Gross profit increased $4.9 million to $55.9 million in the third quarter of 2013, compared to $51.0 million for the comparable 2012 period. This improvement was driven by increased operational leverage due to our higher sales volumes, as well as a favorable mix of higher margin products. As a result, gross profit as a percentage of sales for the current quarter increased 170 basis points to 33.3% from 31.6% for the prior year third quarter, representing the fourth consecutive quarter our gross profit margin has increased in comparison to the prior year.

Selling, general and administrative (“SG&A”) expenses increased $1.3 million to $21.6 million for the third quarter 2013 compared to $20.3 million for the same period of 2012. This increase is attributable to the additional investments made in sales and marketing resources to drive core business growth, as well as increased performance-based compensation. Synergies realized from our Swiss orthopaedic facility consolidation of approximately $0.4 million partially offset the rise in expenses.

Net research, development and engineering (“RD&E”) costs for the 2013 third quarter of $13.8 million increased 4% over the $13.2 million incurred during the third quarter of 2012. This increase was primarily attributable to a decrease in customer cost reimbursements compared to the prior year of $0.9 million, due to the timing of achievement of milestones on various projects, as well as higher performance-based compensation. These increases were partially offset by our initiative to refocus our medical device RD&E investment, which began in the third quarter of 2012, and included the discontinuation of certain non-core projects. Current quarter results include $1.5 million of design verification testing (“DVT”) costs incurred in connection with the Company’s development of a neuromodulation platform compared to $1.2 million for the comparable 2012 period. In total, costs incurred in connection with our medical device investments were $7.8 million in the third quarter of 2013, compared to $8.7 million for the 2012 third 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.

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