Research, development and engineering costs for the 2013 second quarter of $14.1 million remained consistent with the comparable 2012 period. Efforts to refocus our medical device research and development (“R&D”) investment, which began in the third quarter of 2012 and included the discontinuation of certain non-core R&D projects, were partially offset by higher spend on core R&D development projects and higher performance based compensation. Current quarter results include $1.2 million of design verification testing (“DVT”) costs incurred in connection with the Company’s development of a neuromodulation platform compared to $1.6 million for the comparable 2012 period. In total, costs incurred in connection with our medical devices were $7.9 million in the second quarter of 2013, compared to $8.7 million for the 2012 second quarter. The Company’s medical device technology investment is focused on successfully commercializing Algostim and being selective in opportunities that leverage our strengths in our core business units and drive sustainable growth. Additionally, the Company continues to seek strategic partners to share in the costs of RD&E and reduce the impact to the bottom line.

GAAP operating income for the second quarter 2013 was $17.1 million compared to $11.1 million for the comparable 2012 period. This increase was primarily due to increased gross profit and lower consolidation and optimization costs, partially offset by higher SG&A expenses. Adjusted operating income, which excludes other operating and DVT expenses, increased 19% to $22.2 million compared to $18.6 million in the second quarter of 2012. Refer to Table A at the end of this release for a reconciliation of GAAP operating income to adjusted operating income and the “Use of Non-GAAP Financial Information” section below.

The GAAP effective tax rate for the second quarter of 2013 was 35.0% compared to 43.9% for the same period of 2012. This decrease was primarily attributable to the reinstatement of the R&D tax credit in the first quarter of 2013, as well as higher income in lower tax rate jurisdictions.

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