UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

          Commission File Number  333-119224

Polypore, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s Telephone Number, Including Area Code

(704) 587-8409

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

None

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 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.     Yes þ          No o

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

The Company currently has 100 shares of common stock outstanding, all of which are owned indirectly by Polypore International, Inc. Because no public market exists for such shares, the aggregate market value of the common stock held by non-affiliates of the Company is not determinable.

Polypore, Inc.

Index to Annual Report on Form 10-K

For the Fiscal Year Ended January 1, 2005

In this Annual Report on Form 10-K, the words “Polypore,” “Company,” “we,” “us” and “our” refer to Polypore, Inc. together with its subsidiaries unless the context indicates otherwise. References to “fiscal year” mean the 52 or 53 week period ending on the Saturday that is closest to December 31. The period from January 4, 2004 through May 1, 2004 includes 17 weeks and the period from May 2, 2004 through January 1, 2005 includes 35 weeks (together, 52 weeks), or “fiscal 2004.” The fiscal year ended January 3, 2004, or “fiscal 2003,” included 53 weeks. The fiscal years ended December 28, 2002, or “fiscal 2002,” December 29, 2001, or “fiscal 2001,” and December 30, 2000, or “fiscal 2000,” included 52 weeks.

Forward-looking Statements

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Annual Report on Form 10-K that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about Polypore’s plans, objectives, strategies and prospects regarding, among other things, the financial condition, results of operations and business of Polypore and its subsidiaries. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained under the captions “Business,” “Properties,” “Controls and Procedures” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company’s financial statements or the notes thereto, or the “Risk Factors” set forth in Exhibit 99.1 hereto. These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Annual Report on Form 10-K, including the risks outlined under “Risk Factors” set forth in Exhibit 99.1 hereto, 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, the following, among other things:

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’s results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We do not undertake any obligation to update these forward-looking statements or the Risk Factors set forth in Exhibit 99.1 to this Annual Report on Form 10-K to reflect new information, future events or otherwise, except as may be required under federal securities laws.

We have filed this Annual Report on Form 10-K and Current Reports on Form 8-K, and will file or furnish other reports pursuant to Section 13(a) or 15(d) under the Exchange Act, with the Securities and Exchange Commission (“Commission” or “SEC”). You may inspect a copy of any of our filings without charge at the Public Reference Room of the SEC at 450 Fifth Street, N.W., Room 1024, Washington, DC 20549. You may obtain copies of our filings from such office at prescribed rates. You may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including Polypore, Inc., that file electronically with the SEC. Our reports are available on the SEC website as soon as reasonably practicable after we electronically file such materials with the SEC. The reports are also available in print to any stockholder who requests them by contacting our Manager of Investor Relations, Mark Hadley, at the address above for the Company’s principal executive offices.

General

Polypore, Inc., a Delaware corporation formed in 1994, is a worldwide developer, manufacturer and marketer of highly specialized polymer-based membranes used in separation and filtration processes. Our products and technologies target specialized applications and markets that require the removal or separation of various materials from liquids, with such materials ranging in size from microscopic to those visible to the human eye.

We manage our operations under two business segments: energy storage and separations media. The energy storage segment, which accounts for approximately two-thirds of our total sales, produces different types of membranes that function as separators in lead-acid batteries used in transportation and industrial applications and in lithium batteries used in electronics applications. The separations media segment, which accounts for approximately one-third of our total sales, produces membranes used in various healthcare and industrial applications, including hemodialysis, blood oxygenation, ultrapure water filtration, degasification and other specialty applications.

We believe that we are the number one or number two provider, in terms of market share, of membrane products for use in our primary separation and filtration markets. Our markets are highly specialized and constitute an attractive mix of stability and growth. We generally compete with only a few other companies. We enjoy longstanding relationships and collaborative partnerships with a diverse base of customers who are among the leaders in their respective markets. These relationships are strengthened by our ability to develop highly technical membrane products that meet the precise and evolving needs of our customers. Most of our products require years of cooperative development with customers, extensive testing and, in some applications, regulatory approval prior to the introduction of our customers’ products to the market. Although many of our products are critical functional components in our customers’ end products, they typically represent a relatively small percentage of the final delivered cost. In many of our markets, we are often selected as the customer’s exclusive supplier.

Historically, our growth has been both organic and through acquisitions. We significantly diversified our portfolio of products by acquiring Celgard from the Hoechst Celanese Corporation in December 1999, which gave us access to the fast-growing electronics and specialty filtration markets, and Membrana GmbH, a German corporation, from Acordis AG in February 2002 to expand our presence in the healthcare and specialty filtration markets. Almost every process stream has a filtration application, and many end products require materials possessing specialized filtration and separation functions. The large and extremely fragmented filtration and separation market presents an opportunity for future consolidation.

Our business strategy focuses on maintaining our existing strong collaborative relationships with our customers. Our research and development team works closely with our customers on product development, resulting in products customized to our customers’ manufacturing and end-use specifications. For example, as the power output requirement for rechargeable lithium batteries increases, we work closely with our customers to develop innovative separators, such as our proprietary trilayer separator, to meet the increased technical demands and specifications.

In addition, we seek to expand our products into adjacent markets and pursue new, developing niche end-markets. For example, we intend to expand our existing pipeline of products targeting future technology applications, which currently includes membranes for fuel cells, hybrid electric vehicles and specialty filtration applications. In addition, we believe there are significant opportunities to expand the geographical distribution of our existing products. Our Thailand facility, opened in 2002, gives us a local presence to serve the fast-growing Asian automobile fleet.

Finally, we intend to increase profitability through ongoing initiatives designed to improve efficiencies in the following areas:

Products, markets and customers

Our business segments are energy storage and separations media. Within each of these segments, we develop and produce products that relate to certain industrial and specialty technology end-use markets. The following table describes our key products and end-use markets served:

Energy storage

Our separators in the energy storage segment are used in lead-acid and lithium batteries to separate the positive and negative electrodes and control the flow of ions between them. These separators require specialized technical engineering and must be manufactured to extremely demanding requirements including thickness, porosity, mechanical strength, chemical and electrical resistance. During pro forma fiscal 2004, 2003 and 2002, our energy storage businesses accounted for 67.9%, 66.9% and 68.2% of our sales, respectively.

Transportation and industrial applications. We develop, manufacture and market a complete line of polyethylene and other resin separators for use in lead-acid batteries. Approximately 80% of the lead-acid battery separators we sell are used in starting, lighting and ignition (“SLI”) batteries for automobiles and other motor vehicles and approximately 20% are used in batteries for industrial applications such as forklifts, marine applications and stationary applications such as backup power for telecom infrastructure and uninterruptible power supply systems.

Separators used in lead-acid batteries are among the most highly engineered and performance critical components of the battery, yet only represent a small portion of the battery’s total cost. Our separators are designed to enhance battery performance and stability. We use polyethylene, polypropylene, and/or polyester mats to achieve product characteristics that satisfy highly engineered customer specifications. We have enhanced battery performance by constantly improving the balance between pore size and narrow pore distribution. Membrane pores must be large enough to allow ions to pass through, but small enough to prevent contamination from conductive particles, which cause short circuits. Our top five separator customers are Exide Technologies, Johnson Controls, Inc., East Penn Manufacturing Co., Inc., Fiamm Group and EnerSys, Inc.. We believe we have the number one aggregate market share position in terms of providing battery separators to the global transportation and industrial battery market.

Electronics applications. We also develop, manufacture and market a complete line of polypropylene and polyethylene monolayer and proprietary multilayer separators used for rechargeable (Li2) and disposable (Li1) lithium batteries. Approximately 80% of the lithium battery separators we sell are used in rechargeable lithium batteries and 20% are used in disposable lithium batteries. Rechargeable lithium batteries are used in consumer electronic products such as laptop computers, mobile telephones, cameras and PDAs. Disposable lithium batteries are primarily used in cameras, portable stereos and military applications. Our top lithium battery separator customers include Matsushita Battery Industrial Company Limited, BYD Company Limited, Tianjin Lishen Battery Joint-Stock Co., Ltd., E-One Moli Energy Corp., and Saft SA. We believe we are among the top three providers of battery separators to the lithium battery market and have been since its development in the early 1990’s. We believe these three providers supply more than 90% of the battery separator requirements for the lithium battery market. Market share fluctuates based on many factors including capacity, relative customer strength, product performance and economic conditions.

Separations media

In our separations media segment, we manufacture and market filtration membranes for use in hemodialysis, oxygenation and plasmapheresis machines in the healthcare industry as well as other industrial and specialty applications in the semiconductor, microelectronics, food and beverage and water purification industries. During pro forma fiscal 2004, 2003 and 2002, our separations media business accounted for 32.1%, 33.1% and 31.8% of our sales, respectively.

Hemodialysis. We are a leading independent developer, manufacturer and marketer of hemodialysis membranes, which are a critical component of dialyzers, a consumable item for kidney dialysis.

Dialysis is the artificial process that performs the function of a healthy kidney for patients with end-stage renal disease (“ESRD”). In a healthy person, the kidney carries out certain excretory and endocrine functions, including filtering toxins from the blood and controlling blood pressure. For an ESRD patient on dialysis, the membranes in the dialyzer perform these filtering functions. The membranes consist of

thousands of fibers that resemble hollow straws slightly larger than a human hair. These fibers have micropores in their walls at a density of millions of holes per square inch. The size and distribution of these micropores trap harmful toxins while allowing healthy blood to pass through.

Because dialyzers are designed to use specific membrane technology and require U.S. Food and Drug Administration (“FDA”) approval, a dialyzer manufacturer’s relationship with its membrane supplier is strategically important, and the costs of changing suppliers are substantial. Switching to a membrane manufactured by a different supplier can involve two or three years of development costs. Because of the critical mission and integral role membranes play and the difficulty and expense involved in their substitution, we believe that major membrane manufacturers will play an important role in the future structure of the dialyzer industry. Key customers of the Company’s hemodialysis membranes include dialyzer manufacturers Gambro Dialysatoren GmbH & Co. KG (“Gambro”), Haidylena for Advanced Medical Industries, Nipro Co. Ltd. and Bellco S.p.A.

Hemodialysis filtration membranes are fabricated from two classes of materials: cellulosic and synthetic. Historically, most filtration membranes for dialyzers have been manufactured with cellulosic materials. In the last several years, membranes manufactured from synthetic materials have captured most of the market growth, while unit shipments of cellulosic materials have remained relatively flat. Since 2001, we have invested in developing and improving our own synthetic products and building new capacity to support the expected growth in this segment. We believe that our next generation synthetic product, Purema, which was first introduced at a trade show in May 2004, offers best-in-class technical performance relative to other membranes in the marketplace. The product is currently being evaluated by several potential customers.

Blood oxygenation. We believe we are the world’s leading developer, manufacturer and marketer of membranes for use in blood oxygenators, with over 80% of the estimated global market share. A blood oxygenator is a device containing highly specialized separation media used to remove carbon dioxide from the blood while oxygen is diffused through the membrane and into the blood. Oxygenators are primarily sold to hospitals for use in heart-lung bypass surgical procedures. Because blood oxygenators are designed to utilize a specific membrane technology and require regulatory approval, an oxygenator manufacturer’s relationship with its membrane supplier is vital and switching costs can be substantial. We sell our membranes to all major blood oxygenator producers, including Dideco S.p.A./ Sorin/ Cobe Group, Medtronic Inc. and Jostra AG.

Plasmapheresis. We are a leading developer, manufacturer and marketer of extracorporeal therapeutic plasmapheresis membranes. Plasmapheresis is the extracorporeal separation of blood cells and plasma from plasma proteins in different diseases. Therapeutic plasmapheresis is a new and growing field that is gaining acceptance among the medical community. For example, the German government has recently authorized public insurance reimbursement for rheumatoid arthritis patients who receive therapeutic plasmapheresis treatments. Major manufacturers of plasmapheresis equipment include Dideco S.p.A., Fresenius Medical Care and Gambro.

Industrial and specialty applications. We develop, manufacture and market a number of industrial and specialty filtration and filtration-related products. Liquid filtration is a diverse and high growth market, and almost every process stream has a filtration application. We supply a broad portfolio of membranes based on flat sheet, tubular and capillary technology. Our industrial and specialty products are focused on the gas/liquid and solid/liquid separations sectors in a wide variety of processing end-markets including semiconductor and microelectronics manufacturing, food and beverage processing and water purification. In many of those end-markets, there is growing demand for ever-increasing purity levels in the manufacturing process. We collaborate with customers to develop new products using various media to address demanding customer liquid filtration and purification specifications. In addition, we develop products that can be used in a multitude of applications. The control of dissolved gases in liquids is a key part of the manufacturing process in many industries. The same fibers used in our oxygenation products (CELGARD® and OXYPLUS®) are used in these degasification applications.

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

We have also developed several functional membranes for controlling moisture in fuel cell systems. In addition, we have filed several patent applications for membranes used in polymer electrolyte membrane type fuel cells, including novel concepts for proton exchange film.

New product development

We have focused our research and development efforts on increasing production capacity and improving production processes, developing products for new markets based on existing technologies and developing new process technologies to enhance existing businesses and allow entry into new businesses. We spent approximately $13.6 million (3% of our net sales), $13.4 million (3% of our net sales) and $10.7 million (3% of our net sales) in pro forma fiscal 2004, 2003 and 2002, respectively, on research and development.

We have four research and development centers. Our battery separator product research is performed at technical centers at our plants in Owensboro, Kentucky; Norderstedt, Germany; and Charlotte, North Carolina. Our healthcare technical center is located in Obernberg, Germany and will be relocated to Wuppertal, Germany over the course of 2005.

All of the products that we develop are subject to multiple levels of extensive and rigorous testing. The qualification of separators for use in industrial and automotive applications, for instance, may require one or more years of testing by our staff and battery manufacturers.

End-market overview

The global market for separation and filtration membranes is large and extremely fragmented, with most suppliers producing products for separate and distinct niches. The membranes we manufacture provide these specialized functions for our customers, who use our membranes as a critical component within their own products.

Industry analysts estimate that the annual global market for lead-acid batteries is approximately $30 billion, or 770 million units, of which approximately $25 billion, or 600 million units, are lead-acid batteries for SLI applications for motor vehicles. Although separators are a critical component within lead-

acid batteries, they constitute a small portion of the overall cost. Accordingly, the size of the separator market is much smaller than the overall lead-acid battery market. We estimate that automobile lead-acid batteries are approximately 80% of our lead-acid battery separator revenue. The SLI lead-acid battery market is characterized by stable demand because of the relatively short replacement cycle for batteries in automobiles. For example, industry analysts estimate that the average battery is replaced every three to four years. As a result of this short replacement cycle and due to the large number of motor vehicles worldwide, we estimate that approximately 80% of automotive and other SLI lead-acid batteries are for the replacement market. The primary demand driver of the replacement market is the size of the worldwide fleet of motor vehicles, which, according to Ward’s Motor Vehicles Facts and Figures, has been growing approximately 3% per year. Secondary drivers of the replacement market include weather patterns (hot summers and cold winters tend to shorten battery life), the longer average life of vehicles and the larger average size of engines. We believe that the market for our major product, polyethylene separators, has historically grown at a faster pace than the underlying lead-acid battery market because polyethylene separators have been taking market share from alternative materials such as PVC, cellulose and rubber. Major lead-acid battery manufacturers include Exide Technologies, Johnson Controls Inc., Delphi Energy & Engine Management Systems, East Penn Manufacturing Co., Inc. and Fiamm Group.

According to industry analysts, the market for rechargeable lithium batteries used in electronic devices is over $3 billion, and the market for disposable lithium batteries is approximately $700 million. As with lead-acid batteries, the size of the market for separators is considerably smaller than the overall market for lithium batteries because separators constitute only a small portion of overall cost. Approximately 80% of our unit volume of lithium battery separators is comprised of separators for rechargeable lithium batteries (Li2), while approximately 20% is comprised of separators for disposable lithium batteries (Li1). According to industry analysts, sales in the rechargeable lithium battery market grew at a compound annual growth rate of approximately 22% from 1996 to 2001 and are expected to grow at a compound annual growth rate of approximately 16% through 2011. Growth in the rechargeable lithium battery business has historically been driven by growth in the underlying markets for portable electronic products (primarily mobile telephones and laptop computers) and the displacement of nickel-based battery technologies. The continuing market growth is being driven by the increasing mobility of consumers demanding portable electronic devices, the increasing number of consumers purchasing back-up batteries, and the increasing functionality and complexity of these devices requiring more battery power and more batteries per electronic device. Lithium-based batteries exhibit superior energy density and weight characteristics relative to other battery technologies such as nickel-based materials and have become the standard in the majority of consumer end-markets. For example, we believe that over 90% of new mobile telephones and laptop computers contain rechargeable lithium batteries. Major lithium battery manufacturers include Sanyo Electric Company Limited, Matsushita Battery Industrial Company Limited (Panasonic brand), Sony Corporation, Samsung Electronics Co. Ltd., Duracell International Incorporated, BYD Company Limited, Tianjin Lishen Battery Joint-Stock Co., Ltd., LG Electronics, Inc. and Saft SA.

Demand for dialyzers is driven by the aging population in developed countries, increased ESRD incidence, longer life-expectancy of treated ESRD patients, improving access to treatment in developing countries and the trend in the United States toward single-use rather than multiple-use dialyzers. According to the European Renal Association European Dialysis and Transplant Association, the number of worldwide ESRD patients has been growing 7% per year over the last twenty years to reach approximately 1.3 million ESRD patients globally in 2003. ESRD patients generally receive three kidney dialysis treatments per week, resulting in stable and recurring demand for dialyzers and our membranes.

Sales and marketing

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

We employ a direct worldwide sales force and utilize approximately 50 experienced people who manage major customer relationships. Many of our sales representatives are engineers or similarly trained technical personnel who have advanced knowledge of our products and the applications for which they are used. Our

sales representatives are active in new product development efforts and are strategically located in the major geographic regions in which our products are sold. In certain geographic areas, we use distributors or other agents.

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

In pro forma fiscal 2004, net sales to our top five customers represented approximately 35% of our total net sales. Exide Technologies represented approximately 14% of our sales in pro forma fiscal 2004.

Manufacturing and operations

General

We have manufacturing facilities in the major geographic markets of North America, Europe and Asia. We manufacture our lead-acid separators at our facilities in Owensboro, Kentucky; Corydon, Indiana; Selestat, France; Norderstedt, Germany; Potenza, Italy; Prachinburi, Thailand; and Feistritz, Austria. We manufacture our lithium battery separators and industrial and specialty separation and filtration media products at our facilities in Charlotte, North Carolina. We have finishing operations at our facility in Shanghai, China. We manufacture healthcare membranes at our facilities in Wuppertal, Germany and Charlotte, North Carolina.

In pro forma fiscal 2004, 2003 and 2002, we generated revenues from customers outside the United States of approximately 77%, 72% and 68%, respectively. We typically sell our products in the currency of the country in which the products are manufactured rather than the local currency of our customers.

Our manufacturing facilities in North America accounted for 41% of total sales for pro forma fiscal 2004, with facilities in Europe accounting for 55% and facilities in Asia accounting for 4%. Our foreign operations are, and any future foreign operations will be, subject to certain risks that could materially affect our sales, profits, cash flows and financial position. These risks include fluctuations in foreign currency exchange rates, inflation, economic or political instability, shipping delays, changes in applicable laws and regulatory policies and various trade restrictions, all of which could have a significant impact on our ability to deliver products on a competitive and timely basis. The future imposition of, or significant increases in the level of, customs duties, import quotas or other trade restrictions could also have a material adverse effect on our business, financial condition and results of operations.

We recently completed a significant multi-year expansion program through construction of a new plant in Prachinburi, Thailand, the opening of a new facility in Shanghai, China and expansions of our Charlotte, North Carolina and Wuppertal, Germany plants. These expansions increased our production capacity for our lead-acid battery separators, lithium battery separators and hemodialysis membranes, respectively. Our facilities have plant-wide, real-time control and monitoring systems to ensure all products meet customer specifications.

Manufacturing processes

All of our manufacturing processes involve an extrusion process. To produce Liqui-Cel® membrane contactors, hollow fibers are glued into a cartridge form by extruding either a polyolefin resin or an epoxy adhesive before final assembly into a finished module. To produce our flat sheet and hollow fiber membranes, we use one of three basic membrane processes that begin with an extrusion step. These include phase separation (thermally-induced, solvent-induced, or reaction-induced), “dry stretch” (“Celgard” process), and composite extrusion/ extraction (“Daramic” process) processes. Each process, and its resulting product properties, is well suited to the various membrane requirements for our target markets.

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

Similar to our Daramic® product, we begin the manufacture of lithium battery separators with an extrusion step. However, no solvent or other additives are used in conjunction with the polymer at extrusion (hence the “dry” stretch process description). The same “Celgard” process is used for producing CELGARD® flat sheet monolayer and proprietary trilayer separators. After extrusion, we use a lamination step for the trilayer product, followed by annealing and stretching to produce a microporous film. Some special coated and non-woven laminate products are also manufactured for specialty battery and other applications.

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

Competition

Our markets are highly competitive. Our primary competitors in the market for separators used in industrial and automotive batteries are Entek International LLC (“Entek”) in North America and Europe and Nippon Muki Co., Ltd. in Japan. In addition, we have a number of smaller competitors in South Korea, Indonesia and China. In the market for separators used in lithium batteries, we compete with Asahi Kasei Corporation, Tonen Corporation (a subsidiary of ExxonMobil), Ube Industries Limited, and Entek. In addition, we have a number of smaller competitors elsewhere in Asia. In the healthcare area, we compete with Fresenius Medical Care, Gambro, Asahi Medical Corporation, Terumo Medical Corporation and Toyobo Co. Ltd. among others. Product innovation and performance, quality, service, utility and cost are the primary competitive factors, with technical support being highly valued by the largest customers.

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

Raw materials

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

The primary raw materials we use to manufacture most of our products are polyethylene and polypropylene resins, silica, paper, and oil. Our major supplier of polyethylene resins is Ticona LLC and our major suppliers of polypropylene resins are Exxon Chemical Company (a subsidiary of ExxonMobil) and Fina (a subsidiary of Total). Our major suppliers of silica are PPG Industries, Inc., Degussa A.G. and Acordis, while our major supplier of oil is Shell Chemical LP (a subsidiary of Royal Dutch/ Shell).

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

Management information systems

We use a combination of flexible systems to meet the ever-changing needs of our operations and customers. In our Selestat, Prachinburi, Norderstedt, Owensboro and Corydon plants, we use an integrated application that includes an Oracle-based financial system and a proprietary information system custom designed for our manufacturing, inventory purchasing and quality operations. The same solution suite is being implemented in our Potenza plant. In the Charlotte, North Carolina facility, we use the MAPICS SyteLine ERP system. In Wuppertal and Obernberg, Germany, we employ the SAP R/3 ERP System.

These systems are bridged together for financial consolidation through the GEAC, Comshare Management Planning and Control application. The vast majority of all other applications are built on current Microsoft technology.

Employees

At January 1, 2005, the Company had approximately 2,000 employees worldwide. We offer our full-time employees a complete package of benefits that varies by country and end-market focus and may include health and life insurance, medical and dental benefits and retirement plans. We believe that our compensation and benefits are competitive by industry standards. Hourly employees at eight of our 11 facilities are unionized and account for approximately 66% of our total employees. These facilities were unionized prior to our ownership; no facility has been unionized under our ownership. Negotiations on a new labor contract with the union representing our Owensboro, Kentucky facility are in process. We have historically had good relationships with our unions, with no occurrences of any work stoppages. The following summarizes those employees represented by unions as of January 1, 2005:

Environmental matters

We are subject to a broad range of federal, state, local and foreign environmental laws and regulations which govern, among other things, air emissions, wastewater discharges and the handling, storage disposal and release of wastes and hazardous substances. It is our policy to comply with applicable environmental requirements at all of our facilities. We are also subject to laws, such as the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), that may impose liability retroactively and without fault for releases or threatened releases of hazardous substances at on-site or off-site locations. From time to time, we have identified environmental compliance issues at our facilities. For more information, see “Item 3. Legal Proceedings” below.

We are not aware of any material off-site releases for which we may be liable under CERCLA or any other environmental or health and safety law. We already have conducted some cleanup of the on-site releases at some facilities and we will be conducting additional cleanups of on-site contamination at other facilities under regulatory supervision or voluntarily. Costs for such work and related measures (such as eliminating sources of contamination) could be substantial, particularly at our Wuppertal, Germany and Potenza, Italy facilities. We have established reserves for environmental liabilities of approximately $28.4 million as of January 1, 2005. However, we do not anticipate that the cleanups will disrupt operations at our facilities or have a material adverse effect on our business, financial condition or results of operations. In addition, we have asserted claims under an indemnity from Akzo Nobel (“Akzo”), the prior owners of Membrana GmbH, that will provide indemnification of up to €15.0 million ($20.4 million at January 1, 2005), representing a substantial percentage of anticipated environmental costs at Wuppertal. To date we have not had any significant disagreement with Akzo over its environmental indemnity obligations to us.

Intellectual property rights

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

Our manufacturing facilities are strategically located to serve our customers globally:

Between the existing capacity at the facilities listed in the table above, planned productivity gains and planned capital expenditure for fiscal 2005, we believe we will have sufficient capacity available to meet our needs for fiscal 2005.

We are currently a party to various claims and legal actions that arise in the ordinary course of business. We believe such claims and legal actions, individually and in the aggregate, will not have a material adverse effect on our business, financial condition or results of operations.

With respect to environmental matters, the Kentucky Natural Resources and Environmental Protection Cabinet recently concluded an enforcement action against us filed on March 19, 2004 concerning our Owensboro, Kentucky facility relating to certain air emissions requirements. Pursuant to this action, we

entered into an agreed order with the Cabinet obliging us to undertake certain remedial measures. We believe we have substantially complied with our obligations under the agreed order. If there are any outstanding violations of environmental requirements at Owensboro or any other of our facilities, we do not believe that such violations would disrupt operations at our facilities or would have a material adverse effect on our business, financial condition or results of operations.

None

Part II

All of our issued and outstanding shares of common stock are owned indirectly by Polypore International, Inc. (“Polypore International”). Warburg Pincus Private Equity VIII, L.P., Warburg Pincus International Partners, L.P. (collectively, “Warburg Pincus”) and certain members of management own, directly or indirectly, all of the equity securities of Polypore International. Our common stock has not been registered under the Securities Act or the Exchange Act, and there is no established public trading market for our common stock.

We did not declare or pay any dividends on our common stock in our two most recent fiscal years, and we do not expect to pay any such dividends in 2005. Our senior secured credit facilities include negative covenants restricting or limiting our and our subsidiaries’ ability to, among other things, declare dividends, make payments on or redeem or repurchase capital stock. In addition, the indenture relating to our $225.0 million aggregate principal amount of 8³/4% senior subordinated dollar notes due 2012 and €150.0 million aggregate principal amount of 8³/4% senior subordinated euro notes due 2012 (collectively, the “8³/4% Notes”) also contains negative covenants which restrict or limit our ability to pay dividends. For more detailed information about our credit facilities and 8³/4% Notes, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 7 to our Consolidated Financial Statements.

We did not repurchase any of our common stock during the fourth quarter of 2004.

On May 13, 2004, in connection with the acquisition of Polypore, Inc. by PP Acquisition Corporation, we completed the offering of our 8³/4% Notes to certain qualified institutional buyers in a transaction exempt from registration under Rule 144A of the Securities Act. For more information on the Polypore, Inc. acquisition, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In connection with the offering of the 8³/4% Notes, we entered into a registration rights agreement with the initial purchasers of the 8³/4% Notes pursuant to which we agreed to offer new 8³/4% senior subordinated dollar notes due 2012 and 8³/4% senior subordinated euro notes due 2012, registered under the Securities Act, in exchange for the original notes. The exchange offer was completed on December 13, 2004.

On October 18, 2004, Polypore International, our parent company, issued 10¹/2% senior discount notes due 2012. These notes are not our obligations and are effectively subordinated to all of our existing and future indebtedness and other liabilities.

The following table presents selected historical consolidated financial data of Polypore for the period from May 2, 2004 through January 1, 2005 (Post-Transactions), the period from January 4, 2004 through May 1, 2004 (Pre-Transactions), and each of the preceding four years ended January 3, 2004 (Pre-Transactions). The selected historical consolidated financial data has been derived from Polypore’s audited consolidated financial statements.

On May 13, 2004, Polypore and its shareholders consummated a stock purchase agreement with PP Acquisition Corporation, a subsidiary of Polypore International, pursuant to which PP Acquisition Corporation purchased all of the outstanding shares of the Company’s capital stock. At the time of the closing of the acquisition, PP Acquisition merged with and into Polypore, with Polypore as the surviving corporation. For more information on this transaction, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

On November 16, 2001, we acquired all of the outstanding shares of Jungfer. On February 28, 2002, we acquired all of the outstanding shares of Membrana GmbH. The results of operations of Jungfer and

Membrana GmbH are included in Polypore’s consolidated financial statements from the date of each acquisition.

The information presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.