Arrow International (ARRO) 11-K Annual report of employee stock purchases

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

___________________________

FORM 11-K

FOR ANNUAL REPORTS OF

EMPLOYEE STOCK REPURCHASE SAVINGS AND SIMILAR PLANS

PURSUANT TO SECTION 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 0-20212

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

ARROW INTERNATIONAL, INC. 401(K) PLAN

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Arrow International, Inc.

P.O. Box 12888

Reading, Pennsylvania 19612

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Table of Contents

FINANCIAL STATEMENTS:			PAGE NO.
	Report of Beard Miller Company LLP, Independent Registered		1
		Public Accounting Firm
	Statements of Net Assets Available for Benefits as of		2
		December 31, 2006 and 2005
	Statements of Changes in Net Assets Available for Benefits		3
		for the years ended December 31, 2006 and 2005
	Notes to Financial Statements		4
SUPPLEMENTARY SCHEDULE:
	Schedule of Assets (Held at End of Year)		9
	Signature		10
	Exhibit Index		11

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Report of Independent Registered Public Accounting Firm

To the Administrative Committee

Arrow International, Inc. 401(k) Plan

We have audited the accompanying statements of net assets available for benefits of the Arrow International, Inc. 401(k) Plan as of December 31, 2006 and 2005, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2006 and 2005, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedule of assets (held at end of year) as of December 31, 2006 is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplementary schedule is the responsibility of the Plan’s management. The supplementary schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ BEARD MILLER COMPANY LLP

Beard Miller Company LLP

Reading, Pennsylvania

June 5, 2007

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ARROW INTERNATIONAL, INC. 401 (K) PLAN

Statements of Net Assets Available for Benefits

December 31, 2006 and 2005

	2006		2005
Assets
Investments, at fair value:
Cash and money market fund	$	6,266,139	$	5,825,703
Mutual funds		55,958,562		47,239,357
Arrow International, Inc. common stock		10,423,515		8,171,234
Investments, at cost:
Participant loans		2,863,429		2,409,897
		75,511,645		63,646,191
Receivables:
Participants’ contributions		39,970		37,367
Employer’s contributions		102,408		99,590
		142,378		136,957
Net Assets Available for Benefits	$	75,654,023	$	63,783,148

See accompanying notes to financial statements

2

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Statements of Changes in Net Assets Available for Benefits

Years Ended December 31, 2006 and 2005

	2006			2005
Investment Income
Net appreciation in fair value of investments	$	6,169,538		$	1,071,186
Interest and dividends		2,363,815			1,635,215
		8,533,353			2,706,401
Contributions
Participants		5,449,660			5,113,751
Rollovers		679,212			585,252
Employer, cash		1,409,523			1,267,169
Employer, Arrow International, Inc. common stock		936,108			891,373
		8,474,503			7,857,545
Benefits Paid to Participants		(5,122,511	)		(7,333,306	)
Administrative Expenses		(14,470	)		(9,181	)
Net Increase		11,870,875			3,221,459
Net Assets Available for Benefits - Beginning of Period		63,783,148			60,561,689
Net Assets Available for Benefits - End of Period	$	75,654,023		$	63,783,148

See accompanying notes to financial statements

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ARROW INTERNATIONAL, INC. 401 (K) PLAN

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

Note 1 - Description of Plan

The following brief description of the Arrow International, Inc. 401(k) Plan (the Plan) is provided for general purposes only. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

General
	The Plan is a contributory, defined contribution plan which was adopted on September 1, 1991 to establish a deferred compensation arrangement under the provisions of Section 401(a) of the Internal Revenue Code (the Code). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and is intended to be a qualified plan under Section 401(a) of the Code.
Eligibility
	All employees of Arrow International, Inc. (the Company) and any of its affiliates which adopt the Plan are eligible to participate in the Plan immediately upon hire except (i) non-resident aliens and (ii) employees who are not scheduled to work 1,000 hours or more annually; provided, however, any employee who does work or is credited with at least 1,000 hours of service during a plan year will be eligible to participate.
Participant Accounts
	Each participant's account is credited with the participant's contributions and credited or charged with allocations of (a) the Company's contributions and (b) Plan investment earnings and losses, and administrative expenses, if any.
Forfeited Accounts
	As of December 31, 2006 and 2005, forfeited employer matching non-vested accounts amounted to $91,136 and $39,139, respectively. Forfeitures of employer matching non-vested accounts are used to reduce the employer’s matching 401(k) contribution. During the periods ended December 31, 2006 and 2005, forfeitures of $0 and $40,000, respectively, were applied against employer contributions.
Vesting
	Participants are immediately vested in their voluntary contributions plus actual earnings thereon. A participant becomes 20% vested in the Company’s discretionary contributions to the Plan after one year of service. Vesting increases 20% each year until the participant is fully vested after five years of credited service.

4

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

Note 1 - Description of Plan (Continued)
Contributions
	Employee Tax Deferred Contributions
		Eligible participants may contribute up to 20% of their pre-tax earnings. The participants may direct their accounts into several different investment options. Participants are not permitted to allocate more than 50% of their contributions to the Arrow International Common Stock Fund. Contributions are subject to certain limitations.
	Employer Contributions
		The Plan sponsor can make discretionary matching contributions to the Plan. During the years ended December 31, 2006 and 2005, the Company made this discretionary matching contribution at the rate of 50% of every dollar contributed by employees up to a maximum of 2% of the employee's pre-tax salary. Contributions are subject to certain limitations.
	Other Employer Contributions
		The Plan sponsor is permitted to make a discretionary contribution to the Plan for the benefit of all employees. This contribution is to be made in the form of the Company’s common stock. During the years ended December 31, 2006 and 2005, the Plan sponsor chose to make this contribution at the rate of 1% of each employee's monthly salary. Once this contribution is made, participants have the ability to liquidate the stock and move the proceeds into other Plan investment options. Participants are immediately 100% vested in this contribution. Contributions are subject to certain limitations.

Payment of Benefits
	Upon retirement, disability, or death, distributions will be paid as soon as administratively possible in a lump sum or as an annuity. Upon termination of service other than by retirement, disability, or death, participants will receive a lump sum payment if the total of their vested account balance does not exceed $1,000 ($5,000 prior to March 28, 2005). If the vested account balance exceeds $1,000, the assets will generally be held in a trust until the participant's normal or early retirement date. However, terminated participants may elect to receive their salary deferral accounts in the year following termination.
	There were distributions due participants in the amount of $0 and $1,287 at December 31,2006 and 2005, respectively.
Participant Loans
	Participants may borrow from their accounts a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of their vested account balance. Loan terms may not exceed five years unless the loan is for the purchase of a primary residence. Loans are secured by the balance in the participant’s account and bear interest at the prime rate. Loans are repaid through regular payroll deductions.
Administrative Costs
	Substantially all plan expenses are paid by the Plan sponsor.

5

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

Note 2 - Summary of Accounting Policies

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:

Basis of Accounting
	The accompanying financial statements have been prepared on the accrual basis of accounting.
Estimates
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
	T. Rowe Price Trust Company is the Plan’s trustee and recordkeeper.
	Money market funds, mutual funds, and the Company’s common stock are stated at quoted market prices. Participant loans are stated at their unpaid principal balance which approximates their fair value. The change in the difference between fair value and the cost of investments is reflected in the statements of changes in net assets available for benefits as a component of the net realized and unrealized appreciation (depreciation) in fair value of investments.
	Investments of the Plan are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term would materially affect investment assets reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.
	Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Mutual Fund Fees
	Net investment returns reflect certain fees paid by the mutual funds to their affiliated investment advisors, transfer agents, and others as further described in each fund prospectus. These fees are deducted prior to allocation of the Plan's investments earnings activity and thus are not separately identifiable as an expense.
Payment of Benefits
	Benefit payments to participants are recorded when paid.

6

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

 

Note 3 - Investments

The following table represents plan investments at December 31, 2006 and 2005. Investments that represent 5% or more of the Plan’s net assets are separately identified.

		December 31, 2006				December 31, 2005
Investments		Cost		Fair Value		Cost		Fair Value
At Fair Value as Determined by Quoted Market Prices:
Money market fund, T. Rowe Price Prime Reserve Fund	$	6,266,049	$	6,266,049	$	5,825,703	$	5,825,703
Non-interest bearing cash		90		90		-		-
Mutual funds:
T. Rowe Price Balanced Fund		10,184,214		11,942,241		9,703,514		10,827,320
T. Rowe Price Blue Chip Growth Fund		15,941,638		20,067,444		16,445,110		19,349,693
Other mutual funds		21,027,635		23,948,877		15,535,614		17,062,344
Common stock, Arrow International, Inc.		7,122,121		10,423,515		6,330,146		8,171,234
At Cost, Which Approximates Fair Value:
Participant loans		2,863,429		2,863,429		2,409,897		2,409,897
	$	63,405,176	$	75,511,645	$	56,249,984	$	63,646,191

During the years ended December 31, 2006 and 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:

	2006		2005
Investments at fair value as determined by quoted market prices:
Arrow International, Inc. common stock	$	1,840,924	$	(557,949	)
Mutual funds		4,328,614		1,629,135
	$	6,169,538	$	1,071,186

7

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

Note 4 - Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions.

Note 5 - Income Tax Status

The Plan obtained its latest determination letter on December 18, 2002, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, they believe that the Plan was qualified and the related trust is tax-exempt.

Note 6 - Parties-in-Interest Transactions

Certain Plan investments are mutual funds that are managed by T. Rowe Price, the Plan’s trustee and a party-in-interest to the Plan. The Plan also has a common stock fund which holds shares of common stock of Arrow International, Inc., the Plan sponsor and a party-in-interest. The Plan held 294,616 shares and 281,684 shares of Arrow International, Inc. common stock at December 31, 2006 and 2005, respectively. In addition, the Plan issues loans to participants, which are secured by the balances in such participants’ accounts.

Fees paid during the years ended December 31, 2006 and 2005 for administrative services rendered by parties-in-interest were based on customary and reasonable rates for such services.

Therefore, related party transactions qualify as parties-in-interest transactions. All other transactions which may be considered parties-in-interest transactions relate to normal plan management and administrative services, and the related payment of fees.

Note 7 - Excess Contributions

As of December 31, 2006 and 2005, net assets available for benefits included approximately $116,000 and $46,000, respectively, due to certain active participants for excess deferral contributions. Excess contributions associated with the Plan year ended December 31, 2005, in the amount of $46,000, were recorded as benefit payments for 2006. The excess contributions as of December 31, 2006 will be recorded as benefit payments when distributed in 2007.

8

ARROW INTERNATIONAL, INC. 401 (K) PLAN

Schedule of Assets (Held at End of Year)

Form 5500 - Schedule H - Line 4i

EIN: 23-1969991

PN: 004

December 31, 2006

(a)	Identity of Issue (b)		Description of Investment (c)		** Cost (d)		Current Value (e)
		Cash and Cash Equivalents		Cash		N/A	$	90
*		T. Rowe Price Prime Reserve Fund		Money Market Fund		N/A		6,266,049
*		T. Rowe Price Balanced Fund		Mutual Fund		N/A		11,942,241
*		T. Rowe Price Blue Chip Growth Fund		Mutual Fund		N/A		20,067,444
*		T. Rowe Price International Stock Fund		Mutual Fund		N/A		3,141,314
*		T. Rowe Price Spectrum Income Fund		Mutual Fund		N/A		1,896,878
*		T. Rowe Price Equity Income Fund		Mutual Fund		N/A		2,829,965
*		T. Rowe Price Equity Index 500 Fund		Mutual Fund		N/A		2,787,258
*		T. Rowe Price Mid-Cap Value Fund		Mutual Fund		N/A		1,646,602
*		T. Rowe Price Small-Cap Value Fund		Mutual Fund		N/A		1,794,477
*		T. Rowe Price Mid-Cap Growth Fund		Mutual Fund		N/A		2,144,766
*		T. Rowe Price Small-Cap Stock Fund		Mutual Fund		N/A		945,276
*		T. Rowe Price Retirement Income Fund		Mutual Fund		N/A		187,611
*		T. Rowe Price Retirement 2005 Fund		Mutual Fund		N/A		20,203
*		T. Rowe Price Retirement 2010 Fund		Mutual Fund		N/A		1,044,479
*		T. Rowe Price Retirement 2015 Fund		Mutual Fund		N/A		310,593
*		T. Rowe Price Retirement 2020 Fund		Mutual Fund		N/A		1,967,867
*		T. Rowe Price Retirement 2025 Fund		Mutual Fund		N/A		661,461
*		T. Rowe Price Retirement 2030 Fund		Mutual Fund		N/A		1,418,515
*		T. Rowe Price Retirement 2035 Fund		Mutual Fund		N/A		322,235
*		T. Rowe Price Retirement 2040 Fund		Mutual Fund		N/A		699,908
*		T. Rowe Price Retirement 2045 Fund		Mutual Fund		N/A		129,469
*		Arrow International, Inc.		Common Stock		N/A		10,423,515
*		Participant loans		5.00% to 10.5%		-0-		2,863,429
							$	75,511,645

*Party-in-interest.

**Historical cost has not been presented as all investments are participant directed.

9

ARROW INTERNATIONAL, INC. 401 (K) PLAN

SIGNATURE

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARROW INTERNATIONAL, INC. 401(k) PLAN
Date: June 8, 2007	By:	/s/ John C. Long
		John C. Long
		Vice President, Secretary and Treasurer

10

ARROW INTERNATIONAL, INC. 401 (K) PLAN

EXHIBIT INDEX

Exhibit No.

23.1 Consent of Beard Miller Company LLP, Independent Registered Public Accounting Firm

11