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, 2004
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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
ARROW INTERNATIONAL, INC. 401(K) PLAN
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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 as of 2
December 31, 2004 and 2003
Statements of Changes in Net Assets Available for Benefits 3
for the years ended December 31, 2004 and 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
We have audited the accompanying statements of net assets available for
benefits of the Arrow International, Inc. 401(k) Plan as of December 31, 2004
and 2003, and the related statements of changes in net assets available for
benefits for the year ended December 31, 2004 and the four-month period ended
December 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, 2004 and 2003, and the
changes in net assets available for benefits for the year ended December 31,
2004 and the four-month period ended December 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, 2004 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
June 29, 2005
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1
ARROW INTERNATIONAL, INC. 401(K) PLAN
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
2004 2003
-------------- --------------
ASSETS
Investments, at fair value:
Money market fund $ 5,863,009 $ 5,789,795
Mutual funds 43,952,989 36,599,680
Arrow International, Inc. common stock 8,484,165 6,085,023
Participant loans 2,183,402 2,035,287
-------------- --------------
60,483,565 50,509,785
-------------- --------------
Receivables:
Participants' contributions 0 36,197
Employer's contributions 78,124 75,097
-------------- --------------
78,124 111,294
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $60,561,689 $50,621,079
============== ==============
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
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
2004 2003
--------------- ---------------
INVESTMENT INCOME
Net appreciation in fair value of investments $ 4,883,009 $ 2,924,042
Interest and dividends 1,032,534 325,283
--------------- ---------------
5,915,543 3,249,325
--------------- ---------------
CONTRIBUTIONS
Participants 5,099,118 1,375,347
Employer, cash 1,202,515 366,098
Employer, Arrow International, Inc. common stock 858,809 276,294
--------------- ---------------
7,160,442 2,017,739
--------------- ---------------
BENEFITS PAID TO PARTICIPANTS (3,126,565) (827,789)
--------------- ---------------
ADMINISTRATIVE EXPENSES (8,810) (3,600)
--------------- ---------------
NET INCREASE 9,940,610 4,435,675
NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF PERIOD 50,621,079 46,185,404
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS - END OF PERIOD $60,561,689 $50,621,079
=============== ===============
SEE NOTES TO FINANCIAL STATEMENTS.
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3
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTH PERIOD ENDED DECEMBER 31, 2003
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, 2004 and 2003, forfeited employer matching
non-vested accounts amounted to $45,626 and $16,565, 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, 2004 and 2003, forfeitures of $11,477 and $-0-,
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.
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4
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTH PERIOD ENDED DECEMBER 31, 2003
NOTE 1 - DESCRIPTION OF PLAN (CONTINUED)
CONTRIBUTIONS
PARTICIPANT 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 contribution to the Arrow
International Common Stock Fund. Contributions are subject to
certain limitations. Included in this line on the Statement of
Changes in Net Assets is $498,000 and $73,000 relating to
rollover contributions for 2004 and 2003, respectively.
EMPLOYER CONTRIBUTIONS
The Plan sponsor can make discretionary matching contributions to
the Plan. During the year ended December 31, 2004 and the
four-month period ended December 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. 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 year ended December 31, 2004 and the four-month
period ended December 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. Contributions are subject to certain
limitations.
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.
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5
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTH PERIOD ENDED DECEMBER 31, 2003
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.
PAYMENT OF BENEFITS
Benefit payments to participants are recorded when paid.
There were distributions due participants in the amount of $-0- and
$37 at December 31, 2004 and 2003, respectively.
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6
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTH PERIOD ENDED DECEMBER 31, 2003
NOTE 3 - INVESTMENTS
The following table represents plan investments at December 31, 2004
and 2003. Investments that represent five percent or more of the Plan's net
assets are separately identified.
DECEMBER 31, 2004 DECEMBER 31, 2003
------------------------------ -------------------------------
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 $ 5,863,009 $ 5,863,009 $ 5,789,795 $ 5,789,795
Mutual funds:
T. Rowe Price Balanced
Fund 9,453,981 10,712,051 9,135,746 9,791,979
T. Rowe Price Blue Chip
Growth Fund 18,374,370 20,741,910 17,761,194 18,622,647
Other mutual funds 11,298,920 12,499,028 7,946,114 8,185,054
Common stock, Arrow
International, Inc. 5,600,019 8,484,165 4,505,246 6,085,023
At Cost, Which Approximates
Fair Value:
Participant loan fund,
stated at cost 2,183,402 2,183,402 2,035,287 2,035,287
-------------- ------------- -------------- --------------
$52,773,701 $60,483,565 $47,173,382 $50,509,785
============== ============= ============== ==============
During the year ended December 31, 2004 and the four-month period ended
December 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 as follows:
FOUR MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
2004 2003
-------------- ---------------
Investments at fair value as determined by
quoted market prices:
Arrow International, Inc. common stock $1,536,440 ($197,489)
Mutual funds 3,346,569 3,121,531
-------------- ---------------
$4,883,009 $2,924,042
============== ===============
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7
ARROW INTERNATIONAL, INC. 401(K) PLAN
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NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTH PERIOD ENDED DECEMBER 31, 2003
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, 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 273,771
shares and 243,596 shares of Arrow International, Inc. common stock at
December 31, 2004 and December 31, 2003, respectively.
Fees paid during the year ended December 31, 2004 and the four month
period ended December 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, 2004 and 2003, net assets available for benefits
include approximately $34,000 and $45,000, respectively, due to certain
active participants for excess deferral contributions. Excess contributions
associated with the Plan year ended December 31, 2003, in the amount of
$45,000, were recorded as benefit payments for 2004. The excess
contributions as of December 31, 2004 will be recorded as benefit payments
when distributed in 2005.
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8
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
FORM 5500 - SCHEDULE H - LINE 4I
EIN: 23-1969991
PN: 004
DECEMBER 31, 2004
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 $ 5,863,009
* T. Rowe Price Balanced Fund Mutual Fund N/A 10,712,051
* T. Rowe Price Blue Chip Growth Fund Mutual Fund N/A 20,741,910
* T. Rowe Price International Stock Fund Mutual Fund N/A 1,735,950
* T. Rowe Price Spectrum Income Fund Mutual Fund N/A 1,671,672
* T. Rowe Price Equity Income Fund Mutual Fund N/A 1,751,717
* T. Rowe Price Equity Index 500 Fund Mutual Fund N/A 2,444,494
* T. Rowe Price Mid-Cap Value Fund Mutual Fund N/A 884,424
* T. Rowe Price Small-Cap Value Fund Mutual Fund N/A 1,065,452
* T. Rowe Price Mid-Cap Growth Fund Mutual Fund N/A 893,046
* T. Rowe Price Small-Cap Stock Fund Mutual Fund N/A 423,472
* T. Rowe Price Retirement Income Fund Mutual Fund N/A 129,921
* T. Rowe Price Retirement 2010 Fund Mutual Fund N/A 563,665
* T. Rowe Price Retirement 2020 Fund Mutual Fund N/A 314,577
* T. Rowe Price Retirement 2030 Fund Mutual Fund N/A 499,072
* T. Rowe Price Retirement 2040 Fund Mutual Fund N/A 121,566
* Arrow International, Inc. Common Stock N/A 8,484,165
Participant loan fund 5.00% to 10.5% -0- 2,183,402
----------------
$60,483,565
================
* 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 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 29, 2005 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