EXHIBIT 99.1
NEWS RELEASE
CRYOLIFE ANNOUNCES AGREEMENTS IN PRINCIPLE TO SETTLE SHAREHOLDER
CLASS ACTION AND SHAREHOLDER DERIVATIVE ACTION LAWSUITS
ATLANTA, July 28 /PRNewswire-FirstCall/ -- CryoLife, Inc. (NYSE: CRY), a
biomaterials and biosurgical device company, announced today that it has reached
an agreement in principle to settle the securities class action lawsuit pending
in the United States District Court for the Northern District of Georgia arising
out of allegedly inadequate disclosures prior to the FDA's August 2002 tissue
recall. The settlement will resolve all claims asserted against the Company and
the individual defendants in this case.
The terms of the settlement, which must be approved by the court following
notice to the class, include a total settlement of $23.25 million, approximately
$11.5 million of which is expected to be paid from insurance proceeds. The
remainder is expected to be comprised of a cash payment from the Company of
approximately $8.0 million, expected to be made in the third or fourth quarter,
and common stock with a stipulated value of approximately $3.75 million. Based
on a stock price of $7.90, the Company expects that the settlement will include
approximately 475,000 shares of CryoLife common stock. The actual number of
common shares issued will depend on the stock price at the time of distribution.
Management expects to record a pre-tax charge of approximately $11.75 million in
the second quarter of 2005 for the combined value of the cash and common stock.
The Company and the individual defendants have denied any wrongdoing and
liability whatsoever, and the settlement does not contain any admission of
liability. While the court previously dismissed a number of plaintiffs' claims
in a ruling on the Company's motion for summary judgment, the court also ruled
that several claims could proceed to trial. Plaintiffs intended to seek damages
at trial in excess of $150 million. Although the Company believes plaintiffs'
claims lacked merit, in light of the inherent risks and uncertainties of
litigation as well as defense costs, the Company determined to resolve the
matter short of trial rather than expose the Company and its current
shareholders to these costs and the risk of a potentially catastrophic award at
trial.
As previously disclosed, the Company has been in settlement discussions
regarding a shareholder derivative action filed in the Superior Court of Fulton
County, Georgia. The terms of the proposed settlement, which must be approved by
the court, include a cash payment of $3.5 million, which the Company expects to
recover from the insurance carriers. As part of the proposed settlement, the
Company and its management have also agreed to several changes in corporate
governance, including the identification and appointment of a new director with
regulatory experience and the formation of a regulatory affairs and quality
assurance committee. In the first quarter of 2005, the Company recorded $3.5
million in accrued expenses and other liabilities, and recorded $3.5 million in
other receivables, representing amounts the Company expects to recover from the
insurance carriers.
Steven G. Anderson, President and CEO of CryoLife, Inc., said: "We are pleased
to now have these matters behind us. We believe these settlements will be in the
best interest of the Company and its shareholders and will enable us to preserve
adequate liquidity for CryoLife's operations. CryoLife has worked very hard over
the last three years to strengthen its processes and resolve the regulatory
issues from 2002 and subsequent FDA activity. As we look to the future, we are
focused on enhancing our leadership position in processing and preserving human
tissues, which improve health and quality of life."
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(R)
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.
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 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 the settlement arrangement may not be
finalized, that the Company's 2005 revenues and expenses may not meet its
expectations; the possibility that the FDA or other regulatory authorities 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 the Company may not have sufficient
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 severe decreases in the Company's revenues and working capital;
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; 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, 2004, its registration statement on Form S-3 (Reg. No. 333-121406),
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 website:
www.cryolife.com
Contact: Joseph T. Schepers
Vice President, Corporate Communications
(770) 419-3355
SOURCE CryoLife, Inc.