ARROW REPORTS FIRST QTR 2005 NET INCOME OF $13.6 MILLION.

Arrow International, Inc. (NASDAQ:ARRO), Reading, Pa., has reported net sales of $113.2 million for the fiscal quarter ended November 30, 2004, an increase of 9.8%, or $10.1 million, versus its prior fiscal year first quarter. Net income for the quarter was $13.6 million compared to $14.4 million in the first quarter of fiscal year 2004, a decrease of 5.5%. Adjusting for certain special items, as described below, net income was $15.5 million compared to $14.4 million in the prior fiscal year quarter, an increase of 7.6%. Diluted earnings per share were $0.31 compared to $0.33 in the first fiscal quarter of 2004 ($0.35 compared to $0.33 diluted earnings per share in the prior fiscal year period when adjusted for the special items).

Arrow's Chairman and CEO, Carl G. Anderson, Jr., stated, "The company moved forward in the first fiscal quarter of 2005 with significant growth in revenue, especially in the international markets. The first quarter fiscal year 2005 core growth rate of our base business, adjusted for favorable exchange rates and excluding Stepic distributed products, was +9.4% versus the prior year period. This core growth rate is roughly in line with our fourth quarter of fiscal year 2004."

Summary of Comparative Results, as Adjusted for Special Items:

Results of total company operations, excluding special items which include: research and development expenses for second generation LionHeart(TM) components incurred in the first quarter of fiscal year 2005, restructuring charges related to consolidation of certain manufacturing facilities and the relocation of its European Distribution Center incurred in the first quarter of fiscal year 2005, and step-up of inventory purchased from AB Medica S.p.A. in the first quarter of fiscal 2005.

(1) In the first quarter of fiscal year 2005, the company incurred research and development expenses of $1.0 million, or $0.01 diluted earnings per share, for development of the second generation power system and controller for the Arrow LionHeart(TM), the company's fully implantable Left Ventricular Assist System (LVAS). The company's remaining investment in the LionHeart(TM) includes $3.0 million of components and open purchase commitments usable with either the first or second generation electronics and $2.3 million in manufacturing equipment.

(2) In August 2004, the company initiated the consolidation of its operations at its Winston-Salem, NC and San Antonio, TX facilities into existing manufacturing facilities. In November 2004, the company decided to move its European Distribution Center. These steps are part of the overall manufacturing realignment and capacity increases announced in June 2004. As a result, the company has accrued $0.4 million, or $0.01 per diluted earnings per share, which primarily consists of severance payments in the first quarter of fiscal year 2005.

(3) Excludes $1.5 million, or $0.02 diluted earnings per share, for the step-up of inventory purchased from AB Medica S.p.A., which was recognized in the first quarter of fiscal year 2005 as additional cost of sales.

Summary of First Quarter Fiscal Year 2005 Sales Results:

Total company U.S. sales in the first quarter of fiscal 2005 increased 5.0%, excluding Stepic distributed products, to $67.3 million from $64.1 million in the first quarter of fiscal 2004, and represented 59.4% of total net sales.

Total company international sales in the first quarter of fiscal 2005 increased 22.6% to $44.0 million from $35.9 million in the first quarter of fiscal 2004, and represented 38.9% of total net sales. The weakness of the U.S. dollar in the quarter, compared to the same period of last year, increased total company international sales by $1.9 million, or 1.8% of total company sales.

Sales of the AutoCAT(R) 2 WAVE(TM) intra-aortic balloon pump and related LightWAVE(TM) catheter system in the first quarter of fiscal year 2005 increased by 8% over the sales of those products in the fourth quarter of fiscal year 2004. Anderson said, "We are encouraged by these early results; however, the selling cycle for intra-aortic balloon pumps is long and involves a number of decision makers in any given hospital. As a result, we are cautiously optimistic that sales will accelerate in the third and fourth quarters of fiscal year 2005."

Manufacturing Strategy:

Anderson stated, "We are now in the execution phase of our manufacturing strategy. Our objectives are to (1) add capacity to support our growing business, (2) simplify a rather complex supply chain, and (3) continue to make process improvements that will help ensure that we deliver the highest quality product possible to our physician and hospital customers."

During the quarter, the company completed the transfer of the manufacturing of its Cannon Catheter(TM) split-tip hemodialysis catheters from its Winston-Salem, NC facility to its Asheboro, NC manufacturing plant. The company plans to transfer manufacturing of its NEOCARE(R) line of products to its manufacturing plant in Mexico in the spring of 2005. The company expects inventories will increase during the period of this transition in manufacturing operations in order to compensate for moving the product lines.

NEOPICC(R) Voluntary Recall:

As previously reported, on December 3, 2004, the company announced that, after consulting with the Food and Drug Administration (FDA), it was voluntarily initiating a nationwide recall of all of its NEOPICC(R) 1.9 FR Peripherally Inserted Central Catheters (the "NeoPICC Catheters"). The company sent recall notices to approximately 700 hospitals and 16 dealers, but is unable at the present time to estimate the number of NeoPICC Catheters that will eventually be returned by customers in response to this voluntary recall. The company is cooperating with the FDA's review of this matter.

Anderson stated, "Arrow has always recognized the importance of making sure that every one of the millions of products we make each year is of the highest quality. We have an ongoing program at Arrow to continuously improve all our processes which touch upon our quality system in some way. As part of this program to achieve operational excellence, we are assessing, with the help of outside consultants, all of our quality assurance systems and processes to enable us to do all that we can to protect the patients who benefit from our products and technology every day around the world."

Development Programs:

Arrow has submitted portions of the design dossier for the second generation LionHeart(TM) power system and controller to the company's European Notified Body, TUV Product Services of Munich, Germany. The company anticipates all required documentation to be submitted by February 2005 and receiving an approval for use of these electronics in the device approximately three months later, given that many of its components have not changed, no additional clinical data is required, and the LionHeart(TM) quality system has already been certified. Arrow's European marketing plan for the LionHeart(TM) is based upon the receipt of this approval and the CE-marking of the second generation electronics.

The company has completed development of modifications to its CorAide(TM) continuous flow ventricular assist device to resolve elevated levels of hemolysis experienced in the first implant of the device. The company expects that European clinical trials of the CorAide(TM) device should resume in the near future. The cardiac transplant center at Bad Oyenhausen, Germany, is currently screening patients for a suitable candidate.

The company has also commissioned a study of its entire Left Ventricular Assist System program by an outside consulting firm in order to provide additional perspective on the long-term commercial opportunity for these products and strategies for maximizing their potential.

International Business Transaction:

In the first quarter of fiscal year 2005, the company purchased certain assets of one of its distributors in Italy, AB Medica S.p.A. (ABM), for a total purchase price of approximately $8.4 million, with various installments due thereafter on account of ongoing tender contract sales. ABM had been one of Arrow's distributors in Italy since 1982. The agreement includes the purchase of distributorship rights, customer lists, as well as the inventory and specified tender contracts associated with the sale by ABM of Arrow products. Arrow began selling directly in Italy through its subsidiary, Arrow Italy S.p.A., in the first quarter of fiscal 2005. Included in the first quarter of fiscal year 2005 was a $1.5 million charge, or $1.0 million against net income, ($0.02 diluted earnings per share) for the step-up of inventory purchased from ABM.

Fiscal Year 2005 Targets:

The targeted growth rate for diluted earnings per share for the second quarter of fiscal year 2005 is lower than the growth targets for the third and fourth quarters of fiscal year 2005 due to favorable comparisons to the third and fourth quarters of the prior fiscal year.

First Quarter Balance Sheets and Cash from Operations:

Cash at November 30, 2004 was $95.3 million, up from $62.9 million at November 30, 2003, while short-term debt of $30.9 million remained relatively flat compared to the prior fiscal year first quarter levels. Days sales outstanding decreased to 72 days versus 77 days in the prior fiscal year first quarter. Inventory turns of 2.2 times per year remained relatively consistent compared to prior year levels. The company had no long-term debt at November 30, 2004.

Operating income, plus depreciation and amortization, decreased to $26.3 million for the first quarter of fiscal year 2005 from $27.3 million in the first quarter of fiscal year 2004. Depreciation and amortization for the first quarter of fiscal year 2005 was approximately $6.5 million. Capital expenditures for the first quarter of fiscal year 2005 were approximately $7.1 million.

Stock Buy Back:

In March 1999, the company began open market purchases of its common stock pursuant to its previously announced program to repurchase up to 2 million shares of its common stock. In April 2000, the company announced that it would repurchase up to another 2 million shares of its stock under this program, for a total of 4 million. As of November 30, 2004, the company had purchased a total of 3,603,600 shares under this program, which remains in effect, although no shares were repurchased in the first quarter of fiscal year 2005.

Company Information:

Arrow International, Inc. develops, manufactures and markets a broad range of clinically advanced, disposable catheters and related products for critical and cardiac care. The company's products are used primarily by anesthesiologists, critical care specialists, surgeons, emergency and trauma physicians, cardiologists, interventional radiologists, electrophysiologists, and other health care providers.

The company's common stock trades on The Nasdaq Stock Market(R) under the symbol ARRO.

For more information, call 610/478-3117 or visit http://www.arrowintl.com.