Greetings and welcome to the CryoLife Second Quarter 2011 Financial Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Anderson, President and CEO for CryoLife. Thank you. Mr. Anderson, you may begin.

Good morning, everyone. This is Steve Anderson, CryoLife’s CEO, and I would like to welcome you to CryoLife’s Second Quarter Conference Call. With me today is Ashley Lee, the company’s Executive Vice President, Chief Financial Officer and Chief Operating Officer. This morning we announced CryoLife's second quarter 2011 operating results. Revenues were a record $29.4 million. These results are in line with our expectation, importantly our growth was led by our new recently acquired and launch product. During the quarter, we also continued to execute on our new products initiatives and made strong progress on the integration on Cardiogenesis, positioning as well for on going success. The agenda for the call this morning is as follows: Ashley will review this morning’s press release and with discuss revenues by product. He will also discuss the recent investment that the company made in ValveXchange, an early stage prosthetic heart valve company. I will discuss the first full quarter of BioGlue sales in Japan. I will also discuss our early sales progress with PerClot the powdered hemostat that we licenses from Starch Medical late last year and that is approved for sale in Europe. I will also discuss our recent acquisition of Cardiogenesis and the integration of that company into CryoLife. After my comments are completed Ashley will return to give you some financial guidance for the rest of the year. After Ashley’s guidance comments are completed, we will open the call up for questions. At this time Ashley will review this mornings press release that discussed CryoLife’s second quarter in year to date results.

Thank you. Steve. To comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995, I would like to make the following statement. Comments made in this call that look forward in time involve risks and uncertainties in our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include the statements made as to the company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, including the guidance for 2011 that I’ll provide in a moment. Additional information concerning risks and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings including the risk factors section of our previously filed Form 10-K for the year-ended December 31, 2010 and our Form 10-Qs for the quarter-ended March 31, 2011 and for the quarter ended June 30 2011, which we expect to file shortly and in the press release that went out this morning. On the call today, I will discuss certain non-GAAP financial measures. You can also find the comparable GAAP measures and a reconciliation of these non-GAAP measures to the applicable GAAP measures in the press release that went out this morning. A copy of which is contained on the Investor Relations portion of our website. This morning, we reported our results for the second quarter and first six months of 2011. We set an all time second quarter revenue record $29.4 million. Importantly, gross margins expanded to 65% in the second quarter of 2011, compared to 61% in the second quarter of 2010. I will have more on the improvement in margins later in my comments. As of June 30 2011, we had $25.1 million in cash, cash equivalents and restricted securities. This includes $1.5 million received from the…

Thank you, Ashley. Clearly we are making progress on our goal to expand our business in the high growth areas and drive to a also higher margin product such as BioGlue, PerClot and Cardiogenesis. We believe we have positioned the company for improved performance and our second quarter results are only scratching the surface in terms of reaching that potential. I now like to give you an update on some specific results and milestones related to these products that are indicative of both our initial traction and growth potential. As you will recall, we announced the BioGlue’s approval in Japan on October 7, 2010. We initially estimated that we would sell about $600,000 of BioGlue in Japan for the first twelve months that it was on the market. We are very pleased to tell you that during the first six weeks BioGlue was on the market in Japan, we sold over $500,000 of BioGlue to Century Medical, our exclusive distribution partner in Japan. This vastly exceeds our and our distributor's expectations. Japanese BioGlue sales in early July continue to be strong and demonstrate that the product is being well received. BioGlue is also doing very well in Brazil where our distributor is on track by a $1 million during calendar 2011. Sales of BioGlue in Brazil have increased from $150,000 for 2005 to about $1 million in 2011. BioGlue is projected to comprise 40% of company’s sales in 2011.As you will recollect, BioGlue’s gross margins are in excess of 80%. We are also very pleased with the early European market acceptance of PerClot. During the second quarter of 2011, sales of PerClot in Europe increased by 76% over the sales of HemoStase, a product we formally distributed for the same timeframe a year earlier. Sales of PerClot for the first…

We are maintaining our expected total revenue guidance for the full year of 2011 between $122 million and $125 million which includes revenues of between $500,000 and $1 million related to the use of funds received from the US Department of Defense in connection with the development of BioFoam. We expect tissue processing revenues to increase between low single and mid single digits on a percentage basis in 2011 compared to 2010; combined BioGlue and BioFoam revenues to increase most single to mid single digits on a percentage basis in 2011 compared to 2010; and revenues from powdered HemoStase, including PerClot and HemoStase to be between $5 million and $6 million. We expect revenues from the Cardiogenesis product line to be between $4 million and $5 million in 2011. We expect R&D expenses to be between $10-$12 million in 2011. And we expect earnings per share of between $0.23 and $0.27 in 2011, excluding the effects of any potential acquisitions or other business development cost during the second half of 2011. Excluding transactions and integration expenses related to the acquisition of Cardiogenesis and other business development charges that were approximately $.05 per share incurred in the first six months of 2011 and the effects of any potential acquisitions or other business development cost during the second half of 2011, we expect a non-GAAP adjusted earnings per share of the between $0.28 and $0.32 in 2011. We expect the effective income tax rate for the second half of 2011 to be in mid to upper 30% range excluding the effects of any potential acquisitions during the second half of 2011. We believe we are successfully executing on our strategy of positioning the company for accelerated revenue and earnings growth by expanding our addressable market opportunities through our internal development and business development activities. Looking forward, we have several key milestones that we expect to complete in the upcoming months. One is re-filing our PerClot IDE and will begin with clinical trials late this year or early next year positioning us to potentially enter the US market with the next generation hemostat by 2014. Begin human trials in the EU using the TMR procedure in conjunction with autologous stem cells and continue evaluating potential acquisitions that will allow us to enter (inaudible) high growth segments of the cardiovascular market and accelerate growth of the company. That completes my comments and I’ll turn back over to Steve.

At this time you’ll open up the call for questions.

(Operator Instructions). Our first question comes from the line of Brooks West with Piper Jaffray. Please proceed with your question.

Couple of things on the preservation services again, the underlying dynamics there. Is it more of a supply issue or demand issue that you guys at this point?

I would say it’s more of a demand issue. I think we have adequate supply to meet any demand that we might have for our products with a perceivable future.

Okay and then on Cardiogenesis on the guide, realizing it was a May acquisition, how much actual contribution thinking about time or number of days did you have in Q2?

I think we closed on that acquisition around May 17, I believe. So, it was right at a month and a half in the second quarter, that we actually had that product line.

Okay, and so anything with the underlying performance there that makes you more or less enthusiastic about products for the rest of the year?

I think right now that it’s tracking according to plan. I think as it’s trending right now we’re probably looking at being at or near and hopefully above that the top end of our guidance and if that’s in fact the case and then we’ll come back and address that in the third quarter call, but things are going according to where I’m right now.

Great, and then maybe one last one from me just on the acquisition pipeline, you guys mentioned you are still going to be active. Can you give us the sense of you know what the near-term pipeline looks like and I mean should we look for something at this year or you feel like you got enough on your plate? Thanks.

I think you should look for something additional this year.

Thank you. Our next question comes from the line of Matt Dolan with Roth Capital Partners. Please proceed with your question.

Just looking at a couple of this on a revenue side, the base business is you mentioned demand there the previous question, were there any maybe distractions related to Cardiogenesis acquisition that might have slowed things down there in the interim? And then another follow on why is the revascularization guidance so low relative to what you put in only set base?

I don’t think that we encountered any real significant distractions you know it was it’s an integration process and inherently those take some time to work through, but I don’t think that we encountered any unexpected issues there. As it relates to the guidance and I alluded to this when I answered Brooks at the second ago the things continue to trend the way they are then it looks like that we will be at the top end or hopefully above or owing to guidance. And if the trends can continue then, then we’ll come back and address our guidance in our next conference call.

Okay, and then shifting to gross margin, which is really strong in the quarter, maybe you can just help us understand how that plays out, especially as we layer in Cardiogenesis, what’s like your number to think about going forward?

If you look at the balance of 2011 I think the margins gross margins are going to be affected by product mix. If you recall you know in the third quarter typically with Europe being on vacation, BioGlue is a little bit less of our revenue mix as compared to the other quarter. So it probably would not surprise to see the margins trend downward slightly during the third quarter of this year, but certainly above where they have been historically before the acquisition of Cardiogenesis. I think longer term, I think that we fully expect our margins to expand and potentially significantly. With the addition of the Cardiogenesis product line, those gross margins we anticipate being, 80% or better going forward. Once we get PerClot, the manufacturing process transferred here and approved in the US, that’s going to be an 80 plus percent gross margin product. So longer term, we fully expect to see margin expansion. In the near-term we expect the margins to be better than they have been historically leading up to the acquisition of Cardiogenesis, but its going to be effective some of our product mix and so that’s what we expect in the second half.

In addition to that, we’re working hard on getting third quarter approved in Brazil and in Canada, and we’re making good progress on that, its just a matter of working our way through the bureaucracy that is involved in approval in those countries. And so they should come on here in the next six to nine month and that products then would be looking at significant sales increases as a result of that. And the success we’re having in Brazil was of course with BioGlue it is sort of piggyback on that. And so, I would expect with the larger volumes late this year and next year with PerClot that those margins probably will continue to increase.

Okay, looking at that R&D your expectations imply a doubling of spend on average in each of the next two quarters, may be go out and see that. Ashley, is that, is that the right way to think about it?

Yes, and again, that’s largely going to be dependent on the timing of enrolment in the BioFoam IDE and how much progress we make on re-climbing the PerClot IDE in beginning enrollment in the fourth quarter. So those numbers could prove to be a little bit high, but it’s going to be largely dependent on the timing of getting these IDEs approved in beginning enrolment. If you look at the two quarters for the balance of the year, I think the expenses the guidance that we gave that the expenses would probably be a little bit skewed towards the fourth quarter as opposed to the third quarter.

Okay, and then last one, it is kind of point of clarification on adjusted EPS. If I look at the adjustments you made in Q1 plus the adjustments in Q2 its greater than the $0.05 adjustment you are making on the guidance for the year. So, can you help us just put that all together and what’s included, what’s not and those numbers?

It’s all transaction and integration related costs predominantly related to Cardiogenesis and also other business development activities. I think maybe with that $0.05 maybe not including some of the taxes that for the second quarter you know the tax rate in the second quarter is 52% and that $0.05 may not include any effect related to that abnormality in the tax rate that result in the second quarter.

So you are calculating on annual basis for the four year guidance versus what we have seen $0.08 here today?

I have to look at that a little bit more detail Matt and get back to you on that.

Thank you. Our next question comes from the line of Raymond Myers with Benchmark. Please proceed with your question.

The first one is actually for Steve. You were talking about the $500,000 of BioGlue that sold in Japan already six weeks. How much is that is stocking orders? How can we think of that as in terms of the run rate?

Of course they are doing their distribution network no question about that. It’s hard for me to know though exactly how much of that is stocking order. I know that they have been surprised as we have that of the repeat orders that they have made here, I think they have made a total of about three large purchases in that short period of time.

Do you feel the sense of what you would expect to sell say in a 12 month period in Japan?

Based on how we are dong, I would put it as slightly over a million dollar.

Okay, that’s pretty good. Originally when we talked about BioGlue in Japan we thought that opportunity would be quite large and then you got approval there for a very specific (inaudible) indication that was about $10 million market.

Yes.

On the last call I asked you about this and you were a little more cautious at that time about Japan BioGlue sales, because that market is small you said that you thought you would have to do an additional clinical study to enter the $150 million general surgical sealant market in Japan. And I wonder are we being more optimistic now that we can broaden the use before having to do that study?

I think it’s evident that the Japanese physicians are using it off label for other uses. I think it’s too early. I don’t happen to know where they are using it at this time, but it’s obvious from the volume that they are using it an addition to and other places in addition to aortic dissections. We are going to do an additional clinical study, but we have the same exact approval from the FDA initially when we marketed that product in the States and of course and it ended up being used a lot for certain neurological indication and maybe that’s where it’s being used in Japan. I would have to ask our distributor we happen to know that I don’t at this early stage.

I think it’s also fair to say to, Ray, that we are pretty early in the roll out right now. So, it certainly has exceeded our expectations at this point, but may be a little bit too early to have a lot of market intel. But I think that will you know as we continue to roll out over the next quarter to beginning a lot of that intelligence and we will probably be in a better position to know exactly what it’s going to look like over the next year to, but we were certainly optimistic about it based on the performance today.

It’s good to see we are making progress in Japan and Brazil with BioGlue, but if you take out the upside of both markets it would appear that the US BioGlue or perhaps its international is lower than might have been anticipated, is that correct?

No, actually I think that US is probably trending close to where we had anticipated. And in fact, BioGlue is actually a little well ahead of plan for the four year today for companywide. But I think that US (inaudible) it’s been you know, we have had challenges there and we talked about those over the last several quarters, but I think that that business is pretty much trending to where we expect it to be overall worldwide we are a little ahead of where we expected to be and that’s largely due to some of the successes that we are having in Japan and other international markets.

Okay, that’s good to hear. Then holding into that, in the last call you were talked about competitive pricing pressures and I think particularly in US across several markets. Can you update us on those?

I think that those continue to persist and those are the things that we have been dealing with over the last several quarters and I think that we’ll continue to deal with over the next several quarters. But we really haven’t seen any significant changes in the cost environment or competitive activities it still remains tough, but what that means that you know we’re seeing some successes albeit and significant growth, but we’re seeing successes in our legacy businesses.

One thing we can definitely say is that PerClot and BioGlue together in Europe give us an opportunity to bundle the adhesive hemostatic agent together in certain bidding situations and that definitely has been an advantage to us. And I think it will continue to be an advantage to us going forward. Once the PerClot is on the markets in the United States I would think that that type of bundling procedure for various hospitals or pharmacies would continue to give us an edge in the marketplace once it’s approved in the States, but it’s certainly is helpful to us to be able to do that in Europe.

I’ll add to, Ray, that that and I alluded to this a little bit earlier in my comments. Our legacy businesses are maturing and but they are profitable; they generate a fair amount of cash for us and they’ve allowed us to go out and execute on the business development front and invest our internal pipeline. And if you look at over the next few quarters and the couple of years, we see growth coming from a lot of these things that we’ve been able to execute on, the acquisition of Cardiogenesis and we think that we’re going to see significant growth in PerClot international markets and with BioGlue in certain international markets. So that’s where we see the growth coming from over the foreseeable future, excluding any other things that we might be able to execute on the business development front. Raymond Myers – Benchmark Company: One last thing did you update us on the BioFoam US IDE?

No we’re still on the early very early stages of enrolling patients in that trial. So that’s very early on. Raymond Myers – Benchmark Company: Can you remind us how many patients you are trying to enroll and how many enrolled.

We are looking at doing I think 20 patients in a highlight study due the way that is currently designed. It’s a two-year follow-up, but we anticipate going to the FDA hopefully with six month data to allow us to move forward afford on pivotal study. Raymond Myers – Benchmark Company: And how long do you think it will take to remove the twenty patients?

Longer than we had anticipated when we began the trial. As I think related to in previous calls the inclusion criteria for the trial were restrictive and we have gone back to the FDA on a couple of occasions to get those criteria loosened. They have done that once and we expect to hopefully get another accommodation that will allow us to expand the inclusion criteria so that we can get the enrollment going.

Thank you. Our next question comes from the line of Joe Mondillo with Sidoti & Company. Please proceed with your question. Joe Mondillo - Sidoti & Company: Just real quick, two questions. What was the CapEx spend for the half year?

CapEx? About $1.2 million. Joe Mondillo - Sidoti & Company: With the growth that you guys are seeing in BioGlue and PerClot, we assume to see an increase in CapEx going forward to support the growth that you are seeing?

Not necessarily. That’s one of the parts of our business that we think is very leverageable. We have got the infrastructure here currently at our facility to ramp production for BioGlue. We do not perceive any significant spend on CapEx for PerClot and getting that manufacturing process migrated to our US facility. It’s going to be well less than $0.5 million in total to get that production facility up and running. So you are not going to see anything significant. Joe Mondillo - Sidoti & Company: And my other question was just on inventory. I know that you guys have seen great growth in BioGlue and PerClot. We expect also to pick up an inventory going forward. It seems like inventory has kind of sink down a little bit from December.

Yeah, I think we do pretty good job of managing our inventory levels for BioGlue. I wouldn’t see anything significant and probably wouldn’t see a significant increase or ramp in PerClot inventory levels until we got an approval in the US.

Our next question is a follow-up question from the line Brooks West with Piper Jaffray. Please proceed with your question.

Hi guys, just a quick follow-up on the R&D spend. Ashley, I think you said 10 to12 million guidance for the year and here today you are only at 3.4-3.5. I am wondering what’s the big delta is in the second half?

Anticipated enrollment in the BioFoam and PerClot IDEs predominately, as well as some of the additional R&D work that needs to be done on PerClot to support the IDEs mission. So, if the enrollment is delaying and likely the guidance for R&D is high, but we guided assuming that we will be enrolling special in fourth quarter this year.

Thank you. Mr. Anderson, there are no further questions, I would like to turn the call.

Alright, well then we will close the call and thank you for joining us and we look forward to talking with you at the close of the third quarter.