Greetings and welcome to the CryoLife Corporation First Quarter 2014 Financial Results 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. I would now like to turn the conference over to your hot Steve Anderson. Thank you, sir. You may begin.

Good morning, everyone. This is Steve Anderson, CryoLife’s CEO, and I would like to CryoLife’s Q1 2014 conference call. With me today is Ashley Lee, the company’s Executive Vice President, COO and CFO. Today the company reported record revenues of $35.7 million for the first quarter of 2014. Earnings for the first quarter were $0.04 per share, HeRO Graft sales were up 26% year-over-year. Cardiac allograft revenues were $7.2 million an increase of 8%.Vascular allograft revenues were $9.1 million an increase of 1%. Ashley we’ll get into the details of these numbers during his financial remarks. The agenda for today’s call is as follows. Ashley will discuss the company’s first quarter results by product. He will discuss the completion of the distribution agreement and purchase option with Hancock Jaffe for their vascular graft product that compliments the HeRO Graft. Ashley will comment on the recent FDA inspection and the result and Form 483 that we received. I will discuss the filing of our motion for a declaratory judgment to obtain the courts confirmation that PerClot technology does not infringe on Bard patent. I will discuss the FDA clearance of our 510-K application for PerClot Topical and the marketing launch date this Topical product in the US. I will discuss the IDE PMA clinical trial for PerClot to use internally. I will also discuss the opening of the sales and service center in Singapore. At the conclusion of my comments Ashley will return to give you some financial guidance for the rest of the year. At this time Ashley will review and comment on today’s earnings release.

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 risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future, including the guidance for 2014 that I will provide in a moment. Additional information concerning risk and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company’s SEC filings, including the Risk Factor section of our Form 10-K for the year ended December 31, 2013 and our Form 10-Q for the first quarter of 2014 which we expect to file shortly and in the press release that went out this morning. This morning we reported our results for the first quarter of 2014, we continue to make progress on executing our strategy to leverage our established sales force to drive growth of an expanding portfolio of high margin medical device products. We are pleased with our results from that perspective in the first quarter. We achieved record first quarter revenues of $35.7 million driven by 26% year-over-year revenue growth from the HeRO device and 4% growth in tissue processing. The following factors influenced our revenue performance. Our domestic revenues were up 3% for the first quarter of 2014 compared to the prior year period led by a 23% increase in HeRo revenues. And a 12% increase in cardiac tissue processing revenues. Our international revenues were down 7% for the first quarter of 2014 compared to the prior year period primarily due to the timing of shipments to international…

On April 3rd the FDA cleared our 510-K submission for PerClot Topical powdered hemostat. This clearance allowance CryoLife to begin commercialization of PerClot hemostatic powder throughout the United States. The approved intended usage for PerClot include used as a topical dressing for the temporary treatment of a mildly bleeding wound such as surgical wounds for the treatment of mild bleeding from topical EMT surgical wounds. And for the control of bleeding from the skin at percutaneous needle access, vascular access and percutaneous catheter access sites. I like to reiterate some points I’ve made in the past regarding the comparison of the CryoLife product PerClot Topical with the bard product Arista. PerClot Topical absorbs four to five times the amount of water Arista absorbs. PerClot also absorbs water twice as fast as Arista and PerClot forms a much more robust gel than Arista does. There is a film on our website that confers the activity of each product in a head-to-head timed experiment using water. I would encourage you to look at the film. We will market PerClot through our 54 person direct sales force in the US. These sales force will be augmented by manufacturers, reps, who previously sold hemostatic powders. This will give us a unique hybrid in sales force. We will be focusing initially on the E&T market with PerClot Topical. We estimate the US market to be about a $100 million for a product with the indications of PerClot Topical. In the future we expect to realize the gross margin north of 85% for PerClot Topical once manufacturing is fully ramped up. We intend to launch this product in the US on June 1st of this year. It is important to note that we also have an approved IDE for the clinical evaluation of PerClot for use…

We are reiterating our guidance for the full year of 2014 with the exception of the effects of the previously mentioned declaratory judgment action we filed with respect to PerClot. We expect total revenues to be between $146 million and $150 million. This represents annual total revenue growth of 4% to 7%. We expect revenues from our higher margin product segment to increase in the mid to high single-digits on a percentage basis for the full year of 2014. As a reminder this does not yet conclude any consideration from the ProCol agreement. We expect tissue processing revenues to increase in the low single-digits on a percentage basis for the full year of 2014 compared to 2013 including the voluntary discontinuation of the allograft tissue shipments into Europe beginning in April of this year. We expect research and development expenses of between $11 million and $12 million in 2014, primarily reflecting our investments in our U.S. clinical trials for PerClot. We expect earnings per share for the full-year of 2014 of between $0.17 and $0.20 down from our previous range of $0.21 and $0.24 per share. The decrease compared to our original guidance is primarily due to the estimated anticipated legal expenses related to the declaratory judgment action. The decrease in EPS as compared to 2013 is primarily result of the increased R&D spending on our PerClot clinical trial which we expect to begin enrollment in, in the near future as well as the litigation expense. It is important to note that our guidance does not reflect activities related to business development and potential share repurchases which are difficult to predict. We believe that we’re continuing to execute to service successfully on our strategy of positioning the company for accelerated revenue and earnings growth by expanding our addressable market opportunities…

At this time I will open up the call for questions.

Thank you. [Operator Instructions]. And our first question comes from the line of Tom Gunderson with Piper Jaffray. Please proceed with your question. Tom Gunderson – Piper Jaffray: So first just a housekeeping one Ashley on BioGlue I think you said it was up 5%, 2% on volume. Did you have a price increase at the beginning of the year or is that product mix differences?

That was 5% domestic increase Tom. And we did have a price increase on July 1, of last year. It was more the volume obviously helped us with the revenue increase but I don’t think there was really a big change and product mix, it was just more volume driving it along with the price increases. Tom Gunderson – Piper Jaffray: Got it thanks. And then more to the point the PerClot headline kind of surprised this morning and then you figured out it’s not the PerClot that you are seeking a PMA on. It’s a Topical in your description you said it’s the same product. Is it packaged the same, delivered the same, is it, if you had PMA approval would it be 1 SKU on the shelf or would it – does it look different to the customer?

It will eventually look different, the package that’s on the shelf right now says PerClot Topical. And however it is packaged the same and it is really the same product it’s just that the FDA regulates it differently depending on where you use it. So, since if you’re going to use it internally they expected us to do an IDE PMA. Interestingly they consider ENT surgery to be topical. So that’s an area that we’re very keenly interested in. Tom Gunderson – Piper Jaffray: So Steve some of the competitors in that zone deliver the hemostatic agent through gauze or a plug or some sort of thing that can go up into the sinuses of which part of ENT surgery is, is that something that would be done in the – or by doctor are you thinking of maybe delivering it sometime in the future through other methods?

It would be done by the doctor but I know that in the ENT a surgery along the post operative care is done by the physician’s assistants. So both parties would be using the product, it comes in a small bellows and the powder can be ejected out of the bellows by squeezing the bellows. We also have extender tips that go along with it extender tips of different lengths so you can access the sinus cavity with those extender tips quite easily.

Tom the existing configuration of PerClot has been used successfully many times in ENT surgeries in Europe. Tom Gunderson – Piper Jaffray: And so just go back to the beginning I want to make sure my assumptions are right but this is FDA regulations 510-K, PMA topical versus internal but essentially the FDA are at least one arm of the FDA said that PerClot this configuration is a safe product to use on the human body so I’m thinking –

They have – they are not commercially used in the United States. Tom Gunderson – Piper Jaffray: Got it I mean if they had any safety issues they would have brought them up and so the assumptions that investors might or could make is at least from a safety standpoint. Your PMA is a little bit more visible as far as approval today than it was last week.

Yeah Tom on the IDE PMA for the surgical product that’s really going to be focused on both the safety and the effectiveness. The 510-K clearance all over the pre-clinical animal work and we’ve been testing that we submit it to the FDA suggest that they made the determination of the product that’s safe to use and so we will again commercializing on June 1st. Tom Gunderson – Piper Jaffray: Got it, thanks. And then last you didn’t mention whether, I’m just curious whether the bad weather that we experienced this winter –

Yeah we had big problems in Atlanta. In other areas of the United States, we think that causes probably $750,000 in lost sales. Tom Gunderson – Piper Jaffray: Sales Steve, sales that you’ll make up or sales that are just on?

Hard to know. Tom Gunderson – Piper Jaffray: Okay thanks. That’s it for me guys.

Thank you. And your next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann & Company. Please proceed with your question. Jeffrey Cohen – Ladenburg Thalmann & Company: So just as one follow-up on the Topical approval would that be a separate line item or that will just following the PerClot as one-line item?

It will probably follow new PerClot. Jeffrey Cohen – Ladenburg Thalmann & Company: Could you talk a little bit about the revascularization line item in revenue for Q1 and any general trends you’re seeing?

Depending obviously the number was below where we expected it to be. If you compare it to the fourth quarter of 2013 Jeff our handset volume was actually relatively flat compared to the fourth quarter of ‘13. We actually benefited from some laser console sales. And the fourth quarter of ‘13 but excluding that the first quarter was relatively flat compared to the – fourth quarter 2013. Now with that being said the business is not where we wanted to be. We think that, we lost some momentum with the product line when we had and when we introduced a new handset in July of last year. And quite frankly we are, we had not yet recovered some of that momentum that we had. If you look at the month of April of this year it’s been pretty strong in regards to handset purchases and volume. So we’re optimistic there that we’re going to get the business turn back around. Jeffrey Cohen – Ladenburg Thalmann & Company: Okay turn back around meaning I know you don’t provide specific guidance but turn back around meaning revenues in excess of 2013 for 2014?

For handsets the answer is yes. I think that we guided, I’m going to give specific guidance on TMR but we’re expecting that revenues will increase year-over-year. Jeffrey Cohen – Ladenburg Thalmann & Company: Okay so for ProCol do you anticipate for Q2 that you’ll have a new product line item working out for ProCol specifically because I’m assuming you have a couple of few hundred veins and valves ready to be sold?

That is correct now some of that is short dated inventory but we are beginning to distribute ProCol reps in the second quarter. We don’t anticipate that we are going to have a significant volume of revenues until Hancock Jaffe has gotten their PMA supplement and we get newly manufactured product. And we can have a full commercial launch. We don’t anticipate that to happen until the second half of this year. it depends on how material the product line becomes as to whether or not we have a separate line item in our financial statements that we filed with the SEC but we will be reporting on our progress with ProCol in our full year conference call. So you’ll have some insight on a quarterly basis as to what our progress is. Jeffrey Cohen – Ladenburg Thalmann & Company: Sure and maybe under other until it becomes its one line item.

That’s correct. Jeffrey Cohen – Ladenburg Thalmann & Company: Okay and you do expect that the Hancock Jaffe manufacturing facility will be up and running and turning our product by the end of ‘14?

That’s our expectation. Yet again they have to get a PMA supplement from the FDA they have recently restarted their manufacturing and as we, when we get to our next quarterly conference call hopefully we’ll have more insight as to what the exact timing is, as to when we expect to launch that product but we think it’s a great opportunity for the company. It’s very complimentary to both of allograft vascular program as well as the HeRo device if you look at the other competitive product that’s out there in space right now, the other biological graft according to IMS they, they had over $11 million in revenues last year, shipped over 10,000 grafts and the business grew at 30% on the top line. So we think it’s a very pretty attractive market for us to be in. Jeffrey Cohen – Ladenburg Thalmann & Company: And one more if I may if you could discuss little bit about the PMA status and timeline. So you’re expecting that the trial for PerCoat will start at July. And could you walk us through number of centers as the –

Yeah there are 15 centers and there are multiple indications for that and cross multiple specially. So I’m of the opinion that the enrollment will move pretty quickly. Jeffrey Cohen – Ladenburg Thalmann & Company: Pretty quickly is six months approximately?

I do, I think the enrollment that we started July when we surprised finished with enrollment by the end of the year. Jeffrey Cohen – Ladenburg Thalmann & Company: Okay and will you be discussing an realizing data to talk about prior to filing?

We really hadn’t made that determination yet Jeff it just depends on the progress that we make. Jeffrey Cohen – Ladenburg Thalmann & Company: Okay but at this point no change in the timeline you’re still looking for a PMA approval by the end of ‘15?

Yes.

Thank you. And our next question comes from the line of Joe Munda with Sidoti & Company. Please proceed with your question. Joe Munda – Sidoti & Company: Just a quick follow-up on ProCol I was just wondering if you could give us some sense of what possibly the gross margin could be when the production is ramped up at the facility? Any sense of that would be very helpful.

Initially Joe we are going to be distributing the product and then we have an option to purchase the product line beginning in month 25 of the agreement. So – Joe Munda – Sidoti & Company: Yeah you have that three year, you have a three year window and then it says in options for each year afterwards is a one year option correct?

That’s correct. It’s to renew the distribution agreement. So during the distribution phase of the agreement we think our margins are going to be in the mid 50% range based on the transfer price that has been established. If we are successful with the product line and we exercise our purchase option and bring the manufacturing in house, we believe that at some point we could easily see 70 plus percent gross margins for the product. Joe Munda – Sidoti & Company: Okay and as far as the quarterly payments of $2.3 million. I’m a little confused here when is that going to occur and how is that going to accoutered for?

Okay. We are going to be paying approximately $2.3 million in quarterly installments. And we have a budget essentially that we’re utilizing to guide us, us to what the amounts that we’re going to pay on a quarterly basis. The payments that we’re making are by and large prepayments for inventory. So where you’re going to be seeing those payments manifest itself in our financial statements is predominantly in inventory. Joe Munda – Sidoti & Company: Okay that’s helpful. And then Steve as far as the patent infringement, I know you guys spoke a little bit here about that. And you gave us some good guidance as far as what the litigation you expect to pay in ‘14 of 1, 2.5 million is that number a baseline number to work off for 2015 or do you think it could ramp higher as we progress?

It might ramp higher. That’s our best estimate for this year. But I have been told its quite expensive going forward in patent litigation. Joe Munda – Sidoti & Company: Okay and then I guess my final question as far as what went on Japan. You guys are saying that it was basically just timing issues and those sales should recover going forward is that correct?

Yeah absolutely it’s just the ordering patterns from out distributor based on – our discussions with them. And we totally believe that the ‘14 revenues to Japan are going to be higher than the ‘13 revenues? Joe Munda – Sidoti & Company: Okay. Thank you.

Thank you. And that does conclude today’s Q&A session. I would now like to turn the floor over for closing comments.

Thank you everyone for joining us. And we look forward to meeting with you at the end of the second quarter.