Prepared by R.R. Donnelley Financial -- Amendment No. 4 To Form S-1

S-1/A 1 ds1a.htm AMENDMENT NO. 4 TO FORM S-1 Prepared by R.R. Donnelley Financial -- Amendment No. 4 To Form S-1

As filed with the Securities and Exchange Commission on March 26, 2002

Registration No. 333-76842

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 4

FORM S-1

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

MedSource Technologies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		3841		52-2094496
(State of Incorporation)		(Primary S.I.C. Code Number)		(IRS Employer Identification No.)

110 Cheshire Lane, Suite 100

Minneapolis, MN 55305

(952) 807-1234

(Address, including zip code and telephone number, of registrant’s principal executive offices)

Richard J. Effress

Chairman of the Board of Directors and Chief Executive Officer

MedSource Technologies, Inc.

110 Cheshire Lane, Suite 100

Minneapolis, MN 55305

(952) 807-1234

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Edward R. Mandell

Jenkens & Gilchrist Parker Chapin LLP

405 Lexington Avenue

New York, NY 10174

Telephone No.: (212) 704-6000

Telecopier No.: (212) 704-6288

Joseph J. Caffarelli

Senior Vice President and Chief Financial Officer

MedSource Technologies, Inc.

110 Cheshire Lane, Suite 100

Minneapolis, MN 55305

Telephone No.: (952) 807-1234

Telecopier No.: (952) 807-1235

Patrick O’Brien

Ropes & Gray

One International Place

Boston, MA 02110

Telephone No.: (617) 951-7000

Telecopier No.: (617) 951-7050

Approximate date of commencement of proposed sale to public: From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued March 26, 2002

7,500,000 Shares

MedSource Technologies, Inc.

COMMON STOCK

MedSource Technologies, Inc. is offering shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $15.00 and $17.00 per share.

We have applied for approval for quotation of our common stock on the Nasdaq National Market under the symbol “MEDT.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 9.

PRICE $ A SHARE

	Price to Public	Underwriting Discounts and Commissions	Proceeds to Company
Per Share	$	$	$
Total	$	$	$

MedSource Technologies, Inc. and two selling stockholders have granted the underwriters the right to purchase up to an additional 800,000 shares and 325,000 shares, respectively, to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 2002.

MORGAN STANLEY

BEAR, STEARNS & CO. INC.

WACHOVIA SECURITIES

THOMAS WEISEL PARTNERS LLC

, 2002

The inside front cover includes 12 pictures of various MedSource manufactured products. The page also includes the following text: "MedSource Technologies, Inc. is a provider of engineering, product development and manufacturing services, and supply chain management solutions to the medical device industry."

TABLE OF CONTENTS

		Page
Prospectus Summary		3
Risk Factors		9
Forward-Looking Statements		20
Use of Proceeds		21
Dividend Policy		22
Capitalization		23
Dilution		25
Selected Unaudited Pro Forma Condensed Combined Financial Information		26
Selected Consolidated Financial Data		31
Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Selected Financial Data of Predecessor Companies		43
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Predecessor Companies		45

		Page
Business		49
Management		60
Related Party Transactions		69
Principal and Selling Stockholders		74
Description of Capital Stock		79
Shares Eligible for Future Sale		83
Underwriting		85
Legal Matters		87
Experts		87
Where You Can Find Additional Information		88
Index to Consolidated Financial Statements and Predecessor Company Financial Statements		F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of common stock. Unless otherwise provided, in this prospectus, the “Company,” “we,” “us” and “our” refer to MedSource Technologies, Inc. and its subsidiaries.

Until , 2002, all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus, including the more detailed information and the financial statements appearing elsewhere in this prospectus.

Our Business

We are an engineering and manufacturing services provider to the medical device industry. Our customers include many of the largest medical device companies in the world, such as Boston Scientific, Johnson & Johnson affiliates and Medtronic, as well as other large and emerging medical device companies. We provide product development and design services, precision metal and plastic part manufacturing, including milling, lathe turning, wire forming, stamping, plastic tubing and injection molding, and product assembly services. In addition, we provide supply chain management services, including the sourcing of components that we do not manufacture internally, such as electronic circuitry, from third party suppliers for the devices we assemble for our customers. Through these products and services, we offer our customers a single source solution for their device development and manufacturing needs, accelerated product development time, and reduced costs, allowing them to focus on their core competencies such as research and sales and marketing. Examples of the medical devices and components we manufacture for our customers include endoscopic instruments, set screws and pins for pacemakers, interventional catheters and guidewires and orthopedic implants such as hips and knees.

The global medical device market in 2000 exceeded $170 billion, with the United States portion alone constituting approximately $70 billion, according to Frost & Sullivan. Our initial target markets are the surgical instrumentation, electro-medical implant, interventional and orthopedic markets. We selected these target markets based on their size, growth, margins, customer dynamics and competitive environment. We believe that medical device companies’ cost of goods sold largely represents the market for medical engineering and manufacturing services. Based on Frost & Sullivan data, we believe the cost of goods sold for our four target markets currently represents at least a $10 billion annual worldwide opportunity.

According to Frost & Sullivan, outsourcing of manufacturing by medical device companies in the United States grew at an annual rate in excess of 18% from 1999 to 2000. We believe that manufacturing outsourcing by medical device companies will continue to increase at approximately the same rate through 2005 and expect several trends to drive this growth, including:

the need for faster product innovation, which requires accelerating product development cycle times;

cost containment pressures in healthcare, which necessitate a more efficient supply chain; and

increased competition and industry consolidation.

As a result of these factors, medical device companies are focusing on their core competencies in research and sales and marketing and are outsourcing other functions such as manufacturing and related engineering and product development services. We believe that the medical engineering and manufacturing services industry is highly fragmented with over 4,000 companies, many of which have annual revenues of less than $3.5 million and limited capabilities that do not satisfy current market requirements. We believe we address this market opportunity by providing our customers:

a single source solution;

accelerated time to market;

quality products and practices;

reduced costs; and

a financially stable product and service provider.

The key elements of our strategy are to:

focus on manufacturing excellence and leading process technologies;

strengthen our customer relationships by collaborating in the design and engineering of new products;

drive additional component manufacturing business by continuing to expand our device assembly services;

pursue product line transfers and acquisitions of customers’ manufacturing assets; and

selectively acquire companies to complement our product and service offerings.

We began operations during March 1999 through the acquisition of seven companies with complementary capabilities, and subsequently broadened our capabilities through five additional acquisitions. Since our launch, we have focused our efforts on integrating and growing our business and have made significant investments in our product design and development capabilities, sales and marketing teams, operations, quality systems and information technology infrastructure to support that growth. We have multiple manufacturing facilities located in various states with an aggregate of approximately 500,000 square feet and approximately 1,350 employees.

Recent Development

On January 4, 2002, we acquired HV Technologies, a specialized manufacturer of polyimide and composite micro-tubing that is used in interventional and minimally invasive catheters, delivery systems and instruments. The acquisition of HV Technologies advances our position in the interventional device market by expanding our offering of proprietary manufacturing capabilities to our customers.

We were formed under the name Veratek International, Inc. in Delaware in April 1998, changed our name to MedSource Technologies, Inc. in January 1999 and began operations in March 1999. Our principal executive offices are located at 110 Cheshire Lane, Suite 100, Minneapolis, Minnesota 55305 and our telephone number is (952) 807-1234. Our internet address is www.medsourcetech.com. Information on our web site is not part of this prospectus.

The Offering

Common stock to be offered by us		7,500,000 shares

Common stock to be outstanding after this offering		24,524,424 shares (assuming that the initial public offering price is $16.00 per share, the midpoint of the price range on the cover of this prospectus), but if the initial public offering price is at the high end of the price range on the cover of this prospectus, there will be 24,331,231 shares outstanding after this offering and if the initial public offering price is at the low end of the price range on the cover of this prospectus, there will be 24,743,373 shares outstanding after this offering, all as a result of variation in the number of shares of our common stock into which the Series C preferred stock will convert, as further described in the second paragraph under the caption “Description of Capital Stock—General.”

Over-allotment option		800,000 shares of our common stock to be sold by us and an aggregate of 325,000 shares of our common stock to be sold by two selling stockholders.

Use of proceeds		For repayment of debt, redemption of our Series E and Series F preferred stock issued in connection with our acquisition of HV Technologies in January 2002, payment of accrued dividends on our Series B preferred stock, termination of certain management agreements and working capital and other general corporate purposes, including acquisitions, all as further described under the caption “Use of Proceeds.”

Dividend policy		We do not intend to pay dividends on our common stock. We plan to retain earnings for use in the operation of our business and to fund future growth.

Proposed Nasdaq National Market symbol		MEDT

Except as otherwise indicated, whenever we present the number of shares of common stock outstanding, we have assumed an initial public offering price of $16.00 per share and given effect, as of December 30, 2001, to the following issuances of our common stock upon completion of this offering:

the conversion of all of our:

Series A preferred stock into an aggregate of 1,918,500 shares of our common stock;

Series B preferred stock into an aggregate of 3,327,279 shares of our common stock;

Series C preferred stock into an aggregate of 3,274,373 shares of our common stock, but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of 3,081,759 shares of our common stock

and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of 3,492,665 shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General”;

Series D preferred stock into an aggregate of 1,769,549 shares of our common stock; and

Series Z preferred stock into an aggregate of 650,000 shares of our common stock; and

the cashless exercise of a warrant to purchase 525 shares of our Series C preferred stock, and the conversion of that preferred stock into an aggregate of 9,843 shares of our common stock, but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of 9,264 shares of our common stock and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of 10,500 shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General.”

We calculated the number of shares outstanding after this offering on the assumption that the underwriters do not exercise their over-allotment option, and we also excluded:

2,991,693 shares of our common stock issuable, at a weighted average exercise price of $15.60 per share, upon exercise of stock options outstanding as of December 30, 2001;

1,659,858 shares of our common stock available for future grant under our 1999 stock plan as of December 30, 2001;

500,000 shares of our common stock available for purchase under our employee stock purchase plan as of December 30, 2001; and

200,000 shares of our common stock issuable upon exercise of outstanding warrants at an exercise price of $0.01 per share issued in conjunction with our Series E preferred stock.

Summary Consolidated Financial Data

The following table summarizes historical and pro forma consolidated financial data for our business. You should read this table along with “Selected Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

The unaudited pro forma statement of operations data set forth below for the year ended June 30, 2001 show our pro forma results of operations as if our acquisition of ACT Medical in December 2000 and as if our acquisition of HV Technologies in January 2002 and our related issuances of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000, and the unaudited pro forma statement of operations data set forth below for the six months ended December 30, 2001 show our pro forma results of operations as if the acquisition of HV Technologies in January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000, as further discussed under the caption “Selected Unaudited Pro Forma Condensed Combined Financial Information.”

The unaudited pro forma balance sheet data set forth below and the unaudited pro forma as adjusted balance sheet data set forth below both give effect to our acquisition of HV Technologies in January 2002 and our related issuances of Series E preferred stock and warrants and Series F preferred stock as if they had all occurred on December 30, 2001, as further discussed under the caption “Selected Unaudited Pro Forma Condensed Combined Financial Information.” The unaudited pro forma as adjusted balance sheet data set forth below also give effect to this offering, the conversion of all of our outstanding convertible preferred stock and the exercise of the warrant as described in the first and second paragraphs of the table under “— The Offering” and the application of the net proceeds of this offering, together with proceeds of $40.0 million from our new senior credit facility.

	Fiscal Year Ended						Pro Forma Fiscal Year Ended June 30, 2001(b)			Six Months Ended December 30,						Pro Forma Six Months Ended December 30, 2001(b)
	July 1, 2000(a)			June 30, 2001			Pro Forma Fiscal Year Ended June 30, 2001(b)			2000			2001			Pro Forma Six Months Ended December 30, 2001(b)
Statement of Operations Data:	(In thousands, except share and per share data)
Revenues	$	89,352		$	128,462		$	149,769		$	55,491		$	72,155		$	76,486

Costs and expenses:
Cost of products sold		59,811			94,386			108,126			41,514			54,616			56,565
Selling, general and administrative expense		21,167			26,199			31,334			11,771			14,080			16,151
Amortization of goodwill and other intangibles(c)		4,255			5,640			6,544			2,432			169			169
Restructuring charge(d)		—			11,464			11,464			—			—			—

Total costs and expenses		85,233			137,689			157,468			55,717			68,865			72,885

Operating income (loss)		4,119			(9,227	)		(7,699	)		(226	)		3,290			3,601
Interest (expense), net		(10,682	)		(10,213	)		(10,155	)		(5,417	)		(4,886	)		(4,867	)
Other income (expense)		(7	)		53			64			(361	)		(27	)		(19	)

Loss before income taxes		(6,570	)		(19,387	)		(17,790	)		(6,004	)		(1,623	)		(1,285	)
Income tax benefit (expense)		535			(70	)		(70	)		—			—			—

Net loss		(6,035	)		(19,457	)		(17,860	)		(6,004	)		(1,623	)		(1,285	)
Preferred stock dividends and accretion of discount on preferred stock		(8,345	)		(9,688	)		(12,514	)		(4,654	)		(5,322	)		(6,077	)

Net loss attributed to common stockholders	$	(14,380	)	$	(29,145	)	$	(30,374	)	$	(10,658	)	$	(6,945	)	$	(7,362	)

Net loss per share attributed to common stockholders (basic and diluted)	$	(3.10	)	$	(5.55	)	$	(5.00	)	$	(2.03	)	$	(1.32	)	$	(1.21	)

Weighted average number of shares of common stock outstanding (basic and diluted)		4,633,571			5,252,749			6,076,974			5,251,833			5,256,058			6,080,280

Other Data:
Net cash provided by (used in) operating activities(e)	$	6,290		$	1,253					$	5,342		$	(4,024	)
Net cash used in investing activities(e)		(22,244	)		(11,627	)					(5,963	)		(5,115	)
Net cash provided by (used in) financing activities(e)		16,356			28,453						27,686			2,167
EBITDA(f)		12,867			3,021		$	5,988			5,022			7,201		$	7,664
Adjusted EBITDA(f)(g)		14,373			16,140			19,107			5,746			8,132			8,595

	As of December 30, 2001
	Actual			Pro Forma(b)			Pro Forma As Adjusted(b)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	13,317		$	9,307		$	46,058
Working capital		25,916			22,916			63,986
Total assets		201,334			219,674			255,503
Total debt (h)		86,356			86,356			40,511
Mandatory redeemable convertible stock		103,085			106,721			—
Total stockholders’ equity (deficit)		(14,324	)		(636	)		190,365

(a)

Our fiscal years originally ended on the Saturday closest to June 30. Effective July 1, 2001, our fiscal year end was changed to June 30.

(b)

In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.2 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 because we plan to redeem our Series E preferred stock by that date. The effect of the accretion is excluded from the pro forma and pro forma as adjusted presentation.

(c)

The Statement of Operations Data for the six months ended December 30, 2001 does not include a charge for the amortization of goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we continued to amortize goodwill during the six months ended December 30, 2001, amortization expense in that period would have increased by approximately $2.9 million or $0.55 per common share.

(d)

In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million.

(e)

Because of the subjectivity inherent in the assumptions concerning the nature and timing of the uses of cash generated by the pro forma interest and other expenses, cash flows from operating, investing and financing activities are not presented for the pro forma periods.

(f)

EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities.

(g)

Adjusted EBITDA excludes costs of management agreements that we have entered into with Kidd & Company and Whitney & Co. We incurred fees under these agreements of $0.4 million for the period from March 31, 1999 (inception) through July 3, 1999, $1.5 million for the year ended July 1, 2000, $1.7 million for the year ended June 30, 2001, $0.7 million for the six months ended December 30, 2000 and $0.9 million for the six months ended December 30, 2001. These agreements will terminate upon completion of this offering. Adjusted EBITDA also excludes restructuring charges of $11.5 million for year ended June 30, 2001.

(h)

In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount, a redemption premium of $1.6 million (assuming the redemption is prior to March 30, 2002), and $2.8 million to terminate our existing interest rate swap agreements.

RISK FACTORS

You should carefully consider the risks described below, together with all of the other information included in this prospectus, before deciding whether to invest in our common stock. The following risks and uncertainties are not the only ones we face. However, these are the risks our management believes are material. If any of the following risks materializes, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Adverse trends or business conditions affecting the medical device industry or our customers could harm our operating results.

Our business depends on trends in the medical device industry, which is subject to rapid technological changes, short product life-cycles, frequent new product introductions and evolving industry standards, as well as economic cycles. Conditions or technological innovations adversely affecting any of our major customers, the medical device industry in general or the surgical instrumentation, electro-medical implant, interventional and orthopedic markets we target in particular, could adversely affect our operating results. For example, the discovery and market acceptance of non-device treatments for specific medical conditions could make the medical devices used to treat these conditions obsolete. In addition, the products and services that we provide to our customers generally are specific to a particular medical device being developed or marketed by them. If a customer’s medical device does not gain or maintain market acceptance because of competing medical devices or treatments, changing market conditions, unfavorable regulatory actions or other reasons, our revenues from that customer and our results of operations would be adversely affected.

Because a significant portion of our revenue comes from a few large customers, any decrease in sales to these customers could harm our operating results.

The medical device industry is concentrated, with relatively few companies accounting for a large percentage of sales in the surgical instrumentation, electro-medical implant, interventional and orthopedic markets that we target. Accordingly, our revenue and profitability are highly dependent on our relationships with a limited number of large medical device companies. In fiscal 2001, our top four customers accounted for approximately 41% of our revenues, with one customer accounting for 18% of our revenues and another accounting for 12% of our revenues. In fiscal 2000, our top four customers accounted for approximately 42% of our revenues, with one customer accounting for 16% of our revenues and another accounting for 14% of our revenues. We provide products and services to several different divisions of our top customers. We are likely to continue to experience a high degree of customer concentration, particularly if there is further consolidation within the medical device industry. We cannot assure you that there will not be a loss or reduction in business from one or more of our major customers. In addition, we cannot assure you that revenues from customers that have accounted for significant revenues in the past, either individually or as a group, will reach or exceed historical levels in any future period. The loss or a significant reduction of business from any of our major customers would adversely affect our results of operations.

Our growth may be slow if the trend toward outsourcing by medical device companies does not continue or if our customers decide to manufacture internally products that we currently provide.

To date, we have benefited from the growing trend of medical device companies to outsource all or a portion of their engineering, product development, manufacturing and assembly requirements. Although we expect medical device companies to increase their outsourcing of these requirements in the future, we cannot be certain that this trend will continue or that, if it continues, we will benefit from it. Even if the outsourcing trend in the industry continues, one or more of our principal customers could decide to decrease its reliance on or use of outsourcing, which would reduce our customer base.

Also, as part of our growth strategy, we are seeking to accept full supply chain management and manufacturing responsibility for selected product lines from our customers and, in some cases, to acquire the related manufacturing assets from these customers. While we believe that product line transfers and asset acquisitions of this kind are becoming increasingly attractive to our customers, we have only consummated one of these transactions to date. We cannot be sure that opportunities of this nature will be available, especially if the trend toward outsourcing does not continue.

We have few contracts with our customers that ensure us future business, and cancellations, reductions or delays in customer orders could harm our operating results.

Generally, we work with our customers on a project-by-project or purchase order-by-purchase order basis, without any long term revenue, volume or other commitments to ensure us future business. Customer orders typically may be cancelled and volume levels may be changed or delayed at any time. We cannot assure you that we can replace delayed, cancelled or reduced projects with new business in a timely manner. Also, we may not fully recover our costs in connection with cancelled, delayed or reduced projects.

Our quarterly operating results fluctuate significantly, and if we fail to meet the expectations of securities analysts or investors, our stock price may decrease.

Our operating results have fluctuated in the past from quarter to quarter and are likely to fluctuate significantly in the future due to a variety of factors, including:

the timing of actual customer orders and the accuracy of our customers’ forecasts of future production requirements;

the introduction and market acceptance of our customers’ new products and changes in demand for our customers’ existing products;

changes in the relative portion of our revenue represented by our various products, services and customers, including the relative mix of our business across our target markets;

changes in competitive or economic conditions generally or in our customers’ markets;

changes in availability or costs of raw materials or supplies; and

demand for our products and services, which, during our limited operating history, has been higher than average during the last quarter of our fiscal year and lower than average during the first quarter of our fiscal year.

For all these reasons, our quarterly results are difficult to predict and should not be relied upon as an indication of future performance. Fluctuations in our quarterly results could result in our failing to meet the expectations of the investment community, which could adversely affect the market price of our common stock even if those fluctuations are unrelated to our long term operating performance or prospects.

Risks relating to acquisitions, including failure to successfully manage our growth and integrate acquired businesses, may adversely affect our financial performance.

We were formed in March 1999 through the acquisition of seven separate businesses. In January 2000, we acquired the business of Tenax Corporation; in February 2000, we acquired Apex Engineering; in May 2000, we acquired Thermat Precision Technology, Inc.; in December 2000, we acquired ACT Medical, Inc.; and in January 2002, we acquired HV Technologies. As a result, we are experiencing rapid growth that could strain our managerial and other resources.

We also plan to seek to make select acquisitions of complementary medical engineering and manufacturing services providers that bring desired capabilities, customers or geographic coverage and either strengthen our position in our target markets or provide us with a significant presence in a new market. The risks we may encounter in pursuing these acquisitions include expenses associated with, and difficulties in identifying, potential targets, costs associated with acquisitions we ultimately are unable to complete and higher prices for acquired companies due to competition for attractive targets. Completing acquisitions also may result in dilution to our existing shareholders and may require us to seek additional capital, if available, including by increasing our indebtedness.

Once acquired, the successful integration and operation of a business requires communication and cooperation among key managers, the transition of customer relationships, the management of ongoing projects of acquired companies and the management of new projects across previously independent facilities. Acquisitions also involve a number of other risks, including:

the diversion of management attention;

difficulties in integrating the operations and products of an acquired business or in realizing projected operational results, synergies and cost savings;

inaccurate assessments of undisclosed liabilities; and

potential loss of key customers or employees of the acquired businesses.

Customer satisfaction or performance problems with an acquired company could also harm our reputation as a whole, and any acquired business could significantly underperform relative to our expectations. Because all of our acquisitions were completed in the past 36 months, we are currently facing all of these challenges and our ability to meet them over the long term has not been established. For all these reasons, our pursuit of an overall acquisition strategy or any individual completed, pending or future acquisition may adversely affect the realization of our strategic goals.

In addition, while we anticipate cost savings, operating efficiencies and other synergies as a result of our acquisitions, the consolidation of functions and the integration of departments, systems and procedures present significant management challenges. We cannot assure you that we will:

successfully accomplish those actions as rapidly as anticipated;

achieve the cost savings and efficiencies that we expect from our acquisitions;

successfully manage the integration of new locations or acquired operations;

fully use new capacity; or

enhance our business as a result of any past or future acquisition, including those mentioned above.

The acquisition of new operations can also introduce new types of risks to our business. For example, new acquisitions may require greater effort to address United States Food and Drug Administration, or FDA, regulation or similar foreign regulation.

We may face product liability claims that could result in costly litigation and divert the attention of our management.

We may be exposed to product liability claims and product recalls, including those which may arise from misuse or malfunction of, or design flaws in, our customers’ products, whether or not such problems directly

relate to the products and services we have provided. Generally, we do not at this time have agreements in place with our customers governing liability for product liability and recalls. Even where we have agreements with customers that contain provisions attempting to limit our damages, these provisions may not be enforceable or may otherwise fail to protect us from liability. Product liability claims or product recalls, regardless of their ultimate outcome, could require us to spend significant time and money in litigation or require us to pay significant damages. The occurrence of product liability claims or product recalls could cause our results of operations to be adversely affected.

We carry $20.0 million of product liability insurance coverage which is limited in scope. Our management believes that our insurance coverage is adequate given the risks we face. We cannot assure you that we will be able to maintain this insurance or to do so at reasonable cost and on reasonable terms. We also cannot assure you that this insurance will be adequate to protect us against a product liability claim that may arise in the future.

If we experience decreasing prices for our products and services and we are unable to reduce our expenses, our results of operations will suffer.

We may experience decreasing prices for the products and services we offer due to:

pricing pressure experienced by our customers from managed care organizations and other third-party payors;

increased market power of our customers as the medical device industry consolidates; and

increased competition among medical engineering and manufacturing services providers.

If the prices for our products and services decrease for whatever reason and we are unable to reduce our expenses, our results of operations will be adversely affected.

If our manufacturing processes, products and services fail to meet the highest quality standards, our reputation could be damaged and our results of operations could be harmed.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure. Our success depends in part on our ability to manufacture to exact design specifications precision engineered plastic and metal components, subassemblies and finished devices from multiple materials. If our products and services fail to meet the highest quality standards or fail to adapt to evolution in those standards, our reputation could be harmed and our competitive position could be damaged. In addition, our quality systems and certifications are critical to the marketing success of our products and services. If we fail to maintain our quality systems or certifications, our reputation could be damaged and our results of operations could be adversely affected.

Competition from our customers’ internal operations as well as from other medical engineering and manufacturing service providers could result in downward pressure on prices, fewer new business opportunities and loss of market share.

Our current and prospective customers often evaluate our product and service offerings against the merits of internal design and engineering, manufacturing, assembly and supply chain management. In this sense, we often compete for business with the internal resources of our customers, many of whom are leading medical device companies with long-standing internal design and engineering, manufacturing and supply chain management capabilities. Our success therefore depends heavily upon our ability to demonstrate and deliver cost savings and accelerated time to market for our customers as compared to use of internal resources, without loss of quality, confidentiality or reliability.

In addition, we believe the medical engineering and manufacturing services industry is very competitive and fragmented with over 3,000 companies, many of which are specialized. To the extent that medical device companies seek to outsource more of the design, prototyping and manufacturing of their products, we will face increasing competitive pressures to broaden our capabilities and grow our business in order to maintain our competitive position, and we may encounter competition from other companies with design, technological and manufacturing capabilities similar or superior to ours.

If we fail to comply with the covenants under our new senior credit facility or other indebtedness, are unable to pay interest and principal when due or experience increased interest costs, our operating results and financial condition could be harmed.

Failure to comply with the covenants under our senior credit facility or with respect to any future indebtedness may result in an event of default. If an event of default occurs and is not cured or waived, substantially all of our indebtedness could become immediately due and payable. We anticipate that upon the closing of this offering our total debt will be approximately $40 million and our annual interest expense will be approximately $2.5 million. The ability to pay interest and principal on our debt obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. There can be no assurance that our operations will generate earnings in any future period sufficient to cover the fixed charges. In addition, we may experience variable financial results as a consequence of floating interest rate debt. As interest rates fluctuate, we may experience increases in interest expense, which may materially affect financial results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” on page 37.

If we cannot obtain the additional capital required to fund our operations and finance acquisitions on favorable terms or at all, we may have to delay or abandon our growth strategy.

Our growth strategy will require additional capital for, among other purposes, completing acquisitions of companies and customers’ product lines and manufacturing assets, integrating acquired companies and assets, acquiring new equipment and maintaining the condition of existing equipment. In connection with this offering, we intend to repay all of our subordinated indebtedness and replace our existing senior credit facility with a new senior credit facility. If cash generated internally is insufficient to fund capital requirements, if funds are not available under our new senior credit facility, or if we desire to make acquisitions, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may not be available on terms satisfactory to us. If we raise additional capital by issuing equity or convertible debt securities, the issuances may dilute the share ownership of the existing investors. In addition, we may grant future investors rights that are superior to those of our existing investors. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or delaying capital expenditures and acquisitions, selling assets or restructuring or refinancing our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” on page 37.

Our growth may be limited and our competitive position may be harmed if we are unable to identify and consummate future acquisitions.

Our continued growth may depend on our ability to identify and acquire on acceptable terms companies that complement or enhance our business. We may not be able to identify or complete future acquisitions. Some of the risks that we may encounter include expenses associated with, and difficulties in identifying, potential targets, the costs associated with incomplete acquisitions and higher prices for acquired companies because of competition for attractive acquisition targets. If we fail to acquire additional capabilities, we may be unable to compete with other companies in our industry that are able to provide more complete outsourcing capabilities and services to medical device companies, which could adversely affect our results of operations.

A substantial amount of our assets represents goodwill, and our net income will be reduced if our goodwill becomes impaired.

As of December 30, 2001, approximately $97 million, or 48%, of our total assets represented goodwill. Goodwill is generated in our acquisitions when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets we acquire. We historically have recorded goodwill on our balance sheet and amortized it, generally on a straight-line basis over twenty years. Recently, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard, or SFAS, No. 142, Goodwill and Other Intangible Assets, which we adopted effective July 1, 2001. Goodwill is no longer amortized under generally accepted accounting principles as a result of SFAS No. 142. Instead, goodwill is subject to an impairment analysis at least annually based on the fair value of the reporting unit. We could be required to recognize reductions in our net income caused by the write-down of goodwill, if impaired, that if significant could materially and adversely affect our results of operations. For example, in June 2001 we recorded an impairment charge of $2.6 million related to residual goodwill allocated to three businesses. The residual goodwill was impaired by the planned closure of the facilities related to those businesses.

We depend on outside suppliers and subcontractors, and our production and reputation could be harmed if they are unable to meet our volume and quality requirements and alternative sources are not available.

Our current capabilities do not include all elements that are required to satisfy all of our customers’ requirements. As we increasingly position ourselves to provide our customers with a single source solution, we may rely increasingly on third party suppliers, subcontractors and other outside sources for components or services. Manufacturing problems may occur with these third parties. A supplier may fail to develop and supply products and components to us on a timely basis, or may supply us with products and components that do not meet our quality, quantity or cost requirements. If any of these problems occur, we may be unable to obtain substitute sources of these products and components on a timely basis or on terms acceptable to us, which could harm our ability to manufacture our own products and components profitably or on time. In addition, if the processes that our suppliers use to manufacture products and components are proprietary, we may be unable to obtain comparable components from alternative suppliers.

If we are unable to maintain our expertise in manufacturing processes or if our customers demand capabilities that we cannot provide, we will be unable to compete successfully.

We use highly engineered, proprietary processes and sophisticated machining equipment to meet the specifications of our customers. Without the timely incorporation of new processes and enhancements, particularly relating to quality standards and cost-effective production, our manufacturing capabilities would likely become outdated, which would cause us to lose customers. In addition, new or revised technologies could render our existing process technology less competitive or obsolete or could reduce demand for our products and services. It is also possible that finished medical device products introduced by our customers may require fewer of our components or may require components that we lack the capabilities to manufacture or assemble. In addition, we cannot assure you that any investment that we make in new technologies will result in commercially viable processes for our business.

Although we anticipate that our manufacturing and marketing expertise will enable us to successfully develop and market our capabilities, any failure by us to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in capability development or introduction could adversely affect our results of operations.

There are operational and financial risks associated with our new facility in Mexico that could harm our operating results.

We operate a manufacturing facility in Navojoa, Mexico and are in the process of significantly expanding that facility. Our operations at this facility currently comprise a small portion of our business; however, we

expect that these operations will increase as we expand our device assembly service offering. Our operations in Mexico may expose us to risks and uncertainties that are different from those we experience in the United States, including political, social and economic instability, difficulties in staffing and managing international operations and controlling manufacturing quality, product or material transportation delays or disruption, trade restrictions, currency fluctuation and changes in tariffs, regulatory restrictions and import and export license requirements. In addition, we will be subject to currency fluctuations with respect to our labor and facilities costs in Mexico. If any of these risks materializes, our business may be harmed.

Our cost of products sold may be harmed by fluctuations in the availability and price of raw materials.

Raw materials needed for our business are susceptible to fluctuations in price and availability due to transportation costs, government regulations, price controls, changes in economic climate or other unforeseen circumstances. In particular, stainless steel, titanium and platinum are used in some of our products and are in limited supply and subject to fluctuations in price. Our cost of products sold may be adversely impacted by decreases in the availability and increases in the market prices of the raw materials used in our manufacturing processes. There can be no assurance that price increases in raw materials can be passed on to our customers through increases in product prices. Even when we are able to pass along all or a portion of our raw material price increases, there is typically a lag time between the actual cost increase of raw materials and the corresponding increase in the price of our products.

We and our customers are subject to governmental health, safety and consumer product regulations that are burdensome and carry significant penalties for noncompliance.

We and our customers are subject to federal, state and local health and safety and consumer product regulation, including regulation by the FDA, and to similar regulatory requirements in other countries. These regulations govern a wide variety of activities from product safety and effectiveness to design and development to labeling, manufacturing, promotion, sales and distribution. We believe that we are in compliance with the requirements of FDA, of state and local authorities and, as applicable, of equivalent foreign authorities. In the event that we build or acquire additional facilities outside the United States, we will be subject to medical device manufacturing regulation in those jurisdictions as well. Also, our customers’ products are subject to regulation, including manufacturing standards, of other countries in which they sell their products. As a result, we also may be obliged to comply with these manufacturing standards.

To maintain manufacturing approvals, we are generally required, among other things, to register certain of our manufacturing facilities with the FDA and with certain state and foreign agencies, maintain extensive records and submit to periodic inspections by the FDA and certain state and foreign agencies. We may be required to incur significant expenses and to spend significant amounts of time to comply with these regulations or to remedy violations of these regulations. These efforts could be burdensome. In addition, any failure by us to comply with applicable government regulations could result in cessation of portions or all of our operations, imposition of fines and restrictions on our ability to carry on or expand our operations. Compliance by our customers with governmental regulations and their remedying of violations of these regulations also may be time consuming, burdensome and expensive and could negatively affect our customers’ abilities to sell their products, which in turn could adversely affect our ability to sell our products and services.

The regulations to which we are subject are complex, change frequently and have tended to become more stringent over time. In addition, future laws and regulations may increase governmental involvement in healthcare and lead to increased compliance costs.

Our facilities are subject to environmental regulation that exposes us to potential financial liability.

Federal, state and local laws impose various environmental controls on the management, handling, generation, manufacturing, transportation, storage, use and disposal of hazardous chemicals and other materials

used or generated in our manufacturing activities. If we fail to comply with any present or future environmental laws, we could be subject to future liabilities or the suspension of production. We cannot assure you that our operations will not require expenditures for clean-up in the future. Although we do not anticipate that these remediation efforts will be material, we cannot assure you that the costs associated with these efforts will not have an adverse effect on our business, financial condition or results of operations. Changes in environmental laws may impose costly compliance requirements on us or otherwise subject us to future liabilities and additional laws relating to the management, handling, generation, manufacture, transportation, storage, use and disposal of materials used in or generated by the manufacture of our products may be imposed. In addition, we cannot predict the effect that these potential requirements may have on us or our customers.

Accidents at our facilities could delay production, adversely affect our operations and expose us to financial liability.

Our business involves complex manufacturing processes and hazardous materials that can be dangerous to our employees. Although we employ safety procedures in the design and operation of our facilities and we have not experienced any serious accidents or deaths, there is a risk that an accident or death could occur in one of our facilities. Any accident could result in significant manufacturing delays or claims for damages resulting from injuries, which would harm our operations and financial condition. The potential liability resulting from any such accident or death could cause our business to suffer. Any disruption of operations at any of our facilities could harm our business.

If we lose our key personnel, our ability to operate our company and our results of operations may suffer.

Our future success depends in part on our ability to attract and retain key executive, engineering, marketing and sales personnel. Our key personnel include Mr. Effress and our other executive officers and the loss of certain key personnel could have a material adverse effect on us. We face intense competition for these professionals from our competitors, our customers and other companies operating in our industry. To the extent that the services of members of our senior management team and key technical personnel would be unavailable to us for any reason, we would be required to hire other personnel to manage and operate our company and to develop our products and technology. We cannot assure you that we would be able to locate or employ such qualified personnel on acceptable terms.

If we are unable to attract additional qualified personnel, our growth strategy could be adversely affected.

Our success will depend in large part upon our ability to attract, train, retain and motivate highly skilled employees and management. There is currently aggressive competition for employees who have experience in the engineering and technology used in our products and services. We compete intensely with other companies to recruit and hire from this pool. The industries in which we compete for employees are characterized by high levels of employee attrition. Although we believe we offer competitive salaries and benefits, we may have to increase spending in order to retain personnel.

Our business is indirectly subject to healthcare industry cost containment measures that could result in reduced sales of medical devices containing our components.

Our customers and the healthcare providers to whom our customers supply medical devices may rely on third party payors, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which medical devices that incorporate components manufactured or assembled by us are used. The continuing efforts of government, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval for payment from these third party payors. If that occurred, sales of finished medical devices that include our components may decline significantly, and our customers may reduce or eliminate purchases of our components.

We and our customers may be subject to infringement claims by third parties that could subject us to financial liability or limit our product and service offerings, and our competitive position could be harmed if we are unable to protect our intellectual property.

Litigation to enforce and defend patent and other intellectual property rights is common in the medical device industry. Although we do not believe that any of our products, services or processes infringe the intellectual property rights of third parties, we may be accused of infringing the rights of others. Our customers’ products also may be the subject of third-party infringement claims, which could seek damages from both the customer and from us. With most of our customers, we do not have formal agreements governing allocation of liability for such claims. Even where we do not have liability to third parties, an infringement claim against one of our customers could result in reduced demand for our products and services or increased pricing pressure. Any infringement claim, significant charge or injunction against our products or those of our customers could harm our business.

We rely on a combination of patent, trade secret and trademark laws, confidentiality procedures and contractual provisions to protect our intellectual property, which relates principally to proprietary manufacturing processes. We cannot be sure that the steps we take to protect our proprietary rights will adequately deter unauthorized disclosure or misappropriation of our intellectual property, technical knowledge, practice or procedures. We may be required to spend significant resources to monitor and defend our intellectual property rights, we may be unable to detect or defend against infringement of these rights and we may lose any competitive advantage associated with these rights.

Risks Related to this Offering and Our Stock

Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.

Before this offering there has not been a public market for our common stock, and an active public market for our common stock may not develop or be sustained after this offering. Further, the market price of our common stock may decline below the price you paid for your shares.

Among the factors that could affect our stock price are:

industry trends and the business success of our customers;

loss of a key customer;

fluctuations in our results of operations;

our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future results of operations;

strategic moves by our competitors, such as product announcements or acquisitions;

regulatory developments;

litigation;

general market conditions; and

other domestic and international macroeconomic factors unrelated to our performance.

The stock market has recently experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. If a securities class action suit is filed against us, we would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business in order to respond to the litigation.

There may be sales of a substantial amount of our common stock 180 days after this offering, or earlier, by our stockholders, and these sales could cause our stock price to fall.

MedSource and each of its directors, executive officers and stockholders have entered into a lock-up agreement with Morgan Stanley on behalf of the underwriters for a period of 180 days after the date of this prospectus. Sales of substantial amounts of our common stock in the public market after this offering, or the perception that such sales will occur, could adversely affect the market price of our common stock and make it difficult for us to raise funds through equity offerings in the future. A substantial number of outstanding shares of common stock and shares issuable upon exercise of outstanding options and warrants will become available for resale in the public market at prescribed times. Of the 24,524,424 shares to be outstanding after the offering, subject to adjustment depending upon the number of shares of our common stock issued upon conversion of our Series C preferred stock, 7,500,000 shares offered by this prospectus will be eligible for immediate sale in the public market without restriction by persons other than our affiliates. The remaining 69.4%, or 17,024,424 shares, of our total outstanding shares will become available for resale in the public market as shown in the chart below.

Number of Shares				Date Available for Resale
5,000				Immediately
400				90 days after this offering ( , 2002)
16,200,302				180 days after this offering ( , 2002) or earlier in the sole discretion of Morgan Stanley & Co. Incorporated
818,722				January 4, 2003

Beginning 180 days after this offering ( , 2002), holders of 10,947,372 shares of our common stock may require us to register their shares for resale under the federal securities laws. Holders of an additional 5,610,921 shares of our common stock and the holders of 200,000 shares of our common stock issued upon exercise of warrants are entitled to have their shares included in the registration statement, subject to reduction upon the request of the underwriter in the offering, if any. Registration of those shares would allow the holders to immediately resell their shares in the public market. Any such sales or anticipation thereof could cause the market price of our common stock to decline.

In addition, after this offering, we intend to register 5,151,551 shares of common stock subject to outstanding options or reserved for issuance under our stock purchase plan. For more information, see “Shares Eligible for Future Sale.”

Our principal stockholders and management own a significant percentage of our company and will be able to exercise significant influence over our company and their interests may differ from those of other stockholders.

After this offering, our executive officers and directors and principal stockholders and their affiliated entities will together control approximately 41% of our outstanding common stock. Accordingly, these stockholders, if they act together, will be able to control the composition of our board of directors and many other matters requiring stockholder approval and will continue to have significant influence over our affairs. They may exercise this influence, including by voting at a meeting of the stockholders or by written consent, in a manner that advances their best interests and not necessarily those of other stockholders. This concentration of ownership also could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us.

Provisions in our charter documents and Delaware law may deter takeover efforts that you feel would be beneficial to stockholder value.

Our certificate of incorporation and bylaws and Delaware law contain provisions which could make it difficult for a third party to acquire us without the consent of our board of directors. These provisions include a

classified board of directors and limitations on actions by our stockholders. In addition, our board of directors has the right to issue preferred stock without stockholder approval that could be used to dilute a potential hostile acquiror. Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. While we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders, and a takeover bid otherwise favored by a majority of our stockholders might be rejected by our board of directors.

You will suffer immediate and substantial dilution.

The initial public offering price of our common stock will be substantially higher than the net tangible book value per share. Accordingly, if you purchase common stock in this offering, you will incur immediate and substantial dilution of $13.13 per share in your investment. This dilution is due in large part to earlier investors in us having paid substantially less than the initial public offering price when they purchased their shares. The exercise of outstanding options and warrants to purchase shares of our common stock will result in additional dilution per share. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial additional dilution.

We do not intend to pay dividends, and absence of dividends could reduce our attractiveness to investors.

Some investors favor companies that pay dividends, particularly in market downturns. We currently intend to retain any future earnings to finance the continued development and expansion of our business, and therefore, we do not anticipate paying cash dividends on our common stock in the future. In addition, our new senior credit facility will restrict our payment of dividends. Because we likely will not pay dividends, your return on this investment likely depends on your ability to sell our stock for a profit.

FORWARD-LOOKING STATEMENTS

You should not rely on forward-looking statements in this prospectus. This prospectus contains forward-looking statements within the meaning of federal securities laws that relate to future events or our future financial performance. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other comparable terminology.

Some of the factors that may cause actual results to differ materially from the results expressed or implied by these forward-looking statements are set forth under “Risk Factors.”

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We do not intend to update any of the forward-looking statements after the date of this prospectus or to conform these statements to actual results.

USE OF PROCEEDS

Our net proceeds from the sale of 7,500,000 shares of common stock in this offering at an assumed initial public offering price of $16.00 per share will be approximately $110.0 million (approximately $121.9 million if the underwriters’ over-allotment option is exercised in full), after deducting the underwriting discount and estimated offering expenses payable by us.

We intend to use those proceeds as follows:

	Approximate dollar amount
	(In millions)
Refinancing of our senior credit facility(a)	$	33.2
Repayment of our 12.5% senior subordinated notes(b)		21.6
Redemption of our Series E preferred stock and our Series F preferred stock(c)		10.4
Payment of accrued and unpaid dividends on our Series B preferred stock(d)		4.8
Fees under agreements with Kidd & Company and Whitney Mezzanine Management Company(e)		3.7
Working capital and other general corporate purposes, including potential acquisitions(f)		36.3

Total	$	110.0

(a)

As of the date of this prospectus, we owed $68.3 million under our existing senior credit facility. We expect to repay this facility in full with $28.3 million of the proceeds of this offering and $40.0 million from our new senior credit facility while incurring $2.1 million in fees on our new facility, described below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility” and $2.8 million to terminate our existing interest rate swap agreements. The outstanding loans under our existing senior credit facility mature between March 2005 and March 2007 and presently bear interest at rates ranging from 5.4% to 6.9% per year.

(b)

The senior subordinated notes mature in 2009, but we will prepay the notes in full, together with a redemption premium of $1.6 million, with the proceeds from this offering, as further discussed below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Senior Subordinated Notes.”

(c)

Our Series E preferred stock and Series F preferred stock were issued in connection with our acquisition of HV Technologies in January 2002. The Series E preferred stock was issued to investors for cash that was paid to shareholders of HV Technologies, and the Series F preferred stock was issued to one of the shareholders of HV Technologies. Our Series E preferred stock and our Series F preferred stock accrue dividends at the rate of 6% per year until December 31, 2002 and January 4, 2003, respectively, and accrue dividends at 16% per year on a retroactive basis thereafter. We expect to use a portion of the proceeds of this offering to redeem our Series E preferred stock before December 31, 2002, and we will use a portion of the proceeds of this offering to redeem our Series F preferred stock within 45 days after we complete this offering.

(d)

This amount represents payment of accrued and unpaid dividends on our Series B preferred stock as of the date of this prospectus, which accrues dividends at the rate of 6% per year. As discussed above under the first paragraph after the table under the caption “Prospectus Summary — The Offering,” the Series B preferred stock will convert into common stock upon completion of this offering.

(e)

This amount represents amounts payable to terminate agreements with Kidd & Company and Whitney Mezzanine Management Company, together with accrued and unpaid fees thereunder, all described below under the caption “Related Party Transactions — Certain Services Provided to Us by Related Parties.”

(f)

From time to time, in the ordinary course of business, we evaluate possible acquisitions of, or investments in, businesses, products and technologies that are complementary to our business. We currently have no arrangements, agreements or understandings for any such acquisitions or investments.

We will pay an aggregate of $26.3 million of the proceeds of this offering to related parties, as further described below under the caption “Related Party Transactions.”

The amounts and timing of our use of the proceeds of this offering will depend upon numerous factors, including the amount of proceeds actually raised in this offering, the timing of any acquisitions we complete, the availability of debt financing and the amount of cash generated by our operations. Until used as described above, we intend to invest the proceeds of this offering in short-term, investment-grade securities.

The above description represents our present intentions based on our current plans and business conditions. Unforeseen events or changed business conditions, however, could result in the application of the net proceeds from this offering in a manner other than as described in this prospectus. Our management will have broad discretion to allocate the net proceeds from this offering.

DIVIDEND POLICY

We anticipate that we will retain future earnings, if any, to finance the continued development and expansion of our business. In addition, our new senior credit facility will restrict our payment of dividends. Any future determination with respect to the payment of dividends will be dependent upon, among other things, our earnings, capital requirements, the terms of our then existing indebtedness, applicable requirements of Delaware corporate law, general economic conditions and other factors considered relevant by our board of directors.

CAPITALIZATION

The following table sets forth our capitalization as of December 30, 2001:

on an actual basis;

on a “pro forma” basis to reflect our acquisition of HV Technologies in January 2002 and the related issuance of our Series E preferred stock and warrants and Series F preferred stock as if they had all occurred on December 30, 2001; and

on a “pro forma as adjusted” basis to reflect, in addition to the pro forma adjustments discussed above, (1) the sale of 7,500,000 shares of common stock by us in this offering at an assumed initial public offering price of $16.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us; (2) the conversion of the preferred stock and the exercise of the warrant as described in the first and second paragraphs after the table under the caption “Prospectus Summary — The Offering”; and (3) the application of the net proceeds of this offering, together with proceeds of $40.0 million from the new senior credit facility described in footnote (a) below.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Unaudited Pro Forma Condensed Combined Financial Information” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

	As of December 30, 2001
	Actual			Pro Forma			Pro Forma As Adjusted
	(In thousands, except share data)

Cash and cash equivalents	$	13,317		$	9,307		$	46,058

Existing senior credit facility, including current portion	$	68,327		$	68,327		$	—
New senior credit facility, including current portion(a)		—			—			40,000
12.5% senior subordinated notes, including current portion and unamortized discount(b)		20,000			20,000			—
Other long-term debt including current portion		511			511			511
Mandatory redeemable stock:
Series B, Series C, Series D and Series F preferred stock, par value $0.01 per share, 499,029 shares authorized in the aggregate actual, 499,029 shares authorized in the aggregate pro forma, none authorized pro forma as adjusted, 408,419 shares outstanding in the aggregate actual, 412,419 outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted		103,085			106,721			—
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 1,000,000 shares authorized		—			—			—
Series A, Series E and Series Z preferred stock, par value $0.01 per share, 171,000 shares authorized in the aggregate actual and aggregate pro forma, none authorized pro forma as adjusted, 108,870 shares outstanding in the aggregate actual, 109,370 shares outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted		1			1			—
Common stock, par value $0.01 per share, 40,000,000 shares authorized, actual and pro forma, 70,000,000 shares authorized pro forma as adjusted, 5,256,158 shares outstanding actual, 6,080,380 shares outstanding pro forma and 24,529,924 shares outstanding pro forma as adjusted		53			61			246
Additional paid-in capital		39,380			53,060			268,767
Accumulated other comprehensive loss		(2,407	)		(2,407	)		—
Accumulated deficit		(51,208	)		(51,208	)		(78,505	)(c)(d)
Unaccrued compensation		(143	)		(143	)		(143	)

Total stockholders’ equity		(14,324	)		(636	)		190,365

Total capitalization	$	177,599		$	194,923		$	230,876

(a)

Concurrently with this offering, we intend to replace our existing senior credit facility with a new $85.0 million senior credit facility described under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility.”

(b)

In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount, a redemption premium of $1.6 million, and $2.8 million to terminate our existing interest rate swap agreements.

(c)

As discussed in the second paragraph under the caption “Description of Capital Stock — General,” our Series C preferred stock converts into a number of shares of our common stock that depends upon the public offering price of our common stock. The pro forma as adjusted accumulated deficit therefore reflects a deemed preferred stock dividend of $9.3 million as the value of the additional shares of our common stock issued to the holders of our Series C preferred stock upon conversion in this offering. We determined the value of the dividend in accordance with Emerging Issues Task Force, or EITF, 00-27 by multiplying the number of additional shares of our common stock that are issuable upon conversion of our Series C preferred stock, determined as set forth in the second paragraph under the caption “Description of Capital Stock — General,” by the value of our common stock on the date that investors first committed to purchase our Series C preferred stock.

(d)

In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.2 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 since we plan to redeem our Series E preferred stock by that date. The pro forma as adjusted accumulated deficit reflects full accretion of this discount in connection with the planned redemption of our Series E preferred stock.

The above table excludes the shares of common stock issuable upon exercise of outstanding options and warrants described in the second paragraph after the table under the caption “Prospectus Summary — The Offering.”

DILUTION

Our pro forma net tangible book value (deficit) as of December 30, 2001 is $(30.7) million, or $(1.80) per share of common stock. Pro forma net tangible book value (deficit) per share represents the amount of total tangible assets less total liabilities, divided by the number of outstanding shares of common stock after giving effect to the acquisition of HV Technologies in January 2002 and our related issuances of Series E preferred stock and warrants and Series F preferred stock and the conversion of all outstanding convertible preferred stock and the exercise of the warrant described in the first paragraph after the table under “Prospectus Summary—The Offering.”

After giving effect to the sale of 7,500,000 shares of common stock offered by us in this prospectus at an assumed initial public offering price of $16.00 per share, less the underwriting discount and estimated offering expenses payable by us, and the application of the net proceeds of this offering, together with proceeds of $40.0 million from our new senior credit facility, our pro forma net tangible book value as of December 30, 2001 would have been $70.5 million, or $2.87 per share. This represents an immediate increase in the pro forma net tangible book value to existing stockholders of $4.67 per share and an immediate dilution to new investors of $13.13 per share. The following table illustrates this dilution on a per share basis:

Initial public offering price per share				$	16.00
Pro forma net tangible book value (deficit) per share as of December 30, 2001	$	(1.80	)
Increase per share attributable to new investors		4.67

Pro forma net tangible book value per share after this offering					2.87

Dilution per share to new investors				$	13.13

The following table summarizes, on a pro forma basis as of December 30, 2001, the difference between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid (1) by our existing stockholders and (2) by the new investors purchasing stock in this offering:

	Shares Purchased			Total Consideration				Average Price Per Share
	Number	Percent		Amount		Percent		Average Price Per Share
Existing stockholders	17,029,924	69.4	%	$	133,433,000	52.7	%	$	7.84
New investors	7,500,000	30.6			120,000,000	47.3			16.00

Total	24,529,924	100.0	%	$	253,433,000	100.0	%

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following selected unaudited pro forma condensed combined statement of operations, for the year ended June 30, 2001 is presented as if the acquisition of ACT Medical in December 2000 and as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000. The historical balances for the ACT Medical statement of operations are for the unaudited six month period from July 1, 2000 through the December 31, 2000 date of acquisition. The results of ACT Medical for the period from January 1, 2001 through June 30, 2001 are included in our results of operations.

The acquisition of HV Technologies, a specialized manufacturer of polyimide and composite micro-tubing used in interventional and minimally invasive catheters, delivery systems and instruments, enables us to expand our offering of proprietary manufacturing capabilities to our customers in the interventional device market. We determined the purchase price for HV Technologies by evaluating a number of factors including HV Technologies’ profit margins and earnings growth rates, trade secrets and manufacturing capabilities and customer relationships as well as asset values, and we have allocated the amount by which the purchase price exceeded the fair value of the assets acquired to goodwill.

The following selected unaudited pro forma condensed combined statement of operations for the six months ended December 30, 2001 is presented as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000.

The following selected unaudited pro forma condensed combined balance sheet as of December 30, 2001 is presented as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on December 30, 2001.

The following selected unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of MedSource and ACT Medical and the notes thereto appearing elsewhere in this prospectus. The historical financial statements of HV Technologies are not separately presented in this prospectus.

The following selected unaudited pro forma condensed combined financial information does not purport to represent the results that would have been reported had such events actually occurred on the dates specified, nor is it indicative of our future results.

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2001

	Historical						Pro Forma						Historical			Pro Forma
	MedSource			ACT Medical			Adjustments			Combined			HV Technologies			Adjustments			Combined
	(In thousands, except share and per share amounts)
Revenues	$	128,462		$	12,786		$	—		$	141,248		$	8,521		$	—		$	149,769
Costs and expenses:
Cost of products sold		94,386			9,988			—			104,374			3,752			—			108,126
Selling, general and administrative expenses		26,199			3,257			—			29,456			1,878			—			31,334
Amortization of goodwill and other intangibles		5,640			58			(58	)(a)		6,544			—			—			6,544
								904	(b)
Restructuring charge		11,464			—			—			11,464			—			—			11,464

Total costs and expenses		137,689			13,303			846			151,838			5,630			—			157,468

Operating (loss) income		(9,227	)		(517	)		(846	)		(10,590	)		2,891			—			(7,699	)
Interest (expense), net		(10,213	)		(560	)		560	(c)		(10,213	)		7			51	(c)		(10,155	)
Other income (expense)		53			—			—			53			285			(274	)(d)		64

(Loss) income before income taxes		(19,387	)		(1,077	)		(286	)		(20,750	)		3,183			(223	)		(17,790	)
Income tax benefit (expense)		(70	)		—			—			(70	)		(181	)		181	(d)		(70	)

Net (loss) income		(19,457	)		(1,077	)		(286	)		(20,820	)		3,002			(42	)		(17,860	)
Preferred stock dividends and accretion of discount on preferred stock		(9,688	)					(1,317	)(e)		(11,005	)		—			(1,509	)(f)		(12,514	)

Net (loss) income attributed to common stockholders	$	(29,145	)	$	(1,077	)	$	(1,603	)	$	(31,825	)	$	3,002		$	(1,551	)	$	(30,374	)

Net loss per common share attributed to common stockholders — basic and diluted	$	(5.55	)							$	(6.06	)							$	(5.00	)

Weighted average common shares — basic and diluted		5,252,749									5,252,749						824,222	(g)		6,076,971

See notes to pro forma condensed combined financial information.

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 30, 2001

	Historical					Pro Forma
	MedSource			HV Technologies		Adjustments			Combined
	(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	13,317		$	1,100	$	500	(h)	$	9,307
							(5,610	)(i)
Accounts and notes receivable, net		21,313			869		—			22,182
Inventories		16,548			936		—			17,484
Prepaid expenses and other current assets		3,515			71		—			3,586
Deferred income taxes		1,335			—		—			1,335

Total current assets		56,028			2,976		(5,110	)		53,894
Property, plant and equipment, net		40,219			2,147		—			42,366
Goodwill, net		96,813			—		18,327	(j)		115,140

Other identifiable intangible assets, net		4,263			—		—			4,263
Deferred financing costs		3,022			—		—			3,022
Interest escrow fund		599			—		—			599
Other assets		390			—		—			390

Total assets	$	201,334		$	5,123	$	13,217		$	219,674

Liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit)
Current liabilities	$	30,112		$	866	$	—		$	30,978
Long term debt, less unamortized discount and current portion		78,237			562		(562	)(k)		78,237
Deferred income taxes		1,335			—		—			1,335
Other long-term liabilities		2,889			150		—			3,039
Mandatory redeemable stock		103,085			—		3,636	(l)		106,721
Stockholders’ equity (deficit)
Series A, Series E and Series Z preferred stock		1			—		—			1
Common Stock		53			50		8	(l)		61
							(50	)(m)
Additional paid-in capital		39,380			—		500	(h)		53,060
							13,180	(l)
Accumulated other comprehensive loss		(2,407	)		—		—			(2,407	)
Retained earnings (accumulated deficit)		(51,208	)		3,495		(3,495	)(m)		(51,208	)
Unearned compensation		(143	)		—		—			(143	)

Total stockholders’ equity (deficit)		(14,324	)		3,545		10,143			(636	)

Total liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit)	$	201,334		$	5,123	$	13,217		$	219,674

See notes to pro forma condensed combined financial information.

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED DECEMBER 30, 2001

	Historical						Pro Forma
	MedSource			HV Technologies			Adjustments			Combined
	(In thousands, except share and per share amounts)
Revenues	$	72,155		$	4,331		$	—		$	76,486
Costs and expenses:
Cost of products sold		54,616			1,949			—			56,565
Selling, general and administrative expense		14,080			2,071			—			16,151
Amortization of goodwill and other intangibles		169			—			—			169

Total costs and expenses		68,865			4,020			—			72,885

Operating income		3,290			311			—			3,601
Interest (expense), net		(4,886	)		(2	)		21	(n)		(4,867	)
Other income (expense)		(27	)		117			(109	)(o)		(19	)

(Loss) income before income taxes		(1,623	)		426			(88	)		(1,285	)
Income tax benefit (expense)		—			(318	)		318	(o)		—

Net (loss) income		(1,623	)		108			230			(1,285	)
Preferred stock dividends and accretion of discount on preferred stock		(5,322	)		—			(755	)(p)		(6,077	)

Net (loss) income attributable to common stockholders	$	(6,945	)	$	108		$	(525	)	$	(7,362	)

Net loss per common share attributed to common stockholders — basic and diluted	$	(1.32	)							$	(1.21	)

Weighted average shares — basic and diluted		5,256,058						824,222	(q)		6,080,280

See notes to pro forma condensed combined financial information.

MEDSOURCE TECHNOLOGIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Unaudited Pro Forma Statement of Operations Adjustments for the Year Ended June 30, 2001

We have made the following pro forma adjustments to arrive at our pro forma statement of operations for the year ended June 30, 2001:

(a)

Represents elimination of the amortization of goodwill that existed on ACT Medical’s balance sheet at the time of the acquisition.

(b)

Represents the amortization of goodwill and other intangibles resulting from the acquisition of ACT Medical.

(c)

Represents elimination of the interest income and interest expense incurred by ACT Medical or HV Technologies, as applicable, because the debt associated with the interest expense was paid off in connection with the acquisition.

(d)

Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense.

(e)

Represents recognition of the dividends and amortization of discount on the preferred stock issued in conjunction with the acquisition of ACT Medical.

(f)

Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock.

(g)

Represents shares of common stock issued in connection with the acquisition of HV Technologies.

Unaudited Pro Forma Balance Sheet Adjustments as of December 30, 2001

We have made the following pro forma adjustments to arrive at our pro forma balance sheet as of

December 30, 2001:

(h)

Represents receipt of an additional $0.5 million of Series E preferred stock and related warrants to finance our acquisition of HV Technologies. The total Series E preferred stock and warrants are recorded at their respective allocated fair market values of $3.8 million and $2.2 million, respectively. We will accrete the discount allocated to the Series E preferred stock over the 12 month period ending December 31, 2002 because we plan to redeem the Series E preferred stock by that date.

(i)

Represents cash paid to acquire HV Technologies.

(j)

Represents excess of purchase price over book value of assets acquired in the acquisition of HV Technologies based on a preliminary purchase price allocation. As we finalize the purchase price allocation, we may reallocate a portion of the purchase price to identifiable intangibles, which we would amortize over the economic life of those intangibles.

(k)

Represents repayment of debt of HV Technologies on the date of acquisition.

(l)

Represents issuance of Series F preferred stock and common stock in consideration of the acquisition of HV Technologies. The Series F preferred stock is recorded at its fair market value of $3.6 million. We will record an expense of $0.4 million when we redeem the Series F preferred stock.

(m)

Represents elimination of existing equity of HV Technologies as of December 30, 2001.

Unaudited Pro Forma Statement of Operations Adjustments for the Six Months Ended

December

30, 2001

We have made the following pro forma adjustment to arrive at our pro forma statement of operations for the six months ended December 30, 2001:

(n)

Represents elimination of interest expense incurred by HV Technologies because the debt associated with the interest expense was paid off in connection with the acquisition.

(o)

Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense.

(p)

Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock.

(q)

Represents shares of common stock in connection with the acquisition of HV Technologies.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for the dates and periods indicated have been derived from our consolidated financial statements. The selected consolidated statement of operations data for our fiscal period from March 31, 1999 (inception) through July 3, 1999 and our fiscal years ended July 1, 2000 and June 30, 2001 and the selected consolidated balance sheet data as of July 1, 2000 and June 30, 2001 were derived from the historical consolidated financial statements that were audited by Ernst & Young LLP, whose report appears elsewhere in this prospectus. The selected consolidated balance sheet data as of July 3, 1999 were derived from historical consolidated financial statements audited by Ernst & Young LLP, which do not appear elsewhere in this prospectus. The selected consolidated statement of operations data for the six months ended December 30, 2000 and December 30, 2001 and the selected consolidated balance sheet data as of December 30, 2001 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus, which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the financial condition and results of operations for those periods.

You should read the selected consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

	Period from March 31, 1999 (inception) through July 3, 1999(a)			Fiscal Year Ended						Six Months Ended December 30,
				July 1, 2000(a)			June 30, 2001			2000			2001
	(In thousands, except share and per share data)
Statement of Operations Data:
Revenues	$	21,968		$	89,352		$	128,462		$	55,491		$	72,155
Costs and expenses:
Cost of products sold		13,437			59,811			94,386			41,514			54,616
Selling, general and administrative expense		4,458			21,167			26,199			11,771			14,080
Amortization of goodwill and other intangibles(b)		4,135			4,255			5,640			2,432			169
Organization and start-up costs		4,981			—			—			—			—
Restructuring charge(c)		—			—			11,464			—			—

Total costs and expenses		27,011			85,233			137,689			55,717			68,865

Operating (loss) income		(5,043	)		4,119			(9,227	)		(226	)		3,290
Interest expense, net		(2,658	)		(10,682	)		(10,213	)		(5,417	)		(4,886	)
Other income (expense)		(289	)		(7	)		53			(361	)		(27	)

Loss before income taxes		(7,990	)		(6,570	)		(19,387	)		(6,004	)		(1,623	)
Income tax benefit (expense)		2,975			535			(70	)		—			—

Net loss		(5,015	)		(6,035	)		(19,457	)		(6,004	)		(1,623	)
Preferred stock dividends and accretion of discount on preferred stock		(2,078	)		(8,345	)		(9,688	)		(4,654	)		(5,322	)

Net loss attributed to common stockholders	$	(7,093	)	$	(14,380	)	$	(29,145	)	$	(10,658	)	$	(6,945	)

Net loss per share attributed to common stockholders (basic and diluted)	$	(1.60	)	$	(3.10	)	$	(5.55	)	$	(2.03	)	$	(1.32	)

Weighted average number of shares of common stock outstanding (basic and diluted)		4,448,000			4,633,571			5,252,749			5,251,833			5,256,058


Other Data:
Net cash (used in) provided by operating activities	$	(244	)	$	6,290		$	1,253		$	5,342		$	(4,024	)
Net cash used in investing activities		(93,744	)		(22,244	)		(11,627	)		(5,963	)		(5,115	)
Net cash provided by (used in) financing activities		95,796			16,356			28,453			27,686