UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
RIDER 1A
FORM 11-K
RIDER 1B
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the four-month period ended: December 31, 2003
---------------------------------------
OR
[ ] 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
RIDERS
Rider 1A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------
Rider 1B
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE NO.
FINANCIAL STATEMENTS:
Report of Beard Miller Company LLP, Independent Registered 1
Public Accounting Firm
Statements of Net Assets Available for Benefits at 2
December 31 and August 31, 2003
Statements of Changes in Net Assets Available for Benefits 3
for the Four Months Ended December 31, 2003 and the
Year Ended August 31, 2003
Notes to Financial Statements 4
SUPPLEMENTARY SCHEDULE:
Schedule of Assets (Held at End of Year) 9
Signatures 10
Exhibit Index 11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Administrative Committee
Arrow International, Inc. 401(k) Plan
Reading, Pennsylvania
We have audited the accompanying statements of net assets available for
benefits of the Arrow International, Inc. 401(k) Plan as of December 31, 2003
and August 31, 2003, and the related statements of changes in net assets
available for benefits for the four-month period ended December 31, 2003 and the
year ended August 31, 2003. 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. 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 December 31, 2003 and August 31, 2003, and
the changes in net assets available for benefits for the four-month period ended
December 31, 2003 and the year ended August 31, 2003 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, 2003 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
Reading, Pennsylvania
May 25, 2004
1
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, August 31,
2003 2003
----------- -----------
ASSETS
Investments, at fair value:
Money market fund $ 5,789,795 $ 6,282,396
Mutual funds 36,599,680 31,872,876
Arrow International, Inc. common stock 6,085,023 5,954,059
Participant loans 2,035,287 1,966,698
----------- -----------
50,509,785 46,076,029
----------- -----------
Receivables:
Participants' contributions 36,197 33,324
Employer's contributions 75,097 76,051
----------- -----------
111,294 109,375
----------- -----------
Net Assets Available for Benefits $50,621,079 $46,185,404
=========== ===========
See notes to financial statements.
- --------------------------------------------------------------------------------
2
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Four Months
Ended Year Ended
December 31, August 31,
2003 2003
----------- -----------
INVESTMENT INCOME
Net appreciation in fair value of investments $ 2,924,042 $ 4,875,130
Interest and dividends 325,283 543,319
----------- -----------
3,249,325 5,418,449
----------- -----------
CONTRIBUTIONS
Participant 1,375,347 3,748,970
Employer, cash 366,098 898,998
Employer, Arrow International, Inc. common stock 276,294 716,244
----------- -----------
2,017,739 5,364,212
----------- -----------
BENEFITS PAID TO PARTICIPANTS (827,789) (2,820,130)
----------- -----------
ADMINISTRATIVE EXPENSES (3,600) (9,650)
----------- -----------
Net Increase 4,435,675 7,952,881
NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF
PERIOD 46,185,404 38,232,523
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS - END OF PERIOD $50,621,079 $46,185,404
=========== ===========
See notes to financial statements.
- --------------------------------------------------------------------------------
3
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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. Effective September 1,
2003, the Plan year-end was changed to December 31 from August
31.
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, 2003 and August 31, 2003, forfeited
employer matching non-vested accounts amounted to $16,565 and
$11,232, 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,
2003 and August 31, 2003, forfeitures of $-0- and $125,563,
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
NOTE 1 - DESCRIPTION OF PLAN (CONTINUED)
Contributions
Employee Tax Deferred Contributions
Eligible participants may contribute up to 20% 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 the four-month period
ended December 31, 2003 and the year ended August 31,
2003, 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.
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 four-month
period ended December 31, 2003 and the year ended August
31, 2003, 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.
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.
- --------------------------------------------------------------------------------
5
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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.
Payment of Benefits
Benefit payments to participants are recorded when paid.
There were distributions due participants in the amount of $37
and $24,679 at December 31, 2003 and August 31, 2003,
respectively.
- --------------------------------------------------------------------------------
6
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INVESTMENTS
The following table represents plan investments at December 31, 2003
and August 31, 2003. Investments that represent five percent or more of
the Plan's net assets are separately identified.
December 31, 2003 August 31, 2003
------------------------- -------------------------
Investments Cost Fair Value Cost Fair Value
- ------------------------------------- ----------- ----------- ----------- -----------
Money market fund, at quoted market
prices:
T. Rowe Price Prime Reserve
Fund $ 5,789,795 $ 5,789,795 $ 6,282,396 $ 6,282,396
Mutual funds, at quoted market
prices:
T. Rowe Price Balanced
Fund 9,135,746 9,791,979 8,975,702 8,883,877
T. Rowe Price Blue Chip Growth
Fund 17,761,194 18,622,647 17,502,553 16,685,287
Other mutual funds 7,946,114 8,185,054 6,752,146 6,303,712
Common stock, at quoted market
prices:
Arrow International, Inc. 4,505,246 6,085,023 4,135,739 5,954,059
Participant loan fund, stated at cost 2,035,287 2,035,287 1,966,698 1,966,698
----------- ----------- ----------- -----------
$47,173,382 $50,509,785 $45,615,234 $46,076,029
=========== =========== =========== ===========
During the four-month period ended December 31, 2003 and the year
ended August 31, 2003, 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 $2,924,042 and $4,875,130,
respectively, as follows:
Four Months
Ended
December 31, August 31,
2003 2002
----------- -----------
Arrow International, Inc. common stock ($ 197,489) $ 1,831,731
Mutual funds 3,121,531 3,043,399
----------- -----------
$ 2,924,042 $ 4,875,130
=========== ===========
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.
- --------------------------------------------------------------------------------
7
ARROW INTERNATIONAL, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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, no provision for income
taxes has been included in the Plan's financial statements.
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 Arrow
International, Inc., the Plan sponsor and a party-in-interest. The Plan
held 243,596 shares and 230,777 shares of Arrow International, Inc. common
stock at December 31, 2003 and August 31, 2003, respectively.
Fees paid during the periods ended December 31, 2003 and August 31,
2003 for administrative services rendered by parties-in-interest were
based on customary and reasonable rates for such services.
NOTE 7 - EXCESS CONTRIBUTIONS
As of December 31, 2003 and August 31, 2003, net assets available
for benefits include approximately $45,000, due to certain active
participants for excess deferral contributions. Excess contributions
associated with the Plan year ended August 31, 2002, in the amount of
$68,000 were recorded as a reduction in contributions for the Plan year
ended August 31, 2003. The excess contributions as of December 31, 2003
will be recorded as benefit payments when distributed in 2004.
- --------------------------------------------------------------------------------
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, 2003
- -------------------------------------------------------------------------------------------
Description of ** Current
(a) Identity of Issue (b) Investment (c) Cost (d) Value (e)
- --- ------------------------------------ ----------------- -------- -----------
* T. Rowe Price Prime Reserve Fund Money Market Fund N/A $ 5,789,795
* T. Rowe Price Balanced Fund Mutual Fund N/A 9,791,979
* T. Rowe Price Blue Chip Growth Fund Mutual Fund N/A 18,622,647
* T. Rowe Price International Stock Mutual Fund
Fund N/A 1,385,571
* T. Rowe Price Spectrum Income Fund Mutual Fund N/A 1,456,128
* T. Rowe Price Equity Income Fund Mutual Fund N/A 1,334,846
* T. Rowe Price Equity Index 500 Fund Mutual Fund N/A 2,286,006
* T. Rowe Price Mid-Cap Value Fund Mutual Fund N/A 288,575
* T. Rowe Price Small-Cap Value Fund Mutual Fund N/A 404,005
* T. Rowe Price Mid-Cap Growth Fund Mutual Fund N/A 415,407
* T. Rowe Price Small-Cap Stock Fund Mutual Fund N/A 150,188
* T. Rowe Price Retirement Income Fund Mutual Fund N/A 13,755
* T. Rowe Price Retirement 2010 Fund Mutual Fund N/A 242,379
* T. Rowe Price Retirement 2020 Fund Mutual Fund N/A 56,480
* T. Rowe Price Retirement 2030 Fund Mutual Fund N/A 150,178
* T. Rowe Price Retirement 2040 Fund Mutual Fund N/A 1,536
* Arrow International, Inc. Common Stock N/A 6,085,023
Participant loan fund 5.00% to 10.5% -0- 2,035,287
-----------
$50,509,785
===========
* Party-in-interest.
** Historical cost has not been presented as all investments are participant
directed.
- --------------------------------------------------------------------------------
9
SIGNATURES
The Plan. 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 on its behalf by the undersigned hereunto duly
authorized.
ARROW INTERNATIONAL, INC. 401(k) PLAN
Date: June 25, 2004 By: /s/ John C. Long
----------------------- ---------------------------------------
John C. Long
Vice President, Secretary and Treasurer
10
EXHIBIT INDEX
Exhibit No.
- -----------
23.1 Consent of Beard Miller Company LLP, Independent Registered Public
Accounting Firm
11