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Form 8-K
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 


CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 2, 2006

_______________________

CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)
_________________________

Florida
1-13165
59-2417093
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

1655 Roberts Boulevard, N.W., Kennesaw, Georgia 30144
(Address of principal executive office) (zip code)

Registrant's telephone number, including area code: (770) 419-3355

_____________________________________________________________
(Former name or former address, if changed since last report)

_________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


Section 2 Financial Information

Item 2.02 Results of Operations and Financial Condition.

The information provided pursuant to this Item 2.02 is to be considered “filed” under the Securities and Exchange Act of 1934 (“Exchange Act”) and incorporated by reference into those filings of CryoLife, Inc. (“CryoLife”) that provide for the incorporation of all reports and documents filed by CryoLife under the Exchange Act.
 
On November 2, 2006, CryoLife issued a press release announcing its financial results for the quarter ended September 30, 2006. CryoLife hereby incorporates by reference herein the information set forth in the press release dated November 2, 2006, a copy of which is attached hereto as Exhibit 99.1. Except as otherwise provided in the press release, the press release speaks only as of its date and shall not create any implication that the affairs of CryoLife have continued unchanged since that date.
 
Except for the historical information contained in this report, the statements made by CryoLife are forward-looking statements that involve risks and uncertainties. All such statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. CryoLife’s future financial performance could differ significantly from the expectations of management and from results expressed or implied in the press release.  Please refer to the last paragraph of the press release for further discussion about forward-looking statements. For further information on risk factors, please refer to “Risk Factors” contained in CryoLife’s Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission (“SEC”) and any subsequent SEC filings. CryoLife disclaims any obligation or duty to update or modify these forward-looking statements.

Section 7 Regulation FD
Item 7.01 Regulation FD Disclosure

The information provided in this Item 7.01 and Exhibit 99.2 hereto is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” under the Exchange Act or otherwise subject to the liability of the section, is not subject to the requirements of Item 10 of Regulation S-K promulgated by the SEC, nor shall it be deemed incorporated by reference in any registration or other filing with the SEC under the Exchange Act or the Securities Act of 1933, regardless of any statement contained in such a filing.

On November 2, 2006, CryoLife issued a press release announcing the conclusion of its strategic review and the identification of key growth strategies. CryoLife has furnished with this Form 8-K as Exhibit 99.2 a copy of the press release.

Section 9 Financial Statements and Exhibits.
Item 9.01(c)  Exhibits.

(a) Financial Statements.
Not applicable.

(b) Pro Forma Financial Information.
Not applicable.
 
 
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(c) Shell Company Transactions.
Not applicable.

(d) Exhibits.


Exhibit Number
Description
   
99.1*
Press release dated November 2, 2006
99.2
Press release dated November 2, 2006




* This exhibit is filed, not furnished.




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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, CryoLife, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
CRYOLIFE, INC.
   
   
   
Date: November 2, 2006
By: /s/ D. A. Lee
 
Name: D. Ashley Lee
 
Title: Executive Vice President, Chief
 
Operating Officer and Chief
 
Financial Officer
   


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Press Release
Exhibit 99.1

 

 
FOR IMMEDIATE RELEASE
 

Media Contacts:

D. Ashley Lee
Katie Brazel
Executive Vice President, Chief Financial Officer and
Fleishman Hillard
Chief Operating Officer
Phone: 404-739-0150
Phone: 770-419-3355
  
 
CryoLife Reports Profitable Third Quarter 2006

Company posts third quarter net income of $2.0 Million; forecasts record revenues in 2007

ATLANTA, GA… (November 2, 2006)… CryoLife, Inc. (NYSE: CRY), a biomaterials and biosurgical device company, announced today that revenues for the third quarter of 2006 increased 22 percent to $20.0 million compared to $16.5 million in the third quarter of 2005. Net income in the third quarter of 2006 was $2.0 million, and $0.07 per basic and fully diluted common share, compared to a net loss of ($3.1) million, and ($0.14) per basic and fully diluted common share in the third quarter of 2005.

The third quarter of 2006 included a net $2.0 million gain related to the settlement of an insurance dispute. The third quarter of 2005 included a $741,000 charge related to the adjustment of reserves for product liability losses, a $701,000 charge related to post employment benefits, and a $412,000 gain for the change in the value of the derivative related to the Company’s preferred stock.

Revenues for the first nine months of 2006 increased 17 percent to $60.2 million compared to $51.3 million in the first nine months of 2005. Net income in the first nine months of 2006 was $415,000, and a net loss of ($0.01) per basic and fully diluted common share, compared to a net loss of ($18.9) million, and ($0.81) per basic and fully diluted common share in the first nine months of 2005.

- more -
 
 
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The first nine months of 2006 included a net $2.0 million gain related to the settlement of an insurance dispute, an $832,000 charge related to stock based compensation, a $451,000 gain related to the adjustment of reserves for product liability losses, and a $448,000 charge related to post employment benefits. The first nine months of 2005 included an $11.8 million charge for the settlement of the shareholder class action lawsuit, a $701,000 charge related to post employment benefits, a $403,000 benefit related to the adjustment of reserves for product liability and other legal losses, and a $372,000 charge for the change in the value of the derivative related to the Company’s preferred stock.

Steven G. Anderson, President and CEO of CryoLife, Inc., stated, “We are very pleased with the Company’s ongoing recovery. Steady improvement in the Company’s gross margins is encouraging, and the combination of increasing revenues and decreasing operating expenses bode well for the future. We expect to achieve record annual revenues and sustained profitability in 2007.”

BioGlue® revenues were $9.4 million for the third quarter of 2006 compared to $8.9 million in the third quarter of 2005, an increase of 6 percent. U. S. BioGlue revenues were $7.1 million and $6.7 million in the third quarter of 2006 and 2005, respectively. International BioGlue revenues were $2.3 million and $2.2 million in the third quarter of 2006 and 2005, respectively.

BioGlue revenues were $29.5 million for the first nine months of 2006 compared to $28.3 million in the first nine months of 2005, an increase of 4 percent. U.S. BioGlue revenues were $22.0 million and $21.5 million in the first nine months of 2006 and 2005, respectively. International BioGlue revenues were $7.5 million and $6.8 million in the first nine months of 2006 and 2005, respectively.

Tissue processing revenues in the third quarter of 2006 increased 41 percent to $10.3 million compared to $7.3 million in the third quarter of 2005. Tissue processing revenues in the first nine months of 2006 increased 34 percent to $29.8 million compared to $22.2 million in the first nine months of 2005. Tissue processing revenues increased primarily due to an increase in tissue procurement and an improvement in processing yields, which resulted in an increased number of allografts available for distribution.

Total product and tissue processing gross margins were 57 percent in the third quarter of 2006 compared to 52 percent in the third quarter of 2005. Total product and tissue processing gross margins were 56 percent in the first nine months of 2006 compared to 53 percent in the first nine months of 2005. Tissue processing gross margins in the third quarter of 2006 were 33 percent compared to 18 percent in the third quarter of 2005. Tissue processing gross margins in the first nine months of 2006 were 30 percent compared to 19 percent in the first nine months of 2005. Tissue processing gross margins improved in 2006 compared to 2005, primarily as a result of price increases and improved tissue processing yields, as well as an increase in the number of tissues processed.

General, administrative, and marketing expenses in the third quarter of 2006 were $8.5 million compared to $11.1 million in the third quarter of 2005. General, administrative, and marketing expenses in the third quarter of 2006 included a net $2.0 million gain from the settlement of an insurance dispute. General, administrative, and marketing expenses in the third quarter of 2005 included a $741,000 charge related to the adjustment of reserves for product liability losses and a $701,000 charge related to post employment benefits.

General, administrative, and marketing expenses in the first nine months of 2006 were $30.1 million compared to $42.7 million in the first nine months of 2005. General, administrative, and marketing expenses for the first nine months of 2006 included a net $2.0 million gain from the settlement of an insurance dispute, an $832,000 charge for stock based compensation, a $451,000 gain related to the adjustment of reserves for product liability losses and a $448,000 charge related to post employment benefits. General, administrative, and marketing for the first nine months of 2005 included an $11.8 million charge for the settlement of the shareholder class action lawsuit, a $701,000 charge related to post employment benefits and a $403,000 benefit related to the adjustment of reserves for product liability and other legal losses.
 

 
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R&D expenses were $826,000 and $894,000 in the third quarters of 2006 and 2005, respectively. R&D expenses were $2.6 million and $2.7 million in the first nine months of 2006 and 2005, respectively.

As of September 30, 2006, the Company had $8.2 million in cash, cash equivalents, marketable securities (at market), and restricted securities, not including the net $2.0 million in proceeds from the settlement of an insurance dispute, which was received in October 2006.

2006 Guidance

The Company expects revenues for the full year of 2006 to be within its previous range of guidance of between $80.0 and $82.0 million. Selling, general and administrative expenses are expected to be between $40.5 and $41.5 million, which includes the net $2.0 million gain from the insurance dispute. Research and development expenses are expected to be between $3.5 and $4.0 million.

2007 Guidance

The Company expects record annual revenues for the full year of 2007 exceeding its previous record of $87.7 million recorded in 2002. The Company expects to provide more detailed guidance in its year-end conference call in February 2007.

Webcast and Conference Call Information

The Company will hold a teleconference call and live webcast at 11:15 a.m. Eastern Time, November 2, 2006, to discuss third quarter 2006 financial results, followed by a question and answer session hosted by Mr. Anderson.

To listen to the live teleconference please dial 201-689-8261 a few minutes prior to 11:15 a.m. A replay of the teleconference will be available November 2 - 9, 2006 and can be accessed by calling (toll free) 877-660-6853 or 201-612-7415. The account number for the replay is 244 and the conference number is 217256.
 
 
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The live webcast and replay, as well as a copy of this press release, can be accessed by going to the Investor Relations section of the CryoLife web site at http://www.cryolife.com and selecting the heading Webcasts & Presentations.

About CryoLife, Inc.

Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiovascular, vascular, and orthopaedic surgeries throughout the United States and Canada. The Company's BioGlue® Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels and is CE marked in the European Community and approved in Canada for use in soft tissue repair and approved in Australia for use in vascular and pulmonary sealing and repair. The Company also distributes the CryoLife-O'Brien® stentless porcine heart valve and the SG Model 100 vascular graft, which are CE marked for distribution within the European Community.

Statements made in this press release that look forward in time or that express management's beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include those regarding anticipated revenues for the full year of 2006 and 2007 and future growth and financial improvement. These future events may not occur as and when expected, if at all, and, together with the Company's business, are subject to various risks and uncertainties. These risks and uncertainties include that the Company’s recently announced strategic directives may not generate anticipated revenue and earnings growth, the Company's efforts to continue to increase revenue may not be effective, since their effectiveness is subject to such factors as competitive pressures and tissue availability, that the Company's efforts to develop and introduce new products outside the U.S. may be unsuccessful, that the Company's efforts to improve procurement and tissue processing yields may not continue to prove effective, the possibility that the FDA could impose additional restrictions on the Company's operations, require a recall, or prevent the Company from processing and distributing tissues or manufacturing and distributing other products, that products and services under development, including BioDisc, may not be commercially feasible, the Company’s SynerGraft products may not receive FDA approval when anticipated or at all, that the Company may not have sufficient borrowing or other capital availability to fund its business, that pending litigation cannot be settled on terms acceptable to the Company, that the Company may not have sufficient resources to pay punitive damages (which are not covered by insurance) or other liabilities in excess of available insurance, the possibility of decreases in the Company's working capital if cash flow does not improve, that to the extent the Company does not have sufficient resources to pay the claims against it, it may be forced to cease operations or seek protection under applicable bankruptcy laws, changes in laws and regulations applicable to CryoLife, efforts by existing stockholders or others to gain influence or control over CryoLife may divert management’s attention from the Company’s operational recovery or otherwise be detrimental to the interests of the other stockholders, existing or other potential litigation initiated by stockholders or others; possible litigation by CryoLife if stockholders or others make proposals or statements which CryoLife does not believe to be fair or accurate or in the best interests of its other shareholders and other risk factors detailed in CryoLife's Securities and Exchange Commission filings, including CryoLife's Form 10-K filing for the year ended December 31, 2005, its most recent Form 10-Q, and the Company's other SEC filings. The Company does not undertake to update its forward-looking statements.



8

CRYOLIFE, INC.
Unaudited Financial Highlights
(In thousands, except share data)
 
 
   
Three Months Ended
  
Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2006
  
2005
  
2006
  
2005
  
Revenues:
                  
Products
  
$
9,687
  
$
9,129
  
$
30,308
  
$
29,102
  
Human tissue preservation services
    
10,319
    
7,329
    
29,839
    
22,219
  
Research grants
    
12
    
--
    
74
    
--
  
Total revenues
    
20,018
    
16,458
    
60,221
    
51,321
  
Costs and expenses:
                          
Products
   
1,576
    
1,940
    
5,581
    
6,135
  
Human tissue preservation services
   
6,954
    
6,015
    
20,751
    
17,984
  
General, administrative, and marketing
    
8,549
    
11,085
    
30,106
    
42,726
  
Research and development
    
826
    
894
    
2,572
    
2,744
  
Interest expense
    
169
    
77
    
504
    
220
  
Interest income
    
(94
)
  
(166
)
  
(304
)
  
(408
)
Change in valuation of derivative
    
44
    
(412
)
  
111
    
372
  
Other expense, net
    
4
    
37
    
348
    
212
  
Total costs and expenses
    
18,028
    
19,470
    
59,669
    
69,985
  
                           
                           
Earnings (loss) before income taxes
    
1,990
    
(3,012
)
  
552
    
(18,664
)
Income tax expense
   
12
    
106
    
137
    
190
  
Net Income (loss)
  
$
1,978
    
$(3,118
)
$
415
  
$
(18,854
)
Effect of preferred stock
    
(243
)
  
(243
)
  
(730
)
  
(533
)
Net Income (loss) applicable to common shares
  
$
1,735
  
$
(3,361
)
$
(315
)
$
(19,387
)
                           
Income (loss) per common share:
                          
Basic
  
$
0.07
  
$
(0.14
)
$
(0.01
)
$
(0.81
)
Diluted
  
$
0.07
  
$
(0.14
)
$
(0.01
)
$
(0.81
)
                           
Weighted average common shares outstanding:
                          
Basic
    
24,847
    
24,161
    
24,804
    
23,839
  
Diluted
    
25,118
    
24,161
    
24,804
    
23,839
  
                           
                           
Revenues from:
                          
BioGlue
  
$
9,444
  
$
8,917
  
$
29,534
  
$
28,340
  
Bioprosthetic devices
    
243
    
212
    
774
    
762
  
Total products
    
9,687
    
9,129
    
30,308
    
29,102
  
                           
Cardiovascular
    
4,189
    
3,139
    
11,550
    
10,407
  
Vascular
    
4,468
    
2,825
    
13,066
    
8,281
  
Orthopaedic
    
1,662
    
1,365
    
5,223
    
3,531
  
Total preservation services
    
10,319
    
7,329
    
29,839
    
22,219
  
                           
Other
    
12
    
--
    
74
    
--
  
Total revenues
  
$
20,018
  
$
16,458
  
$
60,221
  
$
51,321
  
                           
Domestic revenues
  
$
17,297
  
$
14,011
  
$
51,497
  
$
43,595
  
International revenues
    
2,721
    
2,447
    
8,724
    
7,726
  
Total revenues
  
$
20,018
  
$
16,458
  
$
60,221
  
$
51,321
  

 
 
9

CRYOLIFE, INC.
Financial Highlights
(In thousands)


   
September 30,
  
December 31,
  
   
2006
  
2005
  
   
(Unaudited)
  
Cash and cash equivalents, marketable securities,
              
at market, and restricted securities
  
$
8,157
  
$
12,159
  
Trade receivables, net
    
11,754
    
10,153
  
Other receivables
    
4,087
    
1,934
  
Deferred preservation costs, net
    
19,509
    
13,959
  
Inventories
    
5,013
    
4,609
  
Total assets
    
80,464
    
76,809
  
Shareholders’ equity
    
51,472
    
50,621
  


 
For additional information about the company, visit CryoLife’s Web site:
http://www.cryolife.com

END

10

Press Release
Exhibit 99.2
 

 
FOR IMMEDIATE RELEASE
 

Media Contacts:
 
D. Ashley Lee
Katie Brazel
Executive Vice President, Chief Financial
Fleishman Hillard
Officer and Chief Operating Officer
Phone: 404-739-0150
Phone: 770-419-3355
 
 
CryoLife Identifies Key Growth Strategies as Result of Strategic Review

ATLANTA…(November 2, 2006)…CryoLife, Inc. (NYSE:CRY), a biomaterials and biosurgical device company, today announced that in addition to continuing to focus on growing its business and leveraging its strengths and expertise in its core marketplaces, it will pursue three key strategies designed to generate revenue and earnings growth. These strategies were identified and evaluated as part of a strategic review begun in January 2006 at the request of the Company’s Board of Directors and with the assistance of Piper Jaffray & Co.

The Board has directed management to actively pursue the following three strategies:

·  
Identify and evaluate acquisition opportunities of complementary product lines and companies;
·  
License Company technology to third parties for non-competing uses; and
·  
Analyze and identify underperforming assets for potential sale or disposal.

In connection with its strategic analysis, the Board has determined that shareholder value is not likely to be maximized through a sale of the Company, or of a major product line, at this time. Further, the Board has concluded that the significant improvements in the Company’s operating results in the second and third quarters, coupled with recent improvements in the Company’s liquidity, make it unnecessary for the Company to pursue a capital-raising transaction at this time.
 
Steven G. Anderson, CryoLife’s President and Chief Executive Officer, stated, “We believe that we are embarking on a strategy that will lead to significant revenue and earnings growth in the
 
 
--more--
 
 
 
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years to come, and we expect that we will soon be able to report continued progress on these initiatives. In fact, our recently announced licensing agreement with BioForm Medical, Inc., to develop and market BioGlue® for cosmetic and plastic surgeries is an example of our commitment to this value enhancement strategy. This marks our first initiative in the implementation of our successful strategic alternatives review and we look forward to continued progress in pursuing our strategic opportunities.”
 
 
About CryoLife, Inc.
 
 
Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiovascular and vascular surgeries throughout the United States and Canada. The Company's BioGlue® Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels and is CE marked in the European Community and approved in Canada for use in soft tissue repair and approved in Australia for use in vascular and pulmonary sealing and repair. The Company also manufactures the SG Model 100 vascular graft, which is CE marked for distribution within the European Community.
 
Statements made in this press release that look forward in time or that express management's beliefs, expectations or hopes, including statements regarding the Company’s ability to successfully implement the three strategic directives and the impact of that implementation on earnings and revenues, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These future events may not occur as and when expected, if at all, and, together with the Company's business, are subject to various risks and uncertainties. These risks and uncertainties include that the Company may be unable to acquire complementary products or businesses, continue to successfully license Company technology, or sell underperforming assets, and that even if the Company is able to successfully pursue its strategic directives, it may be unable to materially increase revenues or earnings. The Company’s business is also subject to a number of risks, that the Company's efforts to continue to increase revenue may not be effective, since their effectiveness is subject to such factors as competitive pressures and tissue availability, that the Company's efforts to develop and introduce new products outside the U.S. may be unsuccessful, that the Company's efforts to improve procurement and tissue processing yields may not continue to prove effective, the possibility that the FDA could impose additional restrictions on the Company's operations, require a recall, or prevent the Company from processing and distributing tissues or manufacturing and distributing other products, that products and services under development, including BioDisc, may not be commercially feasible, the Company's SynerGraft products may not receive FDA approval when anticipated or at all, that the Company may not have sufficient borrowing or other capital availability to fund its business, that pending litigation cannot be settled on terms acceptable to the Company, that the Company may not have sufficient resources to pay punitive damages (which are not covered by insurance) or other liabilities in excess of available insurance, the possibility of decreases in the Company's working capital if cash flow does not improve, that to the extent the Company does not have sufficient resources to pay the claims against it, it may be forced to cease operations or seek protection under applicable bankruptcy laws, changes in laws and regulations applicable to CryoLife, efforts by existing stockholders or others to gain influence or control over CryoLife may divert management's attention from the Company's operational recovery or otherwise be detrimental to the interests of the other stockholders, existing or other potential litigation initiated by stockholders or others; possible litigation by CryoLife if stockholders or others make proposals or statements which CryoLife does not believe to be fair or accurate or in the best interests of its other shareholders and other risk factors detailed in CryoLife's Securities and Exchange Commission filings, including CryoLife's Form 10-K filing for the year ended December 31, 2005, its most recent Form 10-Q, and the Company's other SEC filings. The Company does not undertake to update its forward-looking statements.
 
For additional information about the company, visit CryoLife’s Web site:
http://www.cryolife.com
###
 
 
 
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