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, 2002
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:
John C. Long
Arrow International, Inc.
P. O. Box 12888 Reading,
Pennsylvania 19612
(610) 378-0131
This is the first of 15 pages. The Index to Exhibit is on Page 12.
ARROW INTERNATIONAL, INC. 401(K) PLAN
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TABLE OF CONTENTS
PAGE NO.
FINANCIAL STATEMENTS:
Independent Auditor's Report 1
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
SUPPLEMENTARY INFORMATION:
Independent Auditor's Report on Supplementary Information 9
Form 5500 - Schedule H - Line 4i - Schedule of Assets (Held at End of Year) 10
[LOGO] BEARD MILLER
COMPANY LLP
------------------------
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
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 August 31, 2002 and
2001, 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, 2002 and 2001, 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.
/s/BEARD MILLER COMPANY LLP
Reading, Pennsylvania
December 4, 2002
ARROW INTERNATIONAL, INC. 401(K) PLAN
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AUGUST 31,
=====================================
2002 2001
---------------- ----------------
ASSETS
Investments, at fair value:
Mutual funds $32,879,014 $35,160,507
Arrow International, Inc. Common Stock 3,416,128 2,898,332
Participant loans 1,826,132 1,774,703
---------------- ----------------
38,121,274 39,833,542
---------------- ----------------
Receivables:
Employee contributions 37,226 45,892
Employer contributions 74,023 82,503
---------------- ----------------
111,249 128,395
---------------- ----------------
NET ASSETS AVAILABLE FOR BENEFITS $38,232,523 $39,961,937
================ ================
SEE NOTES TO FINANCIAL STATEMENTS.
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2
ARROW INTERNATIONAL, INC. 401(K) PLAN
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STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED AUGUST 31,
=========================================
2002 2001
------------------ ------------------
INVESTMENT INCOME (LOSS)
Net depreciation in fair value of investments ($5,072,002) ($11,094,681)
Interest and dividends 642,320 2,154,476
------------------ ------------------
(4,429,682) (8,940,205)
------------------ ------------------
CONTRIBUTIONS
Participant 4,062,624 4,154,047
Employer, cash 1,066,209 1,105,534
Employer, Arrow International, Inc. common stock 717,636 175,537
------------------ ------------------
5,846,469 5,435,118
------------------ ------------------
BENEFITS PAID TO PARTICIPANTS (3,137,381) (2,669,261)
------------------ ------------------
ADMINISTRATIVE EXPENSES (8,820) (7,950)
------------------ ------------------
NET DECREASE (1,729,414) (6,182,298)
NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF YEAR 39,961,937 46,144,235
------------------ ------------------
NET ASSETS AVAILABLE FOR BENEFITS - END OF YEAR $38,232,523 $39,961,937
================== ==================
SEE NOTES TO FINANCIAL STATEMENTS.
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3
ARROW INTERNATIONAL, INC. 401(K) PLAN
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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 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 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 August 31, 2002 and 2001, forfeited employer matching
non-vested accounts amounted to $99,018 and $73,441,
respectively. Forfeitures of employer matching non-vested
accounts are used to reduce the employer's matching 401(k)
contribution. During the years ended August 31, 2002 and 2001,
there were no forfeitures applied against employer
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.
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4
ARROW INTERNATIONAL, INC. 401(K) PLAN
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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. 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 2002 and 2001, 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
2002 and 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.
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.
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5
ARROW INTERNATIONAL, INC. 401(K) PLAN
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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 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 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. Common 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. Common 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 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.
RECLASSIFICATION
Certain reclassifications were made to the 2001 financial
statement presentation in order to conform to the 2002
financial statement presentation format.
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6
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INVESTMENTS
The following table represents plan investments at August 31, 2002
and 2001. Investments that represent five percent or more of the Plan's
net assets are separately identified.
2002 2001
----------------------------------- -----------------------------------
INVESTMENTS AT FAIR VALUE AS
DETERMINED BY QUOTED MARKET
PRICE COST FAIR VALUE COST FAIR VALUE
- ------------------------------------------- ---------------- --------------- ---------------- ----------------
Mutual funds:
T. Rowe Price Prime Reserve Fund $ 5,294,274 $ 5,294,274 $ 4,245,585 $ 4,245,585
T. Rowe Price Balanced Fund 9,072,541 8,262,346 8,936,750 8,995,597
T. Rowe Price Blue Chip Growth Fund 18,394,690 14,957,186 19,080,825 18,457,497
Other mutual funds 5,539,156 4,365,208 4,045,225 3,461,828
Common stock:
Arrow International, Inc. 3,360,749 3,416,128 2,522,076 2,898,332
Participant loan fund 1,826,132 1,826,132 1,774,703 1,774,703
---------------- --------------- ---------------- ----------------
$43,487,542 $38,121,274 $40,605,164 $39,833,542
================ =============== ================ ================
During 2002 and 2001, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
depreciated in value by ($5,072,002) and ($11,094,681), respectively,
as follows:
2002 2001
---------------- -----------------
Arrow International, Inc. Common Stock ($245,120) $ 81,948
Mutual funds:
T. Rowe Price Balanced Fund (910,156) (1,305,329)
T. Rowe Price Blue Chip Growth Fund (3,175,329) (8,893,544)
T. Rowe Price International Stock Fund (210,453) (516,464)
T. Rowe Price Spectrum Income Fund (4,992) 3,034
T. Rowe Price Equity Income Fund (151,849) (1,035)
T. Rowe Price Equity Index 500 Fund (374,103) (463,291)
---------------- -----------------
($5,072,002) ($11,094,681)
================ =================
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7
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
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 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.
NOTE 6 - PARTIES-IN-INTEREST TRANSACTIONS
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. The Plan
held 78,738 shares and 97,604 shares of Arrow International, Inc.
common stock at August 31, 2002 and 2001, respectively.
Fees paid during the year for administrative services rendered by
parties-in-interest were based on customary and reasonable rates for
such services.
NOTE 7 - EXCESS CONTRIBUTIONS
As of August 31, 2002 and 2001, net assets available for benefits
include approximately $68,000 and $66,000, respectively, due to certain
active participants for excess deferral contributions. Such
contributions will be included in benefit distributions when paid.
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8
[LOGO] BEARD MILLER
COMPANY LLP
------------------------
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
To the Administrative Committee
Arrow International, Inc. 401(k) Plan
Reading, Pennsylvania
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
at end of year) as of August 31, 2002, 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
December 4, 2002
ARROW INTERNATIONAL, INC. 401(K) PLAN
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FORM 5500 - SCHEDULE H - LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EIN: 23-1969991
PN: 004
AUGUST 31, 2002
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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 $ 5,294,274
* T. Rowe Price Balanced Fund Balanced Fund N/A 8,262,346
* T. Rowe Price Blue Chip Growth Fund Equity Fund N/A 14,957,186
* T. Rowe Price International Stock Fund Equity Fund N/A 966,955
* T. Rowe Price Spectrum Income Fund Equity Fund N/A 689,101
* T. Rowe Price Equity Income Fund Equity Fund N/A 1,005,148
* T. Rowe Price Equity Index 500 Fund Equity Fund N/A 1,704,004
* Arrow International, Inc. Common Stock N/A 3,416,128
Participant loan fund 5.75% to 10.5% 0 1,826,132
----------------
$38,121,274
================
* Party-in-interest.
** Historical cost has not been presented as all investments are participant
directed.
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10
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 24, 2003 By: /s/ John C. Long
--------------------------- -----------------------------------
John C. Long
Vice-President and Treasurer
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11
INDEX TO EXHIBIT
----------------
Exhibit No.
- -----------
23.1 Consent of Beard Miller Company LLP, independent auditors
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12