The medical device market consists of a broad range of medical devices used in hospitals, clinics, physician practices, alternate sites and other provider sites for the diagnosis and treatment of diseases and medical conditions. The medical device market includes numerous market segments, such as orthopedics, cardiovascular, dentistry, ophthalmology and urology, among others. The global medical device market was estimated to be approximately $207 billion in 2003. The orthopedic device segment of the medical device market was estimated to be approximately $16 billion in 2003, and is expected to grow approximately 12% annually to greater than $25 billion by 2007. The global instruments and cases markets were estimated to be $2.7 billion and $0.9 billion, respectively in 2002, a combined increase of approximately 8% versus 2001.

The vast majority of orthopedic implant procedures are performed on patients who are age 65 years and older. According to U.S. Census data, the total U.S. population is projected to grow approximately 9.5% from 2000 to 2010, while the number of individuals in the United States over the age of 65 years is projected to grow 14.8% during the same period. In addition to the growing U.S. elderly population, it is believed that the number of people in Europe and Japan who are age 65 years and older is expected to increase at a rate at least as fast as in the United States.

Implant procedures have become increasingly common. For example, in 2003, there were approximately 1.4 million procedures performed to implant an artificial hip or knee worldwide, an increase of 12.8% from the prior year. Hip and knee replacements are now highly successful in relieving pain and restoring movement and it is believed that the wider acceptance and high success rates of many orthopedic procedures are creating greater patient confidence in reconstructive and other orthopedic procedures. It is expected that this trend to continue as advances in technology and surgical procedures continue to improve clinical outcomes.

Implant sales accounted for 37.1% of the Company’s total revenue in the first quarter of 2004. The Company designs, develops and manufactures implants for use in specific implant systems developed by the customers. The Company makes orthopedic implants used primarily in knee and hip implant systems. The Company’s orthopedic implants are used in reconstructive surgeries to replace or repair hips, knees and other joints, such as shoulders, ankles and elbows, sometimes referred to as extremities that have deteriorated as a result of disease or injury. An orthopedic implant system is generally comprised of several implants designed to work in concert to replicate the structure and function of a healthy joint.

The Company also manufactures implant products for trauma, spine and other implant systems. Trauma implant systems are used primarily to reattach or stabilize damaged bone or tissue while the body heals. Spinal implant systems are used by orthopedic surgeons and neurosurgeons in the treatment of degenerative diseases, deformities and injuries in various regions of the spine.

The Company’s design, engineering and prototyping expertise is an integral part of the Company’s implant offering. Medical device companies, which typically focus their resources on developing new implant systems as well as sales and marketing, often rely on the Company, to design, develop and manufacture the implants that comprise their implant systems. The Company’s manufacturing capabilities, including the Company’s net shaped forging capabilities, technologically advanced casting facility and machining expertise, allow the Company to produce consistent, tight tolerance implants in large volumes for its customers.

Gross profit increased $6.9 million, or 123.1%, to $12.6 million in the first quarter of 2004 from $5.6 million in the first quarter of 2003.

Selling, general and administrative expenses increased $2.6 million, or 89.9%, to $5.5 million in the first quarter of 2004 from $2.9 million in the first quarter of 2003.

Interest expense increased $2.3 million, or 193.4%, to $3.5 million in the first quarter of 2004 from $1.2 million in the first quarter of 2003.