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):  February 21, 2008

_______________________

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.

On February 21, 2008, CryoLife, Inc. (“CryoLife” or the “Company”) issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2007. CryoLife hereby incorporates by reference herein the information set forth in its Press Release dated February 21, 2008, 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 the date of such press release and it shall not create any implication that the affairs of CryoLife have continued unchanged since such date.

The press release includes supplemental non-GAAP financial measures, including non-GAAP net income, non-GAAP gross margins, non-GAAP earnings per share and non-GAAP general, administrative, and marketing expenses.  These supplemental measures exclude such items as stock-based compensation expense, changes in the value of a derivative related to the Company’s retired preferred stock, charges related to certain post-employment benefits, gains related to the settlement of an insurance dispute and a non-cash charge and a net gain related to the Company’s exit from orthopaedic tissue processing.  The additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net income or earnings per share prepared in accordance with GAAP.

The press release also includes non-GAAP revenues, which have been adjusted from the comparable GAAP revenue numbers to exclude revenues related to orthopaedic tissue preservation services.  The press release includes tissue preservation and product revenues and combined cardiac and vascular tissue preservation services revenues.  The Company’s GAAP revenues are composed of tissue preservation services and product revenues plus other revenues, which include grant and license revenues.  Combined cardiac and vascular preservation services revenues have been adjusted from the comparable segment revenue numbers to exclude revenues related to orthopaedic tissue preservation services.  BioGlue revenues have been adjusted from the comparable segment revenue numbers to exclude revenues related to other implantable medical devices because other implantable medical devices account for less than 2% of total product revenues for the full year.

CryoLife believes that providing adjusted non-GAAP net income and earnings per share provides investors with greater transparency to the information used by CryoLife’s management in its financial and operational decision-making and allows investors to see CryoLife’s results through the eyes of management. CryoLife considers non-GAAP financial measures that exclude the effect of stock-based compensation to be useful metrics for management and investors, allowing CryoLife’s management and investors to compare CryoLife’s recurring core business operating results over multiple periods.  Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FAS 123R, CryoLife’s management believes that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between CryoLife’s recurring core business operating results and those of other companies, as well as providing CryoLife’s management with an important tool for financial and operational decision making and for evaluating CryoLife’s own recurring core business operating results over different periods of time.

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In calculating non-GAAP financial measures, CryoLife also excludes certain items to facilitate a review of the comparability of CryoLife’s operating performance on a period-to-period basis because such items are not, in our view, related to the Company’s ongoing operational performance.  In the attached press release, these items included non-recurring items such as the exclusion of changes in the value of a derivative related to the Company’s retired preferred stock, charges related to certain post-employment benefits, gains related to the settlement of an insurance dispute and a non-cash charge and a net gain related to the Company’s exit from orthopaedic tissue processing.  Non-GAAP revenues have been adjusted to exclude revenues from orthopaedic tissue processing because the Company discontinued procuring and processing such tissue as of January 1, 2007 and is currently only distributing those tissues that were processed prior to that time.  Because the Company’s revenues from these tissues will be reduced to zero in the near future, the Company believes that the non-GAAP revenue numbers presented provide investors with a more accurate measure of the relative revenue performance of the Company’s continuing tissue preservation business.  Accordingly, CryoLife believes that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

·   the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

·   the ability to better identify trends in the Company’s underlying business and perform related trend analyses; and

·   a better understanding of how management plans and measures the Company’s underlying business.

The information provided pursuant to this Item 2.02 is to be considered “furnished” pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, nor shall it be deemed incorporated by reference into any of CryoLife’s reports or filings with the Securities and Exchange Commission (“SEC”), whether made before or after the date hereof, except as expressly set forth by specific reference in such report or filing.

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, 2006, as filed with the SEC, and any subsequent SEC filings. CryoLife disclaims any obligation or duty to update or modify these forward-looking statements.

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Section 9  Financial Statements and Exhibits.

Item 9.01(c)  Exhibits.

(a) Financial Statements.

Not applicable.

(b) Pro Forma Financial Information.

Not applicable.

(c) Shell Company Transactions.

Not applicable.

(d) Exhibits.

Exhibit Number	Description
99.1*	Press release dated February 21, 2008

*  This exhibit is furnished, not filed.

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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:  February 21, 2008	By:              /s/ D. A. Lee
	Name:         D. Ashley Lee
	Title: Executive Vice President, Chief
	Operating Officer and Chief
	Financial Officer

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EX-99.1

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 Net Income of $0.26 Per Share in 2007 Compared to a Net Loss of ($0.02) Per Share in 2006

Company reports record annual revenues of $94.8 million, increasing 17 percent in 2007 compared to 2006;

Company posts fourth quarter net income of $0.10 per share in 2007 compared to a net loss of ($0.01) per share in 2006

ATLANTA, GA…(February 21, 2008)…CryoLife, Inc. (NYSE: CRY), a biomaterials, medical device and tissue processing company, announced today that revenues for the full year of 2007 increased 17 percent to $94.8 million compared to $81.3 million in the full year of 2006.  Net income in the full year of 2007 was $7.2 million and $0.26 per basic and fully diluted common share, compared to net income of $365,000 and a net loss of ($0.02) per basic and fully diluted common share in the full year of 2006.

Excluding orthopaedic revenues of $4.2 million and $7.1 million in the full year 2007 and 2006, respectively, total revenues increased 22 percent for the full year of 2007.  Excluding a $2.0 million charge related to stock-based compensation, an $821,000 charge for the change in the valuation of the derivative related to the Company’s preferred stock and conversions of the Company’s preferred stock to common stock, and a $786,000 charge related to post employment benefits, non-GAAP net income in the full year of 2007 was $10.8 million and $0.40 per basic and $0.39 per fully diluted common share.  Excluding a non-cash charge of $2.8 million and a net gain of $2.6 million (comprised of a non-cash gain of $2.9 million offset by approximately $300,000 in transaction costs) related to the Company’s exit from orthopaedic tissue processing, a net $2.0 million gain related to the settlement of an insurance dispute, a $1.5 million charge related to stock-based compensation, and a $448,000 charge related to post employment benefits, non-GAAP net income in the full year of 2006 was $523,000 and a net loss of ($0.02) per basic and fully diluted common share.

- more - -

Revenues for the fourth quarter of 2007 increased 19 percent to $25.1 million compared to $21.1 million in the fourth quarter of 2006.  Net income in the fourth quarter of 2007 was $2.6 million and $0.10 per basic and fully diluted common share, compared to a net loss of ($50,000) and ($0.01) per basic and fully diluted common share in the fourth quarter of 2006.

Excluding orthopaedic revenues of $552,000 and $1.9 million in fourth quarter of 2007 and 2006, respectively, total revenues increased 28 percent for the fourth quarter of 2007.  Excluding a $516,000 charge related to stock-based compensation, non-GAAP net income for the fourth quarter of 2007 was $3.2 million and $0.12 per basic and $0.11 per fully diluted common share.  Excluding a non-cash charge of $2.8 million and a net gain of $2.6 million (comprised of a non-cash gain of $2.9 million offset by approximately $300,000 in transaction costs) related to the Company’s exit from orthopaedic tissue processing, and a $751,000 charge related to stock-based compensation, non-GAAP net income in the fourth quarter of 2006 was $860,000 and $0.02 per basic and fully diluted common share.

Tissue processing revenues in the fourth quarter of 2007 increased 27 percent to $13.0 million compared to $10.2 million in the fourth quarter of 2006.  Tissue processing revenues in the full year of 2007 increased 22 percent to $49.0 million compared to $40.1 million in the full year of 2006.  Tissue processing revenues increased primarily due to increased demand for the Company’s cardiac and vascular processed tissues, increased availability of tissues due to improvements in procurement, and, to a lesser extent, price increases.

Combined cardiac and vascular tissue processing revenues in the fourth quarter of 2007 increased 49 percent to $12.4 million compared to $8.3 million in the fourth quarter of 2006.  Combined cardiac and vascular tissue processing revenues in the full year of 2007 increased 36 percent to $44.8 million compared to $32.9 million in the full year of 2006.  Combined cardiac and vascular tissue processing revenues increased primarily due to increased demand for the Company’s processed tissues and increased availability of tissues due to improvements in procurement.

Orthopaedic tissue processing revenues in the fourth quarter of 2007 decreased 71 percent to $552,000 compared to $1.9 million in the fourth quarter of 2006.  Orthopaedic tissue processing revenues in the full year of 2007 decreased 41 percent to $4.2 million compared to $7.1 million in the full year of 2006.  Orthopaedic tissue processing revenues declined during 2007 because the Company discontinued procuring and processing such tissue in the first quarter of 2007.

BioGlue® revenues were $11.5 million for the fourth quarter of 2007 compared to $10.5 million in the fourth quarter of 2006, an increase of 10 percent.  U.S. BioGlue revenues were $8.1 million and $7.7 million in the fourth quarter of 2007 and 2006, respectively.  International BioGlue revenues were $3.4 million and $2.8 million in the fourth quarter of 2007 and 2006, respectively.

BioGlue revenues were $43.9 million for the full year of 2007 compared to $40.0 million in the full year of 2006, an increase of 10 percent.  U.S. BioGlue revenues were $31.6 million and $29.8 million in the full year of 2007 and 2006, respectively.  International BioGlue revenues were $12.3 million and $10.2 million in the full year of 2007 and 2006, respectively.

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Total product and tissue processing gross margins were 64 percent in the fourth quarter of 2007 compared to 47 percent in the fourth quarter of 2006.  Tissue processing gross margins in the fourth quarter of 2007 were 44 percent compared to 10 percent in the fourth quarter of 2006.  Excluding a non-cash charge of $2.8 million related to the Company’s exit from orthopaedic tissue processing, total non-GAAP product and tissue processing gross margins were 60 percent and non-GAAP tissue processing gross margins were 37 percent in the fourth quarter of 2006.

Total product and tissue processing gross margins were 62 percent in the full year of 2007 compared to 54 percent in full year of 2006.  Tissue processing gross margins in the full year of 2007 were 42 percent compared to 25 percent in the full year of 2006.  Excluding a non-cash charge of $2.8 million related to the Company’s exit from orthopaedic activities, total non-GAAP product and tissue gross margins were 57 percent and non-GAAP tissue processing gross margins were 32 percent for the full year of 2006.  See attached schedule for a reconciliation of these numbers.  Tissue processing gross margins improved in 2007 compared to 2006 primarily as a result of price increases and a favorable product mix in 2007.

General, administrative, and marketing expenses in the fourth quarter of 2007 were $12.1 million compared to $11.4 million in the fourth quarter of 2006.  Excluding a $516,000 charge related to stock-based compensation, non-GAAP general, administrative, and marketing expenses in the fourth quarter of 2007 were $11.5 million.  Excluding a $751,000 charge related to stock-based compensation, non-GAAP general, administrative, and marketing expenses in the fourth quarter of 2006 were $10.7 million.

General, administrative, and marketing expenses in the full year of 2007 were $46.5 million compared to $41.5 million in the full year of 2006.  Excluding a $2.0 million charge related to stock-based compensation, and a $786,000 charge related to post employment benefits, non-GAAP general, administrative, and marketing expenses in the full year of 2007 were $43.6 million.  Excluding a net $2.0 million gain related to the settlement of an insurance dispute, a $1.5 million charge related to stock-based compensation, and a $448,000 charge related to post employment benefits, non-GAAP general, administrative, and marketing expenses in the full year of 2006 were $41.5 million.

Research and development expenses were $1.3 million and $975,000 in the fourth quarters of 2007 and 2006, respectively.  Research and development expenses were $4.5 million and $3.5 million in the full year of 2007 and 2006, respectively.

As of December 31, 2007, the Company had  $17.4 million in cash, cash equivalents and marketable securities (at market), of which $1.2 million was received from the U.S. Department of Defense as advance funding for the development of protein hydrogel technology for use on the battlefield.  The Company used $4.5 million of cash on hand to pay off its prior credit facility, which expired on February 8, 2008.  The Company is currently exploring alternatives to replace its expired credit facility.

“We are extremely pleased with our performance during the fourth quarter and full year of 2007,” stated Steven G. Anderson, president and chief executive officer.  “We believe that the FDA’s recent clearance of the SynerGraft® pulmonary heart valve, coupled with our improving business fundamentals, positions us for a very strong performance in 2008.”

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Financial Guidance

The Company’s GAAP revenues are composed of product and tissue processing revenues plus other revenues.  With the recent clearance of CryoValve®SG pulmonary heart valve, the Company now expects product and tissue processing revenues for the full year of 2008 to be between $101.0 million and $106.0 million.  Other revenues for 2008 are estimated to be up to $1.8 million, primarily related to funding received from the Department of Defense in connection with the development of BioFoam®.

The Company expects tissue processing revenues to be between $53.0 million and $56.0 million and BioGlue revenues to be between $47.0 million and $49.0 million for the full year of 2008.  Other implantable medical device revenues are expected to be approximately $1.0 million in 2008.

The Company expects general, administrative, and marketing expenses of between $48.0 million and $51.0 million, and research and development expenses of between $6.5 million and $8.5 million for the full year of 2008.  The research and development expectations include an estimate of up to $1.7 million to be funded by the Department of Defense in connection with the development of BioFoam.

Webcast and Conference Call Information

The Company will hold a teleconference call and live webcast today at 10:00 a.m. Eastern Time to discuss the 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 10:00 a.m.  A replay of the teleconference will be available February 21 through February 28, 2008 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 271923.

The live webcast and replay can be accessed by going to the Investor Relations section of the CryoLife Web site at 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 cardiac and vascular surgeries throughout the United States and Canada.  The Company recently received FDA clearance for its CryoValve® SG pulmonary human heart valve, processed using CryoLife’s proprietary SynerGraft® Technology.  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.  BioGlue is also CE marked in the European Community and approved in Canada and Australia for use in soft tissue repair.  The Company also distributes the CryoLife-O'Brien® stentless porcine heart valve, which is CE marked for distribution within the European Community.

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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 2008 performance.  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 strategic directives may not generate anticipated revenue and earnings growth, competitive pressures and tissue availability may adversely affect the Company’s ability to grow revenues, the Company's efforts to develop and introduce new products outside the U.S. may be unsuccessful, 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, FDA and other approvals for products in development may not be obtained, and if obtained, may be costly and require lengthy review periods, products and services under development may not be commercially feasible, CryoValve SG may not perform as well as expected or provide all the benefits anticipated, demand for CryoValve SG may not reach anticipated levels, and accordingly, the Company may choose not to process the majority of its pulmonary valves with the Company’s SynerGraft technology, the SynerGraft post-clearance study requested by the FDA may not provide the expected positive results, pending or future litigation cannot be settled on terms acceptable to the Company, 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 Company may be unable to obtain sufficient financing to fully pursue its strategic plan and future healthcare policies, healthcare reimbursement methods and healthcare reimbursement policies may affect the availability, amount and timing of the Company’s revenues.  These risks and uncertainties include the risk factors detailed in CryoLife's Securities and Exchange Commission filings, including CryoLife's Form 10-K filing for the year ended December 31, 2006, its most recent Form 10-Q, and the Company's other SEC filings.  The Company does not undertake to update its forward-looking statements.

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CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands, except per share data)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
	(Unaudited)			(Unaudited)			(Unaudited)			(Audited)
Revenues:
Preservation services	$	12,983		$	10,239		$	49,002		$	40,078
Products		11,616			10,729			44,712			41,037
Other		469			122			1,049			196
Total revenues		25,068			21,090			94,763			81,311
Costs and expenses:
Preservation services		7,250			9,207			28,433			29,958
Products		1,664			1,882			7,108			7,463
General, administrative, and marketing		12,053			11,439			46,470			41,545
Gain on exit activities		--			(2,620	)		--			(2,620	)
Research and development		1,319			975			4,453			3,547
Interest expense		159			153			677			657
Interest income		(167	)		(105	)		(527	)		(409	)
Change in valuation of derivative		--			10			821			121
Other expense (income), net		7			51			(241	)		399
Total costs and expenses		22,285			20,992			87,194			80,661
Earnings before income taxes		2,783			98			7,569			650
Income tax expense		134			148			368			285
Net income (loss)	$	2,649		$	(50	)	$	7,201		$	365
Effect of preferred stock dividends		--			(243	)		(243	)		(973	)
Net income (loss) applicable to common shares	$	2,649		$	(293	)	$	6,958		$	(608	)
Income (loss) per common share:
Basic	$	0.10		$	(0.01	)	$	0.26		$	(0.02	)
Diluted	$	0.10		$	(0.01	)	$	0.26		$	(0.02	)
Weighted average common shares outstanding:
Basic		27,474			24,904			26,331			24,829
Diluted		27,873			24,904			26,974			24,829
Revenues from:
Cardiac tissue	$	6,511		$	4,438		$	22,098		$	15,988
Vascular tissue		5,920			3,890			22,702			16,956
Orthopaedic tissue		552			1,911			4,202			7,134
Total preservation services		12,983			10,239			49,002			40,078
BioGlue		11,511			10,491			43,884			40,025
Other implantable medical devices		105			238			828			1,012
Total products		11,616			10,729			44,712			41,037
Other		469			122			1,049			196
Total revenues	$	25,068		$	21,090		$	94,763		$	81,311
Domestic revenues	$	21,364		$	17,970		$	81,023		$	69,467
International revenues		3,704			3,120			13,740			11,844
Total revenues	$	25,068		$	21,090		$	94,763		$	81,311

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CRYOLIFE, INC. AND SUBSIDIARIES

Financial Highlights

(In thousands)

	December 31,		December 31,
	2007		2006
	(Unaudited)		(Audited)
Cash and cash equivalents, marketable securities,	$	17,447	$	8,669
at market, and restricted securities
Trade receivables, net		12,311		12,553
Other receivables		1,373		1,403
Deferred preservation costs, net		26,903		19,278
Inventories		5,607		5,153
Total assets		92,684		79,865
Shareholders’ equity		62,627		52,088

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 CRYOLIFE, INC.

Unaudited Reconciliation of Non-GAAP Net Income (Loss)

(In thousands, except share data)

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2007		2006			2007			2006
Net income (loss) – as reported	$	2,649	$	(50	)	$	7,201		$	365
Adjustments to net income (loss):
Charge related to the exit from orthopaedic tissue processing		--		2,779			--			2,779
Gain related to the exit from orthopaedic tissue processing		--		(2,620	)		--			(2,620	)
Insurance coverage settlement		--		--			--			(1,993	)
Stock-based compensation		516		751			2,040			1,544
Post employment benefits		--		--			786			448
Change in valuation of derivative		--		--			821			--
Non-GAAP net income	$	3,165	$	860		$	10,848		$	523
Effect of preferred stock dividends		--		(243	)		(243	)		(973	)
Non-GAAP net income (loss) applicable to common shares	$	3,165	$	617		$	10,605		$	(450	)
Weighted average common shares  outstanding – Basic		27,474		24,904			26,331			24,829
Non-GAAP income (loss) per common share – Basic	$	0.12	$	0.02		$	0.40		$	(0.02	)

Numerator for non-GAAP diluted income (loss) per common share:
Non-GAAP net income	$	3,165		860		$	10,848			523
Less effect of preferred stock dividends		--		(243	)		(243	)		(973	)
Non-GAAP net income (loss) applicable to common stock	$	3,165		617		$	10,605			(450	)
Denominator for non-GAAP diluted income (loss) per common share:
Basic weighted-average common shares		27,474		24,904			26,331			24,829
Effect of dilutive stock options		288		311			582			--
Effect of contingently returnable shares		12		--			10			--
Effect of contingent stock awards		99		--			51			--
Weighted average common shares outstanding – Diluted		27,873		25,215			26,974			24,829
Non-GAAP income (loss) per common share – Diluted	$	0.11	$	0.02		$	0.39		$	(0.02	)

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CRYOLIFE, INC.

Unaudited Reconciliation of Adjusted Gross Margin

(In thousands, except percent data)

	Three Months Ended						Twelve Months Ended
	December 31, 2006						December 31, 2006
	Amount			Percentage			Amount			Percentage
	in Dollars			of Revenue			in Dollars			of Revenue
Total preservation services and product:
Revenue	$	20,968					$	81,115
Cost		(11,089	)					(37,421	)
Gross margin	$	9,879			47	%	$	43,694			54	%
Adjustments to gross margin:
Loss on exit activities		2,779			13	%		2,779			3	%
Adjusted gross margin	$	12,658			60	%	$	46,473			57	%
Preservation services:
Revenue	$	10,239					$	40,078
Cost		(9,207	)					(29,958	)
Gross margin	$	1,032			10	%	$	10,120			25	%
Adjustments to gross margin:
Loss on exit activities		2,779			27	%		2,779			7	%
Adjusted gross margin	$	3,811			37	%	$	12,899			32	%

For additional information about the company, visit CryoLife’s Web site:

http://www.cryolife.com

END

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