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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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 16 pages. The Index to Exhibit is on Page 15.
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS AND SCHEDULE 1
FINANCIAL STATEMENTS
Statements of net assets available for benefits 2
Statements of changes in net assets available for benefits 3
Notes to financial statements 4-10
SCHEDULE
Schedule of assets held for investment purposes 11
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, 2001 and
2000, 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 auditing standards generally
accepted in the United States of America. 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, 2001 and 2000, 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 made for the purpose of forming an opinion on the
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of August 31, 2001, is presented for the purpose of
additional analysis and is not a required part of the 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 supplemental schedule has been subjected to the
auditing procedures applied in our audit 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
Reading, Pennsylvania
November 15, 2001
-1-
ARROW INTERNATIONAL, INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
- ----------------------------------------------------------------------------------------------------------------------------
August 31, 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at fair value:
Arrow International, Inc. Stock Fund $ 2,898,332 $ 2,581,094
Participant Loan Fund 1,761,592 1,750,943
T. Rowe Price Prime Reserve Fund 4,245,585 3,661,889
T. Rowe Price Balanced Fund 8,995,597 9,445,531
T. Rowe Price Blue Chip Growth Fund 18,457,497 25,296,828
T. Rowe Price International Stock Fund 1,043,393 1,344,287
T. Rowe Price Spectrum Income Fund 244,529 132,102
T. Rowe Price Equity Income Fund 591,053 192,868
T. Rowe Price Equity Index 500 Fund 1,582,853 1,681,823
------------------------------------------
39,820,431 46,087,365
Receivables:
Employee contributions 45,892 34,187
Employer contributions 82,503 11,020
Loan repayment 13,111 11,663
------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 39,961,937 $ 46,144,235
==========================================
See Notes to Financial Statements.
-2-
ARROW INTERNATIONAL, INC. 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
- ----------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Investment income:
Net appreciation (depreciation) in fair value of investments $ (11,094,681) $ 6,888,537
Interest and dividends 2,154,476 1,017,881
------------------------------------------
Investment income (loss) (8,940,205) 7,906,418
------------------------------------------
Contributions:
Employee 4,154,047 3,589,794
Employer, cash 1,105,534 1,053,411
Employer, Arrow International, Inc. common stock 175,537 0
------------------------------------------
Total contributions 5,435,118 4,643,205
------------------------------------------
Merger of Medical Parameters 0 698,876
------------------------------------------
Total additions (deductions) (3,505,087) 13,248,499
------------------------------------------
Distributions paid to participants 2,669,261 2,482,322
Administrative expenses 7,950 9,400
------------------------------------------
Total deductions 2,677,211 2,491,722
------------------------------------------
Net increase (decrease) (6,182,298) 10,756,777
Net assets available for benefits:
Beginning of year 46,144,235 35,387,458
------------------------------------------
End of year $ 39,961,937 $ 46,144,235
==========================================
See Notes to Financial Statements.
-3-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
1
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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
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.
Valuation of investments and income recognition:
T. Rowe Price Retirement Plan Services, Inc. is the plan
administrator and T. Rowe Price Trust Company is the plan trustee.
The Plan maintains the following nine funds: T. Rowe Price Prime
Reserve Fund, T. Rowe Price Balanced Fund, T. Rowe Price Blue Chip
Growth Fund, Arrow International, Inc. Stock Fund, T. Rowe Price
International Stock Fund, T. Rowe Price Spectrum Income Fund, T.
Rowe Price Equity Income Fund, T. Rowe Price Equity Index 500 Fund
and a Participant 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, T. Rowe Price International Stock Fund, T. Rowe Price
Spectrum Income Fund, T. Rowe Price Equity Income Fund and T. Rowe
Price Equity Index 500 Fund are stated at quoted market prices.
The loans receivable in the Participant 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.
Because of the volatility of the financial markets in which
investments are traded, there is the risk that any future
determination of fair value could be significantly less than that
recorded in the accompanying financial statements.
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.
-4-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
2
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DESCRIPTION OF THE PLAN
The following description of the Arrow International, Inc. 401(k) Plan
(the Plan) provides only general information. Participants should refer
to the Plan agreement for a more complete description of the Plan's
provisions.
General:
The Arrow International, Inc. 401(k) Plan (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. 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 allocations of (a) the Company's
contributions and (b) Plan investment earnings and losses, and
charged with an allocation of administrative expenses, if any.
Forfeitures:
Forfeitures will be used to reduce future Company matching
contributions.
Vesting:
Participants are immediately vested in their voluntary
contributions plus actual earnings thereon. A participant
becomes 20% vested in the employer'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.
-5-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
2
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DESCRIPTION OF THE PLAN (CONTINUED)
Contributions:
Employee tax deferred contributions:
Eligible participants may contribute up to 20% of their
pre-tax earnings. Prior to June 1, 2001, eligible
participants were permitted to contribute up to 10% of
their pre-tax earnings. Participants are not permitted to
allocate more than 50% of their contribution to the Arrow
International Common Stock Fund.
Employer contributions:
The Plan sponsor can make discretionary matching
contributions to the Plan. During 2001 and 2000, the
Company made this discretionary matching contribution at
the rate of 50% of every employee contribution up to a
maximum of 2% of the employee's pre-tax salary.
Other employer contributions:
Effective June 1, 2001, 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 Arrow International common stock. During
2001, 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.
Participant loans:
A participant 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.
-6-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
3
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INVESTMENTS
The following table represents plan investments at August 31, 2001 and
2000. Investments that represent five percent or more of the Plan's net
assets are separately identified.
2001 2000
-----------------------------------------------------------------------
COST FAIR VALUE Cost Fair Value
-----------------------------------------------------------------------
Money market fund, T. Rowe
Price Prime Reserve Fund $ 4,245,585 $ 4,245,585* $ 3,661,889 $ 3,661,889*
---------------------------------------------------------------------
Balanced fund, T. Rowe Price
Balanced Fund 8,936,750 8,995,597* 8,008,452 9,445,531*
---------------------------------------------------------------------
Equity funds:
T. Rowe Price Blue Chip
Growth Fund 19,080,825 18,457,497* 16,847,030 25,296,828*
T. Rowe Price International
Stock Fund 1,320,467 1,043,393 1,120,202 1,344,287
T. Rowe Price Spectrum
Income Fund 245,768 244,529 137,635 132,102
T. Rowe Price Equity Income
Fund 599,764 591,053 199,927 192,868
T. Rowe Price Equity Index 500
Fund 1,879,226 1,582,853 1,521,595 1,681,823
---------------------------------------------------------------------
23,126,050 21,919,325 19,826,389 28,647,908
---------------------------------------------------------------------
Stock fund, Arrow
International, Inc. 2,522,076 2,898,332* 2,237,789 2,581,094*
---------------------------------------------------------------------
Participant loan fund 1,761,592 1,761,592 1,750,943 1,750,943
---------------------------------------------------------------------
$ 40,592,053 $ 39,820,431 $ 35,485,462 $ 46,087,365
=====================================================================
* Investment represents 5% or more of the Plan's net assets.
-7-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
3
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INVESTMENTS (CONTINUED)
During 2001 and 2000, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value by $(11,094,681) and $6,888,537,
respectively, as follows:
2001 2000
------------------------------------------
Arrow International Common Stock Fund $ 81,948 $ 476,023
Mutual Funds:
T. Rowe Price Balanced Fund (1,305,329) 704,083
T. Rowe Price Blue Chip Growth Fund (8,893,544) 5,424,038
T. Rowe Price International Stock Fund (516,464) 108,400
T. Rowe Price Spectrum Income Fund 3,034 (1,875)
T. Rowe Price Equity Income Fund (1,035) (10,576)
T. Rowe Price Equity Index 500 Fund (463,291) 188,444
------------------------------------------
$ (11,094,681) $ 6,888,537
==========================================
4
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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. In the event of Plan termination, participants
would become 100% vested in their employer contributions.
5
- --------------------------------------------------------------------------------
INCOME TAX STATUS
The Plan obtained its latest determination letter on September 9, 1995,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue 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 Internal
Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
-8-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
6
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TRANSACTIONS WITH PARTIES-IN-INTEREST
Certain Plan investments are mutual funds that are managed by T. Rowe
Price, the Plan's trustee and party-in-interest to the Plan. The Plan
also has a common stock fund which holds shares of Arrow International,
Inc., the Plan sponsor and party-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.
7
- --------------------------------------------------------------------------------
EXCESS CONTRIBUTIONS
As of August 31, 2001 and 2000, net assets available for benefits
include approximately $66,000 and $43,000, respectively, due to certain
active participants for excess deferral contributions. Such
contributions will be included in benefit distributions when paid.
8
- --------------------------------------------------------------------------------
PLAN AMENDMENTS
Effective June 1, 2001, the Plan was amended as follows:
o The Plan sponsor was given the option of making a discretionary
contribution to the Plan for the benefit of all employees. This
contribution is made in the form of Arrow International, Inc.
common stock.
o To increase the maximum elective deferral limit from 10% to 20% of
pretax annual compensation.
-9-
ARROW INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
9
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PLAN MERGERS
Effective January 1, 2000, Medical Parameters Inc.'s 401(k) Plan was
merged into Arrow International, Inc. 401(k) Plan which received
$698,876. Medical Parameters Inc. is a wholly-owned subsidiary of Arrow
International, Inc.
Arrow Stock $ 776
T. Rowe Price Prime Reserve Fund 389,496
T. Rowe Price Balanced Fund 21,714
T. Rowe Price Blue Chip Growth Fund 119,570
T. Rowe Price International Stock Fund 47,803
T. Rowe Price Spectrum Income Fund 4,125
T. Rowe Price Equity Income Fund 21,646
T. Rowe Price Equity Index 500 Fund 93,746
T. Rowe Price Participant Loan Fund 0
-------------------
$ 698,876
===================
-10-
ARROW INTERNATIONAL, INC. 401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
EIN: 23-1969991
PN: 004
- ------------------------------------------------------------------------------------------------------------------------------
August 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------
Number Of
Description Shares Cost Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
Short-term fund, T. Rowe Price Prime Reserve
Fund 4,245,585 $ 4,245,585 $ 4,245,585 *
------------------------------------------
Balanced fund, T. Rowe Price Balanced Fund 509,955 8,936,750 8,995,597 *
------------------------------------------
Equity funds:
T. Rowe Price Blue Chip Growth Fund 672,159 19,080,825 18,457,497 *
T. Rowe Price International Stock Fund 90,337 1,320,467 1,043,393 *
T. Rowe Price Spectrum Income Fund 22,558 245,768 244,529 *
T. Rowe Price Equity Income Fund 24,233 599,764 591,053 *
T. Rowe Price Equity Index 500 Fund 51,846 1,879,226 1,582,853 *
------------------------------------------
23,126,050 21,919,325
------------------------------------------
Arrow International, Inc. common stock 78,738 2,522,076 2,898,332 *
------------------------------------------
Participant loan fund (interest rates ranging from 7.75% to
12%) 1,761,592 1,761,592
------------------------------------------
Total investments $ 40,592,053 $ 39,820,431
==========================================
* Represents a party-in-interest.
-11-
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, 2002 By: /s/ Frederick J. Hirt
-----------------------------------
Frederick J. Hirt
Vice-President, Finance, CFO and
Treasurer
Index to Exhibit
----------------
Exhibit No.
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23.1 Consent of Beard Miller Company LLP, independent auditors