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, 2005
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
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, 2005 and 2004
Statements of Changes in Net Assets Available for Benefits 3
for the years ended December 31, 2005 and 2004
Notes to Financial Statements 4
SUPPLEMENTARY SCHEDULE:
Schedule of Assets (Held at End of Year) 9
Signature 10
Exhibit Index 11
ARROW INTERNATIONAL, INC. 401 (K) PLAN
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, 2005
and 2004, 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 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. The Plan is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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, 2005 and 2004, 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 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, 2005 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
Beard Miller Company LLP
Reading, Pennsylvania
June 21, 2006
1
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
2005 2004
----------- -----------
Assets
Investments, at fair value:
Money market fund $ 5,825,703 $ 5,863,009
Mutual funds 47,239,357 43,952,989
Arrow International, Inc. common stock 8,171,234 8,484,165
Investments, at cost:
Participant loans 2,409,897 2,183,402
----------- -----------
63,646,191 60,483,565
----------- -----------
Receivables:
Participants' contributions 37,367 0
Employer's contributions 99,590 78,124
----------- -----------
136,957 78,124
----------- -----------
Net Assets Available for Benefits $63,783,148 $60,561,689
=========== ===========
See accompanying notes to financial statements
2
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2005 and December 31, 2004
2005 2004
------------ ------------
Investment Income
Net appreciation in fair value of investments $ 1,071,186 $ 4,883,009
Interest and dividends 1,635,215 1,032,534
------------ ------------
2,706,401 5,915,543
------------ ------------
Contributions
Participants 5,113,751 4,601,470
Rollovers 585,252 497,648
Employer, cash 1,267,169 1,202,515
Employer, Arrow International, Inc. common stock 891,373 858,809
------------ ------------
7,857,545 7,160,442
------------ ------------
Benefits Paid to Participants (7,333,306) (3,126,565)
------------ ------------
Administrative Expenses (9,181) (8,810)
------------ ------------
Net Increase 3,221,459 9,940,610
Net Assets Available for Benefits - Beginning of Period 60,561,689 50,621,079
------------ ------------
Net Assets Available for Benefits - End of Period $ 63,783,148 $ 60,561,689
============ ============
See accompanying notes to financial statements
3
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Notes to Financial Statements
Years Ended December 31, 2005 and December 31, 2004
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, 2005 and 2004, forfeited employer matching
non-vested accounts amounted to $39,139 and $45,626,
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, 2005 and
2004, forfeitures of $40,000 and $11,477, 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
Years Ended December 31, 2005 and December 31, 2004
Note 1 - Description of Plan (Continued)
Contributions
Employee 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.
Employer Contributions
The Plan sponsor can make discretionary matching
contributions to the Plan. During the years ended December
31, 2005 and 2004, 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 years ended December
31, 2005 and 2004, 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
Participants 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.
5
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Notes to Financial Statements
Years Ended December 31, 2005 and December 31, 2004
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
$1,287 and $-0- at December 31, 2005 and 2004, respectively.
6
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Notes to Financial Statements
Years Ended December 31, 2005 and December 31, 2004
Note 3 - Investments
The following table represents plan investments at December 31,
2005 and 2004. Investments that represent 5% or more of the Plan's net
assets are separately identified.
December 31, 2005 December 31, 2004
------------------------ -------------------------
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 $ 5,825,703 $ 5,825,703 $ 5,863,009 $ 5,863,009
Mutual funds:
T. Rowe Price Balanced Fund 9,703,514 10,827,320 9,453,981 10,712,051
T. Rowe Price Blue Chip
Growth Fund 16,445,110 19,349,693 18,374,370 20,741,910
Other mutual funds 15,535,614 17,062,344 11,298,920 12,499,028
Common stock, Arrow
International, Inc. 6,330,146 8,171,234 5,600,019 8,484,165
At Cost, Which Approximates Fair Value:
Participant loans 2,409,897 2,409,897 2,183,402 2,183,402
----------- ----------- ----------- -----------
$56,249,984 $63,646,191 $52,773,701 $60,483,565
=========== =========== =========== ===========
During the years ended December 31, 2005 and 2004, 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:
2005 2004
----------- -----------
Investments at fair value as determined by quoted market
prices:
Arrow International, Inc. common stock $ (557,949) $ 1,536,440
Mutual funds 1,629,135 3,346,569
----------- -----------
$ 1,071,186 $ 4,883,009
=========== ===========
7
ARROW INTERNATIONAL, INC. 401 (K) PLAN
Notes to Financial Statements
Years Ended December 31, 2005 and December 31, 2004
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 common stock of
Arrow International, Inc., the Plan sponsor and a party-in-interest.
The Plan held 281,864 shares and 273,771 shares of Arrow International,
Inc. common stock at December 31, 2005 and December 31, 2004,
respectively.
Fees paid during the years ended December 31, 2005 and 2004 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, 2005 and 2004, net assets available for
benefits include approximately $46,000 and $34,000, respectively, due
to certain active participants for excess deferral contributions.
Excess contributions associated with the Plan year ended December 31,
2004, in the amount of $34,000, were recorded as benefit payments for
2005. The excess contributions as of December 31, 2005 will be recorded
as benefit payments when distributed in 2006.
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, 2005
Description of ** Current Value
(a) Identity of Issue (b) Investment (c) Cost (d) (e)
- ----------------------------------------------------------------------------------------------------------------------------------
* T. Rowe Price Prime Reserve Fund Money Market Fund N/A $ 5,825,703
* T. Rowe Price Balanced Fund Mutual Fund N/A 10,827,320
* T. Rowe Price Blue Chip Growth Fund Mutual Fund N/A 19,349,693
* T. Rowe Price International Stock Fund Mutual Fund N/A 2,283,478
* T. Rowe Price Spectrum Income Fund Mutual Fund N/A 1,847,995
* T. Rowe Price Equity Income Fund Mutual Fund N/A 2,193,311
* T. Rowe Price Equity Index 500 Fund Mutual Fund N/A 2,259,088
* T. Rowe Price Mid-Cap Value Fund Mutual Fund N/A 1,216,710
* T. Rowe Price Small-Cap Value Fund Mutual Fund N/A 1,512,874
* T. Rowe Price Mid-Cap Growth Fund Mutual Fund N/A 1,546,608
* T. Rowe Price Small-Cap Stock Fund Mutual Fund N/A 700,608
* T. Rowe Price Retirement Income Fund Mutual Fund N/A 100,353
* T. Rowe Price Retirement 2005 Fund Mutual Fund N/A 7,107
* T. Rowe Price Retirement 2010 Fund Mutual Fund N/A 855,233
* T. Rowe Price Retirement 2015 Fund Mutual Fund N/A 63,798
* T. Rowe Price Retirement 2020 Fund Mutual Fund N/A 984,780
* T. Rowe Price Retirement 2025 Fund Mutual Fund N/A 243,152
* T. Rowe Price Retirement 2030 Fund Mutual Fund N/A 883,757
* T. Rowe Price Retirement 2035 Fund Mutual Fund N/A 20,627
* T. Rowe Price Retirement 2040 Fund Mutual Fund N/A 341,341
* T. Rowe Price Retirement 2045 Fund Mutual Fund N/A 1,524
* Arrow International, Inc. Common Stock N/A 8,171,234
* Participant loans 5.00% to 10.5% -0- 2,409,897
----------------
$63,646,191
================
* Party-in-interest.
** Historical cost has not been presented as all investments are participant
directed.
9
ARROW INTERNATIONAL, INC. 401 (K) PLAN
SIGNATURE
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 27, 2006 By: /s/ John C. Long
----------------------------------
John C. Long
Vice President, Secretary and
Treasurer
10
ARROW INTERNATIONAL, INC. 401 (K) PLAN
EXHIBIT INDEX
EXHIBIT NO.
23.1 Consent of Beard Miller Company LLP, Independent Registered Public
Accounting Firm
11