Selling, general and administrative (“SG&A”) expenses increased to $18.6 million, or 13.1% of sales, for the fourth quarter of 2011 compared to $15.3 million, or 11.5% of sales, for the same period of 2010. For the year, SG&A costs were $72.5 million, or 12.8% of sales, versus $64.5 million, or 12.1% of sales for 2010. The change in SG&A expenses for the quarter and full year included the impact of higher legal and regulatory consulting costs incurred in connection with our medical device initiatives ($1.6 million quarter, $4.0 million full year), higher performance based compensation ($0.8 million quarter, $3.9 million full year), and the negative impact of strengthening foreign currencies on the cost of our international operations ($0.09 million quarter, $1.1 million full year) in comparison to the prior year. Additionally, SG&A for the fourth quarter of 2011 included approximately $0.4 million of costs related to the operations of Micro Power.

Net research, development and engineering costs (“RD&E”) for the 2011 fourth quarter were $12.8 million, or 9.0% of sales, compared to $11.4 million, or 8.6% of sales, for the corresponding 2010 period. For 2011, net RD&E costs totaled $45.5 million, or 8.0% of sales, versus $45.0 million, or 8.4% of sales for 2010. During the fourth quarter of 2011, the Company incurred $6.7 million ($23.3 million full year) of RD&E expenses related to the development of complete medical devices, compared to $3.7 million ($20.3 million full year) for the corresponding 2010 periods, respectively. More specifically, included in fourth quarter 2011 amounts are $2.3 million ($5.1 million full year) of design verification testing (“DVT”) costs related to the QiG Group’s development of a neuromodulation platform. Partially offsetting these increases was a higher level ($0.7 million quarter, $2.4 million full year) of customer cost reimbursements in comparison to the 2010 period. These cost reimbursements can vary significantly due to the timing of the achievement of milestones on development projects.

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