10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 30, 2013

Or

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	43-2049334
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

11430 North Community House Road, Suite 350 Charlotte, North Carolina	28277
(Address of Principal Executive Offices)	(Zip Code)

(704) 587-8409

(Registrant’s Telephone Number, Including Area Code)

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.  x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

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

There were 46,648,443 shares of the registrant’s common stock outstanding as of May 1, 2013.

Polypore International, Inc.

Index to Quarterly Report on Form 10-Q

For the Three Months Ended March 30, 2013

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29
SIGNATURES		30

In this Quarterly Report on Form 10-Q, the words “Polypore International,” “Company,” “we,” “us” and “our” refer to Polypore International, Inc. together with its subsidiaries, unless the context indicates otherwise.

2

Forward-looking Statements

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or “Controls and Procedures,” the Company’s financial statements or the notes thereto or elsewhere in this Quarterly Report on Form 10-Q.

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 Quarterly Report on Form 10-Q, including the risks outlined under the caption entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012, 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:

·the highly competitive nature of the markets in which we sell our products;

·the failure to continue to develop innovative products;

·the loss of our customers;

·the vertical integration by our customers of the production of our products into their own manufacturing process;

·increases in prices for raw materials or the loss of key supplier contracts;

·our substantial indebtedness;

·interest rate risk related to our variable rate indebtedness;

·our inability to generate cash;

·restrictions related to the senior secured credit agreement;

·employee slowdowns, strikes or similar actions;

·product liability claims exposure;

·risks in connection with our operations outside the United States, including compliance with applicable anti-corruption laws;

·the incurrence of substantial costs to comply with, or as a result of violations of, or liabilities under environmental laws;

·the failure to protect our intellectual property;

·the loss of senior management;

·the incurrence of additional debt, contingent liabilities and expenses in connection with future acquisitions;

·the failure to effectively integrate newly acquired operations;

·lithium market demand does not materialize as anticipated;

·the absence of expected returns from the intangible assets we have recorded;

·the adverse impact from legal proceedings on our financial condition; and

·natural disasters, epidemics, terrorist acts and other events beyond our control.

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 Quarterly Report on Form 10-Q. We do not undertake any obligation to update these forward-looking statements to reflect new information, future events or otherwise, except as may be required under federal securities laws.

3

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements

Polypore International, Inc.

Condensed consolidated balance sheets

	March 30, 2013
(in thousands, except share data)	(unaudited)			December 29, 2012*
Assets
Current assets:
Cash and cash equivalents	$	43,199		$	44,873
Accounts receivable, net	124,002			137,315
Inventories	124,679			119,909
Deferred income taxes	21,683			21,693
Prepaid and other	22,732			23,506
Total current assets	336,295			347,296
Property, plant and equipment, net	628,588			638,801
Goodwill	469,319			469,319
Intangibles and loan acquisition costs, net	117,845			121,729
Other	8,683			8,927
Total assets	$	1,560,730		$	1,586,072
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	29,014		$	32,316
Accrued liabilities	50,378			45,872
Income taxes payable	1,826			1,603
Current portion of debt	25,000			50,000
Total current liabilities	106,218			129,791
Debt, less current portion	638,750			646,250
Pension obligations, less current portion	101,230			103,491
Deferred income taxes	95,103			98,667
Other	24,930			25,036
Commitments and contingencies
Shareholders’ equity:
Preferred stock — 15,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $.01 par value — 200,000,000 shares authorized; 46,723,723 issued and 46,711,323 outstanding at March 30, 2013 and 46,627,064 issued and outstanding at December 29, 2012	467			466
Paid-in capital	549,864			545,196
Retained earnings	64,789			55,768
Accumulated other comprehensive loss	(24,816		)	(22,353		)
Treasury stock, at cost — 12,400 shares at March 30, 2013 and no shares at December 29, 2012	(476		)	—
Total Polypore shareholders’ equity	589,828			579,077
Noncontrolling interest	4,671			3,760
Total shareholders’ equity	594,499			582,837
Total liabilities and shareholders’ equity	$	1,560,730		$	1,586,072

* Derived from audited consolidated financial statements

See notes to condensed consolidated financial statements

4

Polypore International, Inc.

Condensed consolidated statements of income

(unaudited)

	Three Months Ended
(in thousands, except per share data)	March 30, 2013		March 31, 2012
Net sales	$	163,513	$	173,705
Cost of goods sold	108,738		102,681
Gross profit	54,775		71,024
Selling, general and administrative expenses	31,396		33,886
Operating income	23,379		37,138
Other (income) expense:
Interest expense, net	9,791		8,791
Foreign currency and other	619		451
	10,410		9,242
Income before income taxes	12,969		27,896
Income taxes	3,948		9,123
Net income	$	9,021	$	18,773
Net income per share — basic and diluted	$	0.19	$	0.40
Weighted average shares outstanding:
Basic	46,613,321		46,497,701
Diluted	47,295,430		47,215,006

See notes to condensed consolidated financial statements

5

Polypore International, Inc.

Condensed consolidated statements of comprehensive income

(unaudited)

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Net income	$	9,021		$	18,773
Other comprehensive income (loss):
Foreign currency translation adjustment	(3,988		)	9,423
Change in net actuarial loss and prior service credit	903			(320		)
Income taxes related to other comprehensive income (loss)	622			(534		)
Other comprehensive income (loss)	(2,463		)	8,569
Comprehensive income	$	6,558		$	27,342

See notes to condensed consolidated financial statements

6

Polypore International, Inc.

Condensed consolidated statements of cash flows

(unaudited)

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Operating activities:
Net income	$	9,021		$	18,773
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	11,361			9,441
Amortization expense	2,964			4,091
Amortization of loan acquisition costs	618			617
Stock-based compensation	4,467			4,270
Loss on disposal of property, plant and equipment	2			289
Foreign currency loss	555			1,128
Deferred income taxes	(2,841		)	4,115
Changes in operating assets and liabilities:
Accounts receivable	12,382			15,510
Inventories	(5,865		)	(15,384		)
Prepaid and other current assets	333			575
Accounts payable and accrued liabilities	2,188			(10,470		)
Income taxes payable	203			(2,345		)
Other, net	798			(394		)
Net cash provided by operating activities	36,186			30,216
Investing activities:
Purchases of property, plant and equipment, net	(6,228		)	(45,350		)
Net cash used in investing activities	(6,228		)	(45,350		)
Financing activities:
Principal payments on debt	(7,500		)	(924		)
Payments on revolving credit facility	(25,000		)	—
Proceeds from stock option exercises	202			284
Repurchases of common stock	(476		)	—
Noncontrolling interest	869			(31		)
Net cash used in financing activities	(31,905		)	(671		)
Effect of exchange rate changes on cash and cash equivalents	273			2,187
Net decrease in cash and cash equivalents	(1,674		)	(13,618		)
Cash and cash equivalents at beginning of period	44,873			92,574
Cash and cash equivalents at end of period	$	43,199		$	78,956

See notes to condensed consolidated financial statements

7

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

1.             Description of Business and Basis of Presentation

Description of Business

Polypore International, Inc. (the “Company”) 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, Europe and Asia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries after elimination of intercompany accounts and transactions.  The unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, the unaudited condensed consolidated financial statements and notes do not contain certain information included in the Company’s annual financial statements. In the opinion of management, all normal and recurring adjustments that are necessary for a fair presentation have been made. Operating results for the three months ended March 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2013. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

2.             Inventories

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

(in thousands)	March 30, 2013		December 29, 2012
Raw materials	$	41,332	$	44,285
Work-in-process	30,082		28,051
Finished goods	53,265		47,573
	$	124,679	$	119,909

3.             Debt

Debt, in order of priority, consists of:

(in thousands)	March 30, 2013		December 29, 2012
Senior credit agreement:
Revolving credit facility	$	10,000	$	35,000
Term loan facility	288,750		296,250
	298,750		331,250
7.5% senior notes	365,000		365,000
	663,750		696,250
Less current portion, including borrowings under the revolving credit facility	25,000		50,000
Long-term debt	$	638,750	$	646,250

On June 29, 2012, the Company refinanced its previous senior secured credit agreement with a new senior secured credit agreement.  The credit agreement provides for a $150,000,000 revolving credit facility ($50,000,000 of which was borrowed in connection with the refinancing) and a $300,000,000 term loan facility. The proceeds from the credit agreement were used to pay outstanding principal and interest under the previous credit agreement and loan acquisition costs of $6,228,000, which were capitalized and will be amortized over the life of the credit agreement. In connection with the refinancing, the Company wrote-off unamortized loan acquisition costs of $2,478,000 associated with the previous credit agreement. Interest rates under the credit agreement are, at the Company’s option, equal to either an alternate base rate or the Eurocurrency base rate, plus a specified margin.

8

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

At March 30, 2013, the Company had $10,000,000 outstanding under the revolving credit facility and $140,000,000 available for borrowing. The revolving credit facility matures in June 2017.  The Company intends to pay back outstanding borrowings under the revolving credit facility within the next twelve months and accordingly, has included these borrowings in “Current portion of debt” in the accompanying condensed consolidated balance sheets.

4.             Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates their fair value due to the short-term maturities of these assets and liabilities. The carrying amount of borrowings under the senior secured credit agreement approximates fair value because the interest rates adjust to market interest rates. The fair value of the 7.5% senior notes, based on a quoted market price and classified as level one in the fair value hierarchy, was $391,463,000 at March 30, 2013.

5.             Income Taxes

The income tax provision for the interim periods presented is computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country-by-country basis. 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 and changes in estimates of permanent differences and valuation allowances.

6.             Pension Plans

The Company and its subsidiaries sponsor multiple defined benefit pension plans based in subsidiaries located outside of the United States. The following table provides the components of net periodic benefit cost:

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Service cost	$	563		$	422
Interest cost	1,127			1,207
Expected return on plan assets	(191		)	(215		)
Amortization of prior service credit	(13		)	(13		)
Recognized net actuarial loss	432			119
Net periodic benefit cost	$	1,918		$	1,520

7.             Environmental Matters

Environmental obligations are accrued 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. The Company does not currently anticipate any material loss in excess of the amounts accrued. However, the Company’s future remediation expenses may be affected by a number of uncertainties including, but not limited to, the difficulty in estimating the extent and method of remediation, the evolving nature of environmental regulations and the availability and application of technology. The Company does not expect the resolution of such uncertainties to have a material adverse effect on its consolidated financial position or liquidity. Recoveries of environmental costs from other parties are recognized as assets when receipt is deemed probable.

In connection with the acquisition of Membrana GmbH (“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 initial estimate and subsequent finalization of the reserve was included in the allocation of purchase price at the date of acquisition. The environmental reserve for the Membrana facility, which is denominated in euros, was $10,208,000 and $11,079,000 at March 30, 2013 and December 29, 2012, respectively. The Company anticipates the expenditures associated with the reserve will be

9

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

made in the next twelve months. The reserve is included in “Accrued liabilities” in the accompanying condensed consolidated balance sheets.

The Company has indemnification agreements for certain environmental matters from Acordis A.G. (“Acordis”) and Akzo Nobel N.V. (“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. In addition to the Akzo indemnification, Acordis provides separate indemnification of claims incurred from December 1999 through February 2002, the acquisition date. The Company receives indemnification payments under the indemnification agreements after expenditures are made against approved claims. At March 30, 2013 and December 29, 2012, the indemnification receivable, which is denominated in euros, was $11,189,000 and $11,542,000, respectively. The receivable is included in “Prepaid and other” in the accompanying condensed consolidated balance sheets.

8.             Treasury Stock

On February 19, 2013, the Board of Directors authorized the repurchase of up to 4,000,000 shares of the Company’s common stock by December 31, 2013. As of March 30, 2013, the Company had repurchased 6,800 shares of common stock for $272,000.  Additionally, in connection with the restricted stock grant on February 25, 2013, the Company withheld and repurchased 5,600 shares of common stock for $204,000 to satisfy certain foreign employees’ statutory withholding tax liability.

9.             Related Party Transactions

The Company’s German subsidiary has a 33% equity investment in a patent and trademark service provider and a 25% equity investment in a research company. The investments are accounted for under the equity method of accounting and were $843,000 and $650,000 at March 30, 2013 and December 29, 2012, respectively. Charges from the affiliates for work performed were $266,000 and $327,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. Amounts due to the affiliates were $84,000 and $239,000 at March 30, 2013 and December 29, 2012, respectively.

10.          Noncontrolling Interest

In 2010, the Company formed a joint venture with Camel Group Co., Ltd (“Camel”), a leading battery manufacturer in China, to produce lead-acid battery separators primarily for Camel’s use. The joint venture, Daramic Xiangyang Battery Separator Co., Ltd. (“Daramic Xiangyang”), is located at Camel’s facility and owned 65% by the Company and 35% by Camel. During the three months ended March 30, 2013, the Company and Camel made equity contributions of $1,300,000 and $700,000, respectively, to fund capital expenditures.

In exchange for notes payable, Daramic Xiangyang purchased from Camel a building and from the Company certain production equipment that was previously located at the Company’s former facility in Potenza, Italy. The notes payable and related interest will be paid by Daramic Xiangyang using available free cash flow, as defined in the joint venture agreement.   The building note payable to Camel has a principal balance of $5,910,000 at March 30, 2013 and December 29, 2012 and is included in “Other” non-current liabilities in the accompanying condensed consolidated balance sheets, and the equipment note payable to the Company eliminates in consolidation.

11.          Commitments and Contingencies

Collective Bargaining Agreement

The Company’s employees at the Corydon, Indiana facility are represented under a labor union collective bargaining agreement. The collective bargaining agreement at the Corydon facility, covering approximately 3% of the Company’s workers, expires in August 2013.

Federal Trade Commission Litigation

On September 9, 2008, the Federal Trade Commission (the “FTC”) issued an administrative complaint against the Company alleging that the February 29, 2008 acquisition of Microporous Holding Corporation, the parent company of Microporous Products L.P. (“Microporous”), and the Company’s related actions have substantially lessened competition in North American markets for lead-acid battery separators. After challenging the complaint before an Administrative Law Judge of the FTC and

10

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

subsequently before the Commissioners of the FTC, the Company was ordered to divest substantially all of the Microporous assets that were acquired in February 2008.

On January 28, 2011, the Company filed a petition with the U.S. Court of Appeals for the 11th Circuit to review the FTC’s November 5, 2010 order and opinion. On July 11, 2012, the 11th Circuit affirmed the FTC’s decision. The Company believes that this decision is inconsistent with the law and the facts presented at the hearing and that the Microporous acquisition is and will continue to be beneficial to its customers and the industry. Therefore, on January 15, 2013, the Company filed an appeal with the U.S. Supreme Court.

The Company believes that a final judicial resolution to the challenge by the FTC to the Microporous acquisition could take several months to a year. Although it is difficult to predict the outcome, timing or impact of this matter at this time, the Company believes that the final resolution will not have a material adverse impact on its business or financial condition.

The Company’s core energy storage business produces polymer-based membrane battery separators used in transportation, industrial and consumer electronics applications.  The acquisition of the Microporous business extended the Company’s product portfolio into the niche, mature deep cycle market for rubber-based battery separators, with considerable overlap to customers it currently serves with other products.  The Company does not believe that a required divestiture of all or a portion of the Microporous assets would significantly impact its core energy storage business or the long-term growth drivers impacting this business, including growth in Asia, demand for consumer electronics and growing demand for electric drive vehicles.

For the fiscal year ended December 29, 2012, the Microporous business represented approximately 10% of consolidated revenue and approximately 13% of consolidated operating income, including the facility that the Company completed and shifted production to in Feistritz, Austria post-acquisition.  At December 29, 2012, Microporous assets were less than 5% of consolidated assets.  The impact of a final resolution to this matter may be affected by a number of uncertainties, including, but not limited to, whether the Company is required to divest all or a portion of the Microporous assets, the timing of a potential divestiture, the proceeds of such a divestiture and the incremental growth in its core businesses.  If the Company was required to divest all or a portion of the Microporous assets, it would intend to sell the assets at fair market value.

12.          Stock-Based Compensation Plans

The Company offers stock-based compensation plans to attract, retain, motivate and reward key officers, non-employee directors and employees. Stock-based compensation expense was $4,467,000 and $4,270,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. The income tax benefit related to stock-based compensation expense was $1,587,000 and $1,515,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. Stock-based compensation expense includes costs associated with stock options and restricted stock and is classified as “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of income.

The 2007 Stock Incentive Plan (“2007 Plan”) allows for the grant of stock options, restricted stock and other instruments for up to a total of 4,751,963 shares of common stock. On February 25, 2013, the Company granted 328,467 stock options and 85,461 shares of restricted stock under the 2007 Plan with an aggregate grant-date fair value of $9,248,000, to be recognized over the vesting period for each award.  The stock options granted are time-vested options that vest annually in equal one-third installments and have 10-year terms and an exercise price of $36.42, the fair market value of the Company’s stock on the grant date.

The fair value of the options granted was estimated on the date of grant based on the Black-Scholes option pricing model with the following assumptions:

	February 25, 2013Grant Assumptions
Expected term (years)	5.6
Risk-free interest rate	0.92%
Expected volatility	57.3%
Dividend yield	—

The potential expected term of the stock options ranges from the vesting period of the options (three years) to the contractual term of the options (ten years). The Company determines the expected term of the options based on historical experience,

11

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

vesting periods, structure of the option plans and contractual term of the options. The Company’s risk-free interest rate is based on the interest rate of U.S. Treasury bills with a term approximating the expected term of the options and is measured at the date of the stock option grant. Expected volatility is estimated based on the Company’s historical stock prices and implied volatility from traded options. The Company does not anticipate paying dividends.

On February 25, 2013, the Company modified the terms of stock options granted on August 23, 2011. For participants that meet certain criteria upon retirement, the modification extends the exercise period for vested options from 90 days after retirement to the earlier of the option expiration date or three years after retirement and also allows unvested options to continue to vest for up to three years after retirement as if the participant had remained in the service of the Company. The total incremental stock option expense associated with the modification, net of estimated forfeitures, was $2,500,000, which will be recognized over the remaining vesting period of 1.7 years.

13.          Segment Information

The Company’s operations are principally managed on a products basis and are comprised of three reportable segments for financial reporting purposes. The Company’s three reportable segments are presented in the context of its two primary businesses — energy storage and separations media.

The energy storage business produces and markets membranes that provide the critical function of separating the cathode and anode in a variety of battery markets and is comprised of the following reportable segments:

·Electronics and EDVs - produces and markets membranes for lithium batteries that are used in portable electronic devices, cordless power tools, electric drive vehicles (“EDVs”) and energy storage systems (“ESS”).

·Transportation and industrial - produces and markets membranes for lead-acid batteries that are used in automobiles, other motor vehicles, forklifts and uninterruptible power supply systems.

The separations media business is a reportable segment and produces and markets membranes and membrane modules 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 depreciation and amortization. In addition, it evaluates business segment performance before stock-based compensation and certain non-recurring and other costs.

12

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Financial information relating to the reportable segments is presented below:

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Net sales to external customers (by major product group):
Electronics and EDVs	$	24,375		$	42,388
Transportation and industrial	93,685			86,202
Energy storage	118,060			128,590
Healthcare	29,498			27,545
Filtration and specialty	15,955			17,570
Separations media	45,453			45,115
Total net sales to external customers	$	163,513		$	173,705
Operating income:
Electronics and EDVs	$	(2,519	)	$	16,795
Transportation and industrial	21,355			20,014
Energy storage	18,836			36,809
Separations media	15,509			13,863
Corporate and other	(6,018		)	(8,696		)
Segment operating income	28,327			41,976
Stock-based compensation	4,467			4,270
Non-recurring and other costs	481			568
Total operating income	23,379			37,138
Reconciling items:
Interest expense, net	9,791			8,791
Foreign currency and other	619			451
Income before income taxes	$	12,969		$	27,896
Depreciation and amortization:
Electronics and EDVs	$	4,401		$	3,161
Transportation and industrial	3,481			2,901
Energy storage	7,882			6,062
Separations media	3,436			3,322
Corporate and other	3,007			4,148
Total depreciation and amortization	$	14,325		$	13,532

13

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

14.          Financial Statements of Guarantors

The Company’s senior notes are unconditionally guaranteed, jointly and severally, on a senior basis by certain of the Company’s 100% owned subsidiaries (“Guarantors”). Management has determined that separate complete financial statements of the Guarantors would not be material to users of the financial statements.

The following sets forth condensed consolidating financial statements of the Guarantors and non-Guarantor subsidiaries.

Condensed consolidating balance sheet
March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	29,336	$	13,863		$	—		$	43,199
Accounts receivable, net	39,659		84,343		—			—			124,002
Inventories	42,909		81,770		—			—			124,679
Prepaid and other	25,202		18,253		960			—			44,415
Total current assets	107,770		213,702		14,823			—			336,295
Due from affiliates	585,154		362,474		483,317			(1,430,945		)	—
Investment in subsidiaries	119,766		384,280		655,826			(1,159,872		)	—
Property, plant and equipment, net	330,941		297,647		—			—			628,588
Goodwill	—		—		469,319			—			469,319
Intangibles and loan acquisition costs, net	—		—		117,845			—			117,845
Other	732		7,951		—			—			8,683
Total assets	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	20,173	$	48,808	$	10,411		$	—		$	79,392
Income taxes payable	—		2,209		(383		)	—			1,826
Current portion of debt	—		—		25,000			—			25,000
Total current liabilities	20,173		51,017		35,028			—			106,218
Due to affiliates	602,427		355,811		472,707			(1,430,945		)	—
Debt, less current portion	—		—		638,750			—			638,750
Pension obligations, less current portion	—		101,230		—			—			101,230
Deferred income taxes and other	73,710		46,177		146			—			120,033
Shareholders’ equity	448,053		711,819		594,499			(1,159,872		)	594,499
Total liabilities and shareholders’ equity	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730

14

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Condensed consolidating balance sheet
December 29, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	28,098	$	16,775	$	—		$	44,873
Accounts receivable, net	43,965		93,350		—		—			137,315
Inventories	44,713		75,196		—		—			119,909
Prepaid and other	24,917		19,744		538		—			45,199
Total current assets	113,595		216,388		17,313		—			347,296
Due from affiliates	554,190		330,148		482,869		(1,367,207		)	—
Investment in subsidiaries	123,765		381,295		636,860		(1,141,920		)	—
Property, plant and equipment, net	333,194		305,607		—		—			638,801
Goodwill	—		—		469,319		—			469,319
Intangibles and loan acquisition costs, net	—		—		121,729		—			121,729
Other	884		8,043		—		—			8,927
Total assets	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	26,476	$	47,155	$	4,557	$	—		$	78,188
Income taxes payable	—		723		880		—			1,603
Current portion of debt	—		—		50,000		—			50,000
Total current liabilities	26,476		47,878		55,437		—			129,791
Due to affiliates	579,388		344,398		443,421		(1,367,207		)	—
Debt, less current portion	—		—		646,250		—			646,250
Pension obligations, less current portion	—		103,491		—		—			103,491
Deferred income taxes and other	78,392		45,166		145		—			123,703
Shareholders’ equity	441,372		700,548		582,837		(1,141,920		)	582,837
Total liabilities and shareholders’ equity	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072

15

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Condensed consolidating statement of income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	46,412		$	117,101	$	—		$	—		$	163,513
Cost of goods sold	25,187			83,551		—			—			108,738
Gross profit	21,225			33,550		—			—			54,775
Selling, general and administrative expenses	15,322			11,572		4,502			—			31,396
Operating income (loss)	5,903			21,978		(4,502		)	—			23,379
Interest expense and other	(1,400		)	1,942		9,868			—			10,410
Equity in earnings of subsidiaries	—			—		(16,087		)	16,087			—
Income before income taxes	7,303			20,036		1,717			(16,087		)	12,969
Income taxes	4,840			6,412		(7,304		)	—			3,948
Net income	$	2,463		$	13,624	$	9,021		$	(16,087	)	$	9,021

Condensed consolidating statement of income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	53,521		$	120,184	$	—		$	—		$	173,705
Cost of goods sold	17,412			85,269		—			—			102,681
Gross profit	36,109			34,915		—			—			71,024
Selling, general and administrative expenses	17,309			12,274		4,303			—			33,886
Operating income (loss)	18,800			22,641		(4,303		)	—			37,138
Interest expense and other	(2,584		)	2,797		9,029			—			9,242
Equity in earnings of subsidiaries	—			—		(28,663		)	28,663			—
Income before income taxes	21,384			19,844		15,331			(28,663		)	27,896
Income taxes	7,931			4,634		(3,442		)	—			9,123
Net income	$	13,453		$	15,210	$	18,773		$	(28,663	)	$	18,773

16

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Condensed consolidating statement of comprehensive income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	2,463	$	13,624		$	9,021		$	(16,087	)	$	9,021
Foreign currency translation adjustment, net of income tax benefit of $486	—		(4,277		)	700			75			(3,502		)
Change in net actuarial loss and prior service credit, net of income tax benefit of $136	—		1,039			—			—			1,039
Equity in earnings of subsidiaries	—		—			(3,163		)	3,163			—
Comprehensive income	$	2,463	$	10,386		$	6,558		$	(12,849	)	$	6,558

Condensed consolidating statement of comprehensive income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	13,453	$	15,210		$	18,773		$	(28,663	)	$	18,773
Foreign currency translation adjustment, net of income tax expense of $534	—		8,302			(271		)	858			8,889
Change in net actuarial loss and prior service credit	—		(320		)	—			—			(320		)
Equity in earnings of subsidiaries	—		—			8,840			(8,840		)	—
Comprehensive income	$	13,453	$	23,192		$	27,342		$	(36,645	)	$	27,342

17

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Condensed consolidating statement of cash flows
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	14,072		$	23,661		$	(3,730	)	$	2,183		$	36,186
Investing activities:
Purchases of property, plant and equipment, net	(2,261		)	(3,967		)	—			—			(6,228		)
Net cash used in investing activities	(2,261		)	(3,967		)	—			—			(6,228		)
Financing activities:
Principal payments on debt	—			—			(7,500		)	—			(7,500		)
Payments on revolving credit facility	—			—			(25,000		)	—			(25,000		)
Proceeds from stock option exercises	—			—			202			—			202
Repurchases of common stock	—			—			(476		)	—			(476		)
Noncontrolling interest	—			—			869			—			869
Intercompany transactions, net	(11,811		)	(18,729		)	32,723			(2,183		)	—
Net cash provided by (used in) financing activities	(11,811		)	(18,729		)	818			(2,183		)	(31,905		)
Effect of exchange rate changes on cash and cash equivalents	—			273			—			—			273
Net increase (decrease) in cash and cash equivalents	—			1,238			(2,912		)	—			(1,674		)
Cash and cash equivalents at beginning of period	—			28,098			16,775			—			44,873
Cash and cash equivalents at end of period	$	—		$	29,336		$	13,863		$	—		$	43,199

Condensed consolidating statement of cash flows
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	26,400		$	6,121		$	(2,565	)	$	260		$	30,216
Investing activities:
Purchases of property, plant and equipment, net	(38,689		)	(6,661		)	—			—			(45,350		)
Net cash used in investing activities	(38,689		)	(6,661		)	—			—			(45,350		)
Financing activities:
Principal payments on debt	—			(117		)	(807		)	—			(924		)
Proceeds from stock option exercises	—			—			284			—			284
Noncontrolling interest	—			—			(31		)	—			(31		)
Intercompany transactions, net	12,289			8,774			(20,803		)	(260		)	—
Net cash provided by (used in) financing activities	12,289			8,657			(21,357		)	(260		)	(671		)
Effect of exchange rate changes on cash and cash equivalents	—			2,187			—			—			2,187
Net increase (decrease) in cash and cash equivalents	—			10,304			(23,922		)	—			(13,618		)
Cash and cash equivalents at beginning of period	—			65,495			27,079			—			92,574
Cash and cash equivalents at end of period	$	—		$	75,799		$	3,157		$	—		$	78,956

18

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

Overview

We are a leading global high-technology filtration company that develops, manufactures and markets specialized microporous membranes used in separation and filtration processes. In fiscal 2012, we generated total net sales of $717.4 million. We operate in two primary businesses: energy storage, which includes the transportation and industrial segment and the electronics and EDVs segment, and separations media. The transportation and industrial and separations media segments represent approximately 75% of our total net sales and operate in stable, growing markets, have high recurring revenue bases and generate strong cash flows. In the electronics and EDVs segment, we have a key presence in the more established consumer electronics market and participate in the potentially larger and developing electric drive vehicle (“EDV”) and energy storage systems (“ESS”) markets where lithium is the disruptive technology. As described in more detail below, the long-term growth drivers for lithium batteries are positive, but we have and may continue to experience variability in the short term as these markets emerge.

Since 2009, we have made significant investments in capacity expansion projects, all of which were funded by internally generated cash and a $49.3 million grant from the U.S. Department of Energy. Cash flows from operations and lower capital expenditures position us to generate significant amounts of cash in 2013. In addition, the United States Federal Trade Commission (“FTC”) has ordered us to divest substantially all of the assets acquired in connection with the 2008 acquisition of Microporous Products L.P. (“Microporous”). We are pursuing our legal options and, at the same time, evaluating alternatives for these assets. If we divest all or a portion of these assets, we would intend to sell the assets at fair market value which would provide additional cash. During this period of substantial cash generation, we intend to maintain a total leverage ratio, defined in our credit agreement as the ratio of total indebtedness (total debt less cash on hand of up to $50.0 million) to adjusted EBITDA (as defined in our credit agreement and calculated in the liquidity and capital resources section), of approximately 3.0x, while also evaluating other alternatives for cash, including returning value to shareholders through share repurchases.

Energy Storage

In the energy storage business, our membrane separators are a critical performance component in lithium batteries, which are primarily used in consumer electronics and EDV applications, and lead-acid batteries, which are used globally in transportation and numerous industrial applications. We believe that the long-term growth drivers for the energy storage business — growth in Asia, demand for consumer electronics and growing demand for EDVs — are positive. The energy storage business is comprised of two reportable segments.

Electronics and EDVs.  Lithium batteries are the power source in a wide variety of applications, including consumer electronics applications such as notebook computers, tablets, mobile phones and cordless power tools; EDVs; and emerging applications such as ESS. Demand for lithium batteries in consumer electronics is driven by the need for increased mobility. In EDV applications, demand is driven by the need to increase fuel efficiency to meet mileage standards in many countries such as the U.S. and China, the need to reduce CO2 emissions around the world but especially in Europe due to regulations, conversion from nickel metal hydride to lithium battery technology in hybrid vehicles due to greater energy and power density, concern in developed countries and emerging markets over future access to petroleum at stable prices, smog and pollution control, and the need to address increasing transportation needs in developing economies. Since late 2009, we have expanded capacity at our existing Charlotte, North Carolina and Ochang, South Korea facilities and built a new facility in Concord, North Carolina. Equipment installation for the Concord facility is substantially complete and production has started for portions of the facility. The remaining capacity at Concord will ramp up over time as the nascent market for EDVs develops.

We believe the long-term demand drivers for our products—consumer demand for mobility, regulations for fuel efficiency and CO2 emissions, conversion to lithium technology in hybrids, concerns about access to petroleum, efforts to reduce pollution, and increasing transportation needs in developing countries—remain fully intact. While consumer electronics applications have attractive long-term market growth trends, EDV and eventually ESS applications have the potential to be much larger markets. Based on industry forecasts and industry studies, unit sales of lithium batteries for EDV applications are expected to grow at a compound annual growth rate of greater than 40% over the next five years. We believe lithium battery separator growth will exceed battery unit sales growth because the trend towards larger batteries will require the use of more separator in each battery. Industry forecasts also predict EDV sales to be 5% or more of new car sales within the next five years. If 5% of new car sales were EDVs, we believe the entire lithium battery separator market would virtually double in total size. Based on our current customer base, if only a portion of these industry forecasts materialize, we believe we will completely utilize our current production capacity. We believe the electrification of the worldwide fleet of vehicles is just beginning, from hybrids to

19

plug-ins to full battery electric vehicles, including automobiles, buses, taxis and commercial fleet vehicles. Hybrids are selling well and regulations around the world are driving development and introductions. New hybrids are coming to market and some high-separator content vehicles have just been introduced in Europe. We believe our dry process products continue to be the preferred product in large format lithium-ion batteries for EDVs and ESS. We are currently working with existing and new customers on next-generation batteries, which is important considering the long lead times required to become qualified for EDV applications. EDV and ESS are emerging market applications and are being adopted around the world in many forms. We believe the factors that influenced our decision to expand capacity remain valid, and we continue to expect significant sales growth as the EDV market develops and as ESS experiences more meaningful adoption. Although the long-term growth drivers are positive for these applications, short-term fluctuations in demand can be expected in the early stages of adoption while initial penetration rates are low. Given the high-separator content for these applications, and the potential size of these markets, small changes in end-market demand can have a significant impact on our business.

Transportation and industrial.  In the lead-acid battery market, the high proportion of aftermarket replacement sales and the steady growth of the worldwide fleet of motor vehicles provide us with a growing recurring revenue base in lead-acid battery separators. Worldwide demand for lead-acid battery separators is expected to continue to grow at slightly more than annual economic growth. The Asia-Pacific region is the fastest growing market for lead-acid battery separators. Growth in this region is driven by the increasing penetration of automobile ownership, growth in industrial and manufacturing sectors, export incentives and ongoing conversion to the polyethylene-based membrane separators we produce. We are meeting growing demand in this region by investing in Asia and exporting from our U.S. and European facilities. Our investments in Asia have included completing three capacity expansions at our Prachinburi, Thailand facility, the most recent of which started production in 2012; acquiring battery separator manufacturing assets and subsequently expanding our operations in Bangalore, India; acquiring a production facility in Tianjin, China; establishing an Asian Technical Center in Thailand; and entering into a joint venture with a customer, Camel Group Co., Ltd. (“Camel”), to produce lead-acid battery separators in Xiangyang, China, primarily for Camel’s use.

Separations Media

In the separations media business, our filtration membranes and modules are used in healthcare and high-performance filtration and specialty applications. We believe that the separations media business will continue to benefit from continued growth in demand for higher levels of purity in a growing number of applications. The separations media business is a reportable segment.

For healthcare applications, we produce membranes used in blood filtration applications for hemodialysis, blood oxygenation and plasmapheresis. Growth in demand for hemodialysis membranes is driven by the increasing worldwide population of end-stage renal disease patients. We believe that conversion to single-use dialyzers and increasing treatment frequency will result in additional dialyzer market growth. In late 2011, we completed the expansion of our PUREMA® hemodialysis membrane production capacity to support future market growth.

For filtration and specialty applications, we produce a wide range of membranes and membrane-based elements for micro-, ultra- and nanofiltration and gasification/degasification of liquids. Micro-, ultra- and nanofiltration membrane element 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.

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 the uncertainty inherent in such estimates, actual results may differ from these estimates. These policies are critical to the understanding of our operating results and financial condition and include policies related to the allowance for doubtful accounts, impairment of intangibles and goodwill, pension benefits, environmental matters and repairs and maintenance. For a discussion of each of these policies, please see the discussion entitled “Critical Accounting Policies” under Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 29, 2012.

20

Results of Operations

The following table sets forth, for the periods indicated, certain operating data in amount and as a percentage of net sales:

					Percentage of Net Sales
	Three Months Ended				Three Months Ended
($’s in millions)	March 30, 2013		March 31, 2012		March 30, 2013		March 31, 2012
Net sales	$	163.5	$	173.7	100.0	%	100.0	%
Gross profit	54.8		71.0		33.5		40.9
Selling, general and administrative expenses	31.4		33.9		19.2		19.5
Operating income	23.4		37.1		14.3		21.4
Interest expense, net	9.8		8.8		6.0		5.1
Other	0.6		0.4		0.3		0.2
Income before income taxes	13.0		27.9		8.0		16.1
Income taxes	4.0		9.1		2.5		5.3
Net income	$	9.0	$	18.8	5.5	%	10.8	%

Comparison of the three months ended March 30, 2013 with the three months ended March 31, 2012

Net sales.  Net sales for the three months ended March 30, 2013 were $163.5 million, a decrease of $10.2 million, or 5.9%, from the same period in the prior year, as higher sales in the transportation and industrial and separations media segments were more than offset by lower sales in the electronics and EDVs segment. The impact of foreign currency translation was not significant.

Gross profit.  Gross profit was $54.8 million, a decrease of $16.2 million, or 22.8%, from the same period in the prior year.  Gross profit as a percent of net sales was 33.5% for the three months ended March 30, 2013 compared to 40.9% for the three months ended March 31, 2012.  The decrease in consolidated gross profit and gross profit margin was primarily due to lower sales and higher costs associated with our capacity expansions in the electronics and EDVs segment relative to the prior year.

Selling, general and administrative expenses.  Selling, general and administrative expenses decreased $2.5 million for the three months ended March 30, 2013 compared to the prior year, primarily due to a $2.0 million decrease in performance-based incentive compensation expense and $1.1 million lower amortization expense. Selling, general and administrative expenses were 19.2% of consolidated net sales for the three months ended March 30, 2013 and 19.5% for the same period in the prior year.

Segment operating income.  Segment operating income, which excludes stock-based compensation and certain non-recurring and other costs, was $28.3 million, a decrease of $13.7 million, or 32.6%, from the same period in the prior year. Segment operating income as a percent of net sales was 17.3% for the three months ended March 30, 2013 compared to 24.2% for the three months ended March 31, 2012.  The decrease in segment operating income and segment operating income margin was the result of lower sales and higher costs associated with our capacity expansions in the electronics and EDVs segment relative to the prior year.

Interest expense.  Interest expense for the three months ended March 30, 2013 increased by $1.0 million from the same period in the prior year, primarily resulting from a decrease in capitalized interest as our capacity expansion projects are now substantially complete.

Income taxes.  Income tax expense for the interim periods presented is computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country-by-country basis. The effective tax rate was 30.4% for the three months ended March 30, 2013 compared to 32.7% for the same period in the prior year. The mix of earnings between the tax jurisdictions has the most significant impact on the effective tax rate. Each tax jurisdiction has its own set of tax laws and tax rates, and income earned by our subsidiaries is taxed independently by these various jurisdictions.  Currently, the applicable statutory income tax rates in the jurisdictions in which we operate range from 0% to 39%.

21

The components of our effective tax rate are as follows:

	Three Months Ended
	March 30, 2013		March 31, 2012
U.S. federal statutory rate	35.0	%	35.0	%
State income taxes	0.8		1.1
Mix of income in taxing jurisdictions	(5.5	)	(3.7	)
Other	0.1		0.3
Total effective tax rate	30.4	%	32.7	%

Financial reporting segments

Electronics and EDVs

Comparison of the three months ended March 30, 2013 with the three months ended March 31, 2012

Net sales.  Net sales for the three months ended March 30, 2013 were $24.4 million, a decrease of $18.0 million, or 42.5%, from the same period in the prior year.  The decrease was due primarily to lower volumes, but was also impacted by price/product mix. Net sales were down $15.8 million, or 37.3%, due to lower volumes resulting from weak demand and some customers reducing inventory associated with their fiscal year-ends. Net sales decreased by $2.2 million, or 5.2%, due to price/product mix. Price/product mix includes the impact of volume-based price declines where expected volumes did not materialize but the lower price was honored. During the second quarter of 2013, we increased prices to address this issue.

Based on improved order patterns in March 2013 that continued into April, the ramp-up of two battery and EDV production facilities and new vehicle launches, we expect second quarter sales to be higher than in the first quarter.

Segment operating income (loss).  Segment operating loss was $2.5 million for the three months ended March 30, 2013 compared to segment operating income of $16.8 million for the same period in the prior year. The segment operating loss was due to lower sales volume and higher costs associated with our capacity expansions relative to the prior year.

Since 2009, we have completed five separate capacity expansions and added the fixed costs required to operate the new capacity. Excluding the final phase of expansion at Concord, which will be qualified and ramped-up as demand develops, we have total production capacity sufficient to generate approximately $400.0 million in annual lithium battery separator sales, depending on the mix of products and grades produced. Based on annualized sales in the first quarter of 2013, our current production capacity in terms of sales was approximately 25%.

The key driver of profitability is sales and the resulting benefit of higher production volumes. Because this is a low variable production cost business, operating income and operating income margins fluctuate primarily based on production volumes and the application of fixed costs to those production volumes. When sales volumes increase, operating income margins increase as the production cost per unit is lower due to the allocation of fixed costs to more units of production. Conversely, when sales volumes decline, operating income margins decrease as the production cost per unit is higher due to the allocation of fixed costs to less units of production. Because of this, we expect segment operating income and segment operating income margins to improve as sales volumes increase and the costs associated with our capacity expansions are allocated to more units of production.

22

Transportation and Industrial

Comparison of the three months ended March 30, 2013 with the three months ended March 31, 2012

Net sales.  Net sales for the three months ended March 30, 2013 were $93.7 million, an increase of $7.5 million, or 8.7%, from the same period in the prior year due to growth in Asia and a more typical battery build season associated with colder winter weather in North America and Europe.

Segment operating income.  Segment operating income was $21.3 million, an increase of $1.3 million, or 6.5%, from the same period in the prior year due to higher sales.  Segment operating income as a percent of net sales was 22.7% for the three months ended March 30, 2013, which is consistent with 23.2% for the same period in the prior year.

Separations Media

Comparison of the three months ended March 30, 2013 with the three months ended March 31, 2012

Net sales.  Net sales for the three months ended March 30, 2013 were $45.4 million, an increase of $0.3 million, or 0.7%, from the same period in the prior year.  The increase consisted of higher healthcare sales, offset by a decline in filtration and specialty product sales due to economic weakness in microelectronics.

Segment operating income.  Segment operating income was $15.5 million, an increase of $1.6 million, or 11.5%, from the same period in the prior year.  Segment operating income as a percent of net sales was 34.1% for the three months ended March 30, 2013 compared to 30.8% for the three months ended March 31, 2012.  The increase in segment operating income margin was due to production timing and efficiencies.  Segment operating income margins can fluctuate between quarters due to production timing and mix, but are expected to be relatively consistent to the prior year on an annual basis.

Corporate and other costs

Corporate and other costs include costs associated with the corporate office and other costs that are not allocated to the reporting segments for segment reporting purposes, including amortization of identified intangible assets and performance-based incentive compensation.

Comparison of the three months ended March 30, 2013 with the three months ended March 31, 2012

Corporate and other costs for the three months ended March 30, 2013 were $6.0 million, compared to $8.7 million for the three months ended March 31, 2012. The decrease was primarily due to lower performance-based incentive compensation expense and a decline in amortization expense as certain intangible assets became fully amortized in the second quarter of 2012.

Foreign Operations

As of March 30, 2013, we manufacture our products at 16 strategically located facilities in the United States, Europe and Asia. Net sales from foreign locations were $106.3 million (65.0% of consolidated sales) and $111.7 million (64.3% of consolidated sales) for the three months ended March 30, 2013 and March 31, 2012, respectively. The majority of sales from U.S. production facilities are attributable to the electronics and EDVs segment, where we primarily produce in the U.S. for customers located in Asia. The majority of sales from foreign production facilities are attributable to the transportation and industrial and separations media segments. In the transportation and industrial segment, we have production facilities in the U.S., Europe and Asia and generally produce in the same geographic region that we sell, though we do export some production from U.S. and European facilities to meet growing demand in Asia. In the separations media segment, the majority of production is at our manufacturing facility in Germany and sales are made to customers worldwide. Operating results generated by production facilities within business segments was not significantly impacted by differences in economic, regulatory, geographic or other competitive factors.

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 actions 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.

23

Liquidity and capital resources

Cash and cash equivalents decreased by $1.7 million during the three months ended March 30, 2013, as cash generated from operations was used to repay borrowings under the senior secured credit agreement and fund capital expenditures.

Operating activities.  Net cash provided by operating activities was $36.2 million in the three months ended March 30, 2013, primarily consisting of cash generated from operations of $26.2 million and a net decrease in working capital of $9.2 million.  Accounts receivable decreased due to lower sales as compared to the fourth quarter of 2012. Days sales outstanding is consistent with the prior year, and we have not experienced significant changes in accounts receivable aging or customer payment terms and believe that we have adequately provided for potential bad debts. The increase in inventory was due to higher levels of work-in-process/finished goods in the separations media segment due to production timing. Total work-in-process/finished goods inventory increased from 59 days sales in ending inventory in the fourth quarter of 2012 to 70 days in the first quarter of 2013. We produce inventory to meet expected future customer demand, which is based on a number of factors, including discussions with customers, customer forecasts and industry and economic trends. Inventory is generally not subject to obsolescence and does not have a shelf life, and we do not believe there is a significant risk of inventory impairment.  Accounts payable and accrued liabilities increased primarily due to timing of payments.

Investing activities.  In the three months ended March 30, 2013, total capital expenditures were $6.2 million compared to $45.4 million for the same period in the prior year.  We have substantially completed our capacity expansion projects and currently estimate capital expenditures for fiscal 2013 to be approximately $50.0 million. As of March 30, 2013, we had $155.5 million of construction in progress, primarily related to the expansions in the electronics and EDVs segment, portions of which will be qualified and ramped up over time as market demand develops.

Financing activities.  During the three months ended March 30, 2013, financing activities consisted primarily of repayments of borrowings under the revolving credit facility of $25.0 million and scheduled principal payments under our credit agreement of $7.5 million.

We intend to fund our ongoing operations with cash on hand, cash generated by operations and borrowings under the senior secured credit agreement. As of March 30, 2013, approximately 70% of our cash and cash equivalents were held by foreign subsidiaries. There were no significant restrictions on our ability to transfer funds with and among subsidiaries, or any material adverse tax consequences that would impact our ability to transfer funds held by foreign subsidiaries to the U.S.

Cash flows from operations and lower capital expenditures position us to generate significant amounts of cash in 2013. In addition, the FTC has ordered us to divest substantially all of the assets acquired in connection with the 2008 acquisition of Microporous. We are pursuing our legal options and, at the same time, evaluating alternatives for these assets. If we divest all or a portion of these assets, we would intend to sell the assets at fair market value which would provide additional cash. During this period of substantial cash generation, we intend to maintain a total leverage ratio, defined in our credit agreement as the ratio of total indebtedness (total debt less cash on hand of up to $50.0 million) to adjusted EBITDA (as defined in our credit agreement and calculated below), of approximately 3.0x, while also evaluating other alternatives for cash, including returning value to shareholders through share repurchases. On February 19, 2013, the Board of Directors authorized the repurchase of up to 4.0 million shares of our common stock by December 31, 2013. As of March 30, 2013, we had repurchased 6,800 shares of common stock for $0.3 million. The timing, price and volume of future repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time on the open market or in privately negotiated transactions. The stock repurchase program does not require us to repurchase any specific number of shares, and we may terminate the repurchase program at any time. The cash proceeds received from any potential divestiture of all or a portion of the Microporous assets in Piney Flats, Tennessee, and Feistritz, Austria, may be a factor in the amount of shares repurchased.

Our senior secured credit agreement provides for a $300.0 million term loan facility ($288.8 million outstanding at March 30, 2013) and a $150.0 million revolving credit facility ($10.0 million outstanding at March 30, 2013). At March 30, 2013, the Company had $140.0 million of borrowings available under the revolving credit facility. The term loan facility and the revolving credit facility mature in June 2017. Because we intend to pay back outstanding borrowings under the revolving credit facility within the next twelve months, we have classified these borrowings as current liabilities.

Interest rates under the senior secured credit agreement are, at our option, equal to either an alternate base rate or Eurocurrency base rate plus a specified margin.  At March 30, 2013, the interest rate on borrowings under the senior secured credit agreement was 2.96%.

Under the credit agreement, we are required to maintain a maximum ratio of indebtedness to adjusted EBITDA and a minimum ratio of adjusted EBITDA to cash interest expense.  Adjusted EBITDA, as defined under the senior secured credit agreement, was as follows:

24

(in millions)	Twelve Months Ended March 30, 2013
Net income	$	61.2
Add/Subtract:
Depreciation and amortization expense	56.5
Interest expense, net	37.0
Income taxes	25.4
Stock-based compensation	16.5
Foreign currency loss	0.6
Loss on disposal of property, plant and equipment	0.7
Costs related to the FTC litigation	0.3
Write-off of loan acquisition costs associated with refinancing of senior credit agreement	2.5
Other non-cash or non-recurring charges	0.2
Adjusted EBITDA	$	200.9

As of March 30, 2013, the calculation of the senior leverage ratio, as defined under the senior secured credit agreement, was as follows:

(in millions)
Indebtedness (1)	$	255.6
Adjusted EBITDA	$	200.9
Actual senior leverage ratio	1.27x
Required maximum senior leverage ratio	2.50x

(1)Calculated as the sum of outstanding borrowings under the senior secured credit agreement, less cash on hand (not to exceed $50.0 million).

As of March 30, 2013, the calculation of the interest coverage ratio, as defined under the senior secured credit agreement, was as follows:

(in millions)
Adjusted EBITDA	$	200.9
Interest expense, net (1)	$	36.1
Actual interest coverage ratio	5.56x
Required minimum interest coverage ratio	3.00x

(1)Calculated as cash interest expense, as defined under the senior secured credit agreement, for the twelve months ended March 30, 2013.

The senior secured 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 agreement also contains certain customary events of default, subject to grace periods, as appropriate.

The 7.5% senior notes mature on November 15, 2017 and are guaranteed by most of our existing and future domestic restricted subsidiaries, subject to certain exceptions. Except under certain circumstances, the 7.5% senior notes do not require principal payments prior to their maturity in 2017. Interest on the 7.5% senior notes is payable semi-annually on May 15 and November 15. The 7.5% senior notes contain customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments.

Future debt service payments are expected to be paid out of cash flows from operations, borrowings on our revolving credit facility and future refinancing of our debt. Our cash interest requirements for the next twelve months are estimated to be $37.0 million.

We believe we have sufficient liquidity to meet our cash requirements over both the short (next twelve months) and long term (in relation to our debt service requirements). In evaluating the sufficiency of our liquidity, we considered cash on hand, expected cash flow to be generated from operations and available borrowings under our senior secured credit agreement compared to our anticipated cash requirements for debt service, working capital, cash taxes, capital expenditures and funding requirements for long-term liabilities. We anticipate that our cash on hand and operating cash flow, together with borrowings under the revolving credit facility, will be sufficient to meet our anticipated future operating expenses, capital expenditures and

25

debt service obligations as they become due for at least the next twelve months. However, our ability to make scheduled payments of principal, to pay interest on or to 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 our most recent 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 equity or debt financings 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 or at all.

Environmental matters

Environmental obligations are accrued 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. We do not currently anticipate any material loss in excess of the amounts accrued. Future remediation expenses may be affected by a number of uncertainties including, but not limited to, the difficulty in estimating the extent and method of remediation, the evolving nature of environmental regulations and the availability and application of technology. We do not expect the resolution of such uncertainties to have a material adverse effect on our consolidated financial position or liquidity. Recoveries of environmental costs from other parties are recognized as assets when their receipt is deemed probable.

In connection with the acquisition of Membrana GmbH (“Membrana”) in 2002, we 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 us to remain in compliance with local regulations. The initial estimate and subsequent finalization of the reserve was included in the allocation of purchase price at the date of acquisition. The environmental reserve for the Membrana facility, which is denominated in euros, was $10.2 million at March 30, 2013.  We anticipate the expenditures associated with the reserve will be made in the next twelve months.

We have indemnification agreements for certain environmental matters from Acordis A.G. (“Acordis”) and Akzo Nobel N.V. (“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. In addition to the Akzo indemnification, Acordis provides separate indemnification of claims incurred from December 1999 through February 2002, the acquisition date. We will receive indemnification payments under the indemnification agreements after expenditures are made against approved claims. At March 30, 2013, the indemnification receivable, which is denominated in euros, was $11.2 million.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3.  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 March 30, 2013, we had fixed rate debt of $365.0 million and variable rate debt of $298.8 million. To reduce the interest rate risk inherent in our variable rate debt, we may utilize interest rate derivatives. As of March 30, 2013, there were no outstanding interest rate derivatives. 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 $3.0 million per year.

26

Currency risk

Outside of the United States, we maintain assets and operations in Europe and 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 fluctuations 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 the percentage of our sales in foreign currencies differs from the percentage of our costs in foreign currencies, 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 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:

	March 30, 2013	March 31, 2012
Period end rate	1.2820	1.3339
Period average rate for the three months ended	1.3206	1.3099

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 foreign currency derivatives. As of March 30, 2013, we did not have any foreign currency derivatives outstanding.

Item 4.  Controls and Procedures

An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) was performed under the supervision, and with the participation of, our management, including our Chief Executive Officer and Chief Financial Officer. Our disclosure controls are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 30, 2013 to ensure that information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

During the three months ended March 30, 2013, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

On September 9, 2008, the Federal Trade Commission (the “FTC”) issued an administrative complaint against us alleging that our February 29, 2008 acquisition of Microporous Holding Corporation, the parent company of Microporous Products L.P. (“Microporous”), and our related actions have substantially lessened competition in North American markets for lead-acid battery separators. After challenging the compliant before an Administrative Law Judge of the FTC and subsequently before the Commissioners of the FTC, we were ordered to divest substantially all of the Microporous assets that were acquired in February 2008.

On January 28, 2011, we filed a petition with the U.S. Court of Appeals for the 11th Circuit to review the FTC’s November 5, 2010 order and opinion. On July 11, 2012, the 11th Circuit affirmed the FTC’s decision. We believe that this decision is inconsistent with the law and the facts presented at the hearing and that the Microporous acquisition is and will continue to be beneficial to our customers and the industry.  Therefore, on January 15, 2013, we filed an appeal with the U.S. Supreme Court.

We believe that a final judicial resolution to the challenge by the FTC to the Microporous acquisition could take several months to a year. Although it is difficult to predict the outcome, timing or impact of this matter at this time, we believe that the final resolution will not have a material adverse impact on our business or financial condition.

27

Our core energy storage business produces polymer-based membrane battery separators used in transportation, industrial and consumer electronics applications.  The acquisition of the Microporous business extended our product portfolio into the niche, mature deep cycle market for rubber-based battery separators, with considerable overlap to customers we currently serve with other products.  We do not believe that a required divestiture of all or a portion of the Microporous assets would significantly impact our core energy storage business or the long-term growth drivers impacting this business, including growth in Asia, demand for consumer electronics and growing demand for electric drive vehicles.

For the fiscal year ended December 29, 2012, the Microporous business represented approximately 10% of consolidated revenue and approximately 13% of consolidated operating income, including the facility that we completed and shifted production to in Feistritz, Austria post-acquisition.  At December 29, 2012, Microporous assets were less than 5% of consolidated assets.  The impact of a final resolution to this matter may be affected by a number of uncertainties, including, but not limited to, whether we are required to divest all or a portion of the Microporous assets, the timing of a potential divestiture, the proceeds of such a divestiture and the incremental growth in our core businesses.  If we were required to divest all or a portion of the Microporous assets, we would intend to sell the assets at fair market value.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides detail about our share repurchase activity during the three months ended March 30, 2013:

Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program
December 30, 2012 – February 2, 2013	—	—		—	4,000,000
February 3, 2013 – March 2, 2013	—	—		—	4,000,000
March 3, 2013 – March 30, 2013	6,800	$	39.95	6,800	3,993,200
Total	6,800	$	39.95	6,800	3,993,200

On February 19, 2013, the Board of Directors authorized the repurchase of up to 4.0 million shares of our common stock by December 31, 2013. As of March 30, 2013, we had repurchased 6,800 shares of common stock under the February 2013 repurchase program.

Excluded from this disclosure are shares of common stock withheld and repurchased in connection with the restricted stock grant on February 25, 2013 to satisfy certain foreign employees’ statutory withholding tax liability.

28

Item 6.Exhibits

Exhibit No.	Exhibit Description
10.1	Tax Sharing Agreement, dated as of May 13, 2004, by and among Polypore International, Inc., PP Holding Corporation and Polypore, Inc.
10.2*	Form of Change in Control Agreement entered into between Polypore International, Inc. and certain senior executives
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
101	Interactive Data Files

*   Management contract or compensatory plan or arrangement

29

SIGNATURES

Pursuant to the requirements 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.

Date: May 9, 2013		POLYPORE INTERNATIONAL, INC.
		(Registrant)
	By:	/s/ Robert B. Toth
		Robert B. Toth
		President and Chief Executive Officer
		(principal executive officer)
	By:	/s/ Lynn Amos
		Lynn Amos
		Chief Financial Officer
		(principal financial officer and principal accounting officer)

30

EX-10.1

Exhibit 10.1

TAX SHARING AGREEMENT

THIS AGREEMENT (this “Agreement”) made and entered into as of May 13, 2004, by and among PP Holding Corporation II, a Delaware corporation (“PHC II”), PP Holding Corporation, a Delaware corporation and direct wholly owned subsidiary of PHC II (“PHC”), Polypore, Inc., a Delaware corporation and direct wholly owned subsidiary of PHC (“Polypore”), and such direct and indirect subsidiaries of PHC II that are listed on Exhibit A hereto from time to time (collectively with PHC and Polypore, the “Subsidiaries” and each individually, a “Subsidiary”).

WITNESSETH:

WHEREAS, PHC II and each of the Subsidiaries qualifies as an “includible corporation” within the meaning of Section 1504(b) of the Internal Revenue Code of 1986, as amended (the “Code”);

WHEREAS, the affiliated group of corporations, consisting of PHC II, as the common parent, and each of the Subsidiaries (the “Polypore Group”), qualifies as an “affiliated group” within the meaning of Section 1504(a) of the Code; and

WHEREAS, the Polypore Group desires to take advantage of the tax savings that may result from the filing of U.S. federal income tax returns on a consolidated basis, in accordance with Sections 1501 et seq. of the Code and the Treasury Regulations promulgated thereunder.

NOW, THEREFORE, in consideration of the covenants, agreements, terms and conditions contained herein, and for other good, valid and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

SECTION 1.  Defined Terms.  As used in this Agreement, the following terms shall have the following meanings.

“Code” shall have the meaning set forth in the recitals of this Agreement.

“Fiscal Year” shall mean the annual accounting period of PHC II and any other Member.

“Interim Payments” shall have the meaning set forth in Section 3(b) of this Agreement.

“Member” shall mean a member (as defined in Treasury Regulations Section 1.1502-1(b)) of the Polypore Group.

“PHC” shall have the meaning set forth in the heading of this Agreement.

“PHC II” shall have the meaning set forth in the heading of this Agreement.

“Polypore” shall have the meaning set forth in the heading of this Agreement.

“Polypore Group” shall have the meaning set forth in the recitals of this Agreement.

“Separate Return Liability” shall mean, with respect to any Subsidiary for any Fiscal Year, the U.S. federal income taxes (including any minimum tax or alternative minimum tax) that would be payable by such Subsidiary to the U.S. Treasury had the Subsidiary filed a separate income tax return for that Fiscal Year based on the Subsidiary’s Separate Taxable Income for that Fiscal Year.

“Separate Taxable Income” shall mean, with respect to any Subsidiary for any Fiscal Year, the income, gains, losses, deductions and credits of such Subsidiary for that Fiscal Year calculated as follows:  (i) any dividends received by one Member from another Member will be assumed to qualify for the 100% dividends received deduction of Section 243 of the Code or shall otherwise be eliminated from such calculation; (ii) gain or loss on intercompany transactions, whether or not deferred, shall be treated by each Member in the manner required by Treasury Regulations Section 1.1502-13; (iii) limitations on the calculation of a deduction or the utilization of tax credits or the calculation of a tax liability shall be made on a consolidated basis; (iv) net operating losses and credits of a Subsidiary shall be treated as available to such Subsidiary in determining such Subsidiary’s Separate Taxable Income, and shall not be reduced even if such net operating losses or credits are used in determining the consolidated taxable income of the Polypore Group, instead, such net operating losses and credits shall be reduced only if, when and to the extent used in determining the Separate Taxable Income of the Subsidiary; and (v) elections relating to tax credits and tax computations that differ from the consolidated treatment if separate returns were filed shall be made on an annual basis by PHC II.

“Subsidiary” and “Subsidiaries” shall have the meanings set forth in the heading of this Agreement.

SECTION 2.  Consent to Filing of Consolidated Return.

(a)           PHC II shall file a consolidated U.S. federal income tax return, and pay to the U.S. Treasury any taxes due thereon, on behalf of the Polypore Group for the taxable year ending December 31, 2004, and for each subsequent taxable period for which this Agreement is in effect and for which the Polypore Group is required or permitted to file a consolidated tax return; provided, that PHC II shall not be liable for any taxes attributable to a Subsidiary if such Subsidiary has not complied with its tax payment requirements as set forth in Section 3 hereof.  Each Subsidiary shall execute and file such consents, elections and other documents that may be required or appropriate for the proper filing of such returns.

(b)           Each corporation that, subsequent to the date of this Agreement, becomes a Member shall be added to the list of Subsidiaries contained in Exhibit A hereto.  Polypore (or the applicable Member that is the direct parent corporation of such Subsidiary) shall cause each of the Subsidiaries listed on Exhibit A hereto, as amended from time to time, to become a party hereto by executing this Agreement in counterpart.

2

SECTION 3.  Tax Payments.

(a)           Each Subsidiary shall make payments to PHC II with respect to each Fiscal Year equal to its respective Separate Return Liability for such Fiscal Year.  Such payments shall be made in the manner set forth in paragraphs (b) and (c) below.

(b)           From time to time during the Fiscal Year each Subsidiary shall make interim payments (“Interim Payments”) to PHC II with respect to its Separate Return Liability (i) pursuant to the schedule set forth in Section 6655(c) of the Code and (ii) calculated under the principles Section 6655(d) of the Code.  Interim Payments shall be made no later than 5 calendar days prior to the due date of the relevant estimated tax payment.

(c)           If a Subsidiary’s Separate Return Liability for a particular Fiscal Year is greater than its aggregate Interim Payments with respect to such Fiscal Year, then such Subsidiary shall pay to PHC II the excess of its Separate Return Liability over its aggregate Interim Payments at least five calendar days before PHC II files the Polypore Group’s consolidated U.S. federal income tax return in respect of such Fiscal Year.  If a Subsidiary’s aggregate Interim Payments for a particular Fiscal Year exceed its Separate Return Liability with respect to such Fiscal Year, such excess shall be allowed as a credit to the Subsidiary in respect of the Interim Payment next due from that Subsidiary to PHC II.

SECTION 4.  Adjustments to the Separate Return Liability.

(a)           If for any Fiscal Year the Internal Revenue Service makes an upward adjust to, or PHC II files an amended return resulting in an upward adjustment of, the Polypore Group’s consolidated U.S. federal income tax liability with respect to such Fiscal Year, then each Subsidiary shall pay to PHC II an amount equal to the excess of the Separate Return Liability for such Fiscal Year, as adjusted, over the Separate Return Liability for such Fiscal Year paid to date.  In the event of a downward adjustment, the excess of a Subsidiary’s Separate Return Liability for such Fiscal Year paid to date over its Separate Return Liability, as adjusted, shall be allowed as a credit to the Subsidiary in respect of the Interim Payment next due from that Subsidiary to PHC II under Section 3 of this Agreement.

(b)           The payments required under this Section 4 shall be made promptly after a “determination” (as defined in Section 1313(a) of the Code) in respect of the amount at issue; provided, however, that payments in the case of the filing of an amended return shall be made promptly upon such filing.

SECTION 5.  Interest Payments.  Interest will be paid pursuant to this Agreement only with respect to payments required to be made by a Subsidiary as a result of any adjustment or redetermination of income by the Internal Revenue Service or in the case of a filing of an amended return.  Such interest will be calculated at the applicable overpayment or underpayment rate and shall otherwise be determined in the same manner as would be determined by the Internal Revenue Service.

SECTION 6.  Appointment of PHC II as Agent.  Each Subsidiary hereby appoints PHC II its agent with full power to act on its behalf in all matters concerning the consolidated U.S. federal income tax returns filed on behalf of the Polypore Group, including the preparation

3

and filing of such returns (including any amendments thereto), making or revoking all elections with respect thereto, negotiating and settling any audit, examination or administrative proceeding with respect to such tax returns, and commencing and prosecuting any judicial proceeding related to such tax returns.

SECTION 7.  State Tax Returns.  The provisions of this Agreement shall apply, as appropriately adjusted, to any Members filing combined, consolidated, unitary or similar income or franchise returns for state tax purposes.

SECTION 8.  Miscellaneous.

(a)           This Agreement and any provision hereof may be amended, waived, discharged or terminated only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge or termination is sought.

(b)           This Agreement shall constitute the entire agreement between the parties concerning the subject matter hereof and shall supersede any prior agreements and understandings between or among the parties with respect to the subject matter hereof.

(c)           The validity, interpretation and enforceability of this Agreement shall be governed in all respects by the laws of the State of New York, without regard to conflict of law principles.

(d)           Failure of any party at any time to require the other party’s performance of any obligation under this Agreement shall not affect the right to require performance of that obligation.  Any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver or modification of the provision itself, or a waiver of any right under this Agreement.

(e)           Section and other headings contained in this Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or of any provision hereof.

(f)            Every provision of this Agreement is intended to be severable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

(g)           This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one agreement.  The signatures of any party to any such counterpart shall be deemed to be a signature to, and may be appended to, any other counterpart.

(h)           This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations herein shall be assigned by any party hereto without the prior written consent of the other parties hereto.

4

(i)            Matters of interpretation and calculations under this Agreement shall be made in good faith by PHC II.

(j)            Upon request by PHC II, each Subsidiary shall pay to PHC II, no later than the due date of the next Interim Payment due following such request, such Subsidiary’s pro rata share of (i) amounts expended by PHC II in connection with the determination of the tax liability of the Polypore Group and the preparation of necessary tax return filings and (ii) amounts expended by PHC II in determining amounts due pursuant to this Agreement.

[REMAINDER OF PAGE LEFT BLANK]

5

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

PP HOLDING CORPORATION II		PP HOLDING CORPORATION
By:	/s/ Lynn Amos	By:	/s/ Lynn Amos
Name:		Name:
Title:		Title:
POLYPORE, INC.		CELGARD, INC.
By:	/s/ Lynn Amos	By:	/s/ Lynn Amos
Name:		Name:
Title:		Title:
DARAMIC, INC.		DARAMIC ASIA, INC.
By:	/s/ Lynn Amos	By:	/s/ Lynn Amos
Name:		Name:
Title:		Title:
DARAMIC INTERNATIONAL, INC.		POLYPORE HOLDINGS, INC.
By:	/s/ Lynn Amos	By:	/s/ Lynn Amos
Name:		Name:
Title:		Title:

6

EXHIBIT A

Celgard, Inc., a Delaware corporation

Daramic, Inc., a Delaware corporation

Daramic Asia, Inc., a Delaware corporation

Daramic International, Inc., a Delaware corporation

Polypore Holdings, Inc., a Delaware corporation

Daramic Acquisition Corporation

By:	/s/ Lynn Amos
Name: Lynn Amos
Title: Chief Financial Officer

Microporous Holding Corporation

By:	/s/ Lynn Amos
Name: Lynn Amos
Title: Chief Financial Officer

MPI Acquisition Corporation

By:	/s/ Lynn Amos
Name: Lynn Amos
Title: Chief Financial Officer

MP Assets Corporation

By:	/s/ Lynn Amos
Name: Lynn Amos
Title: Chief Financial Officer

7

EX-10.2

Exhibit 10.2

POLYPORE INTERNATIONAL, INC.

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”), dated as of [DATE], is made and entered into by and between POLYPORE INTERNATIONAL, INC., a Delaware corporation (the “Company”), and [EXECUTIVE] (the “Executive”).

RECITALS:

I.The Executive is a senior executive of the Company or a Subsidiary and has made and is expected to continue to make major contributions to the growth and financial strength of the Company;

II.The Company recognizes that the possibility of a Change in Control (as defined below) exists and that such possibility, and the uncertainty it may create among management, may result in the distraction or departure of management personnel, to the detriment of the Company and its stockholders;

III.The Company desires to assure itself of the continuity of management and desires to establish certain minimum severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control;

IV.The Company wishes to ensure that its senior executives are not unduly distracted by the circumstances attendant to the possibility of a Change in Control and to encourage the continued attention and dedication of such executives, including the Executive, to their assigned duties with the Company; and

V.The Company desires to provide additional inducement for the Executive to continue to remain in the employ of the Company.

NOW, THEREFORE, the Company and the Executive agree as follows:

1.Certain Defined Terms.  In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:

(a)“Base Pay” means the Executive’s annual base salary rate as in effect from time to time.

(b)“Board” means the Board of Directors of the Company.

(c)“Cause” means that, prior to any termination pursuant to Section 3(b), the Executive shall have:

(i)been convicted of a criminal violation involving fraud, embezzlement or theft in connection with the Executive’s duties or in the course of the Executive’s employment with the Company or any Subsidiary;

(ii)committed intentional wrongful damage to tangible or intangible property of the Company or any Subsidiary; or

(iii)committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary.

For purposes of this Agreement, no act or failure to act on the part of the Executive will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the Executive will not be deemed to have been terminated for “Cause” hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board then in office (excluding the Executive if the Executive is then a member of the Board) at a meeting of the Board called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting “Cause” as herein defined and specifying the particulars thereof in reasonable detail.  Nothing herein will limit the right of the Executive or the Executive’s beneficiaries to contest the validity or propriety of any such determination.

(d)“Change in Control” means the occurrence during the Term of any of the following events:

(i)any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) is or becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the combined voting power of the then-outstanding Voting Stock of the Company; provided, however, that:

(1)for purposes of this Section 1(d), the following acquisitions shall not constitute a Change in Control: (A) any acquisition of Voting Stock of the Company directly from the Company that is approved by a majority of the Incumbent Directors, (B) any acquisition of Voting Stock of the Company by the Company or any Subsidiary, (C) any acquisition of Voting Stock of the Company by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, and (D) any acquisition of Voting Stock of the

2

Company by any Person pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of Section 1(d)(iii) below;

(2)if any Person is or becomes the beneficial owner of 30% or more of combined voting power of the then-outstanding Voting Stock of the Company as a result of a transaction described in clause (A) of Section 1(d)(i)(1) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company representing 1% or more of the then-outstanding Voting Stock of the Company, other than in an acquisition directly from the Company that is approved by a majority of the Incumbent Directors or other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Voting Stock are treated equally, such subsequent acquisition shall be treated as a Change in Control;

(3)a Change in Control will not be deemed to have occurred if a Person is or becomes the beneficial owner of 30% or more of the Voting Stock of the Company as a result of a reduction in the number of shares of Voting Stock of the Company outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company representing 1% or more of the then-outstanding Voting Stock of the Company, other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Voting Stock are treated equally; and

(4)if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of 30% or more of the Voting Stock of the Company inadvertently, and such Person divests as promptly as practicable but no later than the date, if any, set by the Incumbent Board a sufficient number of shares so that such Person beneficially owns less than 30% of the Voting Stock of the Company, then no Change in Control shall have occurred as a result of such Person’s acquisition; or

(ii)a majority of the Board ceases to be comprised of Incumbent Directors; or

(iii)the consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the stock or assets of another corporation, or other transaction (each, a “Business Transaction”), unless, in each case, immediately following such Business Transaction (A) the Voting Stock of the Company outstanding immediately prior to such Business Transaction continues to represent (either by remaining outstanding or by being

3

converted into Voting Stock of the surviving entity or any parent thereof), more than 50% of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, 30% or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction, and (C) at least a majority of the members of the Board of Directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or

(iv)approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of Section 1(d)(iii).

(e)“Code” means the Internal Revenue Code of 1986, as amended.

(f)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(g)“Good Reason” means the failure of the Company to remedy any of the following within 30 calendar days after receipt by the Company of written notice thereof from the Executive:

(i)a material diminution in the Executive’s normal duties and responsibilities, including, but not limited to, the assignment without the Executive’s written consent of any diminished duties and responsibilities which are inconsistent with the Executive’s positions, duties and responsibilities with the Company immediately prior to a Change in Control, or a materially adverse change in the Executive’s reporting responsibilities or titles as in effect immediately prior to the Change in Control, whether or not resulting from an act of the Company or otherwise, or any removal of the Executive from or any failure to re-elect the Executive to any of such positions, except in connection with the termination of the Executive’s employment for disability, retirement, or Cause or as a result of the Executive’s death or by the Executive other than for Good Reason;

(ii)a reduction by the Company in the Executive’s Base Pay as in effect on the date hereof or as the same may be increased from time to time;

4

(iii)a reduction by the Company in the Executive’s Incentive Compensation Target as in effect on the date hereof or as the same may be increased from time to time;

(iv)the Company’s requiring the Executive, without the Executive’s written consent, to be based anywhere other than within fifty (50) miles of the Executive’s office location immediately prior to the Change in Control, except for required travel on the Company’s business to an extent substantially consistent with business travel obligations immediately prior to the Change in Control;

(v)the failure by the Company to continue in effect any investment plan, retirement plan, savings plan, supplemental retirement plan, deferred compensation plan, supplemental investment plan, life insurance plan, health and accident plan, disability plan or other welfare benefit plan in which the Executive was participating at the time of the Change in Control (or plans providing the Executive with substantially similar benefits), the taking of any action by the Company which would adversely affect the Executive’s participation or materially reduce the Executive’s benefits or value under any of such plans or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive was then entitled in accordance with the Company’s normal vacation policy in effect on the date of the Change in Control; or

(vi)the failure by the Company to obtain the assumption of the obligation to perform this Agreement by any successor as contemplated in Section 11 hereof.

(h)“Incentive Compensation Target” means the percentage of the Executive’s Base Pay which is targeted as the Executive’s annual incentive bonus under the Company’s employee incentive plan.

(i)“Incumbent Directors” means the individuals who, as of the date of this Agreement, are Directors of the Company and any individual becoming a Director subsequent to the date of this Agreement whose election, nomination for election by the Company’s stockholders, or appointment, was approved by a vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination); provided, however, that an individual shall not be an Incumbent Director if such individual’s election or appointment to the Board occurs as a result of an actual or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

5

(j)“Release Agreement” means an agreement, in substantially the form customarily used by the Company for similarly situated executives of the Company in similar instances, pursuant to which the Executive releases, to the extent permitted by law, all current or future claims, known or unknown, arising on or before the date of the release against the Company, its subsidiaries and its officers.

(k)“Severance Period” means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earlier of (i) the second anniversary of the occurrence of the Change in Control, or (ii) the Executive’s death.

(l)“Subsidiary” means a corporation, company or other entity (i) at least 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but at least 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.

(m)“Term” means the period commencing as of the date hereof and expiring on January 1, 2016, with automatic one-year renewals thereafter unless either party notifies the other at least 120 days before the scheduled expiration date that the Term is not to renew; provided, however, that (i) if a Change in Control occurs during the Term, the Term will expire on, and no sooner than, the last day of the Severance Period; and (ii) subject to Section 3(c), if, prior to a Change in Control, the Executive ceases for any reason to be an officer of the Company or an employee of the Company or any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect.  For purposes of this Section 1(m), the Executive shall not be deemed to have ceased to be an employee of the Company and any Subsidiary by reason of the transfer of the Executive’s employment between the Company and any Subsidiary, or among Subsidiaries.

(n)“Termination Date” means (i) the date on which the Executive’s employment is terminated by the Company or any Subsidiary or (ii) the date on which the Executive terminates his or her employment pursuant to Section 3(b).

(o)“Voting Stock” means at any time, the then-outstanding securities entitled to vote generally in the election of directors of the Company.

2.Operation of Agreement.  This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, except as provided in Section 3(c), the payments and benefits provided under this Agreement will not be payable unless and until a Change in Control occurs.  Upon the occurrence of a Change in Control at any time during the Term, without further action, this Agreement will become immediately operative.

6

3.Termination Following a Change in Control.

(a)If a Change in Control occurs and the Executive’s employment is terminated by the Company or a Subsidiary during the Severance Period (or pursuant to Section 3(c)), the Executive will be entitled to the benefits provided by Section 4 unless such termination is the result of the occurrence of one or more of the following events:

(i)The Executive’s death;

(ii)The Executive’s having become unable (as determined by the Board in good faith), with or without reasonable accommodations, to regularly perform the Executive’s duties by reason of illness or incapacity; or

(iii)Cause.

(b)In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period for Good Reason with the right to severance compensation as provided in Section 4 regardless of whether any other reason, other than Cause, for such termination exists or has occurred, including without limitation other employment.

(c)Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and not more than 120 days prior to the date on which the Change in Control occurs, the Executive’s employment with the Company is terminated by the Company other than as described in Section 3(a)(i), 3(a)(ii) or 3(a)(iii), such termination of employment will be deemed to be a termination of employment after a Change in Control for purposes of this Agreement and, in addition, the Company will be required to pay to the Executive in a lump sum in cash within ten (10) business days after such Change in Control (subject to Section 4(b)), the sum of: (1) the difference between the fair market value of a common share of the Company and the exercise price of each outstanding stock option held by the Executive that was forfeited as a result of the Executive’s termination of employment multiplied by the number of shares underlying each stock option held by the Executive that was forfeited as a result of the Executive’s termination of employment and (2) the fair market value of a common share of the Company multiplied by the number of shares underlying each share of restricted stock and each performance share and other equity award held by the Executive that was forfeited as a result of the Executive’s termination of employment.  For this purpose, the “fair market value of a common share of the Company” shall be deemed to be the price per share paid in connection with the Change in Control.

(d)A termination of employment pursuant to Section 3(a), 3(b) or 3(c) will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company or any Subsidiary providing employee

7

benefits, which rights will be governed by the terms thereof; provided, however, that if upon termination of employment, the Executive is entitled to severance compensation or benefits under this Agreement and pursuant to any employment or severance agreement or employee plan (an “Employment Agreement”), the Executive will be entitled to severance benefits under either this Agreement or such Employment Agreement, whichever agreement provides for greater benefits, but will not be entitled to benefits under both agreements.

4.Severance Compensation.

(a)If, following the occurrence of a Change in Control, the Company or a Subsidiary of the Company terminates the Executive’s employment during the Severance Period other than as described in Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or because the Executive terminates the Executive’s employment pursuant to Section 3(b), subject to Section 4(b), the Company will be obligated to make the following payments and provide the following benefits to the Executive; provided that if payment to the Executive of any amount pursuant to this Section 4(a) would constitute a “deferral of compensation” under Section 409A of the Code and if the Executive’s termination does not constitute a “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, then payment of such amount shall be made, to the extent necessary to comply with Section 409A of the Code and subject to Section 4(b), to the Executive on the later of (i) the payment date identified below in the applicable paragraph of this Section 4(a) or (ii) on the earlier of (A) the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, (B) the Executive’s disability (within the meaning of Section 409A of the Code), (C) a change in control of the Company within the meaning of Section 409A of the Code or (D) the Executive’s death.

(i)The Executive will be entitled to receive: (i) on the sixty-first (61st) day after the Termination Date (subject to Sections 4(a) and 4(b)), any Base Pay which has accrued but is unpaid, any reimbursable expenses which have been incurred but are unpaid, and payment for any unexpired vacation days which have accrued under the Company’s or a Subsidiary’s vacation policy but are unused, as of the date of termination of the Executive’s employment, (ii) any plan benefits which by their terms extend beyond termination of the Executive’s employment (but only to the extent provided in any such benefit plan in which the Executive has participated as an employee of the Company or a Subsidiary and excluding, except as hereinafter provided in this Section 4, any severance pay program or policy of the Company or a Subsidiary), and (iii) subject to Section 4(a)(ii) below, payments or benefits payable pursuant to the terms of any annual and/or long-term incentive plan of the Company or a Subsidiary in accordance with the terms thereof.  In addition, the Executive shall be entitled to the additional benefits and amounts

8

described in the succeeding subsections of this Section 4, in the circumstances described in such subsections.

(ii)On the sixty-first (61st) day after the Termination Date (subject to Sections 4(a) and 4(b)), the Executive will be entitled to receive a lump sum cash payment in an amount equal to the greater of (A) the Executive’s target or actual annual bonus for the fiscal year in which the Termination Date occurs or (B) the Executive’s target or actual annual bonus for the fiscal year in which the Change in Control occurs, pro-rated for the number of full months that the Executive was employed during such fiscal year (i.e., the annual bonus shall be multiplied by a fraction, the numerator of which is the number of full months during which the Executive was actively employed by the Company in the relevant fiscal year and the denominator of which is 12).

(iii)On the sixty-first (61st) day after the Termination Date (subject to Sections 4(a) and 4(b)), the Executive will be entitled to receive a lump sum cash payment in an amount equal to [two (2)][three (3)] times the sum of (A) Base Pay (at the highest rate in effect for any period within three years prior to the Termination Date), plus (B) annual bonus (in an amount equal to the greatest of the Executive’s (1) target or actual annual bonus for the year in which the Termination Date occurs; (2) target or actual annual bonus for the year in which the Change in Control occurs; or (3) average actual bonus for the three full fiscal years prior to the year in which the Termination Date occurs).

(iv)For a period of [twenty-four (24)][thirty-six (36)] months following the Termination Date (the “Continuation Period”), the Executive will be entitled to continued participation in all Company benefits provided to the Executive immediately prior to the date of the Change in Control, at the same employee contribution levels, as if the Executive remained employed by the Company through the Continuation Period, including but not limited to the Company’s medical, dental, vision, long-term disability and life insurance plans (excluding benefits under the executive death benefit plan), employer basic and matching 401(k) and deferred savings plan contributions, car allowance, dues payments, financial and tax planning allowance,  (the “Benefit Plans”), subject to the terms and conditions of the Benefit Plans, including, but not limited to, timely payment of any employee contributions necessary to maintain participation; provided, however, that (A) such coverage shall be provided only to the extent that such coverage would not be considered “deferred compensation” subject to the requirements of Section 409A of the Code; and (B) the Executive’s continued participation in the Benefit Plans during the Continuation Period shall satisfy the Benefit Plans’ obligation, if any, to provide the Executive the right to continuation coverage under the Benefit Plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended.  For clarity and not in limitation of any benefits provided

9

under this paragraph, the Executive will be deemed to be an employee of the Company during the Continuation Period for determination of the Executive’s eligibility for retiree benefits plans, including but not limited to retiree medical benefits under the Company’s Group Medical Plan.  For example, if an employee is required to be age 55 and have ten years of service to be eligible under a retiree benefit plan of the Company, and at the beginning of the Continuation Period, the Executive is age 54 and has nine years of service, upon reaching age 55 and the tenth anniversary of the Executive’s service to the Company, the Executive will be eligible to participate under the retiree benefit plan, as if the Executive had remained in the employ of the Company throughout the Continuation Period.

(v)If the terms of any of the Benefit Plans prohibit the Executive’s continued participation in the plan during any portion of the Continuation Period, on the sixty-first (61st) day after the Termination Date (subject to Sections 4(a) and 4(b)), the Executive will be entitled to receive a lump sum cash payment in an amount equal to the present value of continued participation in the Benefit Plans for the period during which the Executive would otherwise have been entitled to participate in the plan.

(vi)On the Termination Date, any outstanding but unexercised stock options held by Executive under any of the Company’s equity compensation plans and programs will be immediately exercisable, and any unvested restricted stock held by Executive under any of the Company’s equity compensation plans and programs will be immediately vested and free of all restriction.  In addition, all such stock options will continue to be exercisable for the shorter of (1) the original term of the stock options; or (2) the longer of the Continuation Period or, if the Executive has attained age 55 and has achieved ten years of service to the Company (including, for this purpose, years of service credited during the Continuation Period) at any time prior to the end of the Continuation Period, three years after the Termination Date.

(b)Notwithstanding anything to the contrary contained in this Agreement, if any payment, reimbursement, or the provision of any benefit under this Agreement that is paid or provided upon the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code would constitute a “deferral of compensation” under Section 409A of the Code and the Executive is a “specified employee” (as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code) on the date of the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, the Executive (or the Executive’s beneficiary) will receive payment or reimbursement of such amounts or the provision of such benefits upon the earlier of (i) the first day of the seventh month following the date of the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code or (ii) the Executive’s death.

10

(c)Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the “prime rate” as set forth from time to time during the relevant period in The Wall Street Journal “Money Rates” column.  Such interest will be payable as it accrues on demand.  Any change in such prime rate will be effective on and as of the date of such change.

5.Section 280G.  The amounts payable to the Executive under Section 4 may be adjusted as set forth in this Section 5 if the sum (the “combined amount”) of the amounts payable under Section 4 and all other payments or benefits which the Executive has received or has the right to receive from the Company which are defined in Section 280G(b)(2)(A)(i) of the Code, would, but for the application of this Section 5, constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code).  In such event, the combined amount shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a parachute payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payments and benefits to be provided to the Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes).  To the extent the reduction referred to in the second sentence of this Section 5 applies, such reduction shall be made to the combined amount by reduction of the aggregate amount of the lump sum payments described in Sections 4(a)(ii), 4(a)(iii) and 4(a)(v) of this Agreement and, to the extent further reductions are required, in such payments due to the Executive as the Company may determine.  Any determinations required to be made under this Section 5 shall be made by an independent accounting firm selected by the Executive, which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the date of termination or such earlier time as is requested by the Company, and shall be made at the expense of the Company.  The fact that the Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 5 shall not of itself limit or otherwise affect any other rights of the Executive under this Agreement.  If at any time subsequent to payment, the independent accounting firm believes that amounts that have been paid or distributed by the Company to or for the benefit of the Executive should not have been paid or distributed, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Executive which the independent accounting firm believes has a high probability of success (an “Overpayment”), the Executive shall pay any such Overpayment to the Company together with interest at the applicable federal rate; provided, however, that no amount shall be payable by Executive to the Company to the extent the payment would not either reduce the amount on which the Executive is subject to tax  or generate a refund of such tax.  If the independent accounting firm determines that additional amounts could have been paid or distributed to or for the benefit of the Executive (an “Underpayment”), the Underpayment shall be paid within sixty (60) days following the date on which the Underpayment is determined together with interest at the applicable federal rate.

11

6.No Mitigation Obligation.  The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date.  Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise.

7.Legal Fees and Expenses.

If it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such dispute or proceeding.  Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay to the Executive and be financially responsible for reasonable attorneys’ and related fees and expenses incurred by the Executive in connection with claims made in good faith but only if, and to the extent and at the earliest date(s) that, such actions are determined to be permitted without violating Section 409A of the Code.  Such payments will be made after delivery of the Executive’s written requests for payment, accompanied by such evidence of fees and expenses incurred as the Company may reasonably require.  Notwithstanding the foregoing, any such reimbursement shall be for expenses incurred during the Executive’s lifetime and shall be made no later than the last day of the Executive’s tax year following the tax year in which the Executive incurs the expense.  In no event will the amount of expenses eligible for reimbursement by the Company in one year affect the amount of expenses eligible for reimbursement to be provided in any other taxable year.

8.Competitive Activity; Confidentiality; Nonsolicitation.

(a)Acknowledgements and Agreements.  The Executive hereby acknowledges and agrees that in the performance of the Executive’s duties for the Company during the Executive’s employment, the Executive will be brought into frequent contact, either in person, by telephone or through the mails, with existing and potential customers of the Company throughout the United States.  The Executive also agrees that trade secrets and confidential information of the Company, more fully described in Section 8(i) of this Agreement, gained by the Executive during the Executive’s association with the Company, have been developed by the Company through substantial expenditures of time, effort and money and constitute valuable and unique property of the Company.  The Executive further understands and agrees that the foregoing makes it necessary for the protection of the business of

12

the Company that the Executive not compete with the Company during the Executive’s employment and not compete with the Company for a reasonable period thereafter, as further provided in the following subsections.

(b)Covenants During Employment.  During the Executive’s employment, the Executive will not compete with the Company anywhere that the Company conducts its business.  In accordance with this restriction, but without limiting its terms, during the Executive’s employment, the Executive will not:

(i)enter into or engage in any business which competes with the business of the Company;

(ii)solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business that competes with, the business of the Company;

(iii)divert, entice or otherwise take away any customers, business, patronage or orders of the Company or attempt to do so; or

(iv)promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the business of the Company.

(c)Covenants Following Termination.  If, during the Severance Period, the Executive’s employment is terminated entitling the Executive to payments and benefits under Section 4 of this Agreement, for a period of [two (2)][three (3)] years following the termination of the Executive’s employment, the Executive will not:

(i)enter into or engage in any business which competes with the Company’s business worldwide;

(ii)solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business, wherever located, that competes with, the Company’s business worldwide;

(iii)divert, entice or otherwise take away any customers, business, patronage or orders of the Company worldwide, or attempt to do so; or

(iv)promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the Company’s business within the United States.

(d)Indirect Competition.  For the purposes of Sections 8(b) and 8(c), but without limitation thereof, the Executive will be in violation thereof if the Executive engages in any or all of the activities set forth therein directly as an individual on the Executive’s own account, or indirectly as a general partner, joint venturer, employee, agent, salesperson, consultant, officer and/or director of any firm,

13

association, partnership, corporation or other entity, or as a limited partner, member or stockholder of any limited partnership, limited liability company, or corporation in which the Executive or the Executive’s spouse, child or parent owns, directly or indirectly, individually or in the aggregate, more than five percent (5%) of the limited partnership interests, limited liability company interests or outstanding stock, as the case may be.

(e)The Company.  For purposes of this Section 8, the Company shall include any and all Subsidiaries.

(f)The Company’s Business.  For the purposes of Sections 8(b), 8(c), 8(j) and 8(k), the Company’s business is defined to be the development, manufacture, marketing and sale of microporous membranes used in separation and filtration processes.

(g)Non-Solicitation.  Until the expiration of [two (2)][three (3)] years following the Termination Date, the Executive will not directly or indirectly at any time solicit or induce or attempt to solicit or induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Company and/or of its Subsidiaries to terminate their employment, representation or other association with the Company and/or its Subsidiaries.

(h)Further Covenants.

(i)The Executive will keep in strict confidence, and will not, without the prior written consent of the Company or as may otherwise be required by law or legal process, directly or indirectly, at any time during or after the Executive’s employment with the Company, disclose, furnish, disseminate, make available or, except in the course of performing the Executive’s duties of employment, use any trade secrets or non-public confidential business and technical information of the Company or its customers or vendors, including without limitation as to when or how the Executive may have acquired such information before or during employment.  The Executive specifically acknowledges that all such non-public confidential information, whether reduced to writing, maintained on any form of electronic media, or maintained in the Executive’s mind or memory and whether compiled by the Company and/or the Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the Company to maintain the secrecy of such information, that such information is the sole property of the Company and that any retention and use of such information by the Executive during the Executive’s employment with the Company (except in the course of performing the Executive’s duties and obligations to the Company) or after the termination of the Executive’s employment shall constitute a misappropriation of the Company’s trade secrets.

14

(ii)The Executive agrees that upon termination of the Executive’s employment with the Company, for any reason, the Executive shall return to the Company, in good condition, all property of the Company, including without limitation, the originals and all copies of any materials which contain, reflect, summarize, describe, analyze or refer or relate to any items of information listed in Section 8(h)(i) of this Agreement.  In the event that such items are not so returned, the Company will have the right to charge the Executive for all reasonable damages, costs, attorneys’ fees and other expenses incurred in searching for, taking, removing and/or recovering such property.

(i)Discoveries and Inventions; Work Made for Hire.

(i)The Executive hereby assigns and agrees to assign to the Company, its successors, assigns or nominees, all of the Executive’s rights to any discoveries, inventions and improvements, whether patentable or not, made, conceived or suggested, either solely or jointly with others, by the Executive while in the Company’s employ with the use of the Company’s time, material or facilities or in any way within or related to the existing or contemplated scope of the Company’s business.  Any discovery, invention or improvement relating to any subject matter with which the Company was concerned during the Executive’s employment and made, conceived or suggested by the Executive, either solely or jointly with others, within two (2) years following termination of the Executive’s employment under this Agreement or any successor agreements shall be irrebuttably presumed to have been so made, conceived or suggested in the course of such employment with the use of the Company’s time, materials or facilities.  Upon request by the Company with respect to any such discoveries, inventions or improvements, the Executive will execute and deliver to the Company, at any time during or after the Executive’s employment, all appropriate documents for use in applying for, obtaining and maintaining such domestic and foreign patents as the Company may desire, and all proper assignments therefor, when so requested, at the expense of the Company, but without further or additional consideration.

(ii)Executive acknowledges that, to the extent permitted by law, all work papers, reports, documentation, drawings, photographs, negatives, tapes and masters therefor, prototypes and other materials (hereinafter, “items”), including without limitation, any and all such items generated and maintained on any form of electronic media, generated by the Executive during the Executive’s employment with the Company shall be considered a “work made for hire” and that ownership of any and all copyrights in any and all such items shall belong to the Company.

(j)Communication of Contents of Agreement.  During the Executive’s employment and for [two (2)][three (3)] years thereafter, the Executive will communicate the contents of this Agreement to any person, firm, association, partnership,

15

corporation or other entity which the Executive intends to be employed by, associated with, or represent and which is engaged in a business that is competitive to the business of the Company.

(k)Relief.  The Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of the Executive’s obligations under this Agreement would be inadequate.  The Executive therefore agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding which may be brought to enforce any provision contained in Sections 8(b), 8(c), 8(h), 8(i) and 8(j) of this Agreement, without the necessity of proof of actual damage.

(l)Reasonableness.  The Executive acknowledges that the Executive’s obligations under this Section 8 are reasonable in the context of the nature of the Company’s business and the competitive injuries likely to be sustained by the Company if the Executive was to violate such obligations.  The Executive further acknowledges that this Agreement is made in consideration of, and is adequately supported by, the agreement of the Company to perform its obligations under this Agreement and by other consideration, which the Executive acknowledges constitutes good, valuable and sufficient consideration.

9.Employment Rights.  Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control.

10.Withholding of Taxes.  The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling.

11.Successors and Binding Agreement.

(a)The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place.  This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.

16

(b)This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

(c)This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 11(a) and 11(b).  Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 11(c), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated.

12.Notices.  For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as FedEx or UPS, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at the Executive’s principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt.

13.Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware and federal law, without giving effect to the principles of conflict of laws of such State, except as expressly provided herein.

14.Validity.  If any provision of this Agreement or the application of any provision hereof to any person or circumstance is held invalid or otherwise unenforceable, the remainder of this Agreement and the application of such provision to any other person or circumstance will not be affected, and the provision so held to be invalid or otherwise unenforceable will be reformed to the extent (and only to the extent) necessary to make it enforceable or valid.

15.Miscellaneous.

(a)No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of

17

similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement.

(b)Subject to Section 3(d), this Agreement supersedes, as of the date first above written, any prior agreements providing for severance payments and benefits following a Change in Control, including any existing Change in Control Severance Agreement between the Executive and the Company (the “Prior Agreements”).  The Executive agrees that he or she has no further rights under the Prior Agreements. For clarity, this Agreement shall have no effect on any agreement providing for severance payments and benefits in the event of a separation from the Company other than as a result of a Change in Control.

(c)The headings used in this Agreement are intended for convenience or reference only and will not in any manner amplify, limit, modify or otherwise be used in the construction or interpretation of any provision of this Agreement.  References to Sections are to Sections of this Agreement.  Any reference in this Agreement to a provision of a statute, rule or regulation will also include any successor provision thereto.

16.Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid or unenforceable provision had never been contained herein.

17.Survival.  Notwithstanding any provision of this Agreement to the contrary, the parties’ respective rights and obligations under Sections 3(d), 4, 5, 7, 8, 10, 11(b), 16 and 17 will survive any termination or expiration of this Agreement or the termination of the Executive’s employment following a Change in Control for any reason whatsoever.

18.Beneficiaries.  The Executive will be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive’s death, and may change such election, in either case by giving the Company written notice thereof in accordance with Section 12.  In the event of the Executive’s death or a judicial determination of the Executive’s incompetence, reference in this Agreement to the “Executive” will be deemed, where appropriate, to the Executive’s beneficiary, estate or other legal representative.

19.Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same agreement.

18

20.Release Agreement.  No payments shall be made under Section 3(c) and Section 4 hereof (other than Section 4(a)(i)) unless the Executive, on or before the 60th day following the Executive’s Termination Date, (a) signs and returns a Release Agreement within the number of days that the Company determines is required under applicable law, but in no event more than forty-five (45) days after the Company delivers the Release Agreement to the Executive and (b) does not revoke such Release Agreement within the time period provided therein, such time period not to exceed seven (7) days.  If the Executive becomes entitled to payments under Section 4 hereof (other than Section 4(a)(i)), the Company shall deliver to the Executive a copy of the Company’s standard form of Release Agreement within seven (7) days of the Executive’s Termination Date.

21.Representations.  The Executive represents and warrants to the Company that upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms.  The Company represents and warrants to the Executive that upon the execution and delivery of this Agreement by the Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms.

22.Section 409A of the Code.  Each payment or reimbursement and the provision of each benefit under this Agreement shall be considered to be a separate payment and not one of a series of payments for purposes of Section 409A of the Code.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Executive.  This Agreement shall be administered in a manner consistent with this intent.  Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

19

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

POLYPORE INTERNATIONAL, INC.

By:

Name:

Title:

Executive

20

EX-31.1

Exhibit 31.1

POLYPORE INTERNATIONAL, INC.

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert B. Toth, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Polypore International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 9, 2013	/s/ Robert B. Toth
	Robert B. Toth
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

POLYPORE INTERNATIONAL, INC.

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lynn Amos, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Polypore International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2013	/s/ Lynn Amos
	Lynn Amos
	Chief Financial Officer

EX-32.1

Exhibit 32.1

POLYPORE INTERNATIONAL, INC.

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Polypore International, Inc. (the “Company”) on Form 10-Q for the period ended March 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert B. Toth, President and Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2013	/s/ Robert B. Toth
	Robert B. Toth
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

POLYPORE INTERNATIONAL, INC.

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Polypore International, Inc. (the “Company”) on Form 10-Q for the period ended March 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Lynn Amos, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2013	/s/ Lynn Amos
	Lynn Amos
	Chief Financial Officer

XML

Financial Statements of Guarantors (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Net sales	$ 163,513	$ 173,705
Cost of goods sold	108,738	102,681
Gross profit	54,775	71,024
Selling, general and administrative expenses	31,396	33,886
Operating income	23,379	37,138
Interest expense and other	10,410	9,242
Income before income taxes	12,969	27,896
Income taxes	3,948	9,123
Net income	9,021	18,773
Combined Guarantor Subsidiaries
Net sales	46,412	53,521
Cost of goods sold	25,187	17,412
Gross profit	21,225	36,109
Selling, general and administrative expenses	15,322	17,309
Operating income	5,903	18,800
Interest expense and other	(1,400)	(2,584)
Income before income taxes	7,303	21,384
Income taxes	4,840	7,931
Net income	2,463	13,453
Combined Non-Guarantor Subsidiaries
Net sales	117,101	120,184
Cost of goods sold	83,551	85,269
Gross profit	33,550	34,915
Selling, general and administrative expenses	11,572	12,274
Operating income	21,978	22,641
Interest expense and other	1,942	2,797
Income before income taxes	20,036	19,844
Income taxes	6,412	4,634
Net income	13,624	15,210
The Company
Selling, general and administrative expenses	4,502	4,303
Operating income	(4,502)	(4,303)
Interest expense and other	9,868	9,029
Equity in earnings of subsidiaries	(16,087)	(28,663)
Income before income taxes	1,717	15,331
Income taxes	(7,304)	(3,442)
Net income	9,021	18,773
Eliminations
Equity in earnings of subsidiaries	16,087	28,663
Income before income taxes	(16,087)	(28,663)
Net income	$ (16,087)	$ (28,663)

XML

Related Party Transactions (Details) (USD $)	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Dec. 29, 2012
Related party transactions
Ownership percentage in related party	100.00%
German Subsidiary | All related parties
Related party transactions
Equity method investment	$ 843,000		$ 650,000
Charges from the affiliates for work performed	266,000	327,000
Amounts due to the affiliates	$ 84,000		$ 239,000
German Subsidiary | Patent and trademark service provider
Related party transactions
Ownership percentage in related party	33.00%
German Subsidiary | Research company
Related party transactions
Ownership percentage in related party	25.00%

XML

Segment Information (Tables)

3 Months Ended

Mar. 30, 2013

Segment Information

Schedule of financial information relating to the reportable segments

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Net sales to external customers (by major product group):
Electronics and EDVs	$	24,375		$	42,388
Transportation and industrial	93,685			86,202
Energy storage	118,060			128,590
Healthcare	29,498			27,545
Filtration and specialty	15,955			17,570
Separations media	45,453			45,115
Total net sales to external customers	$	163,513		$	173,705
Operating income:
Electronics and EDVs	$	(2,519	)	$	16,795
Transportation and industrial	21,355			20,014
Energy storage	18,836			36,809
Separations media	15,509			13,863
Corporate and other	(6,018		)	(8,696		)
Segment operating income	28,327			41,976
Stock-based compensation	4,467			4,270
Non-recurring and other costs	481			568
Total operating income	23,379			37,138
Reconciling items:
Interest expense, net	9,791			8,791
Foreign currency and other	619			451
Income before income taxes	$	12,969		$	27,896
Depreciation and amortization:
Electronics and EDVs	$	4,401		$	3,161
Transportation and industrial	3,481			2,901
Energy storage	7,882			6,062
Separations media	3,436			3,322
Corporate and other	3,007			4,148
Total depreciation and amortization	$	14,325		$	13,532

XML

Segment Information (Details) (USD $)	3 Months Ended
	Mar. 30, 2013 segment business	Mar. 31, 2012
Segment Information
Number of primary businesses	2
Financial information relating to the reportable segments
Number of reportable segments	3
Total net sales to external customers	$ 163,513,000	$ 173,705,000
Operating income	23,379,000	37,138,000
Interest expense, net	9,791,000	8,791,000
Foreign currency and other	619,000	451,000
Income before income taxes	12,969,000	27,896,000
Depreciation and amortization	14,325,000	13,532,000
Reportable segments
Financial information relating to the reportable segments
Total net sales to external customers	163,513,000	173,705,000
Operating income	28,327,000	41,976,000
Energy Storage
Financial information relating to the reportable segments
Total net sales to external customers	118,060,000	128,590,000
Operating income	18,836,000	36,809,000
Depreciation and amortization	7,882,000	6,062,000
Electronics and EDVs
Financial information relating to the reportable segments
Total net sales to external customers	24,375,000	42,388,000
Operating income	(2,519,000)	16,795,000
Depreciation and amortization	4,401,000	3,161,000
Transportation and industrial
Financial information relating to the reportable segments
Total net sales to external customers	93,685,000	86,202,000
Operating income	21,355,000	20,014,000
Depreciation and amortization	3,481,000	2,901,000
Separations Media
Financial information relating to the reportable segments
Total net sales to external customers	45,453,000	45,115,000
Operating income	15,509,000	13,863,000
Depreciation and amortization	3,436,000	3,322,000
Healthcare
Financial information relating to the reportable segments
Total net sales to external customers	29,498,000	27,545,000
Filtration and specialty
Financial information relating to the reportable segments
Total net sales to external customers	15,955,000	17,570,000
Corporate and other
Financial information relating to the reportable segments
Operating income	(6,018,000)	(8,696,000)
Depreciation and amortization	3,007,000	4,148,000
Unallocated amount to segment
Financial information relating to the reportable segments
Stock-based compensation	4,467,000	4,270,000
Non-recurring and other costs	$ 481,000	$ 568,000

XML

Debt

3 Months Ended

Mar. 30, 2013

Debt

Debt

3.             Debt

Debt, in order of priority, consists of:

(in thousands)	March 30, 2013		December 29, 2012
Senior credit agreement:
Revolving credit facility	$	10,000	$	35,000
Term loan facility	288,750		296,250
	298,750		331,250
7.5% senior notes	365,000		365,000
	663,750		696,250
Less current portion, including borrowings under the revolving credit facility	25,000		50,000
Long-term debt	$	638,750	$	646,250

On June 29, 2012, the Company refinanced its previous senior secured credit agreement with a new senior secured credit agreement.  The credit agreement provides for a $150,000,000 revolving credit facility ($50,000,000 of which was borrowed in connection with the refinancing) and a $300,000,000 term loan facility. The proceeds from the credit agreement were used to pay outstanding principal and interest under the previous credit agreement and loan acquisition costs of $6,228,000, which were capitalized and will be amortized over the life of the credit agreement. In connection with the refinancing, the Company wrote-off unamortized loan acquisition costs of $2,478,000 associated with the previous credit agreement. Interest rates under the credit agreement are, at the Company’s option, equal to either an alternate base rate or the Eurocurrency base rate, plus a specified margin.

At March 30, 2013, the Company had $10,000,000 outstanding under the revolving credit facility and $140,000,000 available for borrowing. The revolving credit facility matures in June 2017.  The Company intends to pay back outstanding borrowings under the revolving credit facility within the next twelve months and accordingly, has included these borrowings in “Current portion of debt” in the accompanying condensed consolidated balance sheets.

XML

Fair Value of Financial Instruments (Details) (7.5% senior notes, USD $)	Mar. 30, 2013	Dec. 29, 2012
Fair Value of Financial Instruments
Debt instrument, interest rate (as a percent)	7.50%	7.50%
Level one
Fair Value of Financial Instruments
Debt instrument, interest rate (as a percent)	7.50%	7.50%
Fair value of 7.5% senior notes	391,463,000

XML

Debt (Details) (USD $)			12 Months Ended		0 Months Ended
	Mar. 30, 2013	Dec. 29, 2012	Dec. 29, 2012 Senior credit agreement	Mar. 30, 2013 Senior credit agreement	Jun. 29, 2012 Revolving credit facility	Mar. 30, 2013 Revolving credit facility M	Dec. 29, 2012 Revolving credit facility	Mar. 30, 2013 Term loan facility	Dec. 29, 2012 Term loan facility	Mar. 30, 2013 7.5% senior notes	Dec. 29, 2012 7.5% senior notes
Debt
Revolving credit facility						$ 10,000,000	$ 35,000,000
Long-term debt including current maturities	663,750,000	696,250,000	331,250,000	298,750,000				288,750,000	296,250,000	365,000,000	365,000,000
Less current maturities	25,000,000	50,000,000
Long-term debt	638,750,000	646,250,000
Debt instrument, interest rate (as a percent)										7.50%	7.50%
Maximum borrowing capacity						150,000,000
Amount borrowed during the period					50,000,000
Debt instrument, face amount								300,000,000
Loan acquisition costs			6,228,000
Write-off of unamortized loan acquisition costs			2,478,000
Available borrowing capacity						$ 140,000,000
Planned repayment period for revolving credit facility (in months)						12

XML

Pension Plans (Details) (Pension Plans, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Pension Plans
Components of net periodic benefit cost:
Service cost	$ 563	$ 422
Interest cost	1,127	1,207
Expected return on plan assets	(191)	(215)
Amortization of prior service credit	(13)	(13)
Recognized net actuarial loss	432	119
Net periodic benefit cost	$ 1,918	$ 1,520

XML

Environmental Matters (Details) (Membrana GmbH, USD $)	3 Months Ended
	Mar. 30, 2013	Dec. 29, 2012
Membrana GmbH
Environmental Matters
Environmental reserve	$ 10,208,000	$ 11,079,000
Period over which expenditures will be made (in months)	12M
Indemnification receivable	$ 11,189,000	$ 11,542,000

XML

Inventories

3 Months Ended

Mar. 30, 2013

Inventories

Inventories

2.             Inventories

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

(in thousands)	March 30, 2013		December 29, 2012
Raw materials	$	41,332	$	44,285
Work-in-process	30,082		28,051
Finished goods	53,265		47,573
	$	124,679	$	119,909

XML

Treasury Stock (Details) (USD $)	3 Months Ended
	Mar. 30, 2013	Feb. 19, 2013
Treasury Stock
Maximum number of shares authorized to be repurchased		4,000,000
Shares of common stock repurchased	6,800
Amount at which shares of common stock were repurchased	$ 272,000
Shares of common stock withheld and repurchased to satisfy the statutory withholding tax liability for certain foreign employees	5,600
Amount at which shares of common stock were withheld and repurchased to satisfy the statutory withholding tax liability for certain foreign employees	$ 204,000

XML

Financial Statements of Guarantors (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Net income	$ 9,021	$ 18,773
Foreign currency translation adjustment	(3,502)	8,889
Foreign currency translation adjustment, income tax benefit (expense)	486	(534)
Change in net actuarial loss and prior service credit	1,039	(320)
Change in net actuarial loss and prior service credit, income tax benefit (expense)	136
Comprehensive income	6,558	27,342
Combined Guarantor Subsidiaries
Net income	2,463	13,453
Comprehensive income	2,463	13,453
Combined Non-Guarantor Subsidiaries
Net income	13,624	15,210
Foreign currency translation adjustment	(4,277)	8,302
Change in net actuarial loss and prior service credit	1,039	(320)
Comprehensive income	10,386	23,192
The Company
Net income	9,021	18,773
Foreign currency translation adjustment	700	(271)
Equity in earnings of subsidiaries	(3,163)	8,840
Comprehensive income	6,558	27,342
Eliminations
Net income	(16,087)	(28,663)
Foreign currency translation adjustment	75	858
Equity in earnings of subsidiaries	3,163	(8,840)
Comprehensive income	$ (12,849)	$ (36,645)

XML

Condensed consolidated balance sheets (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Current assets:
Cash and cash equivalents	$ 43,199	$ 44,873
Accounts receivable, net	124,002	137,315
Inventories	124,679	119,909
Deferred income taxes	21,683	21,693
Prepaid and other	22,732	23,506
Total current assets	336,295	347,296
Property, plant and equipment, net	628,588	638,801
Goodwill	469,319	469,319
Intangibles and loan acquisition costs, net	117,845	121,729
Other	8,683	8,927
Total assets	1,560,730	1,586,072
Current liabilities:
Accounts payable	29,014	32,316
Accrued liabilities	50,378	45,872
Income taxes payable	1,826	1,603
Current portion of debt	25,000	50,000
Total current liabilities	106,218	129,791
Debt, less current portion	638,750	646,250
Pension obligations, less current portion	101,230	103,491
Deferred income taxes	95,103	98,667
Other	24,930	25,036
Commitments and contingencies
Shareholders' equity:
Preferred stock - 15,000,000 shares authorized, no shares issued and outstanding
Common stock, $.01 par value - 200,000,000 shares authorized; 46,723,723 issued and 46,711,323 outstanding at March 30, 2013 and 46,627,064 issued and outstanding at December 29, 2012	467	466
Paid-in capital	549,864	545,196
Retained earnings	64,789	55,768
Accumulated other comprehensive loss	(24,816)	(22,353)
Treasury stock, at cost - 12,400 shares at March 30, 2013 and no shares at December 29, 2012	(476)
Total Polypore shareholders' equity	589,828	579,077
Noncontrolling interest	4,671	3,760
Total shareholders' equity	594,499	582,837
Total liabilities and shareholders' equity	$ 1,560,730	$ 1,586,072

XML

Condensed consolidated statements of cash flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Operating activities:
Net income	$ 9,021	$ 18,773
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	11,361	9,441
Amortization expense	2,964	4,091
Amortization of loan acquisition costs	618	617
Stock-based compensation	4,467	4,270
Loss on disposal of property, plant and equipment	2	289
Foreign currency loss	555	1,128
Deferred income taxes	(2,841)	4,115
Changes in operating assets and liabilities:
Accounts receivable	12,382	15,510
Inventories	(5,865)	(15,384)
Prepaid and other current assets	333	575
Accounts payable and accrued liabilities	2,188	(10,470)
Income taxes payable	203	(2,345)
Other, net	798	(394)
Net cash provided by operating activities	36,186	30,216
Investing activities:
Purchases of property, plant and equipment, net	(6,228)	(45,350)
Net cash used in investing activities	(6,228)	(45,350)
Financing activities:
Principal payments on debt	(7,500)	(924)
Payments on revolving credit facility	(25,000)
Proceeds from stock option exercises	202	284
Repurchases of common stock	(476)
Noncontrolling interest	869	(31)
Net cash used in financing activities	(31,905)	(671)
Effect of exchange rate changes on cash and cash equivalents	273	2,187
Net decrease in cash and cash equivalents	(1,674)	(13,618)
Cash and cash equivalents at beginning of period	44,873	92,574
Cash and cash equivalents at end of period	$ 43,199	$ 78,956

XML

Commitments and Contingencies (Details)	Dec. 29, 2012	Mar. 30, 2013 Total Number of Employees Employees represented under collective bargaining agreements Corydon, Indiana
Federal Trade Commissions Litigation
Microporous revenues as percent of consolidated revenues	10.00%
Microporous operating income as percent of consolidated operating income	13.00%
Microporous assets as percent of consolidated assets, maximum	5.00%
Collective Bargaining Agreements
Concentration risk (as a percent)		3.00%

XML

Debt (Tables)

3 Months Ended

Mar. 30, 2013

Debt

Schedule of debt

(in thousands)	March 30, 2013		December 29, 2012
Senior credit agreement:
Revolving credit facility	$	10,000	$	35,000
Term loan facility	288,750		296,250
	298,750		331,250
7.5% senior notes	365,000		365,000
	663,750		696,250
Less current portion, including borrowings under the revolving credit facility	25,000		50,000
Long-term debt	$	638,750	$	646,250

XML

Stock-Based Compensation Plans (Details) (2007 Stock Incentive Plan, USD $)	0 Months Ended	3 Months Ended
	Feb. 25, 2013	Mar. 30, 2013	Mar. 31, 2012
Stock Based Compensation Plans
Stock-based compensation		$ 4,467,000	$ 4,270,000
Income tax benefit related to stock-based compensation expense		1,587,000	1,515,000
Number of shares authorized for grant under 2007 plan		4,751,963
Aggregate grant-date fair value of awards granted	9,248,000
Stock option
Stock Based Compensation Plans
Granted (in shares)	328,467
Percentage of shares vesting in equal installments		33.00%
Term of Options granted under the plan (in Years)		10Y
Exercise price (in dollars per share)	$ 36.42
Assumptions used in estimation of grant date fair value of options based on the Black Scholes option pricing model
Expected term (years)	5.6
Risk-free interest rate (as a percent)	0.92%
Expected volatility (as a percent)	57.30%
Stock Based Compensation Plans
Vesting period (in years)		3 years
Exercise period after retirement for vested options before modification	90 days
Incremental stock option expense associated with the modification, net of estimated forfeitures	$ 2,500,000
Remaining vesting term for recognizing incremental stock option expense associated with the modification	1 year 8 months 12 days
Stock option | Maximum
Stock Based Compensation Plans
Exercise period after retirement for vested options after modification	3 years
Vesting period after retirement for unvested options after modification	3 years
Restricted Stock
Stock Based Compensation Plans
Restricted stock grants (in shares)	85,461

XML

Stock-Based Compensation Plans (Tables)

3 Months Ended

Mar. 30, 2013

Stock-Based Compensation Plans

Schedule of assumptions for stock option grants

	February 25, 2013Grant Assumptions
Expected term (years)	5.6
Risk-free interest rate	0.92%
Expected volatility	57.3%
Dividend yield	—

XML

Description of Business and Basis of Presentation

3 Months Ended

Mar. 30, 2013

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

1.             Description of Business and Basis of Presentation

Description of Business

Polypore International, Inc. (the “Company”) 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, Europe and Asia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries after elimination of intercompany accounts and transactions.  The unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, the unaudited condensed consolidated financial statements and notes do not contain certain information included in the Company’s annual financial statements. In the opinion of management, all normal and recurring adjustments that are necessary for a fair presentation have been made. Operating results for the three months ended March 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2013. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

XML

Condensed consolidated balance sheets (Parenthetical) (USD $)	Mar. 30, 2013	Dec. 29, 2012
Condensed consolidated balance sheets
Preferred stock, shares authorized	15,000,000	15,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	46,723,723	46,627,064
Common stock, shares outstanding	46,711,323	46,627,064
Treasury stock, shares	12,400	0

XML

Commitments and Contingencies

3 Months Ended

Mar. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

11.          Commitments and Contingencies

Collective Bargaining Agreement

The Company’s employees at the Corydon, Indiana facility are represented under a labor union collective bargaining agreement. The collective bargaining agreement at the Corydon facility, covering approximately 3% of the Company’s workers, expires in August 2013.

Federal Trade Commission Litigation

On September 9, 2008, the Federal Trade Commission (the “FTC”) issued an administrative complaint against the Company alleging that the February 29, 2008 acquisition of Microporous Holding Corporation, the parent company of Microporous Products L.P. (“Microporous”), and the Company’s related actions have substantially lessened competition in North American markets for lead-acid battery separators. After challenging the complaint before an Administrative Law Judge of the FTC and subsequently before the Commissioners of the FTC, the Company was ordered to divest substantially all of the Microporous assets that were acquired in February 2008.

On January 28, 2011, the Company filed a petition with the U.S. Court of Appeals for the 11th Circuit to review the FTC’s November 5, 2010 order and opinion. On July 11, 2012, the 11th Circuit affirmed the FTC’s decision. The Company believes that this decision is inconsistent with the law and the facts presented at the hearing and that the Microporous acquisition is and will continue to be beneficial to its customers and the industry. Therefore, on January 15, 2013, the Company filed an appeal with the U.S. Supreme Court.

The Company believes that a final judicial resolution to the challenge by the FTC to the Microporous acquisition could take several months to a year. Although it is difficult to predict the outcome, timing or impact of this matter at this time, the Company believes that the final resolution will not have a material adverse impact on its business or financial condition.

The Company’s core energy storage business produces polymer-based membrane battery separators used in transportation, industrial and consumer electronics applications.  The acquisition of the Microporous business extended the Company’s product portfolio into the niche, mature deep cycle market for rubber-based battery separators, with considerable overlap to customers it currently serves with other products.  The Company does not believe that a required divestiture of all or a portion of the Microporous assets would significantly impact its core energy storage business or the long-term growth drivers impacting this business, including growth in Asia, demand for consumer electronics and growing demand for electric drive vehicles.

For the fiscal year ended December 29, 2012, the Microporous business represented approximately 10% of consolidated revenue and approximately 13% of consolidated operating income, including the facility that the Company completed and shifted production to in Feistritz, Austria post-acquisition.  At December 29, 2012, Microporous assets were less than 5% of consolidated assets.  The impact of a final resolution to this matter may be affected by a number of uncertainties, including, but not limited to, whether the Company is required to divest all or a portion of the Microporous assets, the timing of a potential divestiture, the proceeds of such a divestiture and the incremental growth in its core businesses.  If the Company was required to divest all or a portion of the Microporous assets, it would intend to sell the assets at fair market value.

XML

Document and Entity Information	3 Months Ended
	Mar. 30, 2013	May 01, 2013
Document and Entity Information
Entity Registrant Name	Polypore International, Inc.
Entity Central Index Key	0001292556
Document Type	10-Q
Document Period End Date	Mar. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-28
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		46,648,443
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

Stock-Based Compensation Plans

3 Months Ended

Mar. 30, 2013

Stock-Based Compensation Plans

Stock-Based Compensation Plans

12.          Stock-Based Compensation Plans

The Company offers stock-based compensation plans to attract, retain, motivate and reward key officers, non-employee directors and employees. Stock-based compensation expense was $4,467,000 and $4,270,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. The income tax benefit related to stock-based compensation expense was $1,587,000 and $1,515,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. Stock-based compensation expense includes costs associated with stock options and restricted stock and is classified as “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of income.

The 2007 Stock Incentive Plan (“2007 Plan”) allows for the grant of stock options, restricted stock and other instruments for up to a total of 4,751,963 shares of common stock. On February 25, 2013, the Company granted 328,467 stock options and 85,461 shares of restricted stock under the 2007 Plan with an aggregate grant-date fair value of $9,248,000, to be recognized over the vesting period for each award.  The stock options granted are time-vested options that vest annually in equal one-third installments and have 10-year terms and an exercise price of $36.42, the fair market value of the Company’s stock on the grant date.

The fair value of the options granted was estimated on the date of grant based on the Black-Scholes option pricing model with the following assumptions:

	February 25, 2013Grant Assumptions
Expected term (years)	5.6
Risk-free interest rate	0.92%
Expected volatility	57.3%
Dividend yield	—

The potential expected term of the stock options ranges from the vesting period of the options (three years) to the contractual term of the options (ten years). The Company determines the expected term of the options based on historical experience, vesting periods, structure of the option plans and contractual term of the options. The Company’s risk-free interest rate is based on the interest rate of U.S. Treasury bills with a term approximating the expected term of the options and is measured at the date of the stock option grant. Expected volatility is estimated based on the Company’s historical stock prices and implied volatility from traded options. The Company does not anticipate paying dividends.

On February 25, 2013, the Company modified the terms of stock options granted on August 23, 2011. For participants that meet certain criteria upon retirement, the modification extends the exercise period for vested options from 90 days after retirement to the earlier of the option expiration date or three years after retirement and also allows unvested options to continue to vest for up to three years after retirement as if the participant had remained in the service of the Company. The total incremental stock option expense associated with the modification, net of estimated forfeitures, was $2,500,000, which will be recognized over the remaining vesting period of 1.7 years.

XML

Condensed consolidated statements of income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Condensed consolidated statements of income
Net sales	$ 163,513	$ 173,705
Cost of goods sold	108,738	102,681
Gross profit	54,775	71,024
Selling, general and administrative expenses	31,396	33,886
Operating income	23,379	37,138
Other (income) expense:
Interest expense, net	9,791	8,791
Foreign currency and other	619	451
Other (income) expense total	10,410	9,242
Income before income taxes	12,969	27,896
Income taxes	3,948	9,123
Net income	$ 9,021	$ 18,773
Net income per share - basic and diluted (in dollars per share)	$ 0.19	$ 0.40
Weighted average shares outstanding:
Basic (in shares)	46,613,321	46,497,701
Diluted (in shares)	47,295,430	47,215,006

XML

Pension Plans

3 Months Ended

Mar. 30, 2013

Pension Plans

Pension Plans

6.             Pension Plans

The Company and its subsidiaries sponsor multiple defined benefit pension plans based in subsidiaries located outside of the United States. The following table provides the components of net periodic benefit cost:

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Service cost	$	563		$	422
Interest cost	1,127			1,207
Expected return on plan assets	(191		)	(215		)
Amortization of prior service credit	(13		)	(13		)
Recognized net actuarial loss	432			119
Net periodic benefit cost	$	1,918		$	1,520

XML

Income Taxes

3 Months Ended

Mar. 30, 2013

Income Taxes

Income Taxes

5.             Income Taxes

The income tax provision for the interim periods presented is computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country-by-country basis. 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 and changes in estimates of permanent differences and valuation allowances.

XML

Pension Plans (Tables)

3 Months Ended

Mar. 30, 2013

Pension Plans

Schedule of components of net periodic benefit cost

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Service cost	$	563		$	422
Interest cost	1,127			1,207
Expected return on plan assets	(191		)	(215		)
Amortization of prior service credit	(13		)	(13		)
Recognized net actuarial loss	432			119
Net periodic benefit cost	$	1,918		$	1,520

XML

Segment Information

3 Months Ended

Mar. 30, 2013

Segment Information

Segment Information

13.          Segment Information

The Company’s operations are principally managed on a products basis and are comprised of three reportable segments for financial reporting purposes. The Company’s three reportable segments are presented in the context of its two primary businesses — energy storage and separations media.

The energy storage business produces and markets membranes that provide the critical function of separating the cathode and anode in a variety of battery markets and is comprised of the following reportable segments:

· Electronics and EDVs - produces and markets membranes for lithium batteries that are used in portable electronic devices, cordless power tools, electric drive vehicles (“EDVs”) and energy storage systems (“ESS”).

· Transportation and industrial - produces and markets membranes for lead-acid batteries that are used in automobiles, other motor vehicles, forklifts and uninterruptible power supply systems.

The separations media business is a reportable segment and produces and markets membranes and membrane modules 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 depreciation and amortization. In addition, it evaluates business segment performance before stock-based compensation and certain non-recurring and other costs.

Financial information relating to the reportable segments is presented below:

	Three Months Ended
(in thousands)	March 30, 2013			March 31, 2012
Net sales to external customers (by major product group):
Electronics and EDVs	$	24,375		$	42,388
Transportation and industrial	93,685			86,202
Energy storage	118,060			128,590
Healthcare	29,498			27,545
Filtration and specialty	15,955			17,570
Separations media	45,453			45,115
Total net sales to external customers	$	163,513		$	173,705
Operating income:
Electronics and EDVs	$	(2,519	)	$	16,795
Transportation and industrial	21,355			20,014
Energy storage	18,836			36,809
Separations media	15,509			13,863
Corporate and other	(6,018		)	(8,696		)
Segment operating income	28,327			41,976
Stock-based compensation	4,467			4,270
Non-recurring and other costs	481			568
Total operating income	23,379			37,138
Reconciling items:
Interest expense, net	9,791			8,791
Foreign currency and other	619			451
Income before income taxes	$	12,969		$	27,896
Depreciation and amortization:
Electronics and EDVs	$	4,401		$	3,161
Transportation and industrial	3,481			2,901
Energy storage	7,882			6,062
Separations media	3,436			3,322
Corporate and other	3,007			4,148
Total depreciation and amortization	$	14,325		$	13,532

XML

Related Party Transactions

3 Months Ended

Mar. 30, 2013

Related Party Transactions

Related Party Transactions

9.             Related Party Transactions

The Company’s German subsidiary has a 33% equity investment in a patent and trademark service provider and a 25% equity investment in a research company. The investments are accounted for under the equity method of accounting and were $843,000 and $650,000 at March 30, 2013 and December 29, 2012, respectively. Charges from the affiliates for work performed were $266,000 and $327,000 for the three months ended March 30, 2013 and March 31, 2012, respectively. Amounts due to the affiliates were $84,000 and $239,000 at March 30, 2013 and December 29, 2012, respectively.

XML

Environmental Matters

3 Months Ended

Mar. 30, 2013

Environmental Matters

Environmental Matters

7.             Environmental Matters

Environmental obligations are accrued 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. The Company does not currently anticipate any material loss in excess of the amounts accrued. However, the Company’s future remediation expenses may be affected by a number of uncertainties including, but not limited to, the difficulty in estimating the extent and method of remediation, the evolving nature of environmental regulations and the availability and application of technology. The Company does not expect the resolution of such uncertainties to have a material adverse effect on its consolidated financial position or liquidity. Recoveries of environmental costs from other parties are recognized as assets when receipt is deemed probable.

In connection with the acquisition of Membrana GmbH (“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 initial estimate and subsequent finalization of the reserve was included in the allocation of purchase price at the date of acquisition. The environmental reserve for the Membrana facility, which is denominated in euros, was $10,208,000 and $11,079,000 at March 30, 2013 and December 29, 2012, respectively. The Company anticipates the expenditures associated with the reserve will be made in the next twelve months. The reserve is included in “Accrued liabilities” in the accompanying condensed consolidated balance sheets.

The Company has indemnification agreements for certain environmental matters from Acordis A.G. (“Acordis”) and Akzo Nobel N.V. (“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. In addition to the Akzo indemnification, Acordis provides separate indemnification of claims incurred from December 1999 through February 2002, the acquisition date. The Company receives indemnification payments under the indemnification agreements after expenditures are made against approved claims. At March 30, 2013 and December 29, 2012, the indemnification receivable, which is denominated in euros, was $11,189,000 and $11,542,000, respectively. The receivable is included in “Prepaid and other” in the accompanying condensed consolidated balance sheets.

XML

Treasury Stock

3 Months Ended

Mar. 30, 2013

Treasury Stock

Treasury Stock

8.             Treasury Stock

On February 19, 2013, the Board of Directors authorized the repurchase of up to 4,000,000 shares of the Company’s common stock by December 31, 2013. As of March 30, 2013, the Company had repurchased 6,800 shares of common stock for $272,000.  Additionally, in connection with the restricted stock grant on February 25, 2013, the Company withheld and repurchased 5,600 shares of common stock for $204,000 to satisfy certain foreign employees’ statutory withholding tax liability.

XML

Noncontrolling Interest

3 Months Ended

Mar. 30, 2013

Noncontrolling Interest

Noncontrolling Interest

10.          Noncontrolling Interest

In 2010, the Company formed a joint venture with Camel Group Co., Ltd (“Camel”), a leading battery manufacturer in China, to produce lead-acid battery separators primarily for Camel’s use. The joint venture, Daramic Xiangyang Battery Separator Co., Ltd. (“Daramic Xiangyang”), is located at Camel’s facility and owned 65% by the Company and 35% by Camel. During the three months ended March 30, 2013, the Company and Camel made equity contributions of $1,300,000 and $700,000, respectively, to fund capital expenditures.

In exchange for notes payable, Daramic Xiangyang purchased from Camel a building and from the Company certain production equipment that was previously located at the Company’s former facility in Potenza, Italy. The notes payable and related interest will be paid by Daramic Xiangyang using available free cash flow, as defined in the joint venture agreement.   The building note payable to Camel has a principal balance of $5,910,000 at March 30, 2013 and December 29, 2012 and is included in “Other” non-current liabilities in the accompanying condensed consolidated balance sheets, and the equipment note payable to the Company eliminates in consolidation.

XML

Noncontrolling Interest (Details) (Daramic Xiangyang, USD $)	3 Months Ended
	Mar. 30, 2013	Dec. 29, 2012
Noncontrolling Interest
Ownership percentage of joint venture	65.00%
Contributions to joint venture	$ 1,300,000
Principal balance of building note payable	5,910,000	5,910,000
Camel Group Co., Ltd, Co-Venturer
Noncontrolling Interest
Ownership percentage of joint venture	35.00%
Contributions to joint venture	$ 700,000

XML

Inventories (Tables)

3 Months Ended

Mar. 30, 2013

Inventories

Schedule of inventories

(in thousands)	March 30, 2013		December 29, 2012
Raw materials	$	41,332	$	44,285
Work-in-process	30,082		28,051
Finished goods	53,265		47,573
	$	124,679	$	119,909

XML

Financial Statements of Guarantors (Tables)

3 Months Ended

Mar. 30, 2013

Financial Statements of Guarantors

Condensed consolidating balance sheet

Condensed consolidating balance sheet
March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	29,336	$	13,863		$	—		$	43,199
Accounts receivable, net	39,659		84,343		—			—			124,002
Inventories	42,909		81,770		—			—			124,679
Prepaid and other	25,202		18,253		960			—			44,415
Total current assets	107,770		213,702		14,823			—			336,295
Due from affiliates	585,154		362,474		483,317			(1,430,945		)	—
Investment in subsidiaries	119,766		384,280		655,826			(1,159,872		)	—
Property, plant and equipment, net	330,941		297,647		—			—			628,588
Goodwill	—		—		469,319			—			469,319
Intangibles and loan acquisition costs, net	—		—		117,845			—			117,845
Other	732		7,951		—			—			8,683
Total assets	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	20,173	$	48,808	$	10,411		$	—		$	79,392
Income taxes payable	—		2,209		(383		)	—			1,826
Current portion of debt	—		—		25,000			—			25,000
Total current liabilities	20,173		51,017		35,028			—			106,218
Due to affiliates	602,427		355,811		472,707			(1,430,945		)	—
Debt, less current portion	—		—		638,750			—			638,750
Pension obligations, less current portion	—		101,230		—			—			101,230
Deferred income taxes and other	73,710		46,177		146			—			120,033
Shareholders’ equity	448,053		711,819		594,499			(1,159,872		)	594,499
Total liabilities and shareholders’ equity	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730

Condensed consolidating balance sheet
December 29, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	28,098	$	16,775	$	—		$	44,873
Accounts receivable, net	43,965		93,350		—		—			137,315
Inventories	44,713		75,196		—		—			119,909
Prepaid and other	24,917		19,744		538		—			45,199
Total current assets	113,595		216,388		17,313		—			347,296
Due from affiliates	554,190		330,148		482,869		(1,367,207		)	—
Investment in subsidiaries	123,765		381,295		636,860		(1,141,920		)	—
Property, plant and equipment, net	333,194		305,607		—		—			638,801
Goodwill	—		—		469,319		—			469,319
Intangibles and loan acquisition costs, net	—		—		121,729		—			121,729
Other	884		8,043		—		—			8,927
Total assets	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	26,476	$	47,155	$	4,557	$	—		$	78,188
Income taxes payable	—		723		880		—			1,603
Current portion of debt	—		—		50,000		—			50,000
Total current liabilities	26,476		47,878		55,437		—			129,791
Due to affiliates	579,388		344,398		443,421		(1,367,207		)	—
Debt, less current portion	—		—		646,250		—			646,250
Pension obligations, less current portion	—		103,491		—		—			103,491
Deferred income taxes and other	78,392		45,166		145		—			123,703
Shareholders’ equity	441,372		700,548		582,837		(1,141,920		)	582,837
Total liabilities and shareholders’ equity	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072

Condensed consolidating statement of income

Condensed consolidating statement of income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	46,412		$	117,101	$	—		$	—		$	163,513
Cost of goods sold	25,187			83,551		—			—			108,738
Gross profit	21,225			33,550		—			—			54,775
Selling, general and administrative expenses	15,322			11,572		4,502			—			31,396
Operating income (loss)	5,903			21,978		(4,502		)	—			23,379
Interest expense and other	(1,400		)	1,942		9,868			—			10,410
Equity in earnings of subsidiaries	—			—		(16,087		)	16,087			—
Income before income taxes	7,303			20,036		1,717			(16,087		)	12,969
Income taxes	4,840			6,412		(7,304		)	—			3,948
Net income	$	2,463		$	13,624	$	9,021		$	(16,087	)	$	9,021

Condensed consolidating statement of income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	53,521		$	120,184	$	—		$	—		$	173,705
Cost of goods sold	17,412			85,269		—			—			102,681
Gross profit	36,109			34,915		—			—			71,024
Selling, general and administrative expenses	17,309			12,274		4,303			—			33,886
Operating income (loss)	18,800			22,641		(4,303		)	—			37,138
Interest expense and other	(2,584		)	2,797		9,029			—			9,242
Equity in earnings of subsidiaries	—			—		(28,663		)	28,663			—
Income before income taxes	21,384			19,844		15,331			(28,663		)	27,896
Income taxes	7,931			4,634		(3,442		)	—			9,123
Net income	$	13,453		$	15,210	$	18,773		$	(28,663	)	$	18,773

Condensed consolidating statement of comprehensive income

Condensed consolidating statement of comprehensive income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	2,463	$	13,624		$	9,021		$	(16,087	)	$	9,021
Foreign currency translation adjustment, net of income tax benefit of $486	—		(4,277		)	700			75			(3,502		)
Change in net actuarial loss and prior service credit, net of income tax benefit of $136	—		1,039			—			—			1,039
Equity in earnings of subsidiaries	—		—			(3,163		)	3,163			—
Comprehensive income	$	2,463	$	10,386		$	6,558		$	(12,849	)	$	6,558

Condensed consolidating statement of comprehensive income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	13,453	$	15,210		$	18,773		$	(28,663	)	$	18,773
Foreign currency translation adjustment, net of income tax expense of $534	—		8,302			(271		)	858			8,889
Change in net actuarial loss and prior service credit	—		(320		)	—			—			(320		)
Equity in earnings of subsidiaries	—		—			8,840			(8,840		)	—
Comprehensive income	$	13,453	$	23,192		$	27,342		$	(36,645	)	$	27,342

Condensed consolidating statement of cash flows

Condensed consolidating statement of cash flows
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	14,072		$	23,661		$	(3,730	)	$	2,183		$	36,186
Investing activities:
Purchases of property, plant and equipment, net	(2,261		)	(3,967		)	—			—			(6,228		)
Net cash used in investing activities	(2,261		)	(3,967		)	—			—			(6,228		)
Financing activities:
Principal payments on debt	—			—			(7,500		)	—			(7,500		)
Payments on revolving credit facility	—			—			(25,000		)	—			(25,000		)
Proceeds from stock option exercises	—			—			202			—			202
Repurchases of common stock	—			—			(476		)	—			(476		)
Noncontrolling interest	—			—			869			—			869
Intercompany transactions, net	(11,811		)	(18,729		)	32,723			(2,183		)	—
Net cash provided by (used in) financing activities	(11,811		)	(18,729		)	818			(2,183		)	(31,905		)
Effect of exchange rate changes on cash and cash equivalents	—			273			—			—			273
Net increase (decrease) in cash and cash equivalents	—			1,238			(2,912		)	—			(1,674		)
Cash and cash equivalents at beginning of period	—			28,098			16,775			—			44,873
Cash and cash equivalents at end of period	$	—		$	29,336		$	13,863		$	—		$	43,199

Condensed consolidating statement of cash flows
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	26,400		$	6,121		$	(2,565	)	$	260		$	30,216
Investing activities:
Purchases of property, plant and equipment, net	(38,689		)	(6,661		)	—			—			(45,350		)
Net cash used in investing activities	(38,689		)	(6,661		)	—			—			(45,350		)
Financing activities:
Principal payments on debt	—			(117		)	(807		)	—			(924		)
Proceeds from stock option exercises	—			—			284			—			284
Noncontrolling interest	—			—			(31		)	—			(31		)
Intercompany transactions, net	12,289			8,774			(20,803		)	(260		)	—
Net cash provided by (used in) financing activities	12,289			8,657			(21,357		)	(260		)	(671		)
Effect of exchange rate changes on cash and cash equivalents	—			2,187			—			—			2,187
Net increase (decrease) in cash and cash equivalents	—			10,304			(23,922		)	—			(13,618		)
Cash and cash equivalents at beginning of period	—			65,495			27,079			—			92,574
Cash and cash equivalents at end of period	$	—		$	75,799		$	3,157		$	—		$	78,956

XML

Financial Statements of Guarantors (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Operating activities:
Net cash provided by (used in) operating activities	$ 36,186	$ 30,216
Investing activities:
Purchases of property, plant and equipment, net	(6,228)	(45,350)
Net cash used in investing activities	(6,228)	(45,350)
Financing activities:
Principal payments on debt	(7,500)	(924)
Payments on revolving credit facility	(25,000)
Proceeds from stock option exercises	202	284
Repurchases of common stock	(476)
Noncontrolling interest	869	(31)
Net cash used in financing activities	(31,905)	(671)
Effect of exchange rate changes on cash and cash equivalents	273	2,187
Net decrease in cash and cash equivalents	(1,674)	(13,618)
Cash and cash equivalents at beginning of period	44,873	92,574
Cash and cash equivalents at end of period	43,199	78,956
Combined Guarantor Subsidiaries
Operating activities:
Net cash provided by (used in) operating activities	14,072	26,400
Investing activities:
Purchases of property, plant and equipment, net	(2,261)	(38,689)
Net cash used in investing activities	(2,261)	(38,689)
Financing activities:
Intercompany transactions, net	(11,811)	12,289
Net cash used in financing activities	(11,811)	12,289
Combined Non-Guarantor Subsidiaries
Operating activities:
Net cash provided by (used in) operating activities	23,661	6,121
Investing activities:
Purchases of property, plant and equipment, net	(3,967)	(6,661)
Net cash used in investing activities	(3,967)	(6,661)
Financing activities:
Principal payments on debt		(117)
Intercompany transactions, net	(18,729)	8,774
Net cash used in financing activities	(18,729)	8,657
Effect of exchange rate changes on cash and cash equivalents	273	2,187
Net decrease in cash and cash equivalents	1,238	10,304
Cash and cash equivalents at beginning of period	28,098	65,495
Cash and cash equivalents at end of period	29,336	75,799
The Company
Operating activities:
Net cash provided by (used in) operating activities	(3,730)	(2,565)
Financing activities:
Principal payments on debt	(7,500)	(807)
Payments on revolving credit facility	(25,000)
Proceeds from stock option exercises	202	284
Repurchases of common stock	(476)
Noncontrolling interest	869	(31)
Intercompany transactions, net	32,723	(20,803)
Net cash used in financing activities	818	(21,357)
Net decrease in cash and cash equivalents	(2,912)	(23,922)
Cash and cash equivalents at beginning of period	16,775	27,079
Cash and cash equivalents at end of period	13,863	3,157
Eliminations
Operating activities:
Net cash provided by (used in) operating activities	2,183	260
Financing activities:
Intercompany transactions, net	(2,183)	(260)
Net cash used in financing activities	$ (2,183)	$ (260)

XML

Condensed consolidated statements of comprehensive income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Condensed consolidated statements of comprehensive income
Net income	$ 9,021	$ 18,773
Other comprehensive income (loss):
Foreign currency translation adjustment	(3,988)	9,423
Change in net actuarial loss and prior service credit	903	(320)
Income taxes related to other comprehensive income (loss)	622	(534)
Other comprehensive income (loss)	(2,463)	8,569
Comprehensive income	$ 6,558	$ 27,342

XML

Fair Value of Financial Instruments

3 Months Ended

Mar. 30, 2013

Fair Value of Financial Instruments

Fair Value of Financial Instruments

4.             Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates their fair value due to the short-term maturities of these assets and liabilities. The carrying amount of borrowings under the senior secured credit agreement approximates fair value because the interest rates adjust to market interest rates. The fair value of the 7.5% senior notes, based on a quoted market price and classified as level one in the fair value hierarchy, was $391,463,000 at March 30, 2013.

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Inventories
Raw materials	$ 41,332	$ 44,285
Work-in-process	30,082	28,051
Finished goods	53,265	47,573
Inventories	$ 124,679	$ 119,909

XML

Financial Statements of Guarantors (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012	Mar. 31, 2012	Dec. 31, 2011
Financial Statements of Guarantors
Ownership percentage in domestic subsidiaries	100.00%
Assets
Cash and cash equivalents	$ 43,199	$ 44,873	$ 78,956	$ 92,574
Accounts receivable, net	124,002	137,315
Inventories	124,679	119,909
Prepaid and other	44,415	45,199
Total current assets	336,295	347,296
Property, plant and equipment, net	628,588	638,801
Goodwill	469,319	469,319
Intangibles and loan acquisition costs, net	117,845	121,729
Other	8,683	8,927
Total assets	1,560,730	1,586,072
Liabilities and shareholders' equity
Accounts payable and accrued liabilities	79,392	78,188
Income taxes payable	1,826	1,603
Current portion of debt	25,000	50,000
Total current liabilities	106,218	129,791
Debt, less current portion	638,750	646,250
Pension obligations, less current portion	101,230	103,491
Deferred income taxes and other	120,033	123,703
Shareholders' equity	594,499	582,837
Total liabilities and shareholders' equity	1,560,730	1,586,072
Combined Guarantor Subsidiaries
Assets
Accounts receivable, net	39,659	43,965
Inventories	42,909	44,713
Prepaid and other	25,202	24,917
Total current assets	107,770	113,595
Due from affiliates	585,154	554,190
Investment in subsidiaries	119,766	123,765
Property, plant and equipment, net	330,941	333,194
Other	732	884
Total assets	1,144,363	1,125,628
Liabilities and shareholders' equity
Accounts payable and accrued liabilities	20,173	26,476
Total current liabilities	20,173	26,476
Due to affiliates	602,427	579,388
Deferred income taxes and other	73,710	78,392
Shareholders' equity	448,053	441,372
Total liabilities and shareholders' equity	1,144,363	1,125,628
Combined Non-Guarantor Subsidiaries
Assets
Cash and cash equivalents	29,336	28,098	75,799	65,495
Accounts receivable, net	84,343	93,350
Inventories	81,770	75,196
Prepaid and other	18,253	19,744
Total current assets	213,702	216,388
Due from affiliates	362,474	330,148
Investment in subsidiaries	384,280	381,295
Property, plant and equipment, net	297,647	305,607
Other	7,951	8,043
Total assets	1,266,054	1,241,481
Liabilities and shareholders' equity
Accounts payable and accrued liabilities	48,808	47,155
Income taxes payable	2,209	723
Total current liabilities	51,017	47,878
Due to affiliates	355,811	344,398
Pension obligations, less current portion	101,230	103,491
Deferred income taxes and other	46,177	45,166
Shareholders' equity	711,819	700,548
Total liabilities and shareholders' equity	1,266,054	1,241,481
The Company
Assets
Cash and cash equivalents	13,863	16,775	3,157	27,079
Prepaid and other	960	538
Total current assets	14,823	17,313
Due from affiliates	483,317	482,869
Investment in subsidiaries	655,826	636,860
Goodwill	469,319	469,319
Intangibles and loan acquisition costs, net	117,845	121,729
Total assets	1,741,130	1,728,090
Liabilities and shareholders' equity
Accounts payable and accrued liabilities	10,411	4,557
Income taxes payable	(383)	880
Current portion of debt	25,000	50,000
Total current liabilities	35,028	55,437
Due to affiliates	472,707	443,421
Debt, less current portion	638,750	646,250
Deferred income taxes and other	146	145
Shareholders' equity	594,499	582,837
Total liabilities and shareholders' equity	1,741,130	1,728,090
Eliminations
Assets
Due from affiliates	(1,430,945)	(1,367,207)
Investment in subsidiaries	(1,159,872)	(1,141,920)
Total assets	(2,590,817)	(2,509,127)
Liabilities and shareholders' equity
Due to affiliates	(1,430,945)	(1,367,207)
Shareholders' equity	(1,159,872)	(1,141,920)
Total liabilities and shareholders' equity	$ (2,590,817)	$ (2,509,127)

XML

Financial Statements of Guarantors

3 Months Ended

Mar. 30, 2013

Financial Statements of Guarantors

Financial Statements of Guarantors

14.          Financial Statements of Guarantors

The Company’s senior notes are unconditionally guaranteed, jointly and severally, on a senior basis by certain of the Company’s 100% owned subsidiaries (“Guarantors”). Management has determined that separate complete financial statements of the Guarantors would not be material to users of the financial statements.

The following sets forth condensed consolidating financial statements of the Guarantors and non-Guarantor subsidiaries.

Condensed consolidating balance sheet
March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	29,336	$	13,863		$	—		$	43,199
Accounts receivable, net	39,659		84,343		—			—			124,002
Inventories	42,909		81,770		—			—			124,679
Prepaid and other	25,202		18,253		960			—			44,415
Total current assets	107,770		213,702		14,823			—			336,295
Due from affiliates	585,154		362,474		483,317			(1,430,945		)	—
Investment in subsidiaries	119,766		384,280		655,826			(1,159,872		)	—
Property, plant and equipment, net	330,941		297,647		—			—			628,588
Goodwill	—		—		469,319			—			469,319
Intangibles and loan acquisition costs, net	—		—		117,845			—			117,845
Other	732		7,951		—			—			8,683
Total assets	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	20,173	$	48,808	$	10,411		$	—		$	79,392
Income taxes payable	—		2,209		(383		)	—			1,826
Current portion of debt	—		—		25,000			—			25,000
Total current liabilities	20,173		51,017		35,028			—			106,218
Due to affiliates	602,427		355,811		472,707			(1,430,945		)	—
Debt, less current portion	—		—		638,750			—			638,750
Pension obligations, less current portion	—		101,230		—			—			101,230
Deferred income taxes and other	73,710		46,177		146			—			120,033
Shareholders’ equity	448,053		711,819		594,499			(1,159,872		)	594,499
Total liabilities and shareholders’ equity	$	1,144,363	$	1,266,054	$	1,741,130		$	(2,590,817	)	$	1,560,730

Condensed consolidating balance sheet
December 29, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		The Company		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	28,098	$	16,775	$	—		$	44,873
Accounts receivable, net	43,965		93,350		—		—			137,315
Inventories	44,713		75,196		—		—			119,909
Prepaid and other	24,917		19,744		538		—			45,199
Total current assets	113,595		216,388		17,313		—			347,296
Due from affiliates	554,190		330,148		482,869		(1,367,207		)	—
Investment in subsidiaries	123,765		381,295		636,860		(1,141,920		)	—
Property, plant and equipment, net	333,194		305,607		—		—			638,801
Goodwill	—		—		469,319		—			469,319
Intangibles and loan acquisition costs, net	—		—		121,729		—			121,729
Other	884		8,043		—		—			8,927
Total assets	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	26,476	$	47,155	$	4,557	$	—		$	78,188
Income taxes payable	—		723		880		—			1,603
Current portion of debt	—		—		50,000		—			50,000
Total current liabilities	26,476		47,878		55,437		—			129,791
Due to affiliates	579,388		344,398		443,421		(1,367,207		)	—
Debt, less current portion	—		—		646,250		—			646,250
Pension obligations, less current portion	—		103,491		—		—			103,491
Deferred income taxes and other	78,392		45,166		145		—			123,703
Shareholders’ equity	441,372		700,548		582,837		(1,141,920		)	582,837
Total liabilities and shareholders’ equity	$	1,125,628	$	1,241,481	$	1,728,090	$	(2,509,127	)	$	1,586,072

Condensed consolidating statement of income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	46,412		$	117,101	$	—		$	—		$	163,513
Cost of goods sold	25,187			83,551		—			—			108,738
Gross profit	21,225			33,550		—			—			54,775
Selling, general and administrative expenses	15,322			11,572		4,502			—			31,396
Operating income (loss)	5,903			21,978		(4,502		)	—			23,379
Interest expense and other	(1,400		)	1,942		9,868			—			10,410
Equity in earnings of subsidiaries	—			—		(16,087		)	16,087			—
Income before income taxes	7,303			20,036		1,717			(16,087		)	12,969
Income taxes	4,840			6,412		(7,304		)	—			3,948
Net income	$	2,463		$	13,624	$	9,021		$	(16,087	)	$	9,021

Condensed consolidating statement of income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		The Company			Eliminations			Consolidated
Net sales	$	53,521		$	120,184	$	—		$	—		$	173,705
Cost of goods sold	17,412			85,269		—			—			102,681
Gross profit	36,109			34,915		—			—			71,024
Selling, general and administrative expenses	17,309			12,274		4,303			—			33,886
Operating income (loss)	18,800			22,641		(4,303		)	—			37,138
Interest expense and other	(2,584		)	2,797		9,029			—			9,242
Equity in earnings of subsidiaries	—			—		(28,663		)	28,663			—
Income before income taxes	21,384			19,844		15,331			(28,663		)	27,896
Income taxes	7,931			4,634		(3,442		)	—			9,123
Net income	$	13,453		$	15,210	$	18,773		$	(28,663	)	$	18,773

Condensed consolidating statement of comprehensive income
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	2,463	$	13,624		$	9,021		$	(16,087	)	$	9,021
Foreign currency translation adjustment, net of income tax benefit of $486	—		(4,277		)	700			75			(3,502		)
Change in net actuarial loss and prior service credit, net of income tax benefit of $136	—		1,039			—			—			1,039
Equity in earnings of subsidiaries	—		—			(3,163		)	3,163			—
Comprehensive income	$	2,463	$	10,386		$	6,558		$	(12,849	)	$	6,558

Condensed consolidating statement of comprehensive income
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net income	$	13,453	$	15,210		$	18,773		$	(28,663	)	$	18,773
Foreign currency translation adjustment, net of income tax expense of $534	—		8,302			(271		)	858			8,889
Change in net actuarial loss and prior service credit	—		(320		)	—			—			(320		)
Equity in earnings of subsidiaries	—		—			8,840			(8,840		)	—
Comprehensive income	$	13,453	$	23,192		$	27,342		$	(36,645	)	$	27,342

Condensed consolidating statement of cash flows
For the three months ended March 30, 2013

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	14,072		$	23,661		$	(3,730	)	$	2,183		$	36,186
Investing activities:
Purchases of property, plant and equipment, net	(2,261		)	(3,967		)	—			—			(6,228		)
Net cash used in investing activities	(2,261		)	(3,967		)	—			—			(6,228		)
Financing activities:
Principal payments on debt	—			—			(7,500		)	—			(7,500		)
Payments on revolving credit facility	—			—			(25,000		)	—			(25,000		)
Proceeds from stock option exercises	—			—			202			—			202
Repurchases of common stock	—			—			(476		)	—			(476		)
Noncontrolling interest	—			—			869			—			869
Intercompany transactions, net	(11,811		)	(18,729		)	32,723			(2,183		)	—
Net cash provided by (used in) financing activities	(11,811		)	(18,729		)	818			(2,183		)	(31,905		)
Effect of exchange rate changes on cash and cash equivalents	—			273			—			—			273
Net increase (decrease) in cash and cash equivalents	—			1,238			(2,912		)	—			(1,674		)
Cash and cash equivalents at beginning of period	—			28,098			16,775			—			44,873
Cash and cash equivalents at end of period	$	—		$	29,336		$	13,863		$	—		$	43,199

Condensed consolidating statement of cash flows
For the three months ended March 31, 2012

(in thousands)	Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			The Company			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	26,400		$	6,121		$	(2,565	)	$	260		$	30,216
Investing activities:
Purchases of property, plant and equipment, net	(38,689		)	(6,661		)	—			—			(45,350		)
Net cash used in investing activities	(38,689		)	(6,661		)	—			—			(45,350		)
Financing activities:
Principal payments on debt	—			(117		)	(807		)	—			(924		)
Proceeds from stock option exercises	—			—			284			—			284
Noncontrolling interest	—			—			(31		)	—			(31		)
Intercompany transactions, net	12,289			8,774			(20,803		)	(260		)	—
Net cash provided by (used in) financing activities	12,289			8,657			(21,357		)	(260		)	(671		)
Effect of exchange rate changes on cash and cash equivalents	—			2,187			—			—			2,187
Net increase (decrease) in cash and cash equivalents	—			10,304			(23,922		)	—			(13,618		)
Cash and cash equivalents at beginning of period	—			65,495			27,079			—			92,574
Cash and cash equivalents at end of period	$	—		$	75,799		$	3,157		$	—		$	78,956