  |                               |   
|                                   |  |                               |    
|Net periodic benefit cost          |  | $                             | 145
|                                   |  |                               |    

61

---



Weighted
average assumptions used to determine the benefit obligation and net periodic benefit costs consist of:

|                               |  | Pension Plans |  | Other Postretirement Benefits | 
|------------------------------ |  | ------------- |  | ----------------------------- | 
|
|Discount rate                  |  | 2.69%4.40%   |  | 2.95%5.75%                   | 
|Expected return on plan assets |  | 4.00%5.00%   |  | 4.00%8.00%                   | 
|Rate of compensation increase  |  | 2.00%3.50%   |  | 2.00%3.50%                   | 
|Increase in pension payments   |  | 1.75%         |  | 2.00%                         | 
|Weighted average discount rate |  | 4.36%         |  | 4.23%                         | 

The
weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate for the medical plan) is 10% for 2006,
and is assumed to trend down to 5% by 2011 and thereafter. The health care cost trend rate assumption has a significant effect on the amount of the obligation and periodic cost reported.

The
Company's pension plan assets, which at December 30, 2006 relate only to plans located outside of the U.S., are invested to obtain a reasonable long-term rate of
return at an acceptable level of investment risk. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial condition. Investment risk is
measured and monitored on an ongoing basis through periodic investment portfolio reviews, liability measurements and asset/liability studies. The Company's expected return on plan assets is based on
historical market data for each asset class. The assets in the pension plans are diversified across equity and fixed income investments, except for certain pension plans funded by insurance contracts.
The investment portfolio has target allocations of approximately 35% equity and 65% fixed income. At December 30, 2006, the actual portfolio allocations approximated the target allocations.

A
one-percentage-point change in the health care trend rates would have the following effects:

1%
Increase

1%
Decrease(in thousands)Effect on total of service and interest cost components of net periodic postretirement health care benefit cost

$
1

$
(1
)Effect on the health care component of the accumulated postretirement benefit obligation

$
8

$
(8
)


The
estimated future benefit payments expected to be paid for each of the next five years and the sum of payments expected for the next five years thereafter are:

(in thousands)

Pension Plans

Other
Postretirement
Benefits2007

$
2,112

$
1492008


2,336


1182009


2,663


922010


2,982


912011


3,208


8820122016


18,795


537


62

---



The
Company sponsors a 401(k) plan for U.S. salaried employees. Salaried employees are eligible to participate in the plan on January 1, April 1,
July 1 or October 1 after their date of employment. Under the plan, employer contributions are defined as 5% of a participant's base salary plus a matching of
employee contributions allowing for a maximum matching contribution of 3% of a participant's earnings. The cost of the plan recognized as expense was $1,550,000 in 2006, $1,585,000 in 2005, $769,000
for the period from May 2, 2004 through January 1, 2005 and $382,000 for the period from January 4, 2004 through May 1, 2004.

In
accordance with collective bargaining agreements, the Company sponsors a 401(k) plan for U.S. hourly employees subject to such agreements. Depending on the applicable collective
bargaining agreement, employer basic contributions are defined as 2% or 3.25% of a participant's base earnings plus a matching of employee contributions allowing for a maximum matching contribution of
2.25% or 2.50% of a participant's earnings. The Company also makes a separate contribution for employees hired prior to January 1, 2000 and who are not eligible for the postretirement benefit
plan. The cost of the plan recognized as expense was $613,000 in 2006, $569,000 in 2005, $360,000 for the period from May 2, 2004 through January 1, 2005, and $156,000 for the period
from January 4, 2004 through May 1, 2004.

Postemployment Benefits

The Company provides postemployment benefits at its German subsidiary under the ATZ early retirement program. The ATZ program allows older workers
to stop working before they reach retirement age and receive a reduced salary and certain benefits until they reach retirement age. The Company accounts for benefits provided under the ATZ program in
accordance with FASB Statement No. 112,Employers' Accounting for Postemployment Benefits. As discussed in Note 2, the Company adopted
EITF No. 05-5,Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early Retirement
Arrangements)on January 1, 2006.

11.    Environmental Matters

The Company accrues for environmental obligations when such expenditures are probable and reasonably estimable. The amount of liability recorded
is based on currently available information, including the progress of remedial investigations, current status of discussions with regulatory authorities regarding the method and extent of
remediation, presently enacted laws and existing technology. Accruals for estimated losses from environmental obligations are adjusted as further information develops or circumstances change. Costs of
future expenditures for environmental obligations are not discounted to their present value. Recoveries of environmental costs from other parties are recognized as assets when their receipt is deemed
probable. Environmental reserves were $27,995,000 and $25,568,000 as of December 30, 2006 and December 31, 2005, respectively.

In
connection with the Transactions, the Company identified potential environmental contamination at its manufacturing facility in Potenza, Italy. Based on environmental studies and the
initial remediation plan presented to local authorities, the Company recorded a liability of $3,261,000 in connection with the application of purchase accounting for the Transactions. During the
fourth quarter of 2006, the Company further refined the remediation plan with the assistance of a third-party advisor and consultations with local authorities, resulting in an increase in the
estimated environmental liability of $1,078,000 that was recorded through a charge to earnings. The Company anticipates that expenditures will be made over the next seven to ten years.

63

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As
part of an internal self-audit of its Corydon, IN and Owensboro, KY facilities, the Company recently identified instances of potential non-compliance with its
environmental operating permits at these facilities. The Company self-reported these issues to the proper state and federal agencies and is taking steps to resolve these issues. Although
the agencies have the authority and discretion to issue substantial fines that could be material, based upon management's analysis of facts and circumstances, in consideration of recent cases
addressed by the agencies involved, and based upon advice from third-party advisors, the Company does not believe that the maximum penalty will be assessed and that penalties, if any, resulting from
this matter will not have a material adverse effect on the business, financial condition or results of operations of the Company.

In
connection with the acquisition of Membrana in 2002, the Company recorded a reserve for environmental obligations. The reserve provides for costs to remediate known environmental
issues and operational upgrades which are required in order for the Company to remain in compliance with local regulations. The Company anticipates that expenditures will be made over the next seven
to ten years. The initial estimate and subsequent finalization of the reserve was included in the allocation of purchase price at the date of acquisition.

The
Company has indemnification agreements for certain environmental matters from Acordis A.G. ("Acordis") and Akzo Nobel ("Akzo"), the prior owners of Membrana. Akzo originally provided
broad environmental protections to Acordis with the right to assign such indemnities to Acordis's successors. Akzo's indemnifications relate to conditions existing prior to December 1999, which
is the date that Membrana was sold to Acordis. The Akzo agreement provides indemnification of claims through December 2007, with the indemnification percentage decreasing each year during the
coverage period. Through December 2003, Akzo pays 75% of any approved claim. After that, Akzo pays 65% of claims reported through December 2006 and 50% of claims reported through
December 2007. In addition to the Akzo indemnification, Acordis provides separate indemnification of claims incurred from December 1999 through February 2002, the acquisition
date. At December 30, 2006 and December 31, 2005, amounts receivable under the indemnification agreements were $18,669,000 and $17,369,000, respectively. The current portion of the
indemnification receivable is included in other current assets.

12.    Business Restructuring

2006 Restructuring Plan

In response to a significant decline in demand for cellulosic hemodialysis membranes driven by a shift in industry demand toward synthetic
membranes, the Company's separations media segment decided to exit the production of cellulosic membranes and realign its cost structure at its Wuppertal, Germany facility. On August 24, 2006,
the Company announced a layoff of approximately 150 employees. Production of cellulosic hemodialysis membranes ceased on December 27, 2006 and the majority of the employees were laid off
effective January 1, 2007. The total cost of the plan is expected to be approximately $17,040,000, consisting of $11,403,000 for the employee layoffs and $5,637,000 for other costs related to
the shutdown of portions of the Wuppertal facility that will no longer be used. The other costs included in the restructuring plan are related to local regulations surrounding complete or partial
shutdowns of a facility. The Company expects to complete these activities by the end of the second quarter of 2008. The timing, scope and costs of these restructuring measures are subject to change as
the Company proceeds with its restructuring plans and further evaluates its business needs and costs. The restructuring charge also included a non-cash impairment charge of $17,492,000 for
buildings and equipment used in the production of cellulosic hemodialysis membranes.

64

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2005 Restructuring Plan

In order to better accommodate customer growth and related demand for both lead-acid and lithium battery separators in the greater
Asian market, the Company's energy storage segment transferred certain assets from Europe and the United States to its facilities in Thailand and China. The capacity realignment plan included the
closure of the Company's facility in Feistritz, Austria, the downsizing of its Norderstedt, Germany facility and the relocation of certain assets from these two plants to the Company's facilities in
Prachinburi, Thailand. During 2006, the Company completed installation and started production with the assets relocated to Thailand. Additionally, finishing equipment from the Company's facility in
Charlotte, North Carolina was relocated to its facility in Shanghai, China. The total cost of the realignment plan is expected to be approximately $8,831,000, of which $8,746,000 has been recognized
through December 30, 2006, and the remaining expenses will be recognized in 2007. In addition to the benefit of realigning capacity with market growth, the Company expects to realize costs
savings, with the full impact expected to be realized in 2007. The timing and
scope of these restructuring measures are subject to change as the Company further evaluates its business needs and costs.

As
part of this realignment plan, the Company announced on June 16, 2005 layoffs of 110 employees at its Feistritz, Austria, Norderstedt, Germany and Charlotte, North Carolina
facilities. The total cost of the employee layoffs and ATZ early retirement program is expected to be approximately $5,511,000, of which $5,449,000 has been recognized through December 30,
2006. The remaining expenses will be recognized in 2007.

The
Company recorded a non-cash impairment charge of $1,278,000 in the three months ended July 2, 2005 for property, plant and equipment located at the Feistritz,
Austria facility that will not be relocated to Prachinburi, Thailand.

The
Company estimates that other costs, including disassembly, moving, and legal expenses, will be approximately $2,042,000, of which $2,019,000 has been incurred. These remaining costs
will be recognized as incurred during 2007 in accordance with FASB Statement No. 146,Accounting for Costs Associated with Exit or Disposal
Activities.

2004 Restructuring Plan

In an effort to manage costs and in response to the decision of a customer to outsource its dialyzer production, the Company implemented a number
of cost reduction measures in 2004 relating to the separations media segment, including employee layoffs, the relocation of certain research and development operations conducted in a leased facility
in Europe to facilities where the related manufacturing operations are conducted and other cost reductions.

65

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On September 3, 2004, the Company announced a layoff of approximately 200 employees at its Wuppertal, Germany facility. The Company recorded a charge for severance and benefit
costs related to the employee layoffs of $13,899,000 during the period ended January 1, 2005. In connection with a customer's outsourcing of its dialyzer production, the Company also recorded a
charge for raw materials, a portion of which the Company was obligated to purchase under an existing purchase commitment, of $1,788,000 in cost of goods sold during the period ended January 1,
2005. Finally, the Company incurred expenses of approximately $2,732,000 in connection with the relocation of its research and development operations. All activities and charges relating to the 2004
Restructuring Plan have been completed as of December 30, 2006.

Restructuring
activity during 2006 consists of:

|(in thousands)           |                             | Balance at December 31, 2005 |       | Restructuring
Charges |   | Non-cash
Charges |        | Cash
Payments |         | Foreign
Currency
Translation |   | Balance at December 30, 2006
|------------------------ | --------------------------- | ---------------------------- | ----- | --------------------- | - | ---------------- | ------ | ------------- | ------- | ---------------------------- | - | ----------------------------
|
|2006 Restructuring Plan: |                             |                              |       |                       |   |                  |        |               |         |                              |   |                             
|                         | Severance and benefit costs |                              | $     |                      |   | $                | 11,403 |               | $       |                             |   | $                           
|                         | Asset impairment            |                              |       |                      |   |                  | 17,492 |               |         | (17,492                      | ) |                             
|                         | Other                       |                              |       |                      |   |                  | 5,637  |               |         |                             |   |                             
|                         |                             |                             
|                         |                             |                              |      |                       |   | 34,532           |        |               | (17,492 | )                            |   | (388                        
|2005 Restructuring Plan: |                             |                              |       |                       |   |                  |        |               |         |                              |   |                             
|                         | Severance and benefit costs |                              |       | 1,506                 |   |                  | 557    |               |         |                             |   |                             
|                         | Other                       |                              |       |                      |   |                  | 1,334  |               |         |                             |   |                             
|                         |                             |                             
|                         |                             |                              | 1,506 |                       |   | 1,891            |        |               |        |                              |   | (2,672                      
|2004 Restructuring Plan: |                             |                              |       |                       |   |                  |        |               |         |                              |   |                             
|                         | Severance and benefit costs |                              |       | 4,069                 |   |                  |       |               |         |                             |   |                             
|                         | Raw materials               |                              |       | 32                    |   |                  |       |               |         |                             |   |                             
|                         | Other                       |                              |       | 265                   |   |                  | 604    |               |         |                             |   |                             
|                         |                             |                             
|                         |                             |                              | 4,366 |                       |   | 604              |        |               |        |                              |   | (4,050                      
|                         |                             |                             
|Total                    |                             | $                            | 5,872 |                       | $ | 37,027           |        | $             | (17,492 | )                            | $ | (7,110                      
|                         |                             |                             

66

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Restructuring
activity during 2005 consists of:

|(in thousands)           |                                 | Balance at January 1, 2005 |        | Restructuring
Charges |   | Non-cash
Charges |       | Cash
Payments |        | Foreign
Currency
Translation |   | Balance at December 31, 2005
|------------------------ | ------------------------------- | -------------------------- | ------ | --------------------- | - | ---------------- | ----- | ------------- | ------ | ---------------------------- | - | ----------------------------
|
|2005 Restructuring Plan: |                                 |                            |        |                       |   |                  |       |               |        |                              |   |                             
|                         | Severance and benefit costs     |                            | $      |                      |   | $                | 4,890 |               | $      |                             |   | $                           
|                         | Asset disposals and impairments |                            |        |                      |   |                  | 1,278 |               |        | (1,278                       | ) |                             
|                         | Other                           |                            |        |                      |   |                  | 685   |               |        |                             |   |                             
|                         |                                 |                           
|                         |                                 |                            |       |                       |   | 6,853            |       |               | (1,278 | )                            |   | (3,863                      
|2004 Restructuring Plan: |                                 |                            |        |                       |   |                  |       |               |        |                              |   |                             
|                         | Severance and benefit costs     |                            |        | 14,944                |   |                  | (112  | )             |        |                             |   |                             
|                         | Raw materials                   |                            |        | 1,256                 |   |                  | (176  | )             |        |                             |   |                             
|                         | Other                           |                            |        |                      |   |                  | 2,128 |               |        |                             |   |                             
|                         |                                 |                           
|                         |                                 |                            | 16,200 |                       |   | 1,840            |       |               |       |                              |   | (12,442                     
|                         |                                 |                           
|Total                    |                                 | $                          | 16,200 |                       | $ | 8,693            |       | $             | (1,278 | )                            | $ | (16,305                     
|                         |                                 |                           

The
Company expects to make payments against the restructuring reserve of approximately $17,154,000 in 2007, with the remaining payments expected to be made in 2008 and 2009.

The
current portion of the reserve for business restructuring costs is recorded in accrued liabilities and the non-current portion is recorded in other
non-current liabilities.

13.    Redeemable Preferred Stock

As discussed in Note 1, on May 13, 2004, a change in ownership occurred requiring the Company to redeem all outstanding shares of Preferred Stock.
At the date of the Transactions, 14,000 shares of Class A Preferred Stock were outstanding and were redeemed for $14,000,000 (the stated liquidation value of $1,000 per share) plus cumulative
dividends payable of $2,645,000.

Redeemable
preferred stock activity during 2004 consisted of:

Successor

Predecessor(in thousands)

May 2, 2004 through January 1, 2005

January 4, 2004 through May 1, 2004Balance at beginning of period

$
16,645

$
16,221Redemption of redeemable preferred stock


(16,645
)

Dividends earned





424Dividends paid





Balance at end of period

$


$
16,645


67

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14.    Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows:

(in thousands)

December 30, 2006

December 31, 2005Foreign currency translation adjustment

$
852

$
(5,934
)Minimum pension liability


(4,901
)

(3,453
)Accumulated other comprehensive loss

$
(4,049
)
$
(9,387
)


15.    Stock Option Plans

The Company offers stock option plans to attract, retain, motivate and reward key officers, non-employee directors and employees. Stock options are
issued at a price not less than the fair market value on the grant date.

On
June 15, 2006, the Company adopted the Polypore International, Inc. 2006 Stock Option Plan ("2006 Plan") and reserved 17,614 shares for issuance under the 2006 Plan.
Options granted under the 2006 Plan have 10-year terms and vest based on satisfaction of certain annual and cumulative performance criteria over the four fiscal year period following the
adoption of the 2006 Plan. In addition, all or a portion of the options granted under the 2006 Plan will vest upon a change in control if equity investors receive predetermined rates of return on
their investment. Additionally, the 2006 Plan also allows for the granting of options that vest over time.

In
2004, the Company adopted the Polypore International, Inc. 2004 Stock Option Plan ("2004 Plan"). Under the 2004 Plan, options granted have 10-year terms. As a
condition to receiving stock option grants under the 2006 Plan, participants in the 2006 Plan agreed that all unvested stock options granted under the 2004 Plan would be forfeited. Additionally, the
participants in the 2006 Plan agreed that all vested stock options granted under the 2004 Plan would be subject to the terms and conditions of the 2006 Plan and that the exercise price and expiration
date of the previously vested options would remain unchanged.

On
June 14, 2006, the Company recognized additional stock compensation expense of $47,000 for the repricing of 1,063 stock options issued under the 2004 Plan. The exercise price
of the options, which were granted in 2005, was reduced from $850 and $875 per share to $772 per share.

68

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A
summary of the Company's stock option activity for its stock option plans and related information is as follows:

Options

Weighted-Average
Exercise
Price

Weighted Average
Remaining
Contractual
Term (Years)

Aggregate
Instrinsic
Value
(in thousands)Outstanding at December 31, 2005

8,741

$
800

9.0

$
814Issued

13,219


772Forfeited

(1,060
)

725Unvested options forfeited upon grant of options under the 2006 Plan

(5,566
)

814Outstanding at December 30, 2006

15,334


769

9.3


6,071Vested and exercisable at December 30, 2006

2,983


767

8.9


1,187


Exercise
prices for options outstanding at December 30, 2006 ranged from $725 to $772.

Under
FAS 123(R), the Company is required to estimate the fair value of stock options on the date of the grant using an option-pricing model. The fair value of each stock option
granted under the 2004 Plan or the 2006 Plan was estimated on the date of grant based on the Black-Scholes option pricing model with the following weighted-average assumptions:

Weighted Average Assumptions2006

2005

2004Weighted-average expected life (years)

3.50

4.00

5.00Risk-free interest rate

5.10
%
3.86
%
3.96
%Expected volatility

23.00
%
20.00
%
20.00
%Dividend yield








The
potential expected life of the stock options range from the vesting period of the options (three and a half years to five years) to the contractual life of the options of ten years.
During 2004 and 2005, because the Company had no history with the expected life of stock options, the Company used the low end of the range in our fair value calculations, as allowed under
FAS 123. During 2006, the Company determined that the expected life of the options was 3.5 years based primarily on the structure of the option plan.

Our
risk-free interest rate is based on the interest rate of U.S. Treasury bills with a term approximating the expected life of the option and is measured at the date of the
stock option grant.

Since
the Company's common stock is not publicly traded, the expected volatility was estimated based on the historical volatility of certain publicly-traded peer companies.

The
Company does not anticipate paying dividends.

During
the year ended December 30, 2006, the Company recorded $302,000 in stock compensation expense, including $47,000 related to the stock option repricing discussed above.
Stock compensation

69

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expense
recognized during the year ended December 31, 2005 under FAS 123 was $456,000. Stock compensation expense is recognized as a component of "Selling, general and administrative
expenses" in the accompanying consolidated statements of operations. As of December 30, 2006, the Company had $1,787,000 of total unrecognized stock compensation expense, net of estimated
forfeitures, related to unvested stock options. This compensation expense is expected to be recognized over a weighted average period of 3 years.

16.    Related Party Transactions

The Company's German subsidiary has equity investments in two companies that provide patent, trademark and research services for the Company. The investments
represent approximately 25% ownership in each of the firms and are accounted for by the equity method of accounting. The Company's equity investment account balance was $177,000 and $150,000 at
December 30, 2006 and December 31, 2005, respectively. Charges from the affiliates for work performed were $961,000 in 2006, $1,407,000 in 2005, $474,000 for the period from
May 2, 2004 through January 1, 2005 and $523,000 for the period from January 4, 2004 through May 1, 2004. The Company has amounts due to the affiliates of approximately
$59,000 and $84,000 at December 30, 2006 and December 31, 2005, respectively.

The
Company's corporate headquarters were housed in space leased by a former shareholder of the Company from an affiliate of the former shareholder. A portion of the lease payments and
other expenses, primarily insurance and allocated other direct costs, were charged to the Company. Charges from the affiliate were $165,000 for the period from January 4, 2004 through
May 1, 2004. Subsequent to the Transactions, the Company entered into a transition services agreement with the affiliate of the former shareholder that expired in April 2005. Charges
from the former affiliate under the transition services agreement were $32,000 in 2005 and $477,000 for the period from May 2, 2004 through January 1, 2005.

17.    Segment Information

The Company's operations are principally managed on a products basis and are comprised of two reportable segments: energy storage and separations media. The
energy storage segment produces and markets membranes that provide the critical function of separating the cathode and anode in a variety of battery markets, including lithium, industrial and
transportation applications. The separations media
segment produces and markets membranes used as the high technology filtration element in various medical and industrial applications.

The
Company evaluates the performance of segments and allocates resources to segments based on operating income before interest, income taxes, depreciation and amortization. In addition,
it evaluates business segment performance before business restructuring charges and the impact of non-recurring costs, such as the purchase accounting adjustments related to the
write-off of in-process research and development costs and the impact of the revaluation of inventory. The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.

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Financial information relating to the reportable operating segments is presented below:

|                                      |                                                                   | Successor |         | Predecessor |  
|------------------------------------- | ----------------------------------------------------------------- | --------- | ------- | ----------- | -
|
|
|Net sales to external customers:      |                                                                   |           |         |             |  
|                                      | Energy storage                                                    |           | $       | 342,972     |  
|                                      | Separations media                                                 |           |         | 136,705     |  
|                                      |                                                                   |           |        
|Total net sales to external customers |                                                                   | $         | 479,677 |             | $
|                                      |                                                                   |           |        
|Operating income:                     |                                                                   |           |         |             |  
|                                      | Energy storage                                                    |           | $       | 72,081      |  
|                                      | Separations media                                                 |           |         | 5,218       |  
|                                      | Corporate                                                         |           |         | (258        | )
|                                      |                                                                   |           |        
|Segment operating income              |                                                                   |           | 77,041  |             |  
|Business restructuring                |                                                                   |           | 37,027  |             |  
|In-process research and development   |                                                                   |           |        |             |  
|Inventory purchase accounting         |                                                                   |           |        |             |  
|                                      |                                                                   |           |        
|Total operating income                |                                                                   |           | 40,014  |             |  
|Reconciling items:                    |                                                                   |           |         |             |  
|                                      | Interest expense                                                  |           |         | 92,287      |  
|                                      | Other                                                             |           |         | 3,207       |  
|                                      | Change in accounting principle related to postemployment benefits |           |         | (2,593      | )
|                                      |                                                                   |           |        
|                                      | Income (loss) before income taxes                                 |           | $       | (52,887     | )
|                                      |                                                                   |           |        
|Depreciation and amortization:        |                                                                   |           |         |             |  
|                                      | Energy storage                                                    |           | $       | 31,453      |  
|                                      | Separations media                                                 |           |         | 28,759      |  
|                                      |                                                                   |           |        
|Total depreciation and amortization   |                                                                   | $         | 60,212  |             | $
|                                      |                                                                   |           |        
|Capital expenditures:                 |                                                                   |           |         |             |  
|                                      | Energy storage                                                    |           | $       | 15,070      |  
|                                      | Separations media                                                 |           |         | 8,903       |  
|                                      |                                                                   |           |        
|Total capital expenditures            |                                                                   | $         | 23,973  |             | $
|                                      |                                                                   |           |        

|(in thousands) |                   | December 30, 2006 |           | December 31, 2005
|-------------- | ----------------- | ----------------- | --------- | -----------------
|
|Assets:        |                   |                   |           |                  
|               | Energy storage    |                   | $         | 840,523          
|               | Separations media |                   |           | 502,203          
|               | Corporate assets  |                   |           | 47,134           
|               |                   |                  
|Total assets   |                   | $                 | 1,389,860 |                  
|               |                   |                  

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Net
sales by geographic location, based on the country from which the product is shipped, were as follows:

|                                     |               | Successor |         | Predecessor
|------------------------------------ | ------------- | --------- | ------- | -----------
|
|
|Net sales to unaffiliated customers: |               |           |         |            
|                                     | United States |           | $       | 181,486    
|                                     | Germany       |           |         | 131,002    
|                                     | France        |           |         | 73,290     
|                                     | Other         |           |         | 93,899     
|                                     |               |          
|Total                                |               | $         | 479,677 |            
|                                     |               |          

Property,
plant and equipment by geographic location were as follows:

|(in thousands) |               | December 30, 2006 |         | December 31, 2005
|-------------- | ------------- | ----------------- | ------- | -----------------
|
|               | United States |                   | $       | 107,050          
|               | Germany       |                   |         | 167,199          
|               | France        |                   |         | 21,621           
|               | Other         |                   |         | 67,656           
|               |               |                  
|Total          |               | $                 | 363,526 |                  
|               |               |                  

18.    Quarterly Results of Operations (Unaudited)

|(in thousands, except per share data)                                                             |  | First
Quarter |         | Second Quarter |   | Third Quarter |   | Fourth Quarter |        
|------------------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------- | - | ------------- | - | -------------- | -------
|
|Fiscal year ended December 30, 2006                                                               |  |               |         |                |   |               |   |                |        
|Net sales                                                                                         |  | $             | 115,293 |                | $ | 123,094       |   | $              | 116,384
|Gross profit                                                                                      |  |               | 40,313  |                |   | 44,633        |   |                | 38,088 
|Loss before the cumulative effect of a change in accounting principle                             |  |               | (1,560  | )              |   | (1,374        | ) |                | (24,118
|Net loss                                                                                          |  |               | (1,329  | )              |   | (1,374        | ) |                | (24,118
|Loss per share before the cumulative effect of a change in accounting principlebasic and diluted |  | $             | (9.10   | )              | $ | (8.01         | ) | $              | (140.27
|Net loss per common sharebasic and diluted                                                       |  | $             | (7.75   | )              | $ | (8.01         | ) | $              | (140.27

72

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|(in thousands, except per share data)                |  | First
Quarter |         | Second Quarter |   | Third Quarter |   | Fourth Quarter |        
|---------------------------------------------------- |  | ------------- | ------- | -------------- | - | ------------- | - | -------------- | -------
|
|Fiscal year ended December 31, 2005                  |  |               |         |                |   |               |   |                |        
|Net sales                                            |  | $             | 112,498 |                | $ | 112,614       |   | $              | 105,764
|Gross profit                                         |  |               | 38,889  |                |   | 40,509        |   |                | 31,448 
|Net income (loss)                                    |  |               | 1,641   |                |   | (1,915        | ) |                | (2,308 
|Net income (loss) per common sharebasic and diluted |  | $             | 9.57    |                | $ | (11.17        | ) | $              | (13.46 

On
January 1, 2006, the Company adopted EITF Issue No. 05-5 which increased net income in the first quarter of 2006 by $1,634,000.

During
the third quarter of 2006, the Company recorded a restructuring charge of $36,008,000 related to the 2006 business restructuring plan. This adjustment resulted in a decrease in
third quarter net income of $22,325,000. The Company continued to refine its estimate of restructuring costs during the fourth quarter of 2006, including completion of negotiations with the local
Works Council in connection with employee layoffs. As a result of these activities, the restructuring reserve was reduced which increased fourth quarter income before income taxes and net income by
$1,476,000 and $969,000, respectively.

The
effective tax rate varies between quarters due to a variety of factors, including state income taxes, the mix of income between U.S. and foreign jurisdictions taxed at varying rates,
certain export sales which are excluded from taxable income, various changes in estimates of permanent differences and valuation allowances, and the relative size of the Company's consolidated income
or loss before taxes.

19.    Subsequent Event

In February 2007, the Company paid $5,188,000 for a 60% share in a manufacturing facility in Tiajin, China that produces membrane
separators for lead-acid batteries.

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Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

An evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13(a)-15(e) or 15d-15(e)
promulgated under the Exchange Act) was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer. Based
on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective, as of December 30,
2006.

During
the Company's fourth fiscal quarter of 2006, there has been no change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f)
or 15d-15(f) promulgated under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information

On March 9, 2007 we entered into the Fourth Amendment (the "Fourth Amendment") to the Credit Agreement. The Fourth Amendment revises the Credit Agreement
to provide that the following events do not affect the calculation of "Excess Cash Flow," as defined in the Credit Agreement: (a) in the case of fiscal 2006 only, charges not to exceed
$15,000,000 related to the Company's previously announced shutdown of the cellulosic business, and (b) in the case of fiscal 2006 and thereafter, certain cash payments by the Company with
respect to the Company's acquisition of a 60% share in a production facility in China. The Fourth Amendment also amends the definition of "Permitted Acquisition" to include our acquisition of a 60%
share in a production facility in China. In addition, the Fourth
Amendment clarifies the circumstances under which our prepayment of the Term Loans under the Credit Agreement will trigger specified prepayment fees.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The following table sets forth certain information concerning our executive officers and directors as of December 30, 2006:

|Name               |  | Age |  | Position                                                                      
|------------------ |  | --- |  | ------------------------------------------------------------------------------
|Robert B. Toth     |  | 46  |  | President, Chief Executive Officer and Director                               
|Lynn Amos          |  | 41  |  | Chief Financial Officer, Treasurer & Secretary                                
|Josef Sauer        |  | 55  |  | Vice President & General Manager, Separations Media                           
|Mitchell J. Pulwer |  | 53  |  | Vice President & General Manager, Energy StorageElectronics                  
|Pierre Hauswald    |  | 53  |  | Vice President & General Manager, Energy StorageTransportation and Industrial
|John O'Malley      |  | 51  |  | Senior Vice President, Human Resources                                        
|Phillip Bryson     |  | 37  |  | General Counsel                                                               
|Michael Graff      |  | 55  |  | Chairman of the Board of Directors                                            
|David A. Barr      |  | 43  |  | Director                                                                      
|Kevin Kruse        |  | 36  |  | Director                                                                      

Robert B. Tothbecame our President, Chief Executive Officer and a director on July 6, 2005. Mr. Toth previously was Chief
Executive Officer and President of CP Kelco ApS, a leading global manufacturer of hydrocolloids, with more than 2,000 customers in over 100 countries and facilities in North America, Europe, Asia and
Latin America. Prior to joining CP Kelco in June of 2001, he spent 19 years at Monsanto and Solutia Inc. in roles of increasing responsibility, most recently as Vice President and
General Manager of the Resins and Additives division of Solutia. Mr. Toth earned a bachelor's degree in Industrial Management and Industrial Engineering from Purdue University, and an MBA from
the John M. Olin School of Business at Washington University in St. Louis, Missouri.

Lynn Amoshas served as our Chief Financial Officer since February 2002. Prior to his current role, Mr. Amos served as
Director of Corporate Development and Corporate Controller at The InterTech Group, a holding company. In these roles, Mr. Amos was directly involved in our financial and acquisition activities.
Prior to joining The InterTech Group, Mr. Amos worked in a variety of financial roles at Umbro International, Reeves Industries, Inc. and Price Waterhouse. Mr. Amos holds a B.S.
Degree from Western Carolina University and is a Certified Public Accountant.

Josef Sauerhas served as Vice President and General Manager of Separations Media, since June 1, 2006. From July 2005 until
joining Polypore, Mr. Sauer served as Business Director, Liquid Coating Resins & Additives (Europe, Middle East and Asia) for Cytec Surface Specialties based in Brussels, Belgium. From
June 2003 to July 2005, Mr. Sauer served as Global Manager, Liquid Coating Resins for Surface Specialties UCB SA and from February 2003 to June 2003, he served as
Business Director, Technical Products for Surface Specialties Germany GmbH & Co KG of the UCB-Group. From July 2002 to February 2003, Mr. Sauer served as
Business Director, Technical Products for Solutia Inc. and from January 2000 to July 2002, he served as Commercial Director and Director, Marketing Technical Service (Europe,
Middle East and Africa), Resins and Additives for Solutia Inc. In addition to an undergraduate degree in Organic Chemistry, Mr. Sauer holds a PhD in Organic Chemistry from University
Dortmund, Dortmund, Germany.

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Mitchell J. Pulwerhas served as Vice President and General Manager of Energy StorageElectronics since April 17, 2006.
Mr. Pulwer previously served as Vice President and General Manager at Solutia, Inc., from 2004 to 2006, where he led steady growth of the company's $600 million interlayer film
division. Before that, he held roles of increasing responsibility in marketing, sales and business development in Solutia's Saflex business, from 1997 to 2004. In addition to an undergraduate degree
in Chemistry, Mr. Pulwer has an MBA from Washington University, St. Louis, Missouri; a PhD in Organic Chemistry from the State University of New York-Buffalo; and a Postdoctoral
Fellowship at Yale University, New Haven, Connecticut. He holds 16 patents and has been published in 14 technical publications.

Pierre Hauswaldhas served as Vice President & General Manager of Energy StorageTransportation and Industrial since
June 2004. Since joining Polypore in 1981, he has held several management positions of increasing responsibility, which included Quality Control Manager, Site Manager, Worldwide Manufacturing
Manager and Vice President of Manufacturing and Engineering. Mr. Hauswald graduated from the Institut National des Sciences Appliques in Lyon as a Diplomed Engineer in Chemistry and
Macro-molecules.

John O'Malleyhas served as Senior Vice President, Human Resources since August 2005. Mr. O'Malley previously served as
Senior Vice President-Human Resources for Southfield, Michigan-based GST AutoLeather, from 2003 to 2005, for which he directed all human resources activities. Before that, he held positions with
increasing responsibility in human resources at several companies, including Certainteed Corporation, Formica Corporation, Clopay Corporation, and Solutia Inc. Mr. O'Malley has a
bachelor's degree in Psychology from Lafayette College in Easton, Pennsylvania, and is a graduate of the University of Michigan Senior Executive Human Resources Program.

Phillip Brysonhas served as General Counsel since July 2004, after having served as General Counsel and Corporate Secretary for
Polymer Group, Inc., a global manufacturer of non-woven fabrics, from March 2003 until July 2004. He previously served as Deputy General Counsel at the
InterTech Group where he focused on merger and acquisition activity. Mr. Bryson earned his bachelor's degree in Finance and Business Economics from the University of South Carolina, and his
Juris Doctor from Columbia University in New York.

Michael Graffbecame Chairman of our board of directors in connection with the closing of the Transactions. Mr. Graff has served as
a member and managing director of Warburg Pincus LLC and a general partner of Warburg Pincus & Co. since October 2003 and has served as an advisor to Warburg Pincus LLC from July 2002
until October 2003. Prior to working with Warburg Pincus LLC, Mr. Graff spent six years with Bombardier, a transportation equipment manufacturer, first as President of Business Aircraft and
later as President and Chief Operating Officer of Bombardier Aerospace Group. Prior to joining Bombardier, Mr. Graff spent 15 years with McKinsey & Company, Inc., a
management consulting firm, as a partner in the New York, London, and Pittsburgh offices. Mr. Graff is a director of TransDigm Group Inc. ("TransDigm"), a producer of aircraft
components, Builders FirstSource, Inc., a building products manufacturer, and CAMP Systems International, a provider of aviation management products. Mr. Graff received an A.B. Degree in
economics from Harvard College and an M.S. in Management from M.I.T.

David A. Barrbecame a director in connection with the closing of the Transactions. Mr. Barr has served as a member and managing
director of Warburg Pincus LLC and a general partner of Warburg Pincus & Co. since January 2001. Prior to joining Warburg Pincus LLC, Mr. Barr was a managing director at Butler
Capital, an investment company, where he focused on industrial and consumer leveraged buyout transactions for more than ten years. Mr. Barr is a director of TransDigm, Eagle Family
Foods, Inc., a food manufacturer, Builders FirstSource, Inc., and Neiman Marcus Group, Inc., a luxury retailer. He holds a B.A. Degree in Economics from Wesleyan University and an
MBA from Harvard Business School.

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Kevin Krusebecame a director in connection with the closing of the Transactions. Mr. Kruse has been a member and managing director
of Warburg Pincus LLC since January 2006 and was previously a Vice President of Warburg Pincus LLC beginning in January 2003 and has been employed by Warburg Pincus LLC since
February 2002. Prior to joining Warburg Pincus LLC, Mr. Kruse was employed by AEA Investors Inc., an investment company, where he focused on private equity opportunities in
industrial and consumer products companies. Before that, he was employed by Bain & Co., a management consulting firm. Mr. Kruse is a director of TransDigm, Builders
FirstSource, Inc. and Wellman, Inc., a chemical manufacturer. Mr. Kruse received an A.B. Degree in Government from Dartmouth College.

On
January 31, 2007, W. Nicholas Howley began serving as a member of the board of directors of the Company. Mr. Howley currently serves as the Chairman of the Board and
Chief Executive Officer of TransDigm. Affiliate entities of Warburg Pincus LLC own the majority of the common stock and appoint a majority of the boards of directors of both TransDigm and the Company.
Mr. Howley served as Chief Executive Officer of TransDigm, since December 2001 and has served in various roles with
TransDigm since TransDigm's inception in September 1993. Mr. Howley is also a director of Satair A/S, a Danish public company.

Term of executive officers and directors

Directors are elected at each annual meeting of our stockholders. We are wholly owned by Polypore International. Executive officers are appointed by the board of
directors and serve at the discretion of the board of directors.

Code of ethics

We have adopted a code of ethics that is applicable to our board of directors, principal executive officer and principal financial and accounting officer, as well
as all our other employees. A copy of the code of ethics may be found on our website at http://www.polypore.net, under the Corporate Governance section.

Board composition

According to a stockholders' agreement among the Company and our stockholders (see"Certain Relationships and
Related Transactions, and Director Independence" below), Warburg Pincus has the right to have certain individuals designated by it on our board of directors until we complete an initial public
offering of our common stock in accordance with the rules promulgated by the SEC. Currently, Warburg Pincus has designated David Barr, Michael Graff and Kevin Kruse. See "Certain Relationships and
Related Transactions, and Director Independence" for more information about this stockholders' agreement. Mr. Barr, Mr. Graff and Mr. Kruse are currently managing directors of
Warburg Pincus LLC and partners of Warburg Pincus & Co., which is an affiliate of Warburg Pincus Private Equity VIII, L.P. and Warburg Pincus International Partners, L.P., our principal
stockholders. We believe that all of our current directors serving in fiscal 2006, other than Mr. Toth, would qualify as independent under NYSE Rule 303A. However, we would be exempt
from such requirements as a "controlled company" under the relevant provisions of Rule 303A. We do not believe that any of our current directors serving in fiscal 2006 would qualify as
independent under SEC Rule 10A-3 for audit committee purposes.

Board committees

Our board of directors has an audit committee and a compensation committee.

Audit committee

The audit committee of our board of directors appoints, determines the compensation for and supervises our independent auditors, reviews our internal accounting
procedures, systems of internal

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controls
and financial statements, reviews and approves the services provided by our internal and independent auditors, including the results and scope of their audit, and resolves disagreements
between management and our independent auditors. Currently, the audit committee consists of Messrs. Graff and Kruse. Our board of directors has reviewed the qualifications and backgrounds of
the members of the audit committee and determined that, although no one member of the audit committee is an "audit committee financial expert" within the meaning of the relevant rules under the
Securities Exchange Act of 1934, the combined qualifications and experience of the members of the audit committee give the committee collectively the financial expertise necessary to discharge its
responsibilities. The audit committee charter is available on our website at http://www.polypore.net, under the Corporate Governance section.

Compensation committee

The compensation committee of our board of directors reviews and recommends to the board of directors the compensation and benefits of all of our executive
officers, administers our equity incentive plans and establishes and reviews general policies relating to compensation and benefits of our employees. Currently, the compensation committee consists of
Messrs. Graff and Barr. The compensation committee charter is available on our website at http://www.polypore.net, under the Corporate Governance section.

Compensation committee interlocks and insider participation

None of our executive officers serve as members of the board of directors or compensation committee of any entity that has an executive officer serving as a
member of our board of directors or compensation committee.

Item 11.    Executive Compensation

Compensation Discussion and Analysis

Compensation Philosophy

Our compensation philosophy primarily focuses on the achievement of Company performance at levels necessary to provide meaningful return to our shareholders upon
an ultimate liquidity event. To that end, in addition to the typical needs to attract, motivate and retain talented executives, our compensation programs are specifically designed to incentivize our
named executive officers to achieve short-and long-term performance goals that our shareholders established with the goal of making us an attractive candidate for either a public offering
of our shares or a sale to financial or strategic buyers, and which provide our named executive officers with meaningful compensation on and following such an event. As a result, our compensation
programs are weighted toward performance-based compensation, with particular emphasis in equity-based compensation, such that our named executive officers will see returns that are ultimately based
upon the returns achieved by our shareholders.

Role of the Compensation Committee

Our compensation committee is responsible for determining the compensation and benefit plans of the Company generally, and establishes and reviews all
compensatory plans and arrangements with respect
to our named executive officers. The compensation committee meets annually early in each fiscal year to determine the achievement of performance goals for the prior fiscal year, set new performance
goals for the current fiscal year, and consider compensation increases. The committee also meets periodically to discuss compensation-related matters as they arise during the year. We have not engaged
any compensation consultants to advise us on compensation design or policy.

Components of Compensation for 2006

For 2006, the compensation provided to our named executive officers consisted of the same elements generally available to our non-executive employees,
including base salary, annual bonus,

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equity-based
compensation and other perquisites and benefits, each of which is described in more detail below. We believe that the mix of cash- and equity-based compensation, as well as
the relationship of fixed to performance-based compensation, is well balanced to further the compensation philosophy discussed previously.

Base Salary

The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive's skill set, experience,
role and responsibilities. Base salary is set by our compensation committee in advance of each year, with our Chief Executive Officer ("CEO") providing recommendations to the committee for each named
executive officer other than himself. In determining base salary for any particular year, the committee considers, among other factors, competitive market practice, individual performance for the
prior year and the mix of fixed compensation to overall compensation.

Annual Incentive Bonuses

The annual incentive bonuses are intended to compensate executives for achieving our annual financial goals at corporate and business unit levels and for
achieving measurable individual annual performance objectives. Our annual incentive bonus plan (also known as the "Employee Incentive Program") provides for a cash bonus, dependent upon the Company's
obtaining specified earnings before interest, taxes, depreciation and amortization adjusted for certain items, such as non-cash charges and restructuring charges (Adjusted EBITDA as defined in the
senior secured credit facilities), calculated as
a percentage of the executive's base salary. Our compensation committee approves the annual incentive award for each of the named executive officers, with the CEO providing recommendations to the
compensation committee for each named executive officer other than himself. For 2006, the target bonus awards for each of the named executive officers were as follows:

Name

Target Bonus (as a percentage of base salary)Robert B. Toth

100%Lynn Amos

70%Pierre Hauswald

70%John O'Malley

70%Josef Sauer

70%


The
incentive bonus pool used for all employee bonuses, including executive bonuses, is based on every employee's target bonus percentage and the actual Adjusted EBITDA achieved as
compared to target Adjusted EBITDA. If actual Adjusted EBITDA exceeds the target, additional funds are added to the bonus pool. Likewise, if actual Adjusted EBITDA is less than the target, then the
bonus pool is decreased. If actual Adjusted EBITDA is below a certain threshold (in 2006, 85% of Adjusted EBITDA target), then no bonuses are paid.

The
actual amount of an executive's annual bonus in respect of such year will be increased or decreased from the target bonus amount based upon company, business unit and individual
performances. Actual 2006 bonus amounts are set forth in the Summary Compensation Table and were paid in March 2007.

Long-Term Equity Compensation

To date, all of the long-term equity incentives granted to named executive officers have been in the form of stock options, which we believe provide
an effective incentive with respect to company performance and an effective retention mechanism as a result of the applicable vesting mechanics of the awards. During 2006, we adopted our 2006 Stock
Option Plan, which replaced our previous plan, in order to better align the equity ownership by our employees with the expectations as to long-term

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company
performance. Options granted in 2006 under the 2006 Stock Option Plan vest based upon the satisfaction of Adjusted EBITDA targets over the four fiscal year period beginning with fiscal 2006.
Specifically, 50% of the awards are subject to annual vesting upon achievement of annual Adjusted EBITDA targets, and the remaining 50% vest upon achievement of a cumulative Adjusted EBITDA target in
2009. Additionally, all or a portion of the options granted will vest upon a change in control if certain of our shareholders receive annualized net rates of return on their investment starting at
20%, with all options vesting if the shareholders received an annualized net rate of return equal to or in excess of 25%. The number of options granted to each executive was determined by our
compensation committee and primarily based upon the executive's relative position within the Company as well as the executive's contribution to our operating results and his expected future
contribution. The exercise prices of our stock option grants were set at the fair market value of a share of our stock at the time of the grant, with fair market values being determined by the board
of directors using reasonable valuation methodologies in a manner consistent with the requirements of Section 409A of the Internal Revenue Code for private company stock.

Upon
the adoption of the 2006 Stock Option Plan, all unvested awards outstanding under our 2004 Stock Option Plan were canceled, and all outstanding vested awards were made subject to
the terms and conditions of the 2006 Stock Option Plan. In connection with this assumption, all options held by Messrs. Toth and O'Malley that had an exercise price greater than the fair market
value of the underlying stock were repriced such that the applicable exercise price was made equal to the then-fair market value. Our compensation committee determined that this repricing
was necessary to minimize the effect of a decline in our fair market value that was the culmination of a trend originating prior to the tenure of and having little to do with the performance of either
Mr. Toth or Mr. O'Malley and to reward Messrs. Toth and O'Malley for their significant contributions to our subsequent and continuing success.

Perquisites and Other Benefits

Our named executive officers are eligible to receive the same benefits, including life and health benefits, that are available to all employees. We also provide
certain additional perquisites to our named executive officers, on a case-by-case basis, including a car
allowance, tax preparation services, reimbursement of relocation costs and tax gross-ups related to such reimbursement of relocation costs, tax preparation services and insurance premiums.
With respect to the perquisites provided, we believe that it is necessary to provide such perquisites given the competitive market for talent, and such perquisites serve to allow our named executive
officers to better focus on the business of the Company.

Severance Benefits

Each of our named executive officers is entitled to receive severance benefits upon certain qualifying terminations of employment, based either on an applicable
provision in such executive's employment agreement or pursuant to the terms of our Executive Severance Policy. These severance arrangements are intended to retain executives and provide continuity of
management in connection with a threatened or actual change in control transaction.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with the Company's management. Based on this review and these
discussions, the compensation committee recommended to the board of directors of the Company that the Compensation Discussion and Analysis be included in the Company's Annual Report on
Form 10-K.

| |  | Compensation Committee              
| |  | ------------------------------------
| |  | Michael GraffChairman
David A. Barr

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Summary Compensation Table

The following table shows information regarding the compensation earned during the fiscal year ended December 30, 2006, by our Chief Executive Officer,
Chief Financial Officer and our three other most highly compensated executive officers who were employed by us as of December 30, 2006, and whose total compensation exceeded $100,000 during
that fiscal year.

|Name and Principal Position                                                                       |  | Year |  | Salary
($) |  | Option
Awards(1)
($) |  | Non-Stock
Incentive Plan
Compensation(2)
($) |  | All Other
Compensation(3)
($) |  | Total
($)
|------------------------------------------------------------------------------------------------- |  | ---- |  | ---------- |  | -------------------- |  | -------------------------------------------- |  | ----------------------------- |  | ---------
|Robert B. Toth
    President and Chief Executive Officer                                          |  | 2006 |  | 472,500    |  | 207,916              |  | 750,000                                      |  | 65,497                        |  | 1,495,913
|Lynn Amos
    Chief Financial Officer, Treasurer and Secretary                                    |  | 2006 |  | 259,231    |  | 44,065               |  | 294,000                                      |  | 16,540                        |  | 613,836  
|Pierre Hauswald
    Vice President & General Manager, Energy StorageTransporation and Industrial |  | 2006 |  | 215,385    |  | 44,173               |  | 268,000                                      |  | 63,602                        |  | 591,160  
|John O'Malley
    Senior Vice President of Human Resources                                        |  | 2006 |  | 223,077    |  | 31,305               |  | 250,000                                      |  | 71,273                        |  | 575,655  
|Josef Sauer(4)
    Vice President & General Manager, Separations Media                            |  | 2006 |  | 149,454    |  | 45,942               |  | 230,000                                      |  | 93,716                        |  | 519,512  

---

During
2006, Messrs. Toth's and O'Malley's stock options issued under the Polypore International, Inc. 2004 Stock Option Plan were repriced. Messrs. Toth's and O'Malley's option
award amounts include $47,000 and $1,000, respectively, related to the option repricings.

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2006 Grants of Plan-Based Awards Table

This table discloses the potential future payouts under our non-equity incentive plan. It also captures the actual numbers of stock options granted
and the grant date fair value of these awards.

|                |  |                          |     | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |  | Estimated Future Payouts Under Equity Incentive Plan Awards |             |  |       |  |       |  |              
|--------------- |  | ------------------------ | --- | ------------------------------------------------------------------ |  | ----------------------------------------------------------- | ----------- |  | ----- |  | ----- |  | -------------
|
|Robert B. Toth  |  | 6/15/06
6/15/06
12/16/05 | (5) | 

                                                              |  | $                                                           | 

472,500 |  | 

 |  | 

 |  | 4,142
1,038

|Lynn Amos       |  | 6/15/06
12/16/05         |     | 
                                                                |  | $                                                           | 
183,400   |  | 
   |  | 
   |  | 1,127
      
|Pierre Hauswald |  | 6/15/06
12/16/05         | (5) | 
                                                                |  | $                                                           | 
154,000   |  | 
   |  | 
   |  | 1,130
      
|John O'Malley   |  | 6/15/06
6/15/06
12/16/05 | (5) | 

                                                              |  | $                                                           | 

148,400 |  | 

 |  | 

 |  | 775
25
     
|Josef Sauer     |  | 6/15/06
12/16/05         | (5) | 
                                                                |  | $                                                           | 
178,900   |  | 
   |  | 
   |  | 1,175
      

---

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2006 Outstanding equity awards at fiscal year-end

|Name            |  | Number of Securities Underlying Unexercised Options (#)
Exercisable |  | Number of Securities Underlying Unexercised Options (#)
Unexercisable |  | Option Awards Equity Incentive Plan
Awards: Number of Securities Underlying Unexercised Unearned Options (#) |     | Option Exercise Price
($) |               | Option Expiration Date
|--------------- |  | ------------------------------------------------------------------- |  | --------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ | --- | ------------------------- | ------------- | ----------------------
|Robert B. Toth  |  | 1,038
518                                                           |  | 
                                                                   |  | 
3,624                                                                                                      | (1) | $$                        | 772.46
772.46 |                       
|Lynn Amos       |  | 48
141                                                              |  | 
                                                                   |  | 
986                                                                                                        | (1) | $$                        | 724.71
772.46 |                       
|Pierre Hauswald |  | 45
141                                                              |  | 
                                                                   |  | 
989                                                                                                        | (1) | $$                        | 724.71
772.46 |                       
|John O'Malley   |  | 25
97                                                               |  | 
                                                                   |  | 
678                                                                                                        | (1) | $$                        | 772.46
772.46 |                       
|Josef Sauer     |  | 147                                                                 |  |                                                                      |  | 1,028                                                                                                        | (1) | $                         | 772.46        |                       

---

Potential Payments Upon Termination or Change in Control

Employment Agreements

We are a party to an employment agreement with Mr. Toth, with a term that runs until July 6, 2008, and is automatically renewed for successive one
year terms thereafter unless and until either party delivers notice of termination within 120 days of the expiration of the then current term. Under the terms of the employment agreement,
Mr. Toth's salary was $472,500 for 2006. Mr. Toth's salary can be increased (but not decreased) at the discretion of the board of directors. As of January 1, 2007,
Mr. Toth's salary was increased to $525,000. Mr. Toth is also eligible to receive incentive bonus compensation with a target of not less than 100% of his base salary.

If
Mr. Toth resigns with good reason, is terminated without cause or his employment term is not extended, then he will receive (i) an amount equal to the greater of his
aggregate base salary payable for the remainder of his employment term or his current base salary, (ii) an amount equal to the greater of his annual bonus from the preceding year or 50% of the
current year's target annual bonus; provided, that if more than a year remains on the employment term, such amount will be increased by
a multiple of the number of months remaining in the employment term divided by twelve, and (iii) continuation of employee benefits through the longer of the remainder of the employment term or
the one-year period following such termination.

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If Mr. Toth's employment is terminated in anticipation of or within twelve months following a merger, consolidation or similar event, then, in lieu of the amounts described above,
he will receive (i) an amount equal to the greater of his aggregate base salary payable for the remainder of his employment term or two times his current base salary, (ii) an amount
equal to two times the greater of his annual bonus from the preceding year or 50% of the current year's target annual bonus; provided, that if more than two years remain on the employment term, such
amount will be increased by a multiple of the number of months remaining in the employment term divided by twelve.

We
are also a party to an employment agreement with Mr. Sauer, with a term that runs until Mr. Sauer's retirement or until terminated by either party, with a required
notice period of twelve months. Under the terms of the employment agreement, Mr. Sauer's annual salary is €200,000. Mr. Sauer is also eligible to receive incentive bonus
compensation with a target of 70% of his base salary. Additionally, we have agreed to provide certain retirement benefits through the purchase of life insurance contracts for Mr. Sauer. In the
event that we terminate Mr. Sauer, he will receive a severance payment equal to his current annual salary.

Executive Severance Policy

Each of our named executive officers, other than Mr. Toth and Mr. Sauer, participates in our Executive Severance Policy, which provides severance
benefits upon certain terminations without cause, including terminations in connection with a merger, consolidation or similar change of control event. The severance benefits consist of one year's
base salary and medical benefits for a year.

2006 Stock Option Plan

Options granted under our 2006 Stock Option Plan typically vest based on the satisfaction of certain annual and cumulative performance criteria over the
four-year fiscal period ended in fiscal 2009. Upon a change in control, all or a portion of the options that were granted under the stock option plan will vest if equity investors receive
predetermined rates of return on their investment starting with a rate of return of 20%, with all options vesting if the rate of return is 25% or more. As of December 30, 2006, under the 2006
stock option plan, there were stock options for 13,219 shares outstanding, of which 1,595 options were vested. As of December 30, 2006, under the 2004 Stock Option Plan, there were stock
options for 2,115 shares outstanding, of which 1,389 were vested. There were 1,308 stock options under the 2004 Stock Option Plan that are now subject to the terms of the 2006
Stock Option Plan. The remaining 81 vested stock options will be redeemed in March 2007 and the remaining unvested stock options will be forfeited. An initial public offering is not
considered a Change in Control under the 2006 Stock Option Plan.

Tabular Summary

The table below reflects the amount of compensation and benefits payable to each named executive officer in the event of (i) termination for cause or
without good reason ("voluntary termination"), (ii) termination other than for cause or with good reason ("involuntary termination"), (iii) termination in connection with a change in
control, (iv) death and (v) disability. The amounts shown assume that the applicable triggering event occurred on December 30, 2006, and therefore, are

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estimates
of the amounts that would be paid to the named executive officers upon the occurrence of such triggering event.

|Name            |  | Type of Payment                                             |  | Voluntary
Termination |  | Involuntary
Termination |                    | Change in
Control (1) |     | Death                       |     | Disability |                
|--------------- |  | ----------------------------------------------------------- |  | --------------------- |  | ----------------------- | ------------------ | --------------------- | --- | --------------------------- | --- | ---------- | ---------------
|Robert B. Toth  |  | Cash Severance
Continued Benefits
Stock Option Acceleration |  | 

                 |  | $$                      | 1,063,125
84,127
 |                       | $$$ | 1,417,500
112,170
1,422,890 |     | $$         | 472,500
7,099

|Lynn Amos       |  | Cash Severance
Continued Benefits
Stock Option Acceleration |  | 

                 |  | $$                      | 262,000
7,099
    |                       | $$$ | 262,000
7,099
387,133       |     |            | 

          
|Pierre Hauswald |  | Cash Severance
Continued Benefits
Stock Option Acceleration |  | 

                 |  | $$                      | 220,000
7,099
    |                       | $$$ | 220,000
7,099
388,311       |     |            | 

          
|John O'Malley   |  | Cash Severance
Continued Benefits
Stock Option Acceleration |  | 

                 |  | $$                      | 212,000
7,099
    |                       | $$$ | 212,000
7,099
266,203       |     |            | 

          
|Josef Sauer     |  | Cash Severance
Continued Benefits
Stock Option Acceleration |  | 

                 |  | $                       | 263,400

        | (3)                   | $$  | 263,400

403,623           | (3) |            | 

          

---

Director Compensation

During 2006, we did not have any outside directors. We will pay our outside directors (which do not include Messrs. Barr, Graff or Kruse) an annual
retainer fee of $20,000, plus $5,000 for each board meeting they attend. In addition, we will pay each of our outside directors $5,000 per year for each committee of our board of directors for which
they act as chairperson. We also may from time to time grant our outside directors options to purchase shares of our common stock in amounts and upon terms to be determined by our board of directors.
Other than outside directors, we do not compensate our directors for serving on our board of directors or any of its committees. We do, however, reimburse each member of our board of directors for
out-of-pocket expenses incurred in connection with attending our board and committee meetings.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The table below sets forth information regarding beneficial ownership of our common stock as of January 30, 2007 for:

Beneficial
ownership is determined in accordance with the rules and regulations of the SEC. Except as indicated in the footnotes to this table and subject to applicable community
property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock listed as beneficially owned by them. Unless otherwise indicated, the
principal address for each of the stockholders below is c/o Polypore International, Inc., 11430 North Community House Road, Suite 350, Charlotte, NC 28277.

|Name of beneficial owner                                         |  | Shares owned |  | Shares
subject to
options |  | Total shares
beneficially
owned |  | Percentage of
common stock
beneficially owned |  
|---------------------------------------------------------------- |  | ------------ |  | ------------------------- |  | ------------------------------- |  | --------------------------------------------- | -
|Warburg Pincus Private Equity VIII, L.P.(1)                      |  | 156,938      |  |                          |  | 156,938                         |  | 91.3                                          | %
|Warburg Pincus International Partners, L.P.(2)                   |  | 156,938      |  |                          |  | 156,938                         |  | 91.3                                          | %
|PP Holding LLC(3)                                                |  | 141,938      |  |                          |  | 141,938                         |  | 82.6                                          | %
|Robert B. Toth(3)                                                |  |             |  |                          |  |                                |  | *                                             |  
|Lynn Amos(3)                                                     |  |             |  |                          |  |                                |  | *                                             |  
|Josef Sauer(3)                                                   |  |             |  |                          |  |                                |  | *                                             |  
|John O'Malley(3)                                                 |  |             |  |                          |  |                                |  | *                                             |  
|Pierre Hauswald(3)                                               |  |             |  |                          |  |                                |  | *                                             |  
|David A. Barr(4)                                                 |  | 171,938      |  |                          |  | 171,938                         |  | 100.0                                         | %
|W. Nicholas Howley(3)                                            |  |             |  |                          |  |                                |  | *                                             |  
|Michael Graff(5)                                                 |  | 171,938      |  |                          |  | 171,938                         |  | 100.0                                         | %
|Kevin Kruse(6)                                                   |  | 171,938      |  |                          |  | 171,938                         |  | 100.0                                         | %
|All directors and executive officers as a group (eleven) persons |  | 171,938      |  |                          |  | 171,938                         |  | 100.0                                         | %

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The
following table provides certain information with respect to the Company's equity compensation plans as of December 31, 2005.

|Plan category                                              |  | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights |  | Weighted-average
exercise price of
outstanding options,
warrants and rights |     | Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | --- | -------------------------------------------------------------------------------------------------------------------------------------------
|
|Equity compensation plans approved by security holders(1)  |  | 15,334                                                                                      |  | $                                                                           | 769 |                                                                                                                                            
|Equity compensation plans not approved by security holders |  |                                                                                            |  |                                                                             |    |                                                                                                                                            
|                                                           |  |                                                                                            
|                                                           |  | 15,334                                                                                      |  | $                                                                           | 769 |                                                                                                                                            
|                                                           |  |                                                                                            

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Item 13.    Certain Relationships and Related Transactions, and Director Independence

The Transactions

On May 13, 2004, Polypore, Inc. and its shareholders consummated a stock purchase agreement with PP Acquisition Corporation, our wholly owned
indirect subsidiary, pursuant to which PP Acquisition Corporation purchased all of the outstanding shares of Polypore Inc.'s capital stock. The aggregate purchase price, including acquisition
related costs, was approximately $1,150.1 million in cash. In connection with the Transactions, PP Acquisition Corporation (i) obtained a new credit facility consisting of a
$370.0 million term loan facility and a €36.0 million term loan facility, with initial borrowings of approximately $414.9 million, (ii) issued the
83/4% senior subordinated notes, with
a face amount of $405.9 million, and (iii) received equity contributions from its shareholders of $320.4 million. PP Acquisition Corporation used the net proceeds from the new
credit facility, the issuance of the 83/4% senior subordinated notes and the equity contributions to pay the net purchase price to the existing shareholders, repay all outstanding
indebtedness under Polypore, Inc.'s existing credit facility and pay transaction related fees and expenses. At the time of closing of the acquisition, PP Acquisition Corporation merged with and
into Polypore, Inc., with Polypore, Inc. as the surviving corporation.

Management investments

Certain executive officers and members of management own an aggregate of 1,744 Class A common units of PP Holding, LLC, one of our stockholders, which
represent approximately 1% of the outstanding membership interests of PP Holding, LLC. Messrs. Toth, Amos, O'Malley and Hauswald collectively own 933 Class A common units, including 518
units purchased in 2006 by Mr. Toth for approximately $400,000.

Operating agreement

Messrs. Toth, Amos, O'Malley and Hauswald (collectively, the "management members"), Warburg Pincus and PP Holding, LLC entered into an operating agreement
which will govern PP Holding, LLC. The operating agreement provides that Warburg Pincus will be the managing member of PP Holding, LLC, which we refer to herein as the "managing members." Subject to
certain customary exceptions, no management member may transfer any Class A common units or any interest therein unless the written consent of the managing members is obtained, and thereafter
any proposed transfer by a management member will be subject to a right of first refusal running in favor of Warburg Pincus. The operating agreement provides that Warburg Pincus may transfer its
Class A common units freely, provided that, in the event of certain types of transfers of Class A common units, the other members of PP Holding, LLC may participate in such transfers on
a pro rata basis. The operating agreement further provides that, in the event of certain types of transfers by Warburg Pincus of our common stock directly owned by Warburg Pincus, PP Holding, LLC will
have the right to, and the managing members will agree to cause PP Holding, LLC to, participate in such transfers on a pro rata basis and distribute the proceeds to the holders of Class A
Common Units.

Pursuant
to the terms of the operating agreement, without the consent of the management members, the managing members may authorize the issuance of additional units, including
Class A common units. In the event the managing members authorize the issuance of additional Units, under certain circumstances, the managing members may permit the other members to participate
in such proposed issuance. In the event Warburg Pincus desires to transfer its Class A common units to persons who are not affiliates of Warburg Pincus or PP Holding, LLC, the operating
agreement permits Warburg Pincus to cause the other members of PP Holding, LLC to transfer their Class A common units for the same consideration proposed to be received by Warburg Pincus.

88

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Stockholders' agreement

In connection with the Transactions, our stockholders, Warburg Pincus and PP Holding, LLC, entered into a stockholders' agreement which will govern our shares of
capital stock.

The
stockholders' agreement provides that, subject to certain customary exceptions, in the event we propose to issue equity securities, Warburg Pincus and PP Holding, LLC are entitled to
participate in such proposed issuance on a pro rata basis. Those participation rights, and certain other rights granted under the stockholders' agreement, will terminate automatically upon the closing
of an initial public offering. The stockholders agreement further provides that until the initial public offering, Warburg Pincus will have the right to designate a majority of our board of directors.

Stockholders' registration rights agreement

In connection with the Transactions, our stockholders and certain management investors entered into a stockholders' registration rights agreement, which granted
such stockholders certain customary registration rights, including demand, piggy-back and Form S-3 registration rights.

Transition services

In connection with the closing of the Transactions, Polypore, Inc. entered into a transition services agreement with The InterTech Group, one of our former
stockholders, pursuant to which InterTech will
provide us with office space and certain administrative services for a period of up to two years from the closing of the Transactions. Payments to Intertech under the transition services agreement
were $32,000 in 2005 and $477,000 in 2004. Prior to the closing of the Transactions, we leased the same office space and similar administrative services on a month to month basis, with no written
agreement governing the relationship.

Tax sharing agreement

We have entered into a tax sharing agreement with our subsidiaries. Under the terms of the tax sharing agreement, we and each of our subsidiaries are obligated to
make payments to us equal to the amount of the federal and state income taxes that such subsidiaries and their subsidiaries would have owed if we did not file our federal and state income tax returns
on a consolidated or combined basis, with cash payments to us being limited by our actual cash tax obligations.

German investment

Our German subsidiary has equity investments in two companies that provide patent, trademark and research services for us. The investments represent approximately
25% ownership in each of the firms and are accounted for by the equity method of accounting. The equity investment account balance was $177,000 and $150,000 at December 30, 2006 and
December 31, 2005, respectively. Charges from the affiliates for work performed were $961,000 in 2006, $1,407,000 in 2005, $474,000 for the period from May 2, 2004 through
January 1, 2005 and $523,000 for the period from January 4, 2004 through May 1, 2004. The Company has amounts due to the affiliates of approximately $59,000 and $84,000 at
December 30, 2006 December 31, 2005, respectively.

Policies and procedures regarding transactions with related persons

Pursuant to our policies, any transactions between the Company and a Company affiliate, director, employee, an immediate family member of a Company director or
employee or business entities in which a Company director or employee or an immediate family member of a Company director employee is an officer, director and/or controlling shareholder must be
conducted at arm's length. Any consideration paid or received by the Company in such a transaction must be on terms no less

89

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favorable
than terms available to an unaffiliated third party under similar circumstances. Any interest of a director or officer in such transactions that do not require prior board approval shall be
reported to the board of directors at least annually.

Item 14.    Principal Accounting Fees and Services

The following table shows the aggregate fees billed to the Company by Ernst & Young LLP for fiscal years 2006 and 2005:

|(in thousands)        |  | 2006 |       | 2005
|--------------------- |  | ---- | ----- | ----
|
|Audit Fees(1)         |  | $    | 1,173 |     
|Audit-Related Fees(2) |  |      |      |     
|Tax Fees(3)           |  |      | 562   |     
|All Other Fees        |  |      | 3     |     

---

The
audit committee has considered whether the non-audit services provided were compatible with maintaining the principal auditor's independence and believes that such
services and related fees have not impaired the independence of our principal auditors. All services provided by Ernst & Young LLP since May 13, 2004, the date of the Transactions, were
pre-approved by the audit committee.

Generally,
before an independent auditor is engaged by the Company to render audit or non-audit services, the engagement is approved by the audit committee. Any subsequent
changes in audit, audit-related, tax or other services to be provided by the independent auditor due to changes in scope of work, terms, conditions or fees of the engagement must be
pre-approved by the audit committee. Requests or applications to provide services that require specific approval by the audit committee will be submitted to the audit committee by both the
independent auditor and the chief financial officer of the Company and must be consistent with applicable SEC regulations regarding auditor independence.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules



Information
required by other schedules has either been incorporated in the consolidated financial statements and accompanying notes or is not applicable to us.

|Exhibit
Number |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                          
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1            |  | Certificate of Incorporation of Polypore International, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                         
|3.2            |  | Amendment to Certificate of Incorporation of Polypore International, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                            
|3.3            |  | Bylaws of Polypore International, Inc. (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                                               
|4.1            |  | Indenture, dated as of May 13, 2004, by and among PP Acquisition Corporation (merged with and into Polypore, Inc.), the Guarantors (as defined therein) and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142)) (the "8.75% Indenture")
|               |  |                                                                                                                                                                                                                                                                                                                                                                              

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|4.2  |  | Form of 8.75% Senior Subordinated Dollar Notes Due 2012 (incorporated by reference to Exhibit C of the 8.75% Indenture)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3  |  | Form of 8.75% Senior Subordinated Euro Notes Due 2012 (incorporated by reference to Exhibit D of the 8.75% Indenture)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.4  |  | Indenture, dated as of October 18, 2004, by and among Polypore International, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission
File No. 333-124142)) (the "10.5% Indenture")                                                                                                                                                                                                                                                                                                          
|4.5  |  | Form of 10.5% Senior Discount Notes Due 2012 (incorporated by reference to Exhibit B of the 10.5% Indenture)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.1 |  | Stock Purchase Agreement, dated as of January 30, 2004, by and among Polypore, Inc., PP Acquisition Corporation and the stockholders of Polypore, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4
filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                                                                                                                                                                  
|10.2 |  | Credit Agreement, dated as of May 13, 2004, by and among PP Holding Corporation, PP Acquisition Corporation, as Borrower, the Several Lenders (as defined therein) from time to time parties thereto, General Electric Capital Corporation, Lehman
Commercial Paper Inc. and UBS Securities LLC, as Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                   
|10.3 |  | First Amendment to Credit Agreement, dated as of May 13, 2004, by and among PP Holding Corporation, PP Acquisition Corporation, as Borrower, the Several Lenders (as defined therein) from time to time parties thereto, General Electric Capital
Corporation, Lehman Commercial Paper Inc. and UBS Securities LLC, as Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))
|10.4 |  | Guarantee and Collateral Agreement, dated as of May 13, 2004, by and among PP Holding Corporation, PP Acquisition Corporation and the subsidiaries of PP Acquisition Corporation identified therein (incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                                                                                                                     
|10.5 |  | Tax Sharing Agreement, dated as of May 13, 2004, by and among Polypore International, Inc., PP Holding Corporation and Polypore, Inc. (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-4 filed on April 18,
2005 (Commission File No. 333-124142))                                                                                                                                                                                                                                                                                                                   
|10.6 |  | Stockholders' Agreement, dated as of May 13, 2004, by and among Warburg Pincus Private Equity VIII, L.P., Warburg Pincus International Partners, L.P., PP Holding, LLC and Polypore International, Inc. (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|10.7   |  | Registration Rights Agreement, dated as of May 13, 2004, by and among Warburg Pincus Private Equity VIII, L.P., Warburg Pincus International Partners, L.P., PP Holding, LLC, Polypore International, Inc. and certain other persons a party thereto
(incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-4 filed on April 18, 2005 (Commission File No. 333-124142))                                                                                                                                                                  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8*  |  | Form of Director and Officer Indemnification Agreement entered into between Polypore, Inc. and certain employees of Polypore, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-4 filed on April 18, 2005
(Commission File No. 333-124142))                                                                                                                                                                                                                                                                                   
|10.9   |  | Second Amendment to Credit Agreement, dated as of June 15, 2005, by and among PP Holding Corporation, PP Acquisition Corporation, as Borrower, the Several Lenders (as defined therein) from time to time parties thereto, General Electric Capital
Corporation, Lehman Commercial Paper Inc. and UBS Securities LLC, as Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q filed on August 16, 2005) 
|10.10* |  | Employment Agreement, dated as of July 6, 2005, by and between Polypore International, Inc. and Robert B. Toth (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 15, 2005)                                                                                                                                                                                                                                                                                                                                           
|10.11* |  | Employment Agreement, dated as of August 15, 2005, by and between Polypore International, Inc. and Frank Nasisi (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on November 15, 2005)                                                                                                                                                                                                                                                                                                                                          
|10.12  |  | Third Amendment to Credit Agreement, dated as of December 19, 2005, by and among PP Holding Corporation, PP Acquisition Corporation, as Borrower, the Several Lenders (as defined therein) from time to time parties thereto, General Electric Capital
Corporation, Lehman Commercial Paper Inc. and UBS Securities LLC, as Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit 10.15 to the
Company's Annual Report of Form 10-K filed on March 31, 2006).
|10.13* |  | Employment Agreement, dated as of April 17, 2006, by and between Polypore, Inc. and Mitchell J. Pulwer (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 15, 2006).                                                                                                                                                                                                                                                                                                                                                    
|10.14* |  | Employment Agreement, dated as of April 4, 2006, by and between Membrana GmbH, a subsidiary of Polypore, Inc. and Josef Sauer (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on August 15,
2006).                                                                                                                                                                                                                                                                                                                             
|10.15* |  | Agreement and Release, dated as of April 17, 2006, by and between Celgard, LLC, an indirect subsidiary of Polypore International, Inc., and Bradley W. Reed (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
filed on August 15, 2006).                                                                                                                                                                                                                                                                                               
|10.16* |  | Contract, dated as of July 27, 2006, by and between Membrana GmbH and Stefan Geyler (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 14, 2006).                                                                                                                                                                                                                                                                                                                                                                     
|10.17* |  | Polypore International, Inc. 2006 Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed on August 15, 2006).                                                                                                                                                                                                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|10.18 |   | Fourth Amendment, dated as of March 9, 2007, to the Credit Agreement, dated as of May 13, 2004, by and among PP Holding Corporation, Polypore, Inc. (f/k/a PP Acquisition Corporation), as Borrower, the Several Lenders (as defined therein) from time to
time parties thereto, General Electric Capital Corporation, Lehman Commercial Paper Inc. and UBS Securities LLC, as Documentation Agents, Bear Stearns Corporate Lending Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative
Agent
|----- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19 | * | Form of Executive Severance Plan Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|12.1  |   | Statement Regarding Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                                           
|21.1  |   | Subsidiaries of Polypore International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|31.1  |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|31.2  |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|32.1  |   | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|32.2  |   | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              

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94

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  | POLYPORE INTERNATIONAL, INC.
| |  | ----------------------------
| |  | By:                         

Date: March 14, 2007

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the
dates indicated.

|                                        |  |                                                                                        |  |               
|--------------------------------------- |  | -------------------------------------------------------------------------------------- |  | --------------
|/s/ROBERT B. TOTHRobert B. Toth         |  | President, Chief Executive Officer and Director (Principal Executive Officer)          |  | March 14, 2007
|/s/LYNN AMOSLynn Amos                   |  | Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) |  | March 14, 2007
|/s/MICHAEL GRAFFMichael Graff           |  | Chairman of the Board                                                                  |  | March 14, 2007
|/s/DAVID BARRDavid Barr                 |  | Director                                                                               |  | March 14, 2007
|/s/W. NICHOLAS HOWLEYW. Nicholas Howley |  | Director                                                                               |  | March 14, 2007
|/s/KEVIN KRUSEKevin Kruse               |  | Director                                                                               |  | March 14, 2007

SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

No
annual report or proxy material has been sent to security holders.

95

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Polypore International, Inc.  Financial statement scheduleValuation and qualifying accounts

For
the years ended December 30, 2006 and December 31, 2005, and the periods from
May 2, 2004 through January 1, 2005 (Successor) and January 4, 2004 through May 1, 2004 (Predecessor)

|                                                 |                                           |   |        | Additions |   |       |       |  
|------------------------------------------------ | ----------------------------------------- | - | ------ | --------- | - | ----- | ----- | -
|
|Year ended December 30, 2006:                    |                                           |   |        |           |   |       |       |  
|                                                 | Allowance for doubtful accounts           |   | $      | 6,815     |   | $     | 1,887 |  
|                                                 | Valuation allowance of deferred
tax asset |   |        | 4,037     |   |       | 2,163 |  
|                                                 |                                           |  
|                                                 |                                           | $ | 10,852 |           | $ | 4,050 |       | $
|Year ended December 31, 2005:                    |                                           |   |        |           |   |       |       |  
|                                                 | Allowance for doubtful accounts           |   | $      | 5,962     |   | $     | 1,873 |  
|                                                 | Valuation allowance of deferred
tax asset |   |        | 2,245     |   |       | 1,792 |  
|                                                 |                                           |  
|                                                 |                                           | $ | 8,207  |           | $ | 3,665 |       | $
|Period from May 2, 2004 through
January 1, 2005: |                                           |   |        |           |   |       |       |  
|                                                 | Allowance for doubtful accounts           |   | $      | 6,672     |   | $     | (959  | )
|                                                 | Valuation allowance of deferred
tax asset |   |        | 2,258     |   |       | 334   |  
|                                                 |                                           |  
|                                                 |                                           | $ | 8,930  |           | $ | (625  | )     | $
|Period from January 4, 2004 through
May 1, 2004: |                                           |   |        |           |   |       |       |  
|                                                 | Allowance for doubtful accounts           |   | $      | 5,324     |   | $     | 1,628 |  
|                                                 | Valuation allowance of deferred
tax asset |   |        | 484       |   |       | 1,774 |  
|                                                 |                                           |  
|                                                 |                                           | $ | 5,808  |           | $ | 3,402 |       | $

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