UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended August 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to ____________
Commission file number 0-20212
ARROW INTERNATIONAL, INC. 401(k) PLAN
(full title of the plan)
Arrow International, Inc.
P. O. Box 12888
Reading, Pennsylvania 19612
(Name of issuer of the securities held pursuant to
the plan and the address of its principal executive offices)
Registrant's telephone number, including area code (610) 378-0131
Notices and communications from the Securities and Exchange
Commission relative to this report should be forwarded to:
Frederick J. Hirt
Arrow International, Inc.
P. O. Box 12888
Reading, Pennsylvania 19612
(610) 378-0131
This is the first of 21 pages. The Index to Exhibit is on Page 20.
ARROW INTERNATIONAL, INC. 401(k) PLAN
FINANCIAL REPORT
AUGUST 31, 1998
C O N T E N T S
[S] Page
[C]
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS AND
SCHEDULES 1
FINANCIAL STATEMENTS
Statements of net assets available for benefits 2-5
Statements of changes in net assets available for benefits 6-9
Notes to financial statements 10-13
SCHEDULES
Schedule of assets held for investment purposes 14
Schedule of reportable transactions 15
INDEPENDENT AUDITOR'S REPORT
To the Plan Administrator
Arrow International, Inc. 401(k) Plan
Reading, Pennsylvania
We have audited the accompanying statements of net assets
available for benefits of Arrow International, Inc. 401(k) Plan
as of August 31, 1998 and 1997, 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 generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit 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 Arrow International, Inc. 401(k)
Plan as of August 31, 1998 and 1997, and the changes in net
assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion
on the financial statements taken as a whole. The supplemental
schedules of assets held for investment and reportable
transactions as of or for the year ended August 31, 1998, are
presented for the purpose of additional analysis and are not a
required part of the financial statements, but are 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 supplemental
schedules have been subjected to the auditing procedures applied
in our audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
Reading, Pennsylvania
December 11, 1998
-1-
ARROW INTERNATIONAL, INC. 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
August 31, 1998
T. Rowe
Arrow Price
International, Participant Prime
Inc. Stock Loan Reserve
Fund Fund Fund
---------------------------------------
ASSETS
Investments, at fair value:
Short-term fund, T. Rowe Price
Prime Reserve Fund $ - $ - $2,522,388
Balanced fund, T. Rowe Price
Balanced Fund - - -
Equity funds:
T. Rowe Price Blue Chip Growth Fund - - -
Fidelity Retirement Growth Fund - - -
Fidelity Puritan Fund - - -
T. Rowe Price International
Stock Fund - - -
Arrow International, Inc.
common stock 1,622,753 - -
Participant loans receivable - 1,295,828 -
---------------------------------------
1,622,753 1,295,828 2,522,388
Receivables:
Accrued income 3,046 6,823 10,387
Employee contributions 764 - 716
Employer contributions 204 - 89
Cash 22,460 - 41,786
----------------------------------------
Total assets 1,649,227 1,302,651 2,575,366
LIABILITY, due to broker 11,784 - -
----------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,637,443 1,302,651 2,575,366
========================================
See Notes to Financial Statements.
-2-
T. Rowe T. Rowe
T. Rowe Price Fidelity Price
Price Blue Chip Retirement Fidelity International Contribution
Balanced Growth Growth Puritan Stock Distribution
Fund Fund Fund Fund Fund Account Total
- --------------------------------------------------------------------------------
$ - $ - $ - $ - $ - $ 62 $2,522,450
2,706,897 - - - - - 2,706,897
- 7,243,898 - - - - 7,243,898
- - 3,872,942 - - - 3,872,942
- - - 4,304,248 - - 4,304,248
- - - - 630,516 - 630,516
- - - - - - 1,622,753
- - - - - - 1,295,828
- ------------------------------------------------------------------------------
2,706,897 7,243,898 3,872,942 4,304,248 630,516 62 24,199,532
49,026 - - - - - 69,282
839 3,961 2,438 1,710 530 - 10,958
281 960 551 397 120 - 2,602
- 528,251 26,718 38,432 112,030 - 769,677
- ------------------------------------------------------------------------------
2,757,043 7,777,070 3,902,649 4,344,787 743,196 62 25,052,051
27,384 451,652 - - 108,686 - 599,506
- ------------------------------------------------------------------------------
$2,729,659 $7,325,418 $3,902,649 $4,344,787 $ 634,510 $ 62 $24,452,545
==============================================================================
-3-
ARROW INTERNATIONAL, INC. 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)
August 31, 1997
Arrow Corestates
International, Participant Cash
Inc. Stock Loan Reserve
Fund Fund Fund
------------------------------------------
ASSETS
Investments, at fair value:
Short-term fund, Corefund Cash
Reserve Fund $ - $ - $2,602,534
Balanced fund, Corefund
Balanced Fund - - -
Equity funds:
Corefund Growth Equity Fund - - -
Fidelity Retirement Growth Fund - - -
Fidelity Puritan Fund - - -
Corefund International Growth
Equity Fund - - -
Arrow International, Inc.
common stock 1,507,913 - -
Participant loans receivable - 949,218 -
--------------------------------------
1,507,913 949,218 2,602,534
Receivables:
Accrued income 2,291 18,470 194
Employee contributions 57,144 - 38,280
Employer contributions 18,606 - 13,900
Cash - - 11,484
--------------------------------------
Total assets 1,585,954 967,688 2,666,392
LIABILITY, due to broker 1,574 - -
--------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,584,380 $ 967,688 $2,666,392
=======================================
See Notes to Financial Statements.
-4-
Corefund
Corefund Fidelity Internationl
Corefund Growth Retirement Fidelity Growth
Balanced Equity Growth Puritan Equity
Fund Fund Fund Fund Fund Total
- --------------------------------------------------------------------
$ - $ - $ - $ - $ - $2,602,534
2,430,305 - - - - 2,430,305
- 5,629,048 - - - 5,629,048
- - 3,366,078 - - 3,366,078
- - - 3,828,629 - 3,828,629
- - - - 405,292 405,292
- - - - - 1,507,913
- - - - - 949,218
- ---------------------------------------------------------------------
2,430,305 5,629,048 3,366,078 3,828,629 405,292 20,719,017
285 - - - - 21,240
33,756 94,532 77,271 83,928 15,996 400,907
11,772 25,445 21,825 25,110 3,402 120,060
22 30 34 17 11 11,598
- --------------------------------------------------------------------
2,476,140 5,749,055 3,465,208 3,937,684 424,701 21,272,822
- - - - - 1,574
- --------------------------------------------------------------------
$2,476,140 $5,749,055 $3,465,208 $3,937,684 $ 424,701 $21,271,248
====================================================================
-5-
ARROW INTERNATIONAL, INC. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended August 31, 1998
T. Rowe
Arrow Price
International, Participant Prime
Inc. Stock Loan Reserve
Fund Fund Fund
---------------------------------------
Investment income:
Net realized and unrealized
appreciation (depreciation)
in fair value of
investments $ (189,374) $ - $ -
Interest and dividends 12,064 98,780 133,816
Contributions:
Employee 333,663 - 255,094
Employer 114,295 - 83,245
Transfer between funds (213,285) 295,628 369,997
-----------------------------------------
Total additions 57,363 394,408 842,152
-----------------------------------------
Distributions paid to participants - 50,705 931,767
Administrative expenses, net 4,300 8,740 1,411
-----------------------------------------
Total deductions 4,300 59,445 933,178
-----------------------------------------
Net increase (decrease) 53,063 334,963 (91,026)
Net assets available for benefits:
Beginning of year 1,584,380 967,688 2,666,392
-----------------------------------------
End of year $1,637,443 $1,302,651 $ 2,575,366
=========================================
See Notes to Financial Statements.
-6-
T. Rowe T. Rowe
T. Rowe Price Fidelity Price
Price Blue Chip Retirement Fidelity International Contribution/
Balanced Growth Growth Puritan Stock Distribution
Fund Fund Fund Fund Fund Account Total
- --------------------------------------------------------------------------------
$ 128,007 $ 413,293 $(602,459) $(113,001) $(20,603) $ - $ (384,137)
183,167 442,266 649,432 349,394 22,435 67 1,891,421
269,614 803,339 633,097 628,158 102,661 - 3,025,626
89,807 246,124 184,669 191,673 29,934 939,747
(417,070) (328,657) (418,383) (639,249) 75,382 1,275,637 -
- -----------------------------------------------------------------------------
253,525 1,576,365 446,356 416,975 209,809 1,275,704 5,472,657
- -----------------------------------------------------------------------------
- - - - - 1,275,342 2,257,814
6 2 8,915 9,872 - 300 33,546
- ------------------------------------------------------------------------------
6 2 8,915 9,872 - 1,275,642 2,291,360
- ------------------------------------------------------------------------------
253,519 1,576,363 437,441 407,103 209,809 62 3,181,297
2,476,140 5,749,055 3,465,208 3,937,684 424,701 - 21,271,248
- ------------------------------------------------------------------------------
$2,729,659 $7,325,418 $3,902,649 $4,344,787 $ 634,510 $ 62 $24,452,545
===============================================================================
-7-
ARROW INTERNATIONAL, INC. 401(K) PLAN
STATEMENT OF CHANGE IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED)
Year Ended August 31, 1997
Arrow Corefund
International, Participant Cash
Inc. Stock Loan Reserve
Fund Fund Fund
---------------------------------------
Investment income:
Net realized and unrealized
appreciation (depreciation)
in fair value of
investments $ 87,781 $ - $ -
Interest and dividends 9,377 63,893 121,846
Contributions:
Employee 459,491 - 297,305
Employer 151,631 - 111,101
Transfer between funds (5,375) 375,252 455,401
Transfer in from Kontron Plan - 135,893 725,134
---------------------------------------
Total additions 702,905 575,038 1,710,787
---------------------------------------
Distributions paid to
participants 18,500 12,016 661,005
Administrative expenses, net 2,778 1,404 1,640
---------------------------------------
Total deductions 21,278 13,420 662,645
---------------------------------------
Net increase 681,627 561,618 1,048,142
Net assets available for benefits:
Beginning of year 902,753 406,070 1,618,250
---------------------------------------
End of year $ 1,584,380 $ 967,688 $2,666,392
=======================================
See Notes to Financial Statements.
-8-
Corefund
Corefund Fidelity International
Corefund Growth Retirement Fidelity Growth
Balanced Equity Growth Puritan Equity
Fund Fund Fund Fund Fund Total
- -------------------------------------------------------------------
$ 231,856 $ 771,537 $399,349 $ 392,957 $ 7,167 $1,890,647
169,303 465,201 304,532 315,874 31,568 1,481,594
261,899 623,024 556,256 571,133 100,846 2,869,954
93,291 205,158 164,471 179,073 29,035 933,760
(268,026) (203,317) (266,720) (20,492) (66,723) -
408,453 266,553 270,264 227,773 59,000 2,093,070
- --------------------------------------------------------------------
896,776 2,128,156 1,428,152 1,666,318 160,893 9,269,025
- --------------------------------------------------------------------
12,448 21,610 1,802 38,962 - 766,343
936 2,155 5,949 6,753 145 21,760
- --------------------------------------------------------------------
13,384 23,765 7,751 45,715 145 788,103
- --------------------------------------------------------------------
883,392 2,104,391 1,420,401 1,620,603 160,748 8,480,922
1,592,748 3,644,664 2,044,807 2,317,081 263,953 12,790,326
- --------------------------------------------------------------------
$2,476,140 $5,749,055 $3,465,208 $3,937,684 $ 424,701 $21,271,248
====================================================================
-9-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
1
- ---------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES
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
generally accepted accounting principles 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.
Valuation of investments and income recognition:
CoreStates Bank, N.A. (subsequently merged with First Union
Bank) acts as plan trustee and administers the Plan's assets. The
Plan maintains the following eight funds: T. Rowe Price Prime Reserve
Fund, T. Rowe Price Balanced Fund, T. Rowe Price Blue Chip Growth
Fund, Arrow International, Inc. Stock Fund, Fidelity Retirement Growth
Fund, Fidelity Puritan Fund, T. Rowe Price International Stock Fund
and a Loan Fund for the commingled investment of employee and company
contributions.
The T. Rowe Price Prime Reserve Fund, T. Rowe Price Balanced
Fund, T. Rowe Price Blue Chip Growth Fund, Arrow International, Inc.
Stock Fund, Fidelity Retirement Growth Fund, Fidelity Puritan Fund and
T. Rowe Price International Stock Fund are stated at fair value as
determined by the bank which holds the investments. The loans
receivable in the Loan Fund 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.
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.
Payment of benefits:
Benefits are recorded when paid.
-10-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
2
- ---------------------------------------------------------------------
DESCRIPTION OF THE PLAN
General:
The Arrow International, Inc. 401(k) Plan (the Plan) is a
contributory, defined contribution plan which was adopted effective
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.
The 401(k) portion of the Plan is available to all employees of
the Company and its U.S. affiliates after completing one year of
service following their date of hire and reaching age 21.
Participant accounts:
Each participant's account is credited with the participant's
share of the Company's match, if any, and of the earnings, expenses,
appreciation and depreciation attributable to the participant's and
the Company's contributions. The benefit to which a participant is
entitled is the benefit that can be provided from the vested portion
of the participant's account.
Summary plan description:
Additional information about the Plan agreement is contained in
the summary plan description. Copies of the summary plan description
are available from the Administrative Committee.
Termination:
The Company has the right to terminate the Plan, subject to the
provisions of ERISA. In the event of Plan termination, participants
will become 100% vested in their accounts.
Forfeitures:
Forfeitures will be used to reduce Company contributions.
Vesting:
A participant becomes 20% vested in the employer's contribution
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.
Funding policy:
Participants may contribute up to 10% of their earnings. The
Company will match an amount equal to a percentage of the employee
contribution as determined for the plan year. The Company can also
make discretionary contributions based on the profits of the Company
as determined by the Board of Directors. No discretionary
contribution was made for the years ended August 31, 1998 and 1997.
Plan benefits:
Included in plan benefits at August 31, 1998 are approximately
$416,368 of distributions to employees whose division was sold by the
Company. All funds were rolled over to qualified plans.
-11-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
3
- --------------------------------------------------------------------
INVESTMENTS
The investments at August 31, 1998 and 1997 as determined by the
trustee are summarized as follows:
1998 1997
------------------------------------------------
Cost Fair Value Cost Fair Value
------------------------------------------------
Money market funds:
Corefund Cash Reserve $ - $ - $2,602,534 $2,602,534*
Fund
T. Rowe Price Price
Reserve Fund 2,522,450 2,522,450* - -
------------------------------------------------
2,522,450 2,522,450 2,602,534 2,602,534
------------------------------------------------
Balanced funds:
Corefund Balanced Fund - - 2,016,772 2,430,305*
T. Rowe Price Balanced
Fund 3,005,603 2,706,897* - -
------------------------------------------------
3,005,603 2,706,897 2,016,772 2,430,305
------------------------------------------------
Equity funds:
Corefund Growth Equity
Fund - - 4,084,949 5,629,048*
T. Rowe Price Blue Chip - -
Growth Fund 8,739,861 7,243,898* - -
Fidelity Retirement
Growth Fund 4,035,768 3,872,942* 2,904,787 3,366,078*
Fidelity Puritan Fund 3,919,600 4,304,248* 3,271,829 3,828,629*
Corefund International
Growth Equity Fund - - 381,011 405,292
T. Rowe Price International
Stock Fund 717,747 630,516 - -
------------------------------------------------
17,412,976 16,051,604 10,642,576 13,229,047
------------------------------------------------
Stock fund, Arrow
International, Inc. 1,894,863 1,622,753* 1,586,955 1,507,913*
------------------------------------------------
Participant loan fund 1,295,828 1,295,828* 949,218 949,218
------------------------------------------------
$26,131,720 $24,199,532 $17,798,055 $20,719,017
================================================
* Investment represents 5% or more of the Plan's net assets.
-12-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
4
- ---------------------------------------------------------------------
INCOME TAX STATUS
The Internal Revenue Service has determined that the Plan meets
the requirements of Section 401(a) of the Internal Revenue Code and
is, therefore, not subject to federal income tax. As a condition of
continued qualification under Section 401(a), the Plan is required to
meet the qualification rules in operation. The Administrative
Committee is not aware of any circumstances that might adversely
affect the Plan's qualified status.
5
- ----------------------------------------------------------------------
TRANSACTIONS WITH PARTIES-IN-INTEREST
Fees paid during the year for administrative services rendered by
parties-in-interest were based on customary and reasonable rates for
such services.
6
- ----------------------------------------------------------------------
CHANGE IN INVESTMENT OPTIONS
Effective July 1, 1998, the selection of investment options in
the Plan changed from the Corefund Cash Reserve Fund to the T. Rowe
Price Prime Reserve Fund, the Corefund Balanced Fund to the T. Rowe
Price Balanced Fund, the Corefund Growth Equity Fund to the T. Rowe
Price Blue Chip Growth Fund and the Corefund International Growth
Equity Fund to the T. Rowe Price International Stock Fund. Any
contributions made on or after July 1, 1998 were invested in the new
investment funds and existing balances at June 30, 1998 were
transferred to the new investment funds during July 1998.
7
- ---------------------------------------------------------------------
SUBSEQUENT EVENT
Effective September 1, 1998, the Plan changed trustees from
CoreStates Bank, N.A. to T. Rowe Price. In addition, eligible
employees are permitted to enter the Plan immediately upon employment
with the Company.
-13-
ARROW INTERNATIONAL, INC. 401 (k) PLAN
LINE 27a -SCHEDULE OF ASSETS HELD FOR INVESTMENTS PURPOSES
EIN: 23-1969991
PN: 004
August 31, 1998
Number Of
Description Shares Cost Fair Value
- --------------------------------------------------------------------------------
Short-term fund, T. Rowe Price Prime Reserve
Fund
2,522,450 $2,522,450 $2,522,450*
------------------------
Balanced fund, T. Rowe Price Balanced Fund 166,169 3,005,603 2,706,897*
------------------------
Equity funds:
T. Rowe Price Blue Chip Growth Fund 307,466 8,739,861 7,243,898*
Fidelity Retirement Growth Fund 225,040 4,035,768 3,872,942*
Fidelity Puritan Fund 226,301 3,919,600 4,304,248*
T. Rowe Price International Stock Fund 46,740 717,747 630,516
------------------------
17,412,976 16,051,604
Arrow International, Inc. common stock 59,825 1,894,863 1,622,753*
------------------------
Participant loan fund 1,295,828 1,295,828 1,295,828*
------------------------
Total investments $26,131,720 $24,199,532
========================
* Represents 5% or more of the net assets available for benefits.
-14-
ARROW INTERNATIONAL, INC. 401 (k) PLAN
LINE 27a -SCHEDULE OF ASSETS HELD FOR INVESTMENTS PURPOSES
EIN: 23-1969991
PN: 004
Year Ended August 31, 1998
Total Total
Number Of Number Of
Purchases Sales Dollar Dollar Cost of Net
Within Within Value Of Value Of Assets Gain
Description Of Asset Plan Year Plan Year Purchases Sales Sold (Loss)
- --------------------------------------------------------------------------------
Short-term funds:
Corefund Cash
Reserve Fund 426 341 $5,242,720 $7,845,323 $7,845,323 $ -
T. Rowe Price Prime
Reserve Fund 11 6 2,681,860 159,410 159,410 -
Balance funds:
Corefund Balanced
Fund 15 14 328,396 3,186,113 2,345,168 840,945
T. Rowe Price
Balanced Fund 4 3 3,040,336 34,035 34,734 (699)
Equity funds
Corefund Growth
Equity Fund 12 16 1,065,956 8,609,870 5,150,907 3,458,963
Fidelity Retirement
Growth Fund 17 13 1,453,293 343,970 322,313 21,657
Fidleity Puritan Fund 21 10 1,023,576 434,957 375,806 59,151
T. Rowe Price Blue
Chip Growth Fund 5 2 8,897,069 151,601 157,209 (5,608)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the Plan) have
duly caused this annual report to be signed by the undersigned
hereunto duly authorized.
ARROW INTERNATIONAL, INC.
401(k) PLAN
Date: February 26, 1999 By:/s/ Frederick J. Hirt
----------------- ----------------------
Frederick J. Hirt
Vice-President, Finance, CFO
and Treasurer
Index to Exhibit
----------------
Exhibit No.
- ----------
23.1 Consent of Beard & Company, Inc., independent auditors
EXHIBIT 23.1
CONSENT OF BEARD & COMPANY, INC., INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-71568) pertaining to the Arrow
International, Inc. 401(k) Plan, of the financial statements of the
Arrow International, Inc. 401(k) Plan included in this Annual Report
(Form 11-K) for the year ended August 31, 1998.
BEARD & COMPANY, INC.
Reading, Pennsylvania
February 23, 1999