10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 27, 2014

Or

oTransition 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 44,653,367 shares of the registrant’s common stock outstanding as of October 29, 2014.

Polypore International, Inc.

Index to Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 27, 2014

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
PART II	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	27
SIGNATURES		28

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”), 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. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained under the captions entitled “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 “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2013, 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 processes;

·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 contained in our 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 not materializing as anticipated;

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

	September 27, 2014
(in thousands, except share data)	(unaudited)			December 28, 2013*
Assets
Current assets:
Cash and cash equivalents	$	35,111		$	163,423
Accounts receivable, net	118,297			113,506
Inventories	105,276			113,860
Prepaid and other	22,367			18,118
Total current assets	281,051			408,907
Property, plant and equipment, net	567,703			595,375
Goodwill	444,512			444,512
Intangibles and loan acquisition costs, net	81,868			93,792
Other	8,001			7,627
Total assets	$	1,383,135		$	1,550,213
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	23,614		$	31,764
Accrued liabilities	43,551			49,266
Income taxes payable	3,888			4,055
Current portion of debt	31,000			16,875
Total current liabilities	102,053			101,960
Debt, less current portion	468,750			629,375
Pension obligations, less current portion	98,440			102,821
Deferred income taxes	71,275			70,332
Other	22,141			26,149
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, 47,123,985 issued and 44,653,618 outstanding at September 27, 2014 and 46,926,205 issued and 44,916,570 outstanding at December 28, 2013	471			469
Paid-in capital	587,826			569,362
Retained earnings	153,580			137,379
Accumulated other comprehensive loss	(27,224		)	(12,865		)
Treasury stock, at cost - 2,470,367 shares at September 27, 2014 and 2,009,635 shares at December 28, 2013	(100,995		)	(80,668		)
Total Polypore shareholders’ equity	613,658			613,677
Noncontrolling interest	6,818			5,899
Total shareholders’ equity	620,476			619,576
Total liabilities and shareholders’ equity	$	1,383,135		$	1,550,213

* 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						Nine Months Ended
(in thousands, except per share data)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net sales	$	165,539		$	152,020		$	493,162		$	466,858
Cost of goods sold	112,036			104,389			322,505			309,606
Gross profit	53,503			47,631			170,657			157,252
Selling, general and administrative expenses	34,999			33,260			109,362			96,390
Operating income	18,504			14,371			61,295			60,862
Other (income) expense:
Interest expense, net	3,328			9,919			18,561			29,631
Foreign currency and other	(4,406		)	601			(5,568		)	902
Costs related to purchase of 7.5% senior notes	—			—			24,937			—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	—			—			1,148			—
	(1,078		)	10,520			39,078			30,533
Income from continuing operations before income taxes	19,582			3,851			22,217			30,329
Income taxes	6,157			(894		)	4,399			7,030
Income from continuing operations	13,425			4,745			17,818			23,299
Income (loss) from discontinued operations, net of income taxes	(327		)	2,514			(655		)	8,822
Net income	13,098			7,259			17,163			32,121
Less: Net income attributable to noncontrolling interest	409			240			962			641
Net income attributable to Polypore International, Inc.	$	12,689		$	7,019		$	16,201		$	31,480
Net income attributable to Polypore International, Inc.:
Income from continuing operations	$	13,016		$	4,505		$	16,856		$	22,658
Income (loss) from discontinued operations	(327		)	2,514			(655		)	8,822
Net income attributable to Polypore International, Inc.	$	12,689		$	7,019		$	16,201		$	31,480
Net income attributable to Polypore International, Inc. per share - basic:
Continuing operations	$	0.29		$	0.10		$	0.38		$	0.50
Discontinued operations	(0.01		)	0.06			(0.02		)	0.19
Net income attributable to Polypore International, Inc. per share	$	0.28		$	0.16		$	0.36		$	0.69
Net income attributable to Polypore International, Inc. per share - diluted:
Continuing operations	$	0.29		$	0.10		$	0.37		$	0.49
Discontinued operations	(0.01		)	0.05			(0.01		)	0.19
Net income attributable to Polypore International, Inc. per share	$	0.28		$	0.15		$	0.36		$	0.68
Weighted average shares outstanding - basic	44,688,921			44,748,071			44,819,952			45,877,092
Weighted average shares outstanding - diluted	45,337,707			45,386,263			45,420,185			46,526,755

See notes to condensed consolidated financial statements

5

Polypore International, Inc.

Condensed consolidated statements of comprehensive income (loss)

(unaudited)

	Three Months Ended						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net income	$	13,098		$	7,259		$	17,163		$	32,121
Other comprehensive income (loss):
Foreign currency translation adjustment	(16,193		)	8,631			(16,578		)	2,922
Change in net actuarial loss and prior service credit	1,215			(712		)	1,397			(73		)
Unrealized gain on interest rate swap	958			—			958			—
Income taxes related to other comprehensive income (loss)	(351		)	(415		)	(179		)	77
Other comprehensive income (loss)	(14,371		)	7,504			(14,402		)	2,926
Comprehensive income (loss)	(1,273		)	14,763			2,761			35,047
Less: Comprehensive income attributable to noncontrolling interest	411			262			919			787
Comprehensive income (loss) attributable to Polypore International, Inc.	$	(1,684	)	$	14,501		$	1,842		$	34,260

See notes to condensed consolidated financial statements

6

Polypore International, Inc.

Condensed consolidated statements of cash flows

(unaudited)

	Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013
Operating activities:
Net income	$	17,163		$	32,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	33,155			34,350
Amortization expense	8,345			8,892
Amortization of loan acquisition costs	1,419			1,855
Stock-based compensation	17,431			14,194
Loss on disposal of property, plant and equipment	141			948
Foreign currency (gain) loss	(3,096		)	1,076
Deferred income taxes	(9,800		)	(3,201		)
Costs related to purchase of 7.5% senior notes	24,937			—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	1,148			—
Changes in operating assets and liabilities:
Accounts receivable	(7,713		)	18,154
Inventories	4,780			1,867
Prepaid and other current assets	1,631			10,672
Accounts payable and accrued liabilities	(11,766		)	4,839
Income taxes payable	103			(446		)
Other, net	5,160			2,332
Net cash provided by operating activities	83,038			127,653
Investing activities:
Purchases of property, plant and equipment, net	(17,520		)	(19,778		)
Net cash used in investing activities	(17,520		)	(19,778		)
Financing activities:
Proceeds from new senior credit agreement	500,000			—
Principal payments in connection with refinancing of senior credit agreement	(273,750		)	—
Purchase of 7.5% senior notes	(385,542		)	—
Loan acquisition costs	(4,080		)	—
Principal payments on debt	(13,750		)	(15,000		)
Proceeds from revolving credit facility	114,000			54,200
Payments on revolving credit facility	(108,000		)	(89,200		)
Repurchases of common stock	(20,327		)	(80,668		)
Proceeds from stock option exercises	1,035			2,039
Contributions from noncontrolling interest.	—			1,330
Net cash used in financing activities	(190,414		)	(127,299		)
Effect of exchange rate changes on cash and cash equivalents	(3,416		)	1,464
Net decrease in cash and cash equivalents	(128,312		)	(17,960		)
Cash and cash equivalents at beginning of period	163,423			44,873
Cash and cash equivalents at end of period	$	35,111		$	26,913

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 (“U.S. GAAP”) 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. Certain amounts previously presented in the condensed consolidated financial statements for prior periods have been reclassified to conform to current classifications. 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 28, 2013. Operating results for the three and nine months ended September 27, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending January 3, 2015.

On December 19, 2013, the Company completed the sale of its Microporous business. The results of operations from this business have been presented as discontinued operations. All disclosures and amounts in the notes to the condensed consolidated financial statements relate to the Company’s continuing operations, unless otherwise indicated.

2.             Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

3.             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)	September 27, 2014		December 28, 2013
Raw materials	$	37,606	$	39,357
Work-in-process	16,037		22,079
Finished goods	51,633		52,424
	$	105,276	$	113,860

8

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

4.             Debt

Debt, in order of priority, consists of:

(in thousands)	September 27, 2014		December 28, 2013
Senior credit agreement:
Revolving credit facility	$	6,000	$	—
Term loan facility	493,750		281,250
	499,750		281,250
7.5% senior notes	—		365,000
	499,750		646,250
Less current portion	31,000		16,875
Long-term debt	$	468,750	$	629,375

On April 8, 2014, the Company entered into a new senior secured credit agreement that provides for a $150,000,000 revolving credit facility and a $500,000,000 term loan facility. At that date, the Company used cash on hand, proceeds from the initial draw of $100,000,000 under the new term loan facility and borrowings of $33,000,000 under the new revolving credit facility to pay all outstanding principal and interest under the previous senior secured credit agreement and loan acquisition costs. The Company incurred loan acquisition costs of approximately $4,080,000, of which $3,944,000 was capitalized and will be amortized over the life of the new credit agreement. The Company wrote off unamortized loan acquisition costs of $1,012,000 associated with the previous credit agreement.

On May 8, 2014, the Company borrowed the remaining $400,000,000 available under the new term loan facility and used the proceeds to purchase and retire all of the previously outstanding 7.5% senior notes. The total purchase price for the notes was $385,542,000, consisting of principal of $365,000,000, redemption premiums of $20,531,000 and other expenses associated with the transaction.  In connection with the purchase, the Company incurred a $24,937,000 charge to income, comprised of the redemption premiums, write-off of unamortized loan acquisition costs of $4,395,000 and other expenses.

The new credit agreement matures in April 2019, is guaranteed by the Company’s domestic subsidiaries and is secured by substantially all assets of the Company and its domestic subsidiaries and a first priority pledge of 65% of the voting capital stock of its foreign subsidiaries. Interest rates are equal to, at the Company’s option, either an alternate base rate or the Eurocurrency base rate, plus a specified margin. The Company’s ability to pay dividends on its common stock is limited under the terms of the credit agreement. The Company is also subject to certain financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio, each of which the Company was in compliance with as of September 27, 2014.

At September 27, 2014, the Company had $6,000,000 outstanding under the revolving credit facility and $144,000,000 available for borrowing. The revolving credit facility matures in April 2019. 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.

Remaining minimum scheduled principal repayments of the term loan facility are as follows:

(in thousands)
2014	$	6,250
2015	25,000
2016	31,250
2017	43,750
2018	62,500
2019	325,000
	$	493,750

9

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

5.             Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, long-term debt and an interest rate swap. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short-term maturities of these assets and liabilities. The carrying amount of borrowings under the senior credit agreement approximates fair value because the interest rates adjust to market interest rates. The Company measures the fair value of the interest rate swap on a recurring basis. See Note 6, “Derivative Instruments and Hedging Activities,” for related interest rate swap disclosures.

6.             Derivative Instruments and Hedging Activities

The Company may use certain derivative instruments to manage interest rate risk. Its principal objective is to reduce significant, unanticipated earnings fluctuations and cash flow variability that may arise from volatility in interest rates.  In August 2014, the Company entered into a forward-starting interest rate swap to pay a fixed interest rate of 1.9% and receive one-month LIBOR on a notional amount of $250,000,000 from its effective date of July 31, 2015 through its expiration on April 8, 2019.  The interest rate swap economically converts a portion of the Company’s LIBOR-based, variable-rate debt into fixed-rate debt.  Under the contract, the Company agrees with a counterparty to exchange, at specified intervals, the difference between floating- and fixed-rate interest payments on the notional amount.  The interest rate swap has been designated as a cash flow hedge and is recorded at fair value in the accompanying condensed consolidated balance sheets with changes in fair value, net of income taxes, recorded in accumulated other comprehensive income (loss) to the extent that the hedge is effective.  The Company will record pre-tax gains or losses reclassified from accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense in the periods when the hedged interest payments occur.

The interest rate swap is recorded in the condensed consolidated balance sheets as follows:

(in thousands)	Balance Sheet Location	September 27, 2014			December 28, 2013
Interest rate swap (current portion)	Accrued liabilities	$	(621	)	$	—
Interest rate swap (non-current portion)	Other assets	1,579			—
Total fair value of interest rate swap		$	958		$	—

The fair value of the interest rate swap is determined using inputs other than the quoted prices in active markets that are observable either directly or indirectly (level two in the fair value hierarchy).  The Company’s calculation is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve, taking into consideration the risk of nonperformance, including counterparty credit risk.

Cash flow hedge activity, net of income taxes, within accumulated other comprehensive income (loss) included:

	Three Months Ended				Nine Months Ended
(in thousands)	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Beginning balance	$	—	$	—	$	—	$	—
Hedging gain before reclassifications	607		—		607		—
Amount reclassified into earnings	—		—		—		—
Other comprehensive income	607		—		607		—
Ending balance	$	607	$	—	$	607	$	—

The estimated loss, net of income taxes, expected to be reclassified out of accumulated other comprehensive income (loss) into earnings during the next twelve months is approximately $393,000.

In order to qualify for hedge accounting, a specified level of hedge effectiveness between the derivative instrument and the item being hedged must exist at inception and throughout the hedged period. The Company must also formally document the nature of and relationship between the derivative instrument and the hedged item, as well as its risk management objective and strategy for undertaking the hedge transaction, and the method of assessing hedge effectiveness. For a hedge of a forecasted transaction, the significant characteristics and expected term of the forecasted transaction must be specifically identified, and it must be probable that the forecasted transaction will occur. If it is no longer probable that the hedged forecasted transaction will occur, the Company would recognize the gain or loss related to the derivative instrument in earnings. No derivative gains or losses, related to either ineffectiveness or to amounts excluded from effectiveness testing, were recognized in net income during the periods presented.

10

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

When the Company uses derivative instruments, it is exposed to credit and market risks. Credit risk exists when a counterparty to a derivative contract might fail to fulfill its performance obligations under the contract. The Company minimizes its credit risk by entering into transactions with counterparties with high quality, investment-grade credit ratings, as well as limiting the amount of exposure with each counterparty and regularly monitoring its financial condition. The Company’s interest rate swap is governed by a standard International Swaps and Derivatives Association master agreement. Market risk exists when the value of a derivative instrument might be adversely affected by changes in market conditions and interest rates. The Company manages market risk by limiting the type of derivative instruments and strategies it uses and the degree of market risk that it plans to hedge through the use of derivative instruments.  As a matter of policy, the Company does not use derivative instruments for trading or speculative purposes.

7.             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 taxes recorded in the financial statements differ 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. During the nine months ended September 27, 2014, the Company’s income tax provision was also impacted by a $9,569,000 tax benefit in the second quarter related to expenses associated with the refinancing of its senior credit agreement and purchase of its 7.5% senior notes. During the nine months ended September 28, 2013, the Company’s income tax provision was impacted by a net tax benefit in the third quarter due to the reversal of a $1,697,000 reserve related to the completion of a tax audit. These were both considered discrete events for interim income tax provision purposes.

8.             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						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Service cost	$	509		$	562		$	1,558		$	1,680
Interest cost	1,046			1,130			3,206			3,371
Expected return on plan assets	(106		)	(192		)	(324		)	(572		)
Amortization of prior service credit	(31		)	(13		)	(95		)	(39		)
Recognized net actuarial loss	260			434			798			1,293
Net periodic benefit cost	$	1,678		$	1,921		$	5,143		$	5,733

9.             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 were 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 $1,062,000 and $2,882,000 at September 27, 2014 and December 28, 2013, 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.

11

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

10.          Treasury Stock

In May 2014, the Board of Directors authorized the repurchase of up to 4,500,000 shares of the Company’s common stock. The share repurchase program has no expiration date. During the nine months ended September 27, 2014, the Company repurchased 450,000 shares of common stock for $20,004,000. In 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. The Company repurchased 2,000,000 shares of common stock under this authorization, all of which were purchased for $80,343,000 in the nine months ended September 28, 2013.

The Company repurchased shares of common stock to satisfy certain employees’ statutory withholding tax liabilities for $323,000 and $325,000 during the nine months ended September 27, 2014 and September 28, 2013, respectively, related to restricted stock grants.

11.          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 $626,000 and $676,000 at September 27, 2014 and December 28, 2013, respectively. Charges from the affiliates for work performed were $880,000 and $1,665,000 for the three and nine months ended September 27, 2014, respectively. Charges from the affiliates for work performed were $384,000 and $1,043,000 for the three and nine months ended September 28, 2013, respectively.  Amounts due to the affiliates were $173,000 and $254,000 at September 27, 2014 and December 28, 2013, respectively.

12.          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 nine months ended September 28, 2013, the Company and Camel made equity contributions of $2,470,000 and $1,330,000, respectively, to fund capital expenditures.

Daramic Xiangyang has notes payable to Camel and the Company for the purchase of certain assets. 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 note payable to Camel had a principal balance of $10,348,000 and $5,910,000 at September 27, 2014 and December 28, 2013, respectively, and is included in “Other” non-current liabilities in the accompanying condensed consolidated balance sheets. The note payable to the Company eliminates in consolidation.

13.          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 $5,921,000 and $17,431,000 for the three and nine months ended September 27, 2014, respectively, and $4,897,000 and $14,194,000 for the three and nine months ended September 28, 2013, respectively. The income tax benefit related to stock-based compensation expense was $2,114,000 and $6,223,000 for the three and nine months ended September 27, 2014, respectively, and $1,740,000 and $5,044,000 for the three and nine months ended September 28, 2013, 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 6,251,963 shares of common stock. On February 27, 2014, the Company granted 369,745 stock options and 104,474 shares of restricted stock under the 2007 Plan with an aggregate grant-date fair value of $9,973,000, to be recognized over the vesting period for each award.  The stock options are time-vested options that vest annually in equal one-third installments and have 10-year terms and an exercise price of $34.98, 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 27, 2014Grant Assumptions
Expected term (years)	5.4
Risk-free interest rate	1.60	%
Expected volatility	53.7	%
Dividend yield	—

12

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

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.

14.          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:

13

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

	Three Months Ended						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net sales to external customers (by major product group):
Electronics and EDVs	$	32,876		$	27,769		$	94,634		$	94,358
Transportation and industrial	81,216			76,453			242,980			232,906
Energy storage	114,092			104,222			337,614			327,264
Healthcare	32,480			29,141			97,436			88,684
Filtration and specialty	18,967			18,657			58,112			50,910
Separations media	51,447			47,798			155,548			139,594
Net sales	$	165,539		$	152,020		$	493,162		$	466,858
Operating income:
Electronics and EDVs	$	4,632		$	2,792		$	11,506		$	11,929
Transportation and industrial	18,224			16,223			52,539			49,264
Energy storage	22,856			19,015			64,045			61,193
Separations media	10,448			9,587			44,616			38,932
Corporate and other	(7,515		)	(8,443		)	(24,402		)	(21,888		)
Segment operating income	25,789			20,159			84,259			78,237
Stock-based compensation	5,921			4,897			17,431			14,194
Non-recurring and other costs	1,364			891			5,533			3,181
Total operating income	18,504			14,371			61,295			60,862
Reconciling items:
Interest expense, net	3,328			9,919			18,561			29,631
Foreign currency and other	(4,406		)	601			(5,568		)	902
Costs related to purchase of 7.5% senior notes	—			—			24,937			—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	—			—			1,148			—
Income from continuing operations before income taxes	$	19,582		$	3,851		$	22,217		$	30,329
Depreciation and amortization:
Electronics and EDVs	$	4,390		$	4,415		$	13,093		$	13,211
Transportation and industrial	2,955			2,799			8,742			8,469
Energy storage	7,345			7,214			21,835			21,680
Separations media	3,658			3,492			11,119			10,419
Corporate and other	2,844			2,815			8,546			8,451
Discontinued operations	—			911			—			2,692
	$	13,847		$	14,432		$	41,500		$	43,242

14

Polypore International, Inc.

Notes to condensed consolidated financial statements

(unaudited)

15.          Discontinued Operations

On December 19, 2013, the Company completed the sale of its Microporous business, which consisted of the production facilities in Piney Flats, Tennessee, and Feistritz, Austria, for $120,000,000.  The Company recognized a gain on sale of $35,200,000, net of direct transaction costs and income taxes, of which $35,855,000 was recognized in the fourth quarter of 2013.  The initial gain was subsequently reduced by $328,000 in the second quarter of 2014, as a result of the finalization of the working capital adjustment, and by $327,000 in the third quarter of 2014, related to the finalization of income taxes associated with the sale.  Microporous was previously included in the transportation and industrial segment. The results of operations from this business are classified as discontinued operations and are presented separately in the accompanying condensed consolidated statements of operations for all periods presented, summarized as follows:

	Three Months Ended					Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013		September 27, 2014			September 28, 2013
Net sales	$	—		$	18,560	$	—		$	54,505
Income (loss) from discontinued operations before income taxes	—			4,159		(518		)	13,954
Income (loss) from discontinued operations, net of income taxes	(327		)	2,514		(655		)	8,822

15

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 28, 2013.

The following discussion includes financial information prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), as well as segment operating income, which is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The presentation of segment operating income is intended to supplement investors’ understanding of our operating performance and is not intended to replace net income as determined in accordance with U.S. GAAP. Segment operating income is defined as operating income before stock-based compensation and certain non-recurring and other costs and is used by management to evaluate business segment performance and allocate resources. See Note 14, “Segment Information,” in the accompanying condensed consolidated financial statements for a reconciliation of segment operating income to income from continuing operations before income taxes.

All disclosures and amounts in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section relate to our continuing operations, unless otherwise indicated.

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 2013, we generated total net sales of $636.3 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 presence in the more established consumer electronics market, but our most significant growth opportunity is 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 experienced and may continue to experience variability in the short term as these markets emerge.

In the second quarter of 2014, we refinanced our existing senior secured credit agreement. We used cash on hand and borrowings under the new senior secured credit agreement to retire our previously outstanding 7.5% senior notes and pay redemption premiums and other transaction-related expenses. The debt reduction and refinancing will provide substantial interest savings and flexibility to pursue growth and value-creation opportunities as we continue to generate cash. We will continue to evaluate alternatives for cash, including returning value to shareholders through share repurchases.

Energy Storage

In the energy storage business, our membrane separators are a critical functional 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 carbon dioxide (“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. Production started for portions of the Concord facility in 2012 and the remaining capacity will ramp up over time as the nascent market for EDVs develops.

In 2014, we entered into long-term supply agreements with Samsung SDI Co., Ltd. (“Samsung”) and Panasonic Automotive and Industrial Division (“Panasonic”), respectively, that include guaranteed purchase and supply volume requirements and volume-based

16

price incentives.  The Samsung agreement has an initial four-year term with a two-year extension provision and the Panasonic agreement has a five-year term. We believe that these agreements highlight the value of our capacity investments and proven industry-leading products and technology.

We have patent-protected ceramic coating technology in which interest and usage is growing in both EDV and consumer electronics applications. We believe that this technology has value for current and future customers, and we have enforced and intend to continue to enforce our intellectual property rights around this and other patent-protected technology. In December 2013, we signed a technology licensing agreement with Sumitomo Chemical Co., Ltd. (“Sumitomo”). In January 2014, we filed a complaint against LG Chem. Ltd. (“LG”) alleging infringement of our patent covering ceramic coating technology. In July 2014, the United States District Court for the Western District of North Carolina granted a motion for a preliminary injunction against LG relating to patent infringement of our ceramic coating technology, although the court has stayed enforcement of the injunction pending appeal.  We believe that the recently signed long-term supply agreements, the licensing agreement with Sumitomo and the preliminary injunction against LG confirm our ability to provide certainty of supply for high-growth applications like EDVs and ESS and the value of our technology and intellectual property.

We believe the long-term demand drivers for our products—consumer demand for mobility, regulations for better fuel efficiency and lower CO2 emissions, conversion from nickel metal hydride to lithium battery technology in hybrids, concerns about access to petroleum, efforts to reduce pollution, and increasing transportation needs in developing countries—remain intact. While consumer electronics applications have attractive long-term market growth trends, EDV and ESS applications represent our most significant growth opportunity and the long-term outlook continues to be positive.  Based on industry forecasts and industry studies, the use of lithium technology in EDV applications is expected to grow at a compound annual growth rate in excess of 40% through 2020 on an energy capacity basis.  Many factors influence membrane separator usage in lithium batteries, but because many new applications are incorporating large-format lithium batteries that require much greater membrane separator volume per battery, we believe that membrane separator growth will exceed battery unit sales growth and, although not perfectly correlated, will more closely approximate the growth rate in energy capacity.  We believe the electrification of the worldwide fleet of vehicles is just beginning, from hybrids to plug-ins to full battery electric vehicles, including automobiles, buses, taxis and commercial fleet vehicles. We believe our dry process products continue to be the preferred product in large-format lithium 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 are qualified on more than fifty EDV models and have field-proven products, significant production capacity already in place, technical advantages, low-cost manufacturing capabilities and intellectual property around ceramic coatings for lithium battery separators. We believe the factors that influenced our decision to expand capacity remain valid, and we continue to expect significant sales growth and utilization of our current production capacity 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.

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.

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,

17

displacement of conventional filtration media by membrane filtration due to the 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 impairment of goodwill, pension benefits, repairs and maintenance and stock-based compensation. For a discussion of each of these policies, please see the discussion entitled “Critical accounting policies” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 28, 2013.

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)	September 27, 2014			September 28, 2013			September 27, 2014		September 28, 2013
Net sales	$	165.5		$	152.0		100.0	%	100.0	%
Gross profit	53.5			47.6			32.3		31.3
Selling, general and administrative expenses	35.0			33.2			21.1		21.8
Operating income	18.5			14.4			11.2		9.5
Interest expense, net	3.3			9.9			2.0		6.5
Other	(4.4		)	0.6			(2.6	)	0.4
Income from continuing operations before income taxes	19.6			3.9			11.8		2.6
Income taxes	6.2			(0.9		)	3.7		(0.6	)
Income from continuing operations	$	13.4		$	4.8		8.1	%	3.2	%

						Percentage of Net Sales
	Nine Months Ended					Nine Months Ended
($’s in millions)	September 27, 2014			September 28, 2013		September 27, 2014		September 28, 2013
Net sales	$	493.2		$	466.9	100.0	%	100.0	%
Gross profit	170.7			157.3		34.6		33.7
Selling, general and administrative expenses	109.4			96.4		22.2		20.7
Operating income	61.3			60.9		12.4		13.0
Interest expense, net	18.6			29.6		3.8		6.3
Costs related to purchase of 7.5% senior notes	24.9			—		5.0		—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	1.1			—		0.2		—
Other	(5.6		)	1.0		(1.1	)	0.2
Income from continuing operations before income taxes	22.3			30.3		4.5		6.5
Income taxes	4.4			7.0		0.9		1.5
Income from continuing operations	$	17.9		$	23.3	3.6	%	5.0	%

Comparison of the three months ended September 27, 2014 with the three months ended September 28, 2013

Net sales.  Net sales for the three months ended September 27, 2014 were $165.5 million, an increase of $13.5 million, or 8.9%, from the same period in the prior year, as sales were higher across all segments. See “Financial reporting segments” below for more information.

Gross profit.  Gross profit for the three months ended September 27, 2014 was $53.5 million, an increase of $5.9 million from the same period in the prior year due to higher sales across all segments. Gross profit margin was 32.3%, as compared to 31.3% in the prior year. See “Financial reporting segments” below for more information.

18

Selling, general and administrative expenses.  Selling, general and administrative expenses for the three months ended September 27, 2014 were $35.0 million, an increase of $1.8 million from the same period in the prior year primarily due to a $1.0 million increase in stock-based compensation expense and a $0.9 million increase in litigation costs associated with patent enforcement, partially offset by a $0.9 million decrease in performance-based incentive compensation expense. Selling, general and administrative expenses were 21.1% of consolidated net sales, as compared to 21.8% 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 $25.8 million, an increase of $5.6 million from the same period in the prior year due to higher sales across all segments. Segment operating income margin was 15.6%, as compared to 13.3% for the same period in the prior year.  See “Financial reporting segments” below for more information.

Interest expense.  Interest expense for the three months ended September 27, 2014 was $3.3 million, a decrease of $6.6 million from the same period in the prior year. The decrease was the result of the debt reduction and refinancing transactions that were completed during the second quarter of 2014.

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 taxes recorded in the financial statements differ 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. The applicable statutory income tax rates in the jurisdictions in which we operate range from 0% to 39%. During the three months ended September 28, 2013, we recognized a net tax benefit due to the reversal of a $1.7 million reserve related to the completion of a tax audit, which was considered a discrete event for interim income tax provision purposes.

The components of our effective tax rate were as follows:

	Three Months Ended
	September 27, 2014		September 28, 2013
U.S. federal statutory rate	35.0	%	35.0	%
State income taxes	0.2		(0.1	)
Mix of income in taxing jurisdictions	(7.2	)	(0.5	)
Completion of tax audit and other	3.4		(57.6	)
Total effective tax rate	31.4	%	(23.2	)%

Comparison of the nine months ended September 27, 2014 with the nine months ended September 28, 2013

Net sales.  Net sales for the nine months ended September 27, 2014 were $493.2 million, an increase of $26.3 million, or 5.6%, from the same period in the prior year due to higher sales in the transportation and industrial and separations media segments, as well as the positive impact of foreign currency translation of $3.0 million. See “Financial reporting segments” below for more information.

Gross profit.  Gross profit for the nine months ended September 27, 2014 was $170.7 million, an increase of $13.4 million from the same period in the prior year due to higher sales in the transportation and industrial and separations media segments. Gross profit margin was 34.6%, as compared to 33.7% in the prior year. See “Financial reporting segments” below for more information.

Selling, general and administrative expenses.  Selling, general and administrative expenses for the nine months ended September 27, 2014 were $109.4 million, an increase of $13.0 million from the same period in the prior year, primarily due to a $4.0 million increase in litigation costs associated with patent enforcement, a $3.2 million increase in stock-based compensation expense and a $1.4 million increase in performance-based incentive compensation expense.  Selling, general and administrative expenses were 22.2% of consolidated net sales, as compared to 20.7% 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 $84.3 million, an increase of $6.1 million from the same period in the prior year due to higher sales in the transportation and industrial and separations media segments. Segment operating income margin was 17.1%, as compared to 16.7% for the same period in the prior year. See “Financial reporting segments” below for more information.

Interest expense.  Interest expense for the nine months ended September 27, 2014 was $18.6 million, a decrease of $11.0 million from the same period in the prior year.  The decrease was the result of the debt reduction and refinancing transactions that were completed during the second quarter of 2014.

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 taxes recorded in the financial statements differ from the federal statutory income tax rate due to a variety of factors, including state income taxes, the mix of income between

19

U.S. and foreign jurisdictions taxed at varying rates and changes in estimates of permanent differences and valuation allowances. The applicable statutory income tax rates in the jurisdictions in which we operate range from 0% to 39%. During the nine months ended September 27, 2014, our effective tax rate was also impacted by a $9.6 million tax benefit in the second quarter related to costs incurred in connection with the refinancing of our senior credit agreement and purchase of our 7.5% senior notes. During the nine months ended September 28, 2013, the effective tax rate was impacted by the reversal of a $1.7 million reserve in the third quarter related to the completion of a tax audit. These were both considered discrete events for interim income tax provision purposes.

The components of our effective tax rate were as follows:

	Nine Months Ended
	September 27, 2014		September 28, 2013
U.S. federal statutory rate	35.0	%	35.0	%
State income taxes	0.2		(0.1	)
Mix of income in taxing jurisdictions	(7.2	)	(0.8	)
Costs associated with debt reduction and refinancing	(9.1	)	—
Completion of tax audit and other	0.9		(10.9	)
Total effective tax rate	19.8	%	23.2	%

Discontinued operations

On December 19, 2013, we completed the sale of our Microporous business, which consisted of the production facilities in Piney Flats, Tennessee, and Feistritz, Austria, for $120.0 million. We recognized a gain on sale of $35.2 million, net of direct transaction costs and income taxes. Microporous was previously included in the transportation and industrial segment. The results of operations from this business are classified as discontinued operations and are excluded from continuing operations and segment results for the three and nine months ended September 27, 2014 and September 28, 2013.

Financial reporting segments

Electronics and EDVs

Comparison of the three months ended September 27, 2014 with the three months ended September 28, 2013

Net sales.  Net sales for the three months ended September 27, 2014 were $32.9 million, an increase of $5.1 million, or 18.3%, from the same period in the prior year. Net sales increased 26.9% due to higher sales volumes, as growth in sales into EDV applications was partially offset by lower sales into consumer electronics applications. Sales volumes into EDV applications increased due to growth with current customers more than offsetting the $2.9 million decline attributable to LG.  We have had no sales to LG since the third quarter of 2013.  EDV applications represent our most significant growth opportunity, and the long-term outlook continues to be positive, given that we are qualified on more than fifty EDV models and have field-proven products, significant production capacity already in place, technical advantages, low-cost manufacturing capabilities and intellectual property around ceramic coatings for lithium battery separators.  For consumer electronics applications, we are working on new projects and development opportunities, but we cannot currently predict when or if sales volumes into consumer electronics applications will improve. Net sales decreased by 8.6% due to changes in price/customer mix, reflecting the impact of recently signed long-term supply agreements, which include purchase commitments and lower pricing. Pricing for lithium battery separators is generally volume-based, with a pricing benefit for higher volume contractual purchase commitments.

Segment operating income.  Segment operating income was $4.6 million, an increase of $1.8 million from the same period in the prior year. Segment operating income margin was 14.0%, as compared to 10.1% for the same period in the prior year. The increase in segment operating income margin was due to higher sales. The key drivers of operating income and operating income margin are sales and the amount of fixed costs relative to sales. Because of the increase in sales with no significant change in fixed costs, operating income and operating income margin increased.

Comparison of the nine months ended September 27, 2014 with the nine months ended September 28, 2013

Net sales.  Net sales for the nine months ended September 27, 2014 were $94.6 million, as compared to $94.4 million for the same period in the prior year.  Net sales increased by 6.4% due to higher sales volumes, as growth in sales into EDV applications was partially offset by lower sales into consumer electronics applications.  Sales volumes into EDV applications increased due to growth with current customers more than offsetting the $22.5 million decline attributable to LG.  We have had no sales to LG since the third quarter of 2013.  EDV applications represent our most significant growth opportunity and the long-term outlook continues to be positive, given that we are qualified on more than fifty EDV models and have field-proven products, significant production capacity already in place,

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technical advantages, low-cost manufacturing capabilities and intellectual property around ceramic coatings for lithium battery separators. For consumer electronics applications, we are working on new projects and development opportunities, but we cannot currently predict when or if sales volumes into these applications will improve.  Net sales decreased by 6.2% due to changes in price/customer mix, reflecting the impact of recently signed long-term supply agreements, which include purchase commitments and lower pricing. Pricing for lithium battery separators is generally volume-based, with a pricing benefit for higher volume contractual purchase commitments.

Segment operating income.  Segment operating income was $11.5 million, as compared to $11.9 million for the same period in the prior year. Segment operating income margin was 12.2%, as compared to 12.6% in the prior year. The key drivers of operating income and operating income margin are sales and the amount of fixed costs relative to sales, which were consistent in the current and prior year. Net sales were $94.6 million, or 32% of our total production capacity in terms of sales, in the nine months ended September 27, 2014, which is consistent with the same period of the prior year. There were no changes in production capacity in 2014 as compared to 2013. In 2014 and 2013, excluding the final phase of expansion at our Concord facility, which will be completed, qualified and ramped up as demand develops, we had 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.

Transportation and Industrial

Comparison of the three months ended September 27, 2014 with the three months ended September 28, 2013

Net sales.  Net sales for the three months ended September 27, 2014 were $81.2 million, an increase of $4.8 million, or 6.3%, from the same period in the prior year, with higher sales in Asia, partially offset by lower sales in the Americas.

Segment operating income.  Segment operating income was $18.2 million, an increase of $2.0 million from the same period in the prior year.  Segment operating income margin was 22.4%, as compared to 21.2% for the same period in the prior year.  The increase in segment operating income margin was due to production efficiencies.

Comparison of the nine months ended September 27, 2014 with the nine months ended September 28, 2013

Net sales.  Net sales for the nine months ended September 27, 2014 were $243.0 million, an increase of $10.1 million, or 4.3%, from the same period in the prior year, with higher sales in Asia and Europe, partially offset by lower sales in the Americas.

Segment operating income.  Segment operating income was $52.5 million, an increase of $3.2 million from the same period in the prior year.  Segment operating income margin was 21.6%, consistent with 21.2% in the prior year.

Separations Media

Comparison of the three months ended September 27, 2014 with the three months ended September 28, 2013

Net sales.  Net sales for the three months ended September 27, 2014 were $51.4 million, an increase of $3.6 million, or 7.5%, from the same period in the prior year, due to higher sales in both healthcare and filtration and specialty products.

Segment operating income.  Segment operating income was $10.5 million, an increase of $0.9 million from the same period in the prior year.  Segment operating income margin was 20.4%, consistent with 20.1% in the prior year.  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.

Comparison of the nine months ended September 27, 2014 with the nine months ended September 28, 2013

Net sales.  Net sales for the nine months ended September 27, 2014 were $155.6 million, an increase of $16.0 million, or 11.5%, from the same period in the prior year, due to higher sales in both healthcare and filtration and specialty products, as well as the positive impact of foreign currency translation of $3.3 million.

Segment operating income.  Segment operating income was $44.7 million, an increase of $5.8 million from the same period in the prior year.  Segment operating income margin was 28.7%, as compared to 27.9% in the prior year.  Segment operating income

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margins can fluctuate between quarters due to product mix and production timing, 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 reportable segments for segment reporting purposes, including amortization of identified intangible assets and performance-based incentive compensation.

Comparison of the three months ended September 27, 2014 with the three months ended September 28, 2013

Corporate and other costs for the three months ended September 27, 2014 were $7.5 million, a decrease of $0.9 million from the same period in the prior year, primarily due to lower performance-based incentive compensation expense.

Comparison of the nine months ended September 27, 2014 with the nine months ended September 28, 2013

Corporate and other costs for the nine months ended September 27, 2014 were $24.4 million, an increase of $2.5 million from the same period in the prior year, primarily due to higher performance-based incentive compensation expense.

Foreign operations

As of September 27, 2014, we manufactured our products at 15 strategically located facilities in the U.S., Europe and Asia. Net sales from foreign locations were $314.4 million (63.7% of consolidated sales) and $296.5 million (63.5% of consolidated sales) for the nine months ended September 27, 2014 and September 28, 2013, respectively. In the electronics and EDVs segment, 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 were 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 U.S. will be favorable to our operations and growth strategy.

Seasonality

Operations at our European production facilities are traditionally subject to shutdowns for approximately one month during the third quarter of each year for employee vacations. Because of the seasonal fluctuations, comparisons of our operating results for the third quarter of any fiscal year with those of the other quarters during the same fiscal year may be of limited relevance in predicting our future financial performance.

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Liquidity and capital resources

Cash and cash equivalents decreased by $128.3 million during the nine months ended September 27, 2014, as we used cash on hand and cash generated from operations to fund capital expenditures, reduce and refinance our debt and repurchase shares of our common stock.

Operating activities.  Net cash provided by operating activities was $83.0 million in the nine months ended September 27, 2014, consisting of cash generated from operations of $90.8 million, partially offset by changes in operating assets and liabilities. Accounts receivable increased due to higher sales and the timing of cash receipts, and days sales outstanding was consistent with prior year-end. 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. Inventory decreased from prior year-end, and days in ending inventory decreased by approximately 11%.  Inventory levels are impacted by production schedules and 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 decreased primarily due to lower accrued interest as the result of our debt reduction and refinancing transactions that were completed during the second quarter of 2014, as well as the timing of payments.

Investing activities.  Capital expenditures were $17.5 million and $19.8 million in the nine months ended September 27, 2014 and September 28, 2013, respectively. We currently estimate capital expenditures for fiscal 2014 to be approximately $40.0 million. As of September 27, 2014, we had $147.7 million of construction in progress, primarily related to capacity expansions in the electronics and EDVs segment, portions of which will be completed, qualified and ramped up over time as market demand develops.

Financing activities.   During the nine months ended September 27, 2014, financing activities consisted of reducing and refinancing our debt and repurchasing common stock.

During the second quarter of 2014, we completed a debt reduction and refinancing, using cash on hand and borrowings under the new senior credit agreement to repay all outstanding obligations under our previous senior credit agreement, redeem and retire our previously outstanding 7.5% senior notes, and pay loan acquisition costs. The total purchase price for the notes was $385.5 million, consisting of principal of $365.0 million and redemption premiums of $20.5 million.

In May 2014, the Board of Directors authorized the repurchase of up to 4,500,000 shares of our common stock. The share repurchase program has no expiration date. During the nine months ended September 27, 2014, we repurchased 450,000 shares of common stock for $20.0 million under the May 2014 repurchase program. 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.  In 2013, the Board of Directors authorized the repurchase of up to 4,000,000 shares of our common stock by December 31, 2013. We repurchased 2,000,000 shares of common stock under this authorization, all of which were purchased for $80.3 million in the nine months ended September 28, 2013.

Our new senior credit agreement provides for a $150.0 million revolving credit facility and a $500.0 million term loan facility and matures in April 2019.  At September 27, 2014, we had $6.0 million outstanding and $144.0 available for borrowing under the revolving credit facility. Interest rates under the new senior credit agreement are equal to, at our option, either an alternate base rate or the Eurocurrency base rate, plus a specified margin. At September 27, 2014, the interest rate on borrowings under the new senior credit agreement was 2.15%.

We intend to fund our ongoing operations with cash on hand, cash generated by operations and borrowings under our new senior credit agreement. As of September 27, 2014, approximately 69.7% 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. During the nine months ended September 27, 2014, we repatriated foreign earnings of approximately $55.1 million related to the sale of the Microporous business. Except for the proceeds from the sale of the Microporous business, our intent is to indefinitely reinvest earnings of our foreign operations and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. However, if we decided to repatriate cash held by our foreign subsidiaries, we would be required to accrue and pay any applicable U.S. and local taxes to repatriate these funds.

Under the senior 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 our senior credit agreement, was as follows:

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(in millions)	Twelve Months Ended September 27, 2014
Net income	$27.6
Add/Subtract:
Depreciation and amortization expense	55.4
Interest expense, net	28.4
Income taxes	11.8
Stock-based compensation	23.9
Costs related to purchase of 7.5% senior notes	24.9
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	1.1
Foreign currency gain	(6.0	)
Litigation costs associated with patent enforcement	6.3
Loss on disposal of property, plant and equipment	0.3
Other non-cash or non-recurring items	(2.1	)
Adjusted EBITDA	$171.6

As of September 27, 2014, the calculation of the leverage ratio, as defined under the senior credit agreement, was as follows:

(in millions)
Indebtedness (1)	$	464.6
Adjusted EBITDA	$	171.6
Actual leverage ratio	2.71x
Required maximum leverage ratio	4.25x

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

As of September 27, 2014, the calculation of the interest coverage ratio, as defined under the senior credit agreement, was as follows:

(in millions)
Adjusted EBITDA	$	171.6
Interest expense, net (1)	$	11.8
Actual interest coverage ratio	14.55x
Required minimum interest coverage ratio	3.00x

(1)Calculated as cash interest expense, as defined under the senior credit agreement, for the twelve months ended September 27, 2014.

Our senior 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.

In August 2014, we entered into a forward-starting interest rate swap to pay a fixed interest rate of 1.9% and receive one-month LIBOR on a notional amount of $250,000,000.  The interest rate swap economically converts a portion of the Company’s LIBOR-based, variable-rate debt into fixed-rate debt from its effective date of July 31, 2015 through its expiration on April 8, 2019.

Future debt service payments are expected to be paid out of cash flows from operations, borrowings on our new revolving credit facility and future refinancing of our debt. Our cash interest requirements for the next twelve months are estimated to be $12.3 million, including the impact of the interest rate swap.

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 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 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

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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 the “Risk Factors” section 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 $1.1 million at September 27, 2014.  We anticipate the expenditures associated with the reserve will be made in the next twelve months.

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 September 27, 2014, we had variable-rate debt of $499.8 million. To reduce the interest rate risk inherent in our variable-rate debt, in August 2014 we entered into a forward-starting interest rate swap to pay a fixed interest rate of 1.9% and receive one-month LIBOR on a notional amount of $250,000,000.  The interest rate swap economically converts a portion of the Company’s LIBOR-based, variable-rate debt into fixed-rate debt from its effective date of July 31, 2015 through its expiration on April 8, 2019. The interest rate swap has been designated as a cash flow hedge and is recorded at fair value in the accompanying condensed consolidated balance sheet with changes in fair value, net of income taxes, recorded in accumulated other comprehensive income (loss). The pre-tax earnings and cash flow impact resulting from a 100 basis point increase in interest rates on our variable-rate debt is estimated to be $4.7 million per year, including the impact of the interest rate swap.

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

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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:

	September 27, 2014	September 28, 2013
Period end rate	1.2729	1.3508
Period average rate for the three months ended	1.3275	1.3251
Period average rate for the nine months ended	1.3567	1.3172

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 September 27, 2014, 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 September 27, 2014 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 September 27, 2014, 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.

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PART II — OTHER INFORMATION

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 September 27, 2014:

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 (1)
June 29, 2014 — August 2, 2014	—	$	—	—	4,300,000
August 3, 2014 — August 30, 2014 (2)	69,378	43.65		68,900	4,231,100
August 31, 2014 — September 27, 2014 (2)	181,463	43.21		181,100	4,050,000
Total	250,841	$	43.33	250,000	4,050,000

(1)In May 2014, the Company announced that its Board of Directors authorized the repurchase of up to 4,500,000 shares of the Company’s common stock. The share repurchase program has no expiration date. As of September 27, 2014, the Company had repurchased 450,000 shares of common stock under the May 2014 repurchase program.

(2)The Company withheld and repurchased 478 and 363 shares of common stock in August and September 2014, respectively, to satisfy certain employees’ withholding tax liabilities related to restricted stock grants.

Item 6.Exhibits

Exhibit No.	Exhibit Description
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

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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: November 5, 2014		POLYPORE INTERNATIONAL, INC.
	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)

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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:  November 5, 2014	/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:  November 5, 2014	/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 September 27, 2014 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: November 5, 2014	/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 September 27, 2014 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:  November 5, 2014	/s/ Lynn Amos
	Lynn Amos
	Chief Financial Officer

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Related Party Transactions (Details) (German Subsidiary, USD $)	3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013	Dec. 28, 2013
All related parties
Related party transactions
Equity method investment	$ 626,000		$ 626,000		$ 676,000
Charges from the affiliates for work performed	880,000	384,000	1,665,000	1,043,000
Amounts due to the affiliates	$ 173,000		$ 173,000		$ 254,000
Patent and trademark service provider
Related party transactions
Ownership percentage in related party	33.00%		33.00%
Research company
Related party transactions
Ownership percentage in related party	25.00%		25.00%

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Debt (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Dec. 28, 2013
Remaining minimum scheduled principal repayments of the term loan
Long-term debt including current maturities	$ 499,750	$ 646,250
New senior credit agreement
Remaining minimum scheduled principal repayments of the term loan
Long-term debt including current maturities	499,750
New senior credit agreement | Term loan facility
Remaining minimum scheduled principal repayments of the term loan
2014	6,250
2015	25,000
2016	31,250
2017	43,750
2018	62,500
2019	325,000
Long-term debt including current maturities	$ 493,750

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Debt (Tables)

9 Months Ended

Sep. 27, 2014

Debt

Schedule of debt

(in thousands)	September 27, 2014		December 28, 2013
Senior credit agreement:
Revolving credit facility	$	6,000	$	—
Term loan facility	493,750		281,250
	499,750		281,250
7.5% senior notes	—		365,000
	499,750		646,250
Less current portion	31,000		16,875
Long-term debt	$	468,750	$	629,375

Schedule of remaining minimum scheduled principal repayments of the term loan

(in thousands)
2014	$	6,250
2015	25,000
2016	31,250
2017	43,750
2018	62,500
2019	325,000
	$	493,750

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Segment Information (Details) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014 segment business	Sep. 28, 2013	May 08, 2014 7.5% senior notes	Sep. 27, 2014 7.5% senior notes	Sep. 27, 2014 Energy storage	Sep. 28, 2013 Energy storage	Sep. 27, 2014 Energy storage	Sep. 28, 2013 Energy storage	Sep. 27, 2014 Operating segments	Sep. 28, 2013 Operating segments	Sep. 27, 2014 Operating segments	Sep. 28, 2013 Operating segments	Sep. 27, 2014 Operating segments Electronics and EDVs	Sep. 28, 2013 Operating segments Electronics and EDVs	Sep. 27, 2014 Operating segments Electronics and EDVs	Sep. 28, 2013 Operating segments Electronics and EDVs	Sep. 27, 2014 Operating segments Transportation and industrial	Sep. 28, 2013 Operating segments Transportation and industrial	Sep. 27, 2014 Operating segments Transportation and industrial	Sep. 28, 2013 Operating segments Transportation and industrial	Sep. 27, 2014 Operating segments Separations Media	Sep. 28, 2013 Operating segments Separations Media	Sep. 27, 2014 Operating segments Separations Media	Sep. 28, 2013 Operating segments Separations Media	Sep. 27, 2014 Operating segments Separations Media Healthcare	Sep. 28, 2013 Operating segments Separations Media Healthcare	Sep. 27, 2014 Operating segments Separations Media Healthcare	Sep. 28, 2013 Operating segments Separations Media Healthcare	Sep. 27, 2014 Operating segments Separations Media Filtration and specialty	Sep. 28, 2013 Operating segments Separations Media Filtration and specialty	Sep. 27, 2014 Operating segments Separations Media Filtration and specialty	Sep. 28, 2013 Operating segments Separations Media Filtration and specialty	Sep. 27, 2014 Corporate and other	Sep. 28, 2013 Corporate and other	Sep. 27, 2014 Corporate and other	Sep. 28, 2013 Corporate and other	Sep. 27, 2014 Material reconciling items	Sep. 28, 2013 Material reconciling items	Sep. 27, 2014 Material reconciling items	Sep. 28, 2013 Material reconciling items
Segment Information
Number of reportable segments			3
Number of primary businesses			2
Financial information relating to the reportable segments
Net sales	$ 165,539,000	$ 152,020,000	$ 493,162,000	$ 466,858,000			$ 114,092,000	$ 104,222,000	$ 337,614,000	$ 327,264,000	$ 165,539,000	$ 152,020,000	$ 493,162,000	$ 466,858,000	$ 32,876,000	$ 27,769,000	$ 94,634,000	$ 94,358,000	$ 81,216,000	$ 76,453,000	$ 242,980,000	$ 232,906,000	$ 51,447,000	$ 47,798,000	$ 155,548,000	$ 139,594,000	$ 32,480,000	$ 29,141,000	$ 97,436,000	$ 88,684,000	$ 18,967,000	$ 18,657,000	$ 58,112,000	$ 50,910,000
Operating income	18,504,000	14,371,000	61,295,000	60,862,000			22,856,000	19,015,000	64,045,000	61,193,000	25,789,000	20,159,000	84,259,000	78,237,000	4,632,000	2,792,000	11,506,000	11,929,000	18,224,000	16,223,000	52,539,000	49,264,000	10,448,000	9,587,000	44,616,000	38,932,000									(7,515,000)	(8,443,000)	(24,402,000)	(21,888,000)
Stock-based compensation	5,921,000	4,897,000	17,431,000	14,194,000																																			5,921,000	4,897,000	17,431,000	14,194,000
Non-recurring and other costs																																							1,364,000	891,000	5,533,000	3,181,000
Interest expense, net	3,328,000	9,919,000	18,561,000	29,631,000
Foreign currency and other	(4,406,000)	601,000	(5,568,000)	902,000
Costs related to purchase of 7.5% senior notes			24,937,000		(24,937,000)
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement			1,148,000		4,395,000
Income from continuing operations before income taxes	$ 19,582,000	$ 3,851,000	$ 22,217,000	$ 30,329,000
Debt instrument, interest rate (as a percent)						7.50%

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Environmental Matters (Details) (Membrana GmbH, USD $)	9 Months Ended
	Sep. 27, 2014	Dec. 28, 2013
Membrana GmbH
Environmental Matters
Environmental reserve	$ 1,062,000	$ 2,882,000
Period over which expenditures will be made	12 months

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Description of Business and Basis of Presentation

9 Months Ended

Sep. 27, 2014

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 (“U.S. GAAP”) 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. Certain amounts previously presented in the condensed consolidated financial statements for prior periods have been reclassified to conform to current classifications. 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 28, 2013. Operating results for the three and nine months ended September 27, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending January 3, 2015.

On December 19, 2013, the Company completed the sale of its Microporous business. The results of operations from this business have been presented as discontinued operations. All disclosures and amounts in the notes to the condensed consolidated financial statements relate to the Company’s continuing operations, unless otherwise indicated.

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Segment Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013
Financial information relating to the reportable segments
Depreciation and amortization:	$ 13,847	$ 14,432	$ 41,500	$ 43,242
Discontinued operations
Financial information relating to the reportable segments
Depreciation and amortization:		911		2,692
Energy storage | Continuing operations
Financial information relating to the reportable segments
Depreciation and amortization:	7,345	7,214	21,835	21,680
Operating segments | Electronics and EDVs | Continuing operations
Financial information relating to the reportable segments
Depreciation and amortization:	4,390	4,415	13,093	13,211
Operating segments | Transportation and industrial | Continuing operations
Financial information relating to the reportable segments
Depreciation and amortization:	2,955	2,799	8,742	8,469
Operating segments | Separations Media | Continuing operations
Financial information relating to the reportable segments
Depreciation and amortization:	3,658	3,492	11,119	10,419
Corporate and other | Continuing operations
Financial information relating to the reportable segments
Depreciation and amortization:	$ 2,844	$ 2,815	$ 8,546	$ 8,451

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Segment Information (Tables)

9 Months Ended

Sep. 27, 2014

Segment Information

Schedule of financial information relating to the reportable segments

	Three Months Ended						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net sales to external customers (by major product group):
Electronics and EDVs	$	32,876		$	27,769		$	94,634		$	94,358
Transportation and industrial	81,216			76,453			242,980			232,906
Energy storage	114,092			104,222			337,614			327,264
Healthcare	32,480			29,141			97,436			88,684
Filtration and specialty	18,967			18,657			58,112			50,910
Separations media	51,447			47,798			155,548			139,594
Net sales	$	165,539		$	152,020		$	493,162		$	466,858
Operating income:
Electronics and EDVs	$	4,632		$	2,792		$	11,506		$	11,929
Transportation and industrial	18,224			16,223			52,539			49,264
Energy storage	22,856			19,015			64,045			61,193
Separations media	10,448			9,587			44,616			38,932
Corporate and other	(7,515		)	(8,443		)	(24,402		)	(21,888		)
Segment operating income	25,789			20,159			84,259			78,237
Stock-based compensation	5,921			4,897			17,431			14,194
Non-recurring and other costs	1,364			891			5,533			3,181
Total operating income	18,504			14,371			61,295			60,862
Reconciling items:
Interest expense, net	3,328			9,919			18,561			29,631
Foreign currency and other	(4,406		)	601			(5,568		)	902
Costs related to purchase of 7.5% senior notes	—			—			24,937			—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	—			—			1,148			—
Income from continuing operations before income taxes	$	19,582		$	3,851		$	22,217		$	30,329
Depreciation and amortization:
Electronics and EDVs	$	4,390		$	4,415		$	13,093		$	13,211
Transportation and industrial	2,955			2,799			8,742			8,469
Energy storage	7,345			7,214			21,835			21,680
Separations media	3,658			3,492			11,119			10,419
Corporate and other	2,844			2,815			8,546			8,451
Discontinued operations	—			911			—			2,692
	$	13,847		$	14,432		$	41,500		$	43,242

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Stock-Based Compensation Plans (Tables)

9 Months Ended

Sep. 27, 2014

Stock-Based Compensation Plans

Schedule of assumptions for stock option grants

	February 27, 2014Grant Assumptions
Expected term (years)	5.4
Risk-free interest rate	1.60	%
Expected volatility	53.7	%
Dividend yield	—

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Discontinued Operations (Details) (USD $)	0 Months Ended	3 Months Ended				9 Months Ended		12 Months Ended
	Dec. 19, 2013	Sep. 27, 2014	Jun. 28, 2014	Dec. 28, 2013	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013	Dec. 28, 2013
Results of operations
Income (loss) from discontinued operations, net of income taxes		$ (327,000)			$ 2,514,000	$ (655,000)	$ 8,822,000
Microporous
Discontinued Operations
Sale price of assets to be sold	120,000,000
Gain on sale of discontinued operations, net of income taxes		(327,000)	(328,000)	35,855,000				35,200,000
Results of operations
Net sales					18,560,000		54,505,000
Income (loss) from discontinued operations before income taxes					4,159,000	(518,000)	13,954,000
Income (loss) from discontinued operations, net of income taxes		$ (327,000)			$ 2,514,000	$ (655,000)	$ 8,822,000

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Discontinued Operations (Tables)

9 Months Ended

Sep. 27, 2014

Discontinued Operations

Summary of results of operations reported as discontinued operations

	Three Months Ended					Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013		September 27, 2014			September 28, 2013
Net sales	$	—		$	18,560	$	—		$	54,505
Income (loss) from discontinued operations before income taxes	—			4,159		(518		)	13,954
Income (loss) from discontinued operations, net of income taxes	(327		)	2,514		(655		)	8,822

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Dec. 28, 2013
Inventories
Raw materials	$ 37,606	$ 39,357
Work-in-process	16,037	22,079
Finished goods	51,633	52,424
Inventories	$ 105,276	$ 113,860

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Condensed consolidated statements of cash flows (Parenthetical) (7.5% senior notes)	Sep. 27, 2014
7.5% senior notes
Debt instrument, interest rate (as a percent)	7.50%

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Debt (Details) (USD $)	9 Months Ended		0 Months Ended				0 Months Ended		0 Months Ended		9 Months Ended		0 Months Ended
	Sep. 27, 2014	Dec. 28, 2013	May 08, 2014 7.5% senior notes	Sep. 27, 2014 7.5% senior notes	Dec. 28, 2013 7.5% senior notes	Dec. 28, 2013 Previous senior credit agreement	Apr. 08, 2014 Previous senior credit agreement Term loan facility	Dec. 28, 2013 Previous senior credit agreement Term loan facility	Apr. 08, 2014 New senior credit agreement	Sep. 27, 2014 New senior credit agreement	Sep. 27, 2014 New senior credit agreement Revolving credit facility	Apr. 08, 2014 New senior credit agreement Revolving credit facility	May 08, 2014 New senior credit agreement Term loan facility	Sep. 27, 2014 New senior credit agreement Term loan facility	Apr. 08, 2014 New senior credit agreement Term loan facility
Debt
Revolving credit facility											$ 6,000,000
Long-term debt including current maturities	499,750,000	646,250,000			365,000,000	281,250,000		281,250,000		499,750,000				493,750,000
Less current maturities	31,000,000	16,875,000
Long-term debt	468,750,000	629,375,000
Debt instrument, interest rate (as a percent)				7.50%
Maximum borrowing capacity												150,000,000
Repayment of debt using proceeds from new term loan							(100,000,000)
Repayment of debt using proceeds from new revolving credit facility							(33,000,000)
Loan acquisition costs	4,080,000								4,080,000
Capitalized loan acquisition costs									3,944,000
Unamortized loan acquisition costs written off	1,148,000		4,395,000						1,012,000
Debt instrument, face amount															500,000,000
Amount received under new credit agreement													400,000,000
Redemption price of notes	385,542,000		385,542,000
Face value of redeemed notes			365,000,000
Premium on redemption of notes			20,531,000
Amount charged to income in connection with the purchase of notes	(24,937,000)		24,937,000
Percentage of voting capital stock of foreign subsidiaries pledged as collateral for borrowing under senior credit agreement (as a percent)									65.00%
Available borrowing capacity											$ 144,000,000
Planned repayment period for revolving credit facility											12 months

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Noncontrolling Interest (Details) (Daramic Xiangyang, USD $)	9 Months Ended
	Sep. 28, 2013	Sep. 27, 2014	Dec. 28, 2013
Noncontrolling Interest
Ownership percentage of joint venture		65.00%
Contributions to joint venture	$ 2,470,000
Principal balance of note payable		10,348,000	5,910,000
Camel Group Co., Ltd, Co-Venturer
Noncontrolling Interest
Ownership percentage of joint venture		35.00%
Contributions to joint venture	$ 1,330,000

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Condensed consolidated balance sheets (USD $) In Thousands, unless otherwise specified	Sep. 27, 2014	Dec. 28, 2013
Current assets:
Cash and cash equivalents	$ 35,111	$ 163,423
Accounts receivable, net	118,297	113,506
Inventories	105,276	113,860
Prepaid and other	22,367	18,118
Total current assets	281,051	408,907
Property, plant and equipment, net	567,703	595,375
Goodwill	444,512	444,512
Intangibles and loan acquisition costs, net	81,868	93,792
Other	8,001	7,627
Total assets	1,383,135	1,550,213
Current liabilities:
Accounts payable	23,614	31,764
Accrued liabilities	43,551	49,266
Income taxes payable	3,888	4,055
Current portion of debt	31,000	16,875
Total current liabilities	102,053	101,960
Debt, less current portion	468,750	629,375
Pension obligations, less current portion	98,440	102,821
Deferred income taxes	71,275	70,332
Other	22,141	26,149
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, 47,123,985 issued and 44,653,618 outstanding at September 27, 2014 and 46,926,205 issued and 44,916,570 outstanding at December 28, 2013	471	469
Paid-in capital	587,826	569,362
Retained earnings	153,580	137,379
Accumulated other comprehensive loss	(27,224)	(12,865)
Treasury stock, at cost - 2,470,367 shares at September 27, 2014 and 2,009,635 shares at December 28, 2013	(100,995)	(80,668)
Total Polypore shareholders' equity	613,658	613,677
Noncontrolling interest	6,818	5,899
Total shareholders' equity	620,476	619,576
Total liabilities and shareholders' equity	$ 1,383,135	$ 1,550,213

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Condensed consolidated statements of comprehensive income (loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013
Condensed consolidated statements of comprehensive income (loss)
Net income	$ 13,098	$ 7,259	$ 17,163	$ 32,121
Other comprehensive income (loss):
Foreign currency translation adjustment	(16,193)	8,631	(16,578)	2,922
Change in net actuarial loss and prior service credit	1,215	(712)	1,397	(73)
Unrealized gain on interest rate swap	958		958
Income taxes related to other comprehensive income (loss)	(351)	(415)	(179)	77
Other comprehensive income (loss)	(14,371)	7,504	(14,402)	2,926
Comprehensive income (loss)	(1,273)	14,763	2,761	35,047
Less: Comprehensive income attributable to noncontrolling interest	411	262	919	787
Comprehensive income (loss) attributable to Polypore International, Inc.	$ (1,684)	$ 14,501	$ 1,842	$ 34,260

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Income Taxes (Details) (USD $)	3 Months Ended
	Jun. 28, 2014	Sep. 28, 2013	Sep. 27, 2014 7.5% senior notes
Income taxes
Income tax benefit related to expenses associated with debt refinancing and redemption	$ 9,569,000
Debt instrument, interest rate (as a percent)			7.50%
Amount of reserve reversed during the period related to the completion of a tax audit		$ 1,697,000

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Segment Information

9 Months Ended

Sep. 27, 2014

Segment Information

Segment Information

14.          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						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net sales to external customers (by major product group):
Electronics and EDVs	$	32,876		$	27,769		$	94,634		$	94,358
Transportation and industrial	81,216			76,453			242,980			232,906
Energy storage	114,092			104,222			337,614			327,264
Healthcare	32,480			29,141			97,436			88,684
Filtration and specialty	18,967			18,657			58,112			50,910
Separations media	51,447			47,798			155,548			139,594
Net sales	$	165,539		$	152,020		$	493,162		$	466,858
Operating income:
Electronics and EDVs	$	4,632		$	2,792		$	11,506		$	11,929
Transportation and industrial	18,224			16,223			52,539			49,264
Energy storage	22,856			19,015			64,045			61,193
Separations media	10,448			9,587			44,616			38,932
Corporate and other	(7,515		)	(8,443		)	(24,402		)	(21,888		)
Segment operating income	25,789			20,159			84,259			78,237
Stock-based compensation	5,921			4,897			17,431			14,194
Non-recurring and other costs	1,364			891			5,533			3,181
Total operating income	18,504			14,371			61,295			60,862
Reconciling items:
Interest expense, net	3,328			9,919			18,561			29,631
Foreign currency and other	(4,406		)	601			(5,568		)	902
Costs related to purchase of 7.5% senior notes	—			—			24,937			—
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	—			—			1,148			—
Income from continuing operations before income taxes	$	19,582		$	3,851		$	22,217		$	30,329
Depreciation and amortization:
Electronics and EDVs	$	4,390		$	4,415		$	13,093		$	13,211
Transportation and industrial	2,955			2,799			8,742			8,469
Energy storage	7,345			7,214			21,835			21,680
Separations media	3,658			3,492			11,119			10,419
Corporate and other	2,844			2,815			8,546			8,451
Discontinued operations	—			911			—			2,692
	$	13,847		$	14,432		$	41,500		$	43,242

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Pension Plans (Details) (Pension Plans, USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013
Pension Plans
Components of net periodic benefit cost:
Service cost	$ 509	$ 562	$ 1,558	$ 1,680
Interest cost	1,046	1,130	3,206	3,371
Expected return on plan assets	(106)	(192)	(324)	(572)
Amortization of prior service credit	(31)	(13)	(95)	(39)
Recognized net actuarial loss	260	434	798	1,293
Net periodic benefit cost	$ 1,678	$ 1,921	$ 5,143	$ 5,733

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Inventories (Tables)

9 Months Ended

Sep. 27, 2014

Inventories

Schedule of inventories

(in thousands)	September 27, 2014		December 28, 2013
Raw materials	$	37,606	$	39,357
Work-in-process	16,037		22,079
Finished goods	51,633		52,424
	$	105,276	$	113,860

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Condensed consolidated statements of cash flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013
Operating activities:
Net income	$ 17,163	$ 32,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	33,155	34,350
Amortization expense	8,345	8,892
Amortization of loan acquisition costs	1,419	1,855
Stock-based compensation	17,431	14,194
Loss on disposal of property, plant and equipment	141	948
Foreign currency (gain) loss	(3,096)	1,076
Deferred income taxes	(9,800)	(3,201)
Costs related to purchase of 7.5% senior notes	24,937
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement	1,148
Changes in operating assets and liabilities:
Accounts receivable	(7,713)	18,154
Inventories	4,780	1,867
Prepaid and other current assets	1,631	10,672
Accounts payable and accrued liabilities	(11,766)	4,839
Income taxes payable	103	(446)
Other, net	5,160	2,332
Net cash provided by operating activities	83,038	127,653
Investing activities:
Purchases of property, plant and equipment, net	(17,520)	(19,778)
Net cash used in investing activities	(17,520)	(19,778)
Financing activities:
Proceeds from new senior credit agreement	500,000
Principal payments in connection with refinancing of senior credit agreement	(273,750)
Purchase of 7.5% senior notes	(385,542)
Loan acquisition costs	(4,080)
Principal payments on debt	(13,750)	(15,000)
Proceeds from revolving credit facility	114,000	54,200
Payments on revolving credit facility	(108,000)	(89,200)
Repurchases of common stock	(20,327)	(80,668)
Proceeds from stock option exercises	1,035	2,039
Contributions from noncontrolling interest		1,330
Net cash used in financing activities	(190,414)	(127,299)
Effect of exchange rate changes on cash and cash equivalents	(3,416)	1,464
Net decrease in cash and cash equivalents	(128,312)	(17,960)
Cash and cash equivalents at beginning of period	163,423	44,873
Cash and cash equivalents at end of period	$ 35,111	$ 26,913

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Condensed consolidated balance sheets (Parenthetical) (USD $)	Sep. 27, 2014	Dec. 28, 2013
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	47,123,985	46,926,205
Common stock, shares outstanding	44,653,618	44,916,570
Treasury stock, shares	2,470,367	2,009,635

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Environmental Matters

9 Months Ended

Sep. 27, 2014

Environmental Matters

Environmental Matters

9.             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 were 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 $1,062,000 and $2,882,000 at September 27, 2014 and December 28, 2013, 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.

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Document and Entity Information	9 Months Ended
	Sep. 27, 2014	Oct. 29, 2014
Document and Entity Information
Entity Registrant Name	Polypore International, Inc.
Entity Central Index Key	0001292556
Document Type	10-Q
Document Period End Date	Sep. 27, 2014
Amendment Flag	false
Current Fiscal Year End Date	--01-03
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		44,653,367
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Treasury Stock

9 Months Ended

Sep. 27, 2014

Treasury Stock

Treasury Stock

10.          Treasury Stock

In May 2014, the Board of Directors authorized the repurchase of up to 4,500,000 shares of the Company’s common stock. The share repurchase program has no expiration date. During the nine months ended September 27, 2014, the Company repurchased 450,000 shares of common stock for $20,004,000. In 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. The Company repurchased 2,000,000 shares of common stock under this authorization, all of which were purchased for $80,343,000 in the nine months ended September 28, 2013.

The Company repurchased shares of common stock to satisfy certain employees’ statutory withholding tax liabilities for $323,000 and $325,000 during the nine months ended September 27, 2014 and September 28, 2013, respectively, related to restricted stock grants.

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Condensed consolidated statements of income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013
Condensed consolidated statements of income
Net sales	$ 165,539	$ 152,020	$ 493,162	$ 466,858
Cost of goods sold	112,036	104,389	322,505	309,606
Gross profit	53,503	47,631	170,657	157,252
Selling, general, and administrative expenses	34,999	33,260	109,362	96,390
Operating income	18,504	14,371	61,295	60,862
Other (income) expense:
Interest expense, net	3,328	9,919	18,561	29,631
Foreign currency and other	(4,406)	601	(5,568)	902
Costs related to purchase of 7.5% senior notes			24,937
Write-off of loan acquisition costs and other expenses associated with refinancing of senior credit agreement			1,148
Other (income) expense total	(1,078)	10,520	39,078	30,533
Income from continuing operations before income taxes	19,582	3,851	22,217	30,329
Income taxes	6,157	(894)	4,399	7,030
Income from continuing operations	13,425	4,745	17,818	23,299
Income (loss) from discontinued operations, net of income taxes	(327)	2,514	(655)	8,822
Net income	13,098	7,259	17,163	32,121
Less: Net income attributable to noncontrolling interest	409	240	962	641
Net income attributable to Polypore International, Inc.	12,689	7,019	16,201	31,480
Net income attributable to Polypore International, Inc.:
Income from continuing operations	13,016	4,505	16,856	22,658
Income (loss) from discontinued operations	(327)	2,514	(655)	8,822
Net income attributable to Polypore International, Inc.	$ 12,689	$ 7,019	$ 16,201	$ 31,480
Net income attributable to Polypore International, Inc. per share - basic:
Continuing operations (in dollars per share)	$ 0.29	$ 0.10	$ 0.38	$ 0.50
Discontinued operations (in dollars per share)	$ (0.01)	$ 0.06	$ (0.02)	$ 0.19
Net income attributable to Polypore International, Inc. per share	$ 0.28	$ 0.16	$ 0.36	$ 0.69
Net income attributable to Polypore International, Inc. per share - diluted:
Continuing operations (in dollars per share)	$ 0.29	$ 0.10	$ 0.37	$ 0.49
Discontinued operations (in dollars per share)	$ (0.01)	$ 0.05	$ (0.01)	$ 0.19
Net income attributable to Polypore International, Inc. per share	$ 0.28	$ 0.15	$ 0.36	$ 0.68
Weighted average shares outstanding:
Weighted average shares outstanding - basic (in shares)	44,688,921	44,748,071	44,819,952	45,877,092
Weighted average shares outstanding - diluted (in shares)	45,337,707	45,386,263	45,420,185	46,526,755

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Debt

9 Months Ended

Sep. 27, 2014

Debt

Debt

4.             Debt

Debt, in order of priority, consists of:

(in thousands)	September 27, 2014		December 28, 2013
Senior credit agreement:
Revolving credit facility	$	6,000	$	—
Term loan facility	493,750		281,250
	499,750		281,250
7.5% senior notes	—		365,000
	499,750		646,250
Less current portion	31,000		16,875
Long-term debt	$	468,750	$	629,375

On April 8, 2014, the Company entered into a new senior secured credit agreement that provides for a $150,000,000 revolving credit facility and a $500,000,000 term loan facility. At that date, the Company used cash on hand, proceeds from the initial draw of $100,000,000 under the new term loan facility and borrowings of $33,000,000 under the new revolving credit facility to pay all outstanding principal and interest under the previous senior secured credit agreement and loan acquisition costs. The Company incurred loan acquisition costs of approximately $4,080,000, of which $3,944,000 was capitalized and will be amortized over the life of the new credit agreement. The Company wrote off unamortized loan acquisition costs of $1,012,000 associated with the previous credit agreement.

On May 8, 2014, the Company borrowed the remaining $400,000,000 available under the new term loan facility and used the proceeds to purchase and retire all of the previously outstanding 7.5% senior notes. The total purchase price for the notes was $385,542,000, consisting of principal of $365,000,000, redemption premiums of $20,531,000 and other expenses associated with the transaction.  In connection with the purchase, the Company incurred a $24,937,000 charge to income, comprised of the redemption premiums, write-off of unamortized loan acquisition costs of $4,395,000 and other expenses.

The new credit agreement matures in April 2019, is guaranteed by the Company’s domestic subsidiaries and is secured by substantially all assets of the Company and its domestic subsidiaries and a first priority pledge of 65% of the voting capital stock of its foreign subsidiaries. Interest rates are equal to, at the Company’s option, either an alternate base rate or the Eurocurrency base rate, plus a specified margin. The Company’s ability to pay dividends on its common stock is limited under the terms of the credit agreement. The Company is also subject to certain financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio, each of which the Company was in compliance with as of September 27, 2014.

At September 27, 2014, the Company had $6,000,000 outstanding under the revolving credit facility and $144,000,000 available for borrowing. The revolving credit facility matures in April 2019. 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.

Remaining minimum scheduled principal repayments of the term loan facility are as follows:

(in thousands)
2014	$	6,250
2015	25,000
2016	31,250
2017	43,750
2018	62,500
2019	325,000
	$	493,750

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Inventories

9 Months Ended

Sep. 27, 2014

Inventories

Inventories

3.             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)	September 27, 2014		December 28, 2013
Raw materials	$	37,606	$	39,357
Work-in-process	16,037		22,079
Finished goods	51,633		52,424
	$	105,276	$	113,860

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Discontinued Operations

9 Months Ended

Sep. 27, 2014

Discontinued Operations

Discontinued Operations

15.          Discontinued Operations

On December 19, 2013, the Company completed the sale of its Microporous business, which consisted of the production facilities in Piney Flats, Tennessee, and Feistritz, Austria, for $120,000,000.  The Company recognized a gain on sale of $35,200,000, net of direct transaction costs and income taxes, of which $35,855,000 was recognized in the fourth quarter of 2013.  The initial gain was subsequently reduced by $328,000 in the second quarter of 2014, as a result of the finalization of the working capital adjustment, and by $327,000 in the third quarter of 2014, related to the finalization of income taxes associated with the sale.  Microporous was previously included in the transportation and industrial segment. The results of operations from this business are classified as discontinued operations and are presented separately in the accompanying condensed consolidated statements of operations for all periods presented, summarized as follows:

	Three Months Ended					Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013		September 27, 2014			September 28, 2013
Net sales	$	—		$	18,560	$	—		$	54,505
Income (loss) from discontinued operations before income taxes	—			4,159		(518		)	13,954
Income (loss) from discontinued operations, net of income taxes	(327		)	2,514		(655		)	8,822

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Related Party Transactions

9 Months Ended

Sep. 27, 2014

Related Party Transactions

Related Party Transactions

11.          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 $626,000 and $676,000 at September 27, 2014 and December 28, 2013, respectively. Charges from the affiliates for work performed were $880,000 and $1,665,000 for the three and nine months ended September 27, 2014, respectively. Charges from the affiliates for work performed were $384,000 and $1,043,000 for the three and nine months ended September 28, 2013, respectively.  Amounts due to the affiliates were $173,000 and $254,000 at September 27, 2014 and December 28, 2013, respectively.

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Income Taxes

9 Months Ended

Sep. 27, 2014

Income Taxes

Income Taxes

7.             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 taxes recorded in the financial statements differ 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. During the nine months ended September 27, 2014, the Company’s income tax provision was also impacted by a $9,569,000 tax benefit in the second quarter related to expenses associated with the refinancing of its senior credit agreement and purchase of its 7.5% senior notes. During the nine months ended September 28, 2013, the Company’s income tax provision was impacted by a net tax benefit in the third quarter due to the reversal of a $1,697,000 reserve related to the completion of a tax audit. These were both considered discrete events for interim income tax provision purposes.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 27, 2014

Fair Value of Financial Instruments

Fair Value of Financial Instruments

5.             Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, long-term debt and an interest rate swap. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short-term maturities of these assets and liabilities. The carrying amount of borrowings under the senior credit agreement approximates fair value because the interest rates adjust to market interest rates. The Company measures the fair value of the interest rate swap on a recurring basis. See Note 6, “Derivative Instruments and Hedging Activities,” for related interest rate swap disclosures.

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 27, 2014

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

6.             Derivative Instruments and Hedging Activities

The Company may use certain derivative instruments to manage interest rate risk. Its principal objective is to reduce significant, unanticipated earnings fluctuations and cash flow variability that may arise from volatility in interest rates.  In August 2014, the Company entered into a forward-starting interest rate swap to pay a fixed interest rate of 1.9% and receive one-month LIBOR on a notional amount of $250,000,000 from its effective date of July 31, 2015 through its expiration on April 8, 2019.  The interest rate swap economically converts a portion of the Company’s LIBOR-based, variable-rate debt into fixed-rate debt.  Under the contract, the Company agrees with a counterparty to exchange, at specified intervals, the difference between floating- and fixed-rate interest payments on the notional amount.  The interest rate swap has been designated as a cash flow hedge and is recorded at fair value in the accompanying condensed consolidated balance sheets with changes in fair value, net of income taxes, recorded in accumulated other comprehensive income (loss) to the extent that the hedge is effective.  The Company will record pre-tax gains or losses reclassified from accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense in the periods when the hedged interest payments occur.

The interest rate swap is recorded in the condensed consolidated balance sheets as follows:

(in thousands)	Balance Sheet Location	September 27, 2014			December 28, 2013
Interest rate swap (current portion)	Accrued liabilities	$	(621	)	$	—
Interest rate swap (non-current portion)	Other assets	1,579			—
Total fair value of interest rate swap		$	958		$	—

The fair value of the interest rate swap is determined using inputs other than the quoted prices in active markets that are observable either directly or indirectly (level two in the fair value hierarchy).  The Company’s calculation is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve, taking into consideration the risk of nonperformance, including counterparty credit risk.

Cash flow hedge activity, net of income taxes, within accumulated other comprehensive income (loss) included:

	Three Months Ended				Nine Months Ended
(in thousands)	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Beginning balance	$	—	$	—	$	—	$	—
Hedging gain before reclassifications	607		—		607		—
Amount reclassified into earnings	—		—		—		—
Other comprehensive income	607		—		607		—
Ending balance	$	607	$	—	$	607	$	—

The estimated loss, net of income taxes, expected to be reclassified out of accumulated other comprehensive income (loss) into earnings during the next twelve months is approximately $393,000.

In order to qualify for hedge accounting, a specified level of hedge effectiveness between the derivative instrument and the item being hedged must exist at inception and throughout the hedged period. The Company must also formally document the nature of and relationship between the derivative instrument and the hedged item, as well as its risk management objective and strategy for undertaking the hedge transaction, and the method of assessing hedge effectiveness. For a hedge of a forecasted transaction, the significant characteristics and expected term of the forecasted transaction must be specifically identified, and it must be probable that the forecasted transaction will occur. If it is no longer probable that the hedged forecasted transaction will occur, the Company would recognize the gain or loss related to the derivative instrument in earnings. No derivative gains or losses, related to either ineffectiveness or to amounts excluded from effectiveness testing, were recognized in net income during the periods presented.

When the Company uses derivative instruments, it is exposed to credit and market risks. Credit risk exists when a counterparty to a derivative contract might fail to fulfill its performance obligations under the contract. The Company minimizes its credit risk by entering into transactions with counterparties with high quality, investment-grade credit ratings, as well as limiting the amount of exposure with each counterparty and regularly monitoring its financial condition. The Company’s interest rate swap is governed by a standard International Swaps and Derivatives Association master agreement. Market risk exists when the value of a derivative instrument might be adversely affected by changes in market conditions and interest rates. The Company manages market risk by limiting the type of derivative instruments and strategies it uses and the degree of market risk that it plans to hedge through the use of derivative instruments.  As a matter of policy, the Company does not use derivative instruments for trading or speculative purposes.

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Pension Plans

9 Months Ended

Sep. 27, 2014

Pension Plans

Pension Plans

8.             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						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Service cost	$	509		$	562		$	1,558		$	1,680
Interest cost	1,046			1,130			3,206			3,371
Expected return on plan assets	(106		)	(192		)	(324		)	(572		)
Amortization of prior service credit	(31		)	(13		)	(95		)	(39		)
Recognized net actuarial loss	260			434			798			1,293
Net periodic benefit cost	$	1,678		$	1,921		$	5,143		$	5,733

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Derivative Instruments and Hedging Activities (Details) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended						1 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014 Cash flow hedge	Sep. 28, 2013 Cash flow hedge	Sep. 27, 2014 Cash flow hedge	Sep. 28, 2013 Cash flow hedge	Sep. 27, 2014 Interest rate swaps	Aug. 31, 2014 Interest rate swaps	Sep. 27, 2014 Interest rate swaps Accrued liabilities	Sep. 27, 2014 Interest rate swaps Other assets	Aug. 31, 2014 Interest rate swaps LIBOR
Derivatives and Hedging Transactions
Fixed interest rate (as a percent)										1.90%
Variable interest rate													one-month LIBOR
Notional amount										$ 250,000,000
Interest rate swap (current portion)											(621,000)
Interest rate swap (non-current portion)												1,579,000
Total fair value of interest rate swap									958,000
Cash flow hedge activity, net of income taxes, within accumulated other comprehensive income (loss)
Beginning balance			(12,865,000)
Hedging gain before reclassifications					607,000		607,000
Other comprehensive income (loss)	(14,371,000)	7,504,000	(14,402,000)	2,926,000	607,000		607,000
Ending balance	(27,224,000)		(27,224,000)		607,000		607,000
Estimated gain (loss), net of income taxes, expected to be reclassified out of accumulated other comprehensive income (loss) into earnings during the next twelve months					(393,000)		(393,000)
Derivative gains (losses), related to either ineffectiveness or to amounts excluded from effectiveness testing					$ 0	$ 0	$ 0	$ 0

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Stock-Based Compensation Plans

9 Months Ended

Sep. 27, 2014

Stock-Based Compensation Plans

Stock-Based Compensation Plans

13.          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 $5,921,000 and $17,431,000 for the three and nine months ended September 27, 2014, respectively, and $4,897,000 and $14,194,000 for the three and nine months ended September 28, 2013, respectively. The income tax benefit related to stock-based compensation expense was $2,114,000 and $6,223,000 for the three and nine months ended September 27, 2014, respectively, and $1,740,000 and $5,044,000 for the three and nine months ended September 28, 2013, 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 6,251,963 shares of common stock. On February 27, 2014, the Company granted 369,745 stock options and 104,474 shares of restricted stock under the 2007 Plan with an aggregate grant-date fair value of $9,973,000, to be recognized over the vesting period for each award.  The stock options are time-vested options that vest annually in equal one-third installments and have 10-year terms and an exercise price of $34.98, 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 27, 2014Grant Assumptions
Expected term (years)	5.4
Risk-free interest rate	1.60	%
Expected volatility	53.7	%
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.

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 27, 2014

Derivative Instruments and Hedging Activities

Schedule of interest rate swap recorded in the condensed consolidated balance sheets

(in thousands)	Balance Sheet Location	September 27, 2014			December 28, 2013
Interest rate swap (current portion)	Accrued liabilities	$	(621	)	$	—
Interest rate swap (non-current portion)	Other assets	1,579			—
Total fair value of interest rate swap		$	958		$	—

Schedule of cash flow hedge activity, net of income taxes, within accumulated other comprehensive income (loss) included

	Three Months Ended				Nine Months Ended
(in thousands)	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Beginning balance	$	—	$	—	$	—	$	—
Hedging gain before reclassifications	607		—		607		—
Amount reclassified into earnings	—		—		—		—
Other comprehensive income	607		—		607		—
Ending balance	$	607	$	—	$	607	$	—

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Stock-Based Compensation Plans (Details) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended		0 Months Ended	9 Months Ended	0 Months Ended
	Sep. 27, 2014	Sep. 28, 2013	Sep. 27, 2014	Sep. 28, 2013	Feb. 27, 2014 2007 Stock Incentive Plan	Sep. 27, 2014 2007 Stock Incentive Plan	Feb. 27, 2014 2007 Stock Incentive Plan Stock option	Sep. 27, 2014 2007 Stock Incentive Plan Stock option	Feb. 27, 2014 2007 Stock Incentive Plan Restricted Stock
Stock Based Compensation Plans
Stock-based compensation	$ 5,921,000	$ 4,897,000	$ 17,431,000	$ 14,194,000
Income tax benefit related to stock-based compensation expense	2,114,000	1,740,000	6,223,000	5,044,000
Number of shares authorized for grant under 2007 plan						6,251,963
Restricted stock grants (in shares)									104,474
Aggregate grant-date fair value of awards granted					$ 9,973,000
Percentage of shares vesting in equal installments								33.00%
Term of Options granted under the plan								10 years
Exercise price (in dollars per share)							$ 34.98
Assumptions used in estimation of grant date fair value of options based on the Black Scholes option pricing model
Expected term							5 years 4 months 24 days
Risk-free interest rate (as a percent)							1.60%
Expected volatility (as a percent)							53.70%
Stock Based Compensation Plans
Granted (in shares)							369,745
Vesting period								3 years

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Condensed consolidated statements of income (Parenthetical) (7.5% senior notes)	Sep. 27, 2014
7.5% senior notes
Debt instrument, interest rate (as a percent)	7.50%

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Recent Accounting Pronouncements

9 Months Ended

Sep. 27, 2014

Recent Accounting Pronouncements

Recent Accounting Pronouncements

2.             Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

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Pension Plans (Tables)

9 Months Ended

Sep. 27, 2014

Pension Plans

Schedule of components of net periodic benefit cost

	Three Months Ended						Nine Months Ended
(in thousands)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Service cost	$	509		$	562		$	1,558		$	1,680
Interest cost	1,046			1,130			3,206			3,371
Expected return on plan assets	(106		)	(192		)	(324		)	(572		)
Amortization of prior service credit	(31		)	(13		)	(95		)	(39		)
Recognized net actuarial loss	260			434			798			1,293
Net periodic benefit cost	$	1,678		$	1,921		$	5,143		$	5,733

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Treasury Stock (Details) (Common Stock, USD $)	9 Months Ended		9 Months Ended		9 Months Ended
	Sep. 27, 2014 May 2014 Share Repurchase Program	May 31, 2014 May 2014 Share Repurchase Program	Sep. 28, 2013 2013 Share Repurchase Program	Feb. 19, 2013 2013 Share Repurchase Program	Sep. 27, 2014 Repurchases related to restricted stock grants	Sep. 28, 2013 Repurchases related to restricted stock grants
Treasury Stock disclosures
Maximum number of shares authorized to be repurchased		4,500,000		4,000,000
Shares of common stock repurchased	450,000		2,000,000
Amount at which shares of common stock were repurchased	$ 20,004,000		$ 80,343,000
Amount at which shares of common stock were withheld and repurchased to satisfy certain employees' withholding tax liabilities related to restricted stock grants					$ 323,000	$ 325,000

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Noncontrolling Interest

9 Months Ended

Sep. 27, 2014

Noncontrolling Interest

Noncontrolling Interest

12.          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 nine months ended September 28, 2013, the Company and Camel made equity contributions of $2,470,000 and $1,330,000, respectively, to fund capital expenditures.

Daramic Xiangyang has notes payable to Camel and the Company for the purchase of certain assets. 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 note payable to Camel had a principal balance of $10,348,000 and $5,910,000 at September 27, 2014 and December 28, 2013, respectively, and is included in “Other” non-current liabilities in the accompanying condensed consolidated balance sheets. The note payable to the Company eliminates in consolidation.