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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

Commission File Number: 333-118675

Accellent Corp.
(Exact name of registrant as specified in its charter)

Registrant's Telephone Number, Including Area Code: (610) 489-0300

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

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

        As of May 9, 2005, 100 shares of the Registrant's common stock were outstanding. The registrant is a wholly owned subsidiary of Accellent Inc.

Table of Contents

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCELLENT CORP.
Unaudited Condensed Consolidated Balance Sheets
As of March 31, 2005 and December 31, 2004
(in thousands)

The accompanying notes are an integral part of these financial statements.

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ACCELLENT CORP.
Unaudited Condensed Consolidated Statements of Operations
For the three months ended March 31, 2005 and 2004
(in thousands)

The accompanying notes are an integral part of these financial statements.

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ACCELLENT CORP.
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2005 and 2004
(in thousands)

The accompanying notes are an integral part of these financial statements.

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ACCELLENT CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2005

1.     Summary of Significant Accounting Policies:

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements of Accellent Corp. ("the Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the fiscal year as a whole. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed on March 15, 2005 with the Securities and Exchange Commission (File No. 333-118675) for the year ended December 31, 2004.

        The Company changed its name from Medical Device Manufacturing, Inc. to Accellent Corp. on May 4, 2005. The Company is a wholly owned subsidiary of Accellent Inc. ("Parent"). Parent is a holding company with no operations and whose only asset is the stock of the Company. Proceeds from the issuance of debt and sale of stock of Parent are used by the Company for its acquisitions of its subsidiaries. Additionally, the proceeds of the Company's issuance of $175.0 million of 10% Senior Subordinated Notes due July 15, 2012 (the "Senior Subordinated Notes") were used to retire all of the senior notes of Parent. Accordingly, in compliance with provisions of Staff Accounting Bulletin 54 (Topic 5-J, Question 3), the accompanying financial statements reflect the push down of Parent's debt, related interest expense, debt issuance costs, the Class B-1 and B-2 Redeemable and Convertible Preferred Stock, and the Class C 8% Redeemable Preferred Stock and related dividends. The Parent debt pushed down to the Company is included in its consolidated balance sheets as long-term debt. The Parent Class B-1 and B-2 Redeemable and Convertible Preferred Stock, and the Class C 8% Redeemable Preferred Stock pushed down to the Company is included in its consolidated balance sheets as redeemable and convertible preferred stock of parent company. Parent has also raised capital from the sale of common stock, Class A-1 though A-8 5% Convertible Preferred Stock, Class AA Convertible Preferred Stock and warrants exercisable for Class AB Convertible Preferred Stock. The proceeds from the common stock, Class A-1 through A-8 5% Convertible Preferred Stock, Class AA Convertible Preferred Stock and warrants exercisable for Class AB Convertible Preferred Stock have been advanced to the Company and reflected in its consolidated balance sheets as additional paid-in capital since the Company is under no obligation to repay these amounts. Any costs incurred by Parent for the benefit of the Company have been fully allocated to the Company. Parent does not incur any common expenses for the benefit of both Parent and the Company, therefore, no common expenses are allocated from Parent to the Company. Management believes the methods of allocation are reasonable. For the three months ended March 31, 2004, Parent pushed down to the Company interest expense, including debt issuance costs, of $1.5 million. Parent did not incur any interest expense for the three months ended March 31, 2005.

        The Company's operating results have been included in Parent's consolidated United States and state income tax returns and in tax returns of certain foreign subsidiaries. The provision for income taxes in the Company's financial statements has been determined on a separate return basis. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. No formal tax sharing agreement exists between the Company and Parent.

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Stock-based compensation

        The Company accounts for stock options issued by Parent to employees of the Company using the intrinsic value method of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Had the Company elected to recognize compensation expense for the granting of Parent options under Parent stock option plans based on the fair values at the grant dates consistent with the methodology prescribed by Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation," pro forma net income would have been reported as follows (in thousands):

2.     Acquisitions:

        On June 30, 2004, the Company acquired MedSource Technologies, Inc. The acquisition was accounted for as a purchase and accordingly the results of operations include MedSource's results beginning June 30, 2004. MedSource is an engineering and manufacturing services provider to the medical device industry. The purchase price was $219.7 million, consisting of $208.8 million in cash for the purchase of common stock and the cash out of options and warrants, and $10.9 million of transaction fees. The purchase was financed by a combination of new debt and equity as discussed in notes 6 and 8. In addition, the then existing indebtedness of MedSource equal to $36.1 million plus related accrued interest was repaid in conjunction with the acquisition. The Company estimates that it will incur $21.3 million for integration and other liabilities.

        The purchase price for the MedSource acquisition was allocated as follows (in thousands):

        The Company determines the value and potential purchase price of target acquisition companies based on multiples of future cash flow. These cash flow projections may include an estimate of improved cash flow performance as compared to historical performance of the target acquisition company based on projected synergies. The value of the acquired company based on our cash flow analysis may differ significantly from the carrying value of the acquired net assets, resulting in an allocation of a significant portion of the purchase price to goodwill.

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        The following unaudited pro forma consolidated financial information reflects the purchase of MedSource assuming the acquisition had occurred as of the beginning of each period. This unaudited pro forma information has been provided for informational purposes only and is not necessarily indicative of the results of operations or financial condition that actually would have been achieved if the acquisitions had been on the date indicated, or that may be reported in the future (in thousands):

        The pro forma net income for the three months ended March 31, 2004 includes $1.1 million of restructuring charges recognized by MedSource.

3.     Restructuring and Other Charges:

        In connection with the MedSource acquisition, the Company identified $21.1 million of costs associated with eliminating duplicate positions and plant consolidations, which is comprised of $11.6 million in severance payments and $9.5 million in lease termination and other contract termination costs. Severance payments relate to approximately 570 employees in manufacturing, selling and administration and are expected to be paid by mid-year 2006. All other costs are expected to be paid by 2018. The costs of these plant consolidations were reflected in the purchase price of MedSource in accordance with the FASB Emerging Issues Task Force ("EITF") No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. These costs include estimates to close facilities and consolidate manufacturing capacity, and are subject to change based on the actual costs incurred to close these facilities. Changes to these estimates could increase or decrease the amount of the purchase price allocated to goodwill in the near term. During the first quarter of fiscal year 2005, the Company decreased the estimated liability for the MedSource facilities consolidation by $0.4 million, resulting in a decrease to the purchase price allocation to goodwill in the same amount.

        The Company recognized $0.9 million of restructuring charges and acquisition integration costs during the first quarter of fiscal year 2005, including $0.3 million of severance costs and $0.5 million of other exit costs including costs to move production processes from three facilities that are closing to other production facilities of the Company. In addition to the $0.8 million in restructuring charges incurred during first quarter of fiscal year 2005, the Company incurred $0.1 million of costs for the integration of MedSource comprised primarily of outside professional services.

        The following table summarizes the recorded accruals and activity related to the restructuring (in thousands):

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4.     Comprehensive Income:

        Comprehensive income represents net income plus the results of any stockholder's equity changes related to currency translation. For the three months ended March 31, 2005 and 2004, the Company reported comprehensive income of (in thousands):

5.     Inventories:

        Inventories at March 31, 2005 and December 31, 2004 consisted of the following (in thousands):

6.     Short-term and long-term debt:

        Long-term debt at March 31, 2005 and December 31, 2004 consisted of the following (in thousands):

        The Company's Senior Secured Credit Facility dated June 30, 2004 (the "Credit Agreement") includes $194.0 million of term loans and up to $40.0 million available under the revolving credit facility. Additionally, the Company may borrow up to $40.0 million in additional term loans, with the approval of participating lenders. On March 25, 2005, the Company amended its Credit Agreement to lower the interest rate applicable to the term loans as follows: on base rate loans from base rate (generally the applicable prime lending rate of Credit Suisse First Boston, as announced from time to time) plus 2.00% to base rate plus 1.25%, on eurodollar rate loans from LIBOR plus 3.00% to LIBOR plus 2.25%. In addition, the amendment increased the amount of potential additional term loans from $40.0 million to $50.0 million and allowed increased flexibility in, and funds for, acquisitions. Additional term loans require the approval of participating lenders. Principal payments will continue to be due in the amounts of $1.9 million per year plus, beginning in 2006, 75% of Excess Cash Flow, as defined by

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the Credit Agreement. The balance is due June 30, 2010. As of March 31, 2005, $6.2 million of the revolving credit facility was supporting the Company's letters of credit, leaving $33.8 million available.

        The Company incurred $0.7 million in fees in connection with the amendment of the Credit Agreement during the first quarter ended March 31, 2005, which will be amortized to interest expense over the remaining term of the Credit Agreement. Also in connection with the amendment, the Company wrote off deferred financing costs resulting in a charge to interest expense of $0.2 million for the three months ended March 31, 2005.

        On June 30, 2004, the Company issued $175.0 million of the Senior Subordinated Notes. Interest is payable on January 15^th and July 15^th of each year.

        The Company's debt agreements contain various covenants, including minimum cash flow (as defined), debt service coverage ratios and maximum capital spending limits. In addition, the debt agreements restrict the Company from paying dividends and making certain investments. The covenants and restrictions of the indenture governing the Senior Subordinated Notes apply only to the Company and not Parent. All covenants and restrictions under the Credit Agreement apply to the Company, and the covenants and restrictions other than financial covenants apply to Parent.

        As of March 31, 2005, the Company and Parent were in compliance with their respective covenants under the Credit Agreement and the Senior Subordinated Notes.

7.     Income taxes:

        The effective income tax rate for the three months ended March 31, 2005 was 45.5% and differs from the statutory rate primarily due to $1.2 million of deferred tax expense for tax benefits acquired from MedSource which have been credited to goodwill and not benefited in the statement of operations, and the different book and tax treatment for goodwill. These deferred taxes have been partially offset by net operating loss carryforwards unrelated to MedSource and lower tax rates on certain foreign subsidiary earnings. The effective income tax rate for the three months ended March 31, 2004 was 18.0% and differs from the statutory rate primarily due to net operating loss carryforwards, which were partially offset by deferred tax expense due to the different book and tax treatment for goodwill.

8.     Capital Stock and Redeemable Preferred Stock:

        The Company has 1,000 shares of common stock authorized and 100 shares issued and outstanding, $.01 per value per share. All shares are owned by Parent.

        The Company has received proceeds from the sale of permanent equity by Parent. The proceeds received by the Company from inception to March 31, 2005 amounted to $201.4 million and are included in additional paid-in capital. The Company is under no obligation to repay these amounts to Parent. For a further discussion of the equity instruments of Parent, see Notes 10 and 11 of the consolidated financial statements included in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004.

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        The following table summarizes the amounts recorded as additional paid in capital and redeemable convertible preferred stock of Parent for the three months ended March 31, 2005 (in thousands):

9.     Pension Plans:

        Effective January 1, 2004, the Company adopted SFAS No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits. This standard requires the disclosure of the components of net periodic benefit cost recognized during interim periods. Components on net periodic pension cost for the three months ended March 31, 2005 and 2004 were as follows (in thousands):

        Assuming that the actual return on plan assets is consistent with the expected annualized rate of 7.0% for the remainder of fiscal year 2005, and that interest rates remain constant, the Company would be required to make total contributions to its pension plans of $74,000 for fiscal year 2005.

10.   Supplemental Guarantor Condensed Consolidating Financial Statements:

        In connection with the Company's issuance of its Senior Subordinated Notes, all of its domestic subsidiaries (the "Subsidiary Guarantors") guaranteed on a joint and several, full and unconditional basis, the repayment by the Company of such notes. Certain foreign subsidiaries of the Company (the "Non-Guarantor Subsidiaries") have not guaranteed such indebtedness.

        The following tables present the unaudited consolidating statements of operations for the three months ended March 31, 2005 and March 31, 2004 of the Company ("Holdings"), the Subsidiary Guarantors and the Non-Guarantor Subsidiaries, the unaudited condensed consolidating balance sheets as of March 31, 2005 and December 31, 2004, and cash flows for the three months ended March 31, 2005 and March 31, 2004.

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Consolidating Statements of Operations
Three months ended March 31, 2005 (in thousands):

Consolidating Statements of Operations
Three months ended March 31, 2004 (in thousands):

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Condensed Consolidating Balance Sheets
March 31, 2005 (in thousands):

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Condensed Consolidating Balance Sheets
December 31, 2004 (in thousands):

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Consolidating Statements of Cash Flows
Three months ended March 31, 2005 (in thousands):

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Consolidating Statements of Cash Flows
Three months ended March 31, 2004 (in thousands):