<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    ---------

                                    FORM 10-Q


(X)     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

                For the quarterly period ended February 28, 2006

        or

( )     Transition Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

           For the transition period from ____________ to ____________

Commission File Number   0-20212


                            ARROW INTERNATIONAL, INC.
                            -------------------------
             (Exact Name of Registrant as Specified in Its Charter)


Pennsylvania                                                          23-1969991
-------------------------                                            -----------
(State or Other Jurisdiction of                                 (I.R.S. Employer
Incorporation or Organization)                               Identification No.)


2400 Bernville Road, Reading, Pennsylvania                                19605
------------------------------------------                               ------
(Address of Principal Executive Offices)                              (Zip Code)


Registrant's Telephone Number, Including Area Code:               (610) 378-0131
                                                                  --------------


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (check
one):

Large Accelerated Filer _X_   Accelerated Filer ___    Non-Accelerated Filer ___


Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes __ No _X_

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class                                   Shares Outstanding At April 4, 2006
-------                                 -----------------------------------

Common Stock, No Par Value                          44,792,456

<PAGE>

                            ARROW INTERNATIONAL, INC.

                                 Form 10-Q Index


                                      PAGE

PART I.   FINANCIAL INFORMATION

          Item 1.    Financial Statements (Unaudited)

                     Consolidated Balance Sheets at February 28, 2006
                     and August 31, 2005                                     3-4

                     Consolidated Statements of Income                       5-6

                     Consolidated Statements of Cash Flows                   7-8

                     Consolidated Statements of Comprehensive
                     Income                                                    9

                     Notes to Consolidated Financial Statements            10-22

          Item 2.    Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                   23-33

          Item 3.    Quantitative and Qualitative Disclosures About
                     Market Risk                                           33-34

          Item 4.    Controls and Procedures                                  34


PART II.  OTHER INFORMATION

          Item 4.    Submission of Matters to a Vote of Security Holders   34-35

          Item 6.    Exhibits                                                 35

Signature                                                                     36

Exhibit Index                                                                 37

Certifications                                                             38-41

<PAGE>
<TABLE>
<CAPTION>

PART I          FINANCIAL INFORMATION

Item 1. Financial Statements


                                    ARROW INTERNATIONAL, INC.
                                   CONSOLIDATED BALANCE SHEETS

                                          (In thousands)
                                           (Unaudited)


                                                           February 28,           August 31,
                                                              2006                  2005
                                                        ------------------    ------------------
<S>                                                     <C>                   <C>
ASSETS
Current assets:
  Cash and cash equivalents                             $          116,837    $          119,326
  Marketable securities                                              6,040                     -
  Accounts receivable, net                                          90,732                91,029
  Inventories                                                      102,574                95,356
  Prepaid expenses and other                                        14,058                 8,410
  Deferred income taxes                                             15,160                16,338
                                                        ------------------    ------------------
  Total current assets                                             345,401               330,459
                                                        ------------------    ------------------


Property, plant and equipment                                      333,280               321,603
Less accumulated depreciation                                     (179,313)             (170,895)
Property, plant and equipment held for sale, net                         -                 1,499
                                                        ------------------    ------------------
                                                                   153,967               152,207
                                                        ------------------    ------------------


Goodwill                                                            42,749                42,772
Intangible assets, net                                              41,256                43,674
Other assets                                                         9,960                10,372
Prepaid pension costs                                               24,395                21,006
                                                        ------------------    ------------------
  Total other assets                                               118,360               117,824
                                                        ------------------    ------------------

  Total assets                                          $          617,728    $          600,490
                                                        ==================    ==================


                   See accompanying notes to consolidated financial statements
</TABLE>
                                            Continued

                                               (3)
<PAGE>
<TABLE>
<CAPTION>

                                    ARROW INTERNATIONAL, INC.
                                   CONSOLIDATED BALANCE SHEETS

                               (In thousands, except share amounts)
                                           (Unaudited)


                                                           February 28,           August 31,
                                                              2006                  2005
                                                        ------------------    ------------------
<S>                                                     <C>                   <C>
LIABILITIES

Current liabilities:
  Current maturities of long-term debt                  $              999    $            1,054
  Notes payable                                                     32,617                26,891
  Accounts payable                                                  19,456                17,391
  Cash overdrafts                                                    1,318                   400
  Accrued liabilities                                               20,509                24,571
  Accrued dividends                                                  7,612                 6,693
  Accrued compensation                                              12,748                12,908
  Accrued income taxes                                               2,630                 1,945
                                                        ------------------    ------------------
  Total current liabilities                                         97,889                91,853

Long-term debt                                                           -                     -

Accrued postretirement and pension benefit obligations              17,830                20,557

Deferred income taxes                                                8,067                 9,573

Commitments and contingencies

SHAREHOLDERS' EQUITY

Preferred stock, no par value;
  5,000,000 shares authorized;
  none issued                                                            -                     -

Common stock, no par value;
  100,000,000 shares authorized;
  52,957,626 shares issued                                          45,661                45,661
Additional paid-in capital                                          31,805                27,404
Retained earnings                                                  469,332               459,181
  Less treasury stock at cost:
    8,181,671 and 8,339,767 shares, respectively                   (53,696)              (54,728)
Accumulated other comprehensive income                                 840                   989
                                                        ------------------    ------------------
  Total shareholders' equity                                       493,942               478,507
                                                        ------------------    ------------------
  Total liabilities and shareholders' equity            $          617,728    $          600,490
                                                        ==================    ==================


                   See accompanying notes to consolidated financial statements
</TABLE>

                                               (4)
<PAGE>
<TABLE>
<CAPTION>

                                           ARROW INTERNATIONAL, INC.
                                       CONSOLIDATED STATEMENTS OF INCOME

                               (In thousands, except share and per share amounts)
                                                  (Unaudited)


                                                                             For the three months ended
                                                                    ------------------------------------------
                                                                       February 28,            February 28,
                                                                           2006                   2005
                                                                    -------------------    -------------------
<S>                                                                 <C>                    <C>
Net sales                                                           $           116,504    $           109,209
Cost of goods sold                                                               59,715                 58,506
                                                                    -------------------    -------------------
  Gross profit                                                                   56,789                 50,703
                                                                    -------------------    -------------------

Operating expenses:
  Research and development                                                        7,058                  7,126
  Selling, general and administrative                                            31,894                 35,545
  Restructuring charge                                                             (269)                   930
                                                                    -------------------    -------------------
                                                                                 38,683                 43,601
                                                                    -------------------    -------------------
  Operating income                                                               18,106                  7,102
                                                                    -------------------    -------------------
Other (income) expenses:
  Interest expense, net of amount capitalized                                       189                    219
  Interest income                                                                  (907)                  (291)
  Other, net                                                                        106                   (108)
                                                                    -------------------    -------------------
  Other (income) expenses, net                                                     (612)                  (180)
                                                                    -------------------    -------------------
Income before income taxes                                                       18,718                  7,282
Provision for income taxes                                                        6,084                  1,928
                                                                    -------------------    -------------------

  Net income                                                        $            12,634    $             5,354
                                                                    ===================    ===================

Basic earnings per common share                                     $              0.29    $              0.12
                                                                    ===================    ===================
Diluted earnings per common share                                   $              0.28    $              0.12
                                                                    ===================    ===================
Cash dividends per common share                                     $              0.17    $              0.15
                                                                    ===================    ===================

Weighted average shares outstanding
  used in computing basic earnings
    per common share                                                         44,729,478             44,213,584
                                                                    ===================    ===================

Weighted average shares outstanding
  used in computing diluted earnings
    per common share                                                         45,275,773             45,009,506
                                                                    ===================    ===================


                          See accompanying notes to consolidated financial statements
</TABLE>

                                                      (5)
<PAGE>
<TABLE>
<CAPTION>

                                           ARROW INTERNATIONAL, INC.
                                       CONSOLIDATED STATEMENTS OF INCOME

                               (In thousands, except share and per share amounts)
                                                  (Unaudited)


                                                                             For the six months ended
                                                                    ------------------------------------------
                                                                       February 28,            February 28,
                                                                           2006                   2005
                                                                    -------------------    -------------------
<S>                                                                 <C>                    <C>
Net sales                                                           $           230,148    $           221,934
Cost of goods sold                                                              117,202                114,811
                                                                    -------------------    -------------------
  Gross profit                                                                  112,946                107,123
                                                                    -------------------    -------------------

Operating expenses:
  Research and development                                                       13,509                 15,045
  Selling, general and administrative                                            64,479                 64,267
  Restructuring charge                                                             (256)                 1,321
                                                                    -------------------    -------------------
                                                                                 77,732                 80,633
                                                                    -------------------    -------------------
  Operating income                                                               35,214                 26,490
                                                                    -------------------    -------------------
Other (income) expenses:
  Interest expense, net of amount capitalized                                       369                    308
  Interest income                                                                (1,516)                  (505)
  Other, net                                                                        118                   (274)
                                                                    -------------------    -------------------
  Other (income) expenses, net                                                   (1,029)                  (471)
                                                                    -------------------    -------------------
Income before income taxes                                                       36,243                 26,961
Provision for income taxes                                                       11,779                  8,324
                                                                    -------------------    -------------------

  Net income                                                        $            24,464    $            18,637
                                                                    ===================    ===================

Basic earnings per common share                                     $              0.55    $              0.42
                                                                    ===================    ===================
Diluted earnings per common share                                   $              0.54    $              0.42
                                                                    ===================    ===================
Cash dividends per common share                                     $              0.32    $              0.24
                                                                    ===================    ===================

Weighted average shares outstanding
  used in computing basic earnings
    per common share                                                         44,687,708             44,023,659
                                                                    ===================    ===================

Weighted average shares outstanding
  used in computing diluted earnings
    per common share                                                         45,221,520             44,766,807
                                                                    ===================    ===================


                          See accompanying notes to consolidated financial statements
</TABLE>

                                                      (6)
<PAGE>
<TABLE>
<CAPTION>

                                               ARROW INTERNATIONAL, INC.
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (in thousands)
                                                      (unaudited)


                                                                                     For the six months ended
                                                                            ------------------------------------------
                                                                               February 28,            February 28,
                                                                                   2006                   2005
                                                                            -------------------    -------------------
<S>                                                                         <C>                    <C>
Cash flows from operating activities:
    Net income                                                              $            24,464    $            18,637
Adjustments to reconcile net income to
  net cash provided by operating activities:
    Depreciation                                                                         10,275                  9,937
    Amortization                                                                          2,800                  2,756
    Lionheart charge                                                                          -                  4,903
    Early retirement  plan stock option charge                                                -                  1,142
    Unrealized holding loss on foreign currency options                                       -                    (41)
    401(k) plan stock contribution                                                          466                    449
    Deferred income taxes                                                                  (350)                 4,045
    (Gain) loss on sale of property, plant and equipment                                    (58)                   209
    Excess tax benefit from exercise of stock options                                      (412)                 3,162
    Stock compensation charge                                                             1,799                      -
    (Decrease) increase in provision for postretirement and pension
      benefit obligation                                                                 (2,720)                 2,086
    (Increase) decrease in prepaid pension costs                                         (3,389)                  (806)
Changes in operating assets and liabilities, net of effects from
acquisition:
    Accounts receivable, net                                                               (726)                (2,173)
    Inventories                                                                          (6,665)                (3,739)
    Prepaid expenses and other                                                           (5,600)               (10,295)
    Accounts payable and accrued liabilities                                             (2,470)                   198
    Accrued compensation                                                                    (91)                  (702)
    Accrued income taxes                                                                  1,184                   (762)
                                                                            -------------------    -------------------
    Total adjustments                                                                    (5,957)                10,369
                                                                            -------------------    -------------------
      Net cash provided by operating activities                                          18,507                 29,006
                                                                            -------------------    -------------------

Cash flows from investing activities:
    Capital expenditures                                                                (13,539)               (17,881)
    Purchases of marketable securities                                                   (6,040)                     -
    Proceeds from sale of property, plant and equipment                                   1,878                     13
    Decrease (increase) in intangible and other assets                                       33                   (607)
    Cash paid for business acquired                                                           -                 (7,148)
                                                                            -------------------    -------------------
      Net cash used in investing activities                                             (17,668)               (25,623)
                                                                            -------------------    -------------------

Cash flows from financing activities:
      Increase (decrease) in notes payable                                                6,192                    166
      Reduction of current maturities of long-term debt                                     (55)                   (38)
      Increase (decrease) in cash overdrafts                                                918                   (382)
      Excess tax benefit from exercise of stock options                                     412                      -
      Dividends paid                                                                    (13,395)                (7,895)
      Proceeds from stock options exercised                                               2,758                 11,907
                                                                            -------------------    -------------------
           Net cash (used in) provided by financing activities                           (3,170)                 3,758
                                                                            -------------------    -------------------

Effects of exchange rate changes on cash and cash equivalents                              (158)                 1,165
Net change in cash and cash equivalents                                                  (2,489)                 8,306
Cash and cash equivalents at beginning of year                                          119,326                 94,176
                                                                            -------------------    -------------------
Cash and cash equivalents at end of period                                  $           116,837                102,482
                                                                            ===================    ===================


                              See accompanying notes to consolidated financial statements
</TABLE>
                                                       Continued

                                                          (7)
<PAGE>
<TABLE>
<CAPTION>

                                               ARROW INTERNATIONAL, INC.
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
                                                     (in thousands)
                                                      (unaudited)


                                                                                     For the six months ended
                                                                            ------------------------------------------
                                                                               February 28,            February 28,
                                                                                   2006                   2005
                                                                            -------------------    -------------------
<S>                                                                         <C>                    <C>

Supplemental schedule of noncash investing and financing activities:

The Company assumed liabilities in conjunction with the purchase of certain assets as follows:

Estimated fair value of assets acquired                                     $                 -    $             8,545
Accrual for additional payments owed                                                          -                  1,397
                                                                            -------------------    -------------------
Cash paid for assets                                                        $                 -    $             7,148
                                                                            ===================    ===================

Cash paid for business acquired:
  Working capital                                                           $                 -    $             3,222
  Intangible assets                                                                           -                  5,323
  Accrual for additional payments owned                                                       -                 (1,397)
                                                                            -------------------    -------------------
                                                                                              -                  7,148
                                                                            ===================    ===================
Dividends declared but not paid                                             $             7,612    $             6,673
                                                                            ===================    ===================
(Decrease) increase in property, plant and
equipment in accounts payable                                               $               (22)   $                48
                                                                            ===================    ===================


                              See accompanying notes to consolidated financial statements
</TABLE>

                                                          (8)
<PAGE>
<TABLE>
<CAPTION>

                                               ARROW INTERNATIONAL, INC.
                               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (EXPENSE)
                                                     (in thousands)
                                                      (unaudited)


                                                                              For the three months ended
                                                                       ----------------------------------------
                                                                          February 28,          February 28,
                                                                              2006                  2005
                                                                       ------------------    ------------------
<S>                                                                    <C>                   <C>
Net income                                                             $           12,634    $            5,354
Other comprehensive income (expense):
  Foreign Currency translation adjustments                                          2,029                 1,543
  Unrealized holding (loss) on foreign currency option contracts                        -                   (41)
                                                                       ------------------    ------------------
Other comprehensive income (expense)                                                2,029                 1,502
                                                                       ------------------    ------------------
    Total comprehensive income                                         $           14,663      $          6,856
                                                                       ==================    ==================



                                                                              For the six months ended
                                                                       ----------------------------------------
                                                                          February 28,          February 28,
                                                                              2006                  2005
                                                                       ------------------    ------------------

Net income                                                             $           24,464    $           18,637
Other comprehensive (expense) income:
  Foreign Currency translation adjustments                                           (149)                7,105
  Unrealized holding (loss) on foreign currency option contracts                        -                   (41)
                                                                       ------------------    ------------------
Other comprehensive (expense) income                                                 (149)                7,064
                                                                       ------------------    ------------------
    Total comprehensive income                                         $           24,315    $           25,701
                                                                       ==================    ==================


                              See accompanying notes to consolidated financial statements
</TABLE>

                                                          (9)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


Note 1 - Basis of Presentation:

These unaudited consolidated financial statements include all adjustments,
consisting only of normal recurring accruals, which management considers
necessary for a fair statement of the consolidated financial position, results
of operations, cash flows and comprehensive income of Arrow International, Inc.
(the "Company") for the interim periods presented. Results for the interim
periods are not necessarily indicative of results for the entire year. Such
statements are presented in accordance with the requirements of Form 10-Q and do
not include all disclosures normally required by generally accepted accounting
principles or those normally made on Form 10-K. These statements should be read
in conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report to Stockholders for the fiscal year
ended August 31, 2005.

Note 2 - Accounting Policies:

The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 123R, "Share-Based Payment", in December 2004.
This statement requires that the cost of all forms of equity-based compensation
granted to employees, excluding employee stock ownership plans, be recognized in
a company's income statement and that such cost be measured at the fair value of
the equity instruments granted. This statement replaces the guidance in SFAS No.
123, Accounting for Stock-Based Compensation, and APB No. 25, Accounting for
Stock Issued to Employees. In addition, the Securities and Exchange Commission
(the "SEC") issued SAB No. 107 "Share-Based Payment" in March 2005, which
provides supplemental SFAS No. 123R application guidance based on the views of
the SEC.

The Company adopted the provisions of SFAS No. 123R effective September 1, 2005
using the modified prospective method. The adoption of this statement has
resulted in charges for the six months ended February 28, 2006 of $1,799 to
income from continuing operations and income before income taxes, of which $236
was recorded to cost of sales, $183 to research and development, and $1,380 to
selling, general and administrative expenses. These charges impacted net income
by $1,542, or $0.03 basic and diluted earnings per share, in the first half of
fiscal 2006. The tax benefit from this stock option expense is less than the
statutory tax benefit because the Company cannot recognize the tax benefit on
future disqualifying dispositions of incentive stock options until such time as
these dispositions occur. Prior to September 1, 2005, the Company had applied
the existing accounting rules under Accounting Principles Board (APB) No. 25, as
amended by SFAS No. 148, and provided pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made as if the
fair value method in measuring compensation costs for stock options granted
subsequent to December 15, 1995 had been applied.

Had compensation expense for stock options granted in fiscal 2005 been recorded
based on the fair market value at the grant date, the Company's net income and
basic and diluted earnings per share, net of related income tax effects, for the
three and six month periods ended February 28, 2005 would have been reduced to
the pro forma amounts indicated in the table below:

<TABLE>
<CAPTION>
                                                                     For the three              For the six
                                                                      months ended              months ended
                                                                   February 28, 2005         February 28, 2005
                                                                  -------------------       -------------------
<S>                                                               <C>                       <C>
Net income applicable to common shareholders
As reported                                                       $             5,354       $            18,637
Add: Stock-based employee compensation expense included in
reported net income, net of related tax effects                                   771                       771

Deduct:  Total stock-based employee compensation expense
determined under fair value based method for all awards, net
of related tax effects                                                           (387)                     (795)
Pro forma                                                         $             5,738       $            18,613

Basic earnings per common share
As reported                                                       $              0.12       $             0.42
Pro forma                                                         $              0.13       $             0.42

Diluted earnings per common share
As reported                                                       $              0.12       $             0.42
Pro forma                                                         $              0.13       $             0.42
</TABLE>


                                      (10)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


The pro forma effects are not representative of the effects on reported net
income for future years, as most of the stock option awards granted by the
Company vest in cumulative increments over a period of either four or five
years. The information provided in the table above includes the impact of both
vested and non-vested options.

The Company has adopted four stock plans, the 1992 Stock Incentive Plan (the
"1992 Plan"), which was adopted on April 1, 1992, the Directors' Stock Incentive
Plan, as amended (the "Directors Plan"), which was approved by the Company's
shareholders on January 17, 1996, with amendments thereto approved by the
Company's shareholders on January 19, 2000, the 1999 Stock Incentive Plan (the
"1999 Plan"), which was approved by the Company's shareholders on June 19, 2000,
with non-material amendments thereto approved by the Company's Board of
Directors on October 27, 2004, and the 2006 Directors Stock Incentive Plan (the
"2006 Directors Plan"), which was approved by the Company's shareholders on
January 18, 2006. The 1992 and 1999 Plans authorize the granting of stock
options, stock appreciation rights and restricted stock. The Directors' Plan,
which had authorized the granting of a maximum of 300,000 non-qualified stock
options, expired in accordance with its terms on January 17, 2006. The 2006
Directors Plan authorizes the granting of a maximum of 500,000 shares of the
Company's common stock (subject to adjustment in the event of any stock
dividend, stock split, recapitalization, reorganization or similar event) in the
form of non-qualified stock options and /or restricted stock. Under the
Directors Plan and the 2006 Directors Plan, members of the Board of Directors of
the Company and its subsidiaries are eligible to participate if they are not
also employees or consultants of the Company or its subsidiaries, and do not
serve on the Board of Directors as representatives of the interest of
shareholders who have made an investment in the Company. The 2006 Directors Plan
provides for an initial grant of options to purchase 10,000 shares of common
stock upon each eligible director's initial election or appointment to the Board
of Directors and, thereafter, the grant of such number of additional options to
purchase shares of common stock and/or shares of restricted stock, in each case
as the Board of Directors in its discretion may determine, on the date of each
annual meeting of shareholders of the Company.

In the three months ended February 28, 2006 and February 28, 2005, the Company
granted 0 and 87,500 options, respectively, to key employees to purchase shares
of the Company's common stock pursuant to the 1999 Plan. The exercise price per
share was $30.60 for the options granted during the three months ended February
28, 2005. During the six months ended February 28, 2006 and February 28, 2005,
the Company granted 1,066,000 and 102,500 options, respectively, to key
employees to purchase shares of the Company's common stock pursuant to the 1999
Plan. The exercise price per share ranged from $29.41 to $29.94 for the options
granted during the six months ended February 28, 2006 and ranged from $29.08 to
$30.60 for the options granted in the same period of fiscal 2005. These amounts
represent the fair market value of the common stock of the Company on the
respective dates that the options were granted. The options expire ten years
from the grant date. The options vest ratably over five years, at one year
intervals from the grant date and, once vested, are exercisable at any time.

In the three months ended February 28, 2006 and February 28, 2005, the Company
granted 30,000 and 27,000 options, respectively, to its directors to purchase
shares of the Company's common stock pursuant to the 2006 Directors Plan and the
Directors Plan, respectively. The exercise price per share was $30.97 for the
options granted during the three months ended February 28, 2006 and $30.60 for
the options granted in the same period of fiscal 2005. During the six months
ended February 28, 2006, the Company granted 30,000 options pursuant to the 2006
Directors Plan and 10,000 options pursuant to the Directors Plan, and during the
six months ended February 28, 2005, granted 27,000 options pursuant to the
Directors Plan, to its directors to purchase shares of the Company's common
stock. The exercise price ranged from $30.92 to $30.97 for the options granted
during the six months ended February 28, 2006 and was $30.60 for the options
granted in the same period of fiscal 2005. These amounts represent the fair
market value of the common stock of the Company on the date the options were
granted. The options expire ten years from the grant date. The options fully
vest one year from the grant date, and once vested, are exercisable at any time.


                                      (11)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


Stock option activity for the three and six month periods ended February 28,
2006 and 2005 is summarized in the tables below:

<TABLE>
<CAPTION>
                                                                         For the three months ended
                                             ------------------------------------------------------------------------------------
                                                      February 28, 2006                                February 28, 2005
                                             ------------------------------------------------------------------------------------
                                                                    Weighted                                        Weighted
                                                                     Average        Aggregate                        Average
                                                                    Exercise        Intrinsic                       Exercise
                                                 Shares               Price           Value       Shares              Price
                                             ------------------------------------------------------------------------------------
<S>                                                <C>                <C>                          <C>                <C>
Outstanding at December 1                          3,359,512          $24.83                       2,868,194          $20.82
Granted                                               30,000          $30.97                         114,500          $30.60
Exercised                                            (77,906)         $19.12                        (530,016)         $17.68
Terminated                                           (29,010)         $26.44                          (3,250)         $22.96
                                             ----------------                                  --------------

Outstanding at February 28                         3,282,596          $25.00         $18,853       2,449,428          $21.95

Exercisable at  February 28                        1,427,481          $21.09          $7,002       1,204,877          $19.50
</TABLE>

The intrinsic value of the stock options exercised during the three months ended
February 28, 2006 and 2005 was $476 and $2,651, respectively.

<TABLE>
<CAPTION>
                                                                           For the six months ended
                                             ------------------------------------------------------------------------------------
                                                      February 28, 2006                                February 28, 2005
                                             ------------------------------------------------------------------------------------
                                                                    Weighted                                        Weighted
                                                                     Average        Aggregate                        Average
                                                                    Exercise        Intrinsic                       Exercise
                                                 Shares               Price           Value       Shares              Price
                                             ------------------------------------------------------------------------------------
<S>                                                <C>                <C>                          <C>                <C>
Outstanding at September 1                         2,381,367          $22.43                       3,084,152          $20.49
Granted                                            1,106,000          $29.96                         129,500          $30.42
Exercised                                           (143,396)         $19.40                        (701,834)         $17.12
Terminated                                           (61,375)         $27.37                         (62,390)         $21.80
                                             ----------------                                  --------------

Outstanding at February 28                         3,282,596          $25.00         $18,853       2,449,428          $21.95

Exercisable at  February 28                        1,427,481          $21.09          $7,002       1,204,877          $19.50
</TABLE>

The intrinsic value of the stock options exercised during six months ended
February 28, 2006 and 2005 was $827 and $3,551, respectively.


                                      (12)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


Stock options outstanding at February 28, 2006 are summarized in the table
below:

<TABLE>
<CAPTION>
                                              Weighted                                            Weighted
                                               Average           Weighted                          Average           Weighted
                                              Remaining          Average                          Remaining           Average
     Range of                Number          Contractual         Exercise          Number        Contractual         Exercise
  Exercise Prices         Outstanding           Life              Price          Exercisable        Life               Price
--------------------     --------------    ----------------    ------------     ------------    -------------      --------------
<S>                      <C>               <C>                 <C>              <C>             <C>                <C>
  $12.56 - $17.50              265,090          2.98              $14.98            265,090         2.98               $14.98
  $17.51 - $21.47              707,693          5.54              $19.08            581,034         5.52               $19.09
  $21.48 - $26.42            1,028,813          7.56              $25.35            525,357         7.57               $25.37
  $26.43 - $30.92            1,231,000          9.55              $30.01             56,000         8.82               $30.52
  $30.93 - $33.59               50,000          9.60              $31.76                  -            -                    -
                         --------------                                         ------------
                             3,282,596                                            1,427,481
</TABLE>

A summary of the status of the Company's nonvested stock options as of February
28, 2006, and changes during the three and six months ended February 28, 2006,
are summarized below:

<TABLE>
<CAPTION>

                                                              For the Three Months Ended February 28, 2006
                                                              --------------------------------------------

                                                                                         Weighted Average
                                                                Number of Shares         Option Grant Date
                                                               Underlying Options           Fair Value
                                                              --------------------     --------------------
<S>                                                           <C>                      <C>
Nonvested at December 1, 2005                                          1,941,326               $6.35
Granted                                                                   30,000               $7.55
Vested                                                                   (89,601)              $5.67
Terminated                                                               (26,610)              $6.19
                                                              --------------------
Nonvested at February 28, 2006                                         1,855,115               $6.39


                                                               For the Six Months Ended February 28, 2006
                                                               ------------------------------------------

                                                                                         Weighted Average
                                                                Number of Shares         Option Grant Date
                                                               Underlying Options           Fair Value
                                                              --------------------     --------------------

Nonvested at September 1, 2005                                         1,259,101               $4.86
Granted                                                                1,106,000               $7.43
Vested                                                                  (451,931)              $4.74
Terminated                                                               (58,055)              $5.20
                                                              --------------------
Nonvested at February 28, 2006                                         1,855,115               $6.39
</TABLE>

As of February 28, 2006, there was $10,574 of total unrecognized cost related to
nonvested share-based compensation arrangements granted under the Company's
Stock Incentive Plans. This cost is expected to be recognized over a weighted
average period of six years. The total fair value of shares underlying stock
options which vested during the three months ended February 28, 2006 and 2005
was $508 and $764, respectively. The total fair value of shares underlying stock
options which vested during the six months ended February 28, 2006 and 2005 was
$2,140 and $2,755, respectively.

The fair value of the stock options granted were estimated on the date of the
grant using the Black-Scholes option pricing model that uses the assumptions
noted in the following table. The risk-free interest rate is based on the U.S.
Treasury yield curve in effect on the date of the grant. The expected
volatilities are based on the historical volatilities of the Company's common
stock. The Company uses historical data to estimate option exercises and
employee terminations within the valuation model. The expected lives of the
stock options granted represent the period of time that options granted are
expected to be outstanding; the range given below results from certain groups of
employees exhibiting different behavior with respect to the options granted to
them.


                                      (13)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


The per share weighted average value of stock options granted in the first six
months of fiscal 2006 and 2005 was $7.43 and $5.68, respectively. The fair value
was estimated as of the grant date using the Black-Scholes option pricing model
with the following average assumption:

                                          February 28,        February 28,
                                              2006                2005
                                        ----------------    ----------------
Risk-free interest rate                    3.71%-4.30%            2.90%
Dividend yield                             2.07%-2.13%            2.08%
Volatility factor                         23.14%-23.77%          22.75%
Expected lives                               6 years             5 years

Accounts Receivable and Allowance for Doubtful Accounts:

Trade accounts receivable are recorded at the invoiced amount and do not bear
interest. The Company maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
This allowance is used to report trade receivables at estimated net realizable
value. The Company relies on prior payment trends while giving consideration to
other criteria such as political risk, financial status and other factors to
estimate the amounts of cash that ultimately will be received. Such amounts
cannot be known with certainty at the financial statement date. The Company
regularly reviews individual past due balances over 90 days and over a specific
amount for collectability and maintains a specific allowance for customer
accounts that will likely not be collectible due to customer liquidity issues.
The Company also maintains an allowance for estimated future collection losses
on existing receivables, determined based on historical trends.

The following are the changes in the allowance for doubtful accounts for the
three and six months ended February 28, 2006 and 2005:

                                           For the three months ended
                                 ----------------------------------------------
                                     February 28,             February 28,
                                         2006                     2005
                                 ---------------------    ---------------------
Balance at December 1            $               2,296    $               1,604
Net additions  (recoveries)                        (77)                     265
Write-offs                                        (168)                     (27)
                                 ---------------------    ---------------------
Balance at February 28           $               2,051    $               1,842
                                 =====================    =====================

                                             For the six months ended
                                 ----------------------------------------------
                                     February 28,             February 28,
                                         2006                     2005
                                 ---------------------    ---------------------
Balance at September 1           $               2,176    $               2,198
Net additions  (recoveries)                         43                      471
Write-offs                                        (168)                    (827)
                                 ---------------------    ---------------------
Balance at February 28           $               2,051    $               1,842
                                 =====================    =====================

The Company has disclosed in Note 1 to its consolidated financial statements
included in its Annual Report on Form 10-K for the fiscal year ended August 31,
2005 those accounting policies that it considers to be significant in
determining its results of operations and financial position. Other than the
Company's compliance with the new accounting requirements of SFAS No. 123R, as
described above, there have been no material changes to the accounting policies
previously identified and described in the Company's 2005 Form 10-K. The
accounting principles utilized by the Company in preparing its consolidated
financial statements conform in all material respects to generally accepted
accounting principles in the United States of America.

The preparation of these consolidated financial statements requires the
Company's management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, as well as the disclosure
of contingent assets and liabilities at the date of its financial statements.
The Company bases its estimates on historical experience, actuarial valuations
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Some of those judgments can be subjective and complex and,
consequently, actual results may differ from these estimates under different
assumptions or


                                      (14)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


conditions. While for any given estimate or assumption made by the Company's
management there may be other estimates or assumptions that are reasonable, the
Company believes that, given the current facts and circumstances, it is unlikely
that applying any such other reasonable estimate or assumption would materially
impact the financial statements.

The FASB issued SFAS No. 151, "Inventory Costs, an Amendment of Accounting
Research Bulletin (ARB) No. 43, Chapter 4", in November 2004. This statement
amends the guidance in ARB No. 43 Chapter 4 "Inventory Pricing" to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS No. 151 requires that those items be recognized
as current period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The Company has adopted the provisions of SFAS No.
151, effective September 1, 2005. The impact of this statement on the Company's
financial statements was not material to its results of operations for the three
and six months ended February 28, 2006.

Certain prior period information has been reclassified for comparative purposes.

Note 3 - Commitments and Contingencies:

The Company is a party to certain legal actions, including product liability
matters, arising in the ordinary course of its business. From time to time, the
Company is also subject to legal actions involving patent and other intellectual
property claims.

The Company had been a defendant in a lawsuit in the United States District
Court in the Southern District of New York, in which the plaintiffs, Thierry
Pourchez and Bard Access Systems, Inc., alleged that the Company's
Cannon-Cath(TM) split-tip hemodialysis catheters, which were acquired as part of
the Company's acquisition in November 2002 of specified assets of Diatek, Inc.,
infringed a patent owned by or licensed to the plaintiffs. In November 2003,
this lawsuit was stayed pending the U.S. Patent and Trademark Office's ruling on
its re-examination of the patent at issue. In September 2005, the Court
dismissed this lawsuit because the U.S. Patent and Trademark Office had not yet
concluded its re-examination of the patent at issue. The plaintiffs may seek
reinstatement of this lawsuit when the re-examination is concluded, which is
expected to occur in calendar 2006, although the Company cannot presently
predict the precise timing. Based on information presently available to the
Company, the Company believes that its products do not infringe any valid claim
of the plaintiff's patent and that, consequently, it has meritorious legal
defenses with respect to this action in the event it were to be reinstated.

The Company is currently a plaintiff in a patent infringement lawsuit in the
United States District Court in Baltimore, Maryland against Datascope Corp. of
Montvale, New Jersey. The Company manufactures and sells the Arrow-Trerotola(TM)
Percutaneous Thrombolytic Device (PTD(R)), which is used to mechanically declot
native arterio-venous fistulae and synthetic hemodialysis grafts. The PTD was
invented by Dr. Scott Trerotola while working at Johns Hopkins University. Johns
Hopkins University, the owner of two patents covering the PTD, is also a
plaintiff, and the Company is the exclusive licensee of the Trerotola patents.
The Company has alleged that Datascope infringes these two patents. A trial is
anticipated during calendar year 2006, although the Company cannot currently
predict the precise timing.

The Company also commenced a patent infringement lawsuit in the United States
District Court in Boston, Massachusetts against Spire Corporation of Bedford,
Massachusetts. The Company is the owner of United States Patent No. 6,872,198,
which covers a method of inserting a double-Y-shaped multi-lumen catheter. The
Company has alleged that the use of Spire's Pourchez RetrO(TM) High Flow
Kink-Resistant Catheter infringes this patent. The case is in the middle of the
discovery phase, and a trial is anticipated during calendar year 2007, although
the Company cannot currently predict the precise timing.

Although the ultimate outcome of any of these actions is not expected to have a
material adverse effect on the Company's business or financial condition,
whether an adverse outcome in any of these actions would materially adversely
affect the Company's reported results of operations in any future period cannot
be predicted with certainty.

Note 4 - Inventories:

Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                               February 28, 2006         August 31, 2005
                                             ---------------------    ---------------------
<S>                                          <C>                      <C>
  Finished goods                             $              38,806    $              32,954
  Semi-finished goods / Work-in-process                     38,376                   38,574
  Raw materials                                             25,392                   23,828
                                             ---------------------    ---------------------
                                             $             102,574    $              95,356
                                             =====================    =====================
</TABLE>


                                      (15)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


Note 5 - Segment Reporting:

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", requires the reporting of certain financial information for each
operating segment. The Company has one operating segment as defined in this
standard, based on the fact that its various business components do not possess
the defined characteristics meeting the standard's definition of operating
segments. For instance, the Company's current management structure is designed
to operate the business as a whole, with no divisional responsibilities. In
addition, over 90% of the Company's net sales are generated from catheter and
catheter-related products. Therefore, the Company continues to operate as a
single operating segment. The Company operates in four main geographic regions,
therefore, information about products and geographic areas is presented below.

The following table provides quarterly and year-to-date information about the
Company's sales by product category:

<TABLE>
<CAPTION>
                                        Quarter ended                        Quarter ended
                                      February 28, 2006                    February 28, 2005
                                -------------------------------     --------------------------------
                                  Critical          Cardiac           Critical          Cardiac
                                    Care             Care               Care              Care
                                -------------    --------------     -------------    ---------------
<S>                             <C>              <C>                <C>              <C>
Sales to external customers         $99,400          $17,100            $93,200           $16,000


                                       Six Months ended                    Six Months ended
                                      February 28, 2006                    February 28, 2005
                                -------------------------------     --------------------------------
                                   Critical          Cardiac          Critical           Cardiac
                                     Care             Care              Care              Care
Sales to external customers     ---------------    ------------     --------------    --------------
                                   $196,300          $33,800           $189,200           $32,700
</TABLE>

The following tables present quarterly information about geographic areas:

<TABLE>
<CAPTION>
                                                    Quarter ended February 28, 2006
                                  -----------------------------------------------------------------------
                                      United                            Asia and
                                      States            Europe        International       Consolidated
                                  --------------    --------------    -------------    ------------------
<S>                                   <C>               <C>               <C>               <C>
Sales to unaffiliated customers       $72,000           $23,200           $21,300           $116,500

                                                     Quarter ended February 28, 2005
                                  -----------------------------------------------------------------------
                                      United                            Asia and
                                      States            Europe        International       Consolidated
                                  --------------    --------------    -------------    ------------------
Sales to unaffiliated customers       $67,900           $19,800           $21,500           $109,200
</TABLE>

The following tables present year-to-date information about geographic areas:

<TABLE>
<CAPTION>
                                                   Six Months ended February 28, 2005
                                  -----------------------------------------------------------------------
                                      United                            Asia and
                                      States            Europe        International       Consolidated
                                  --------------    --------------    -------------    ------------------
<S>                                   <C>               <C>               <C>               <C>
Sales to unaffiliated customers       $142,000          $42,800           $45,300           $230,100
</TABLE>


                                      (16)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                  Six Months ended February 28, 2005
                                  -----------------------------------------------------------------------
                                      United                            Asia and
                                      States            Europe        International       Consolidated
                                  --------------    --------------    -------------    ------------------
<S>                                   <C>               <C>               <C>               <C>
Sales to unaffiliated customers       $136,600          $39,800           $45,500           $221,900
</TABLE>

Note 6 - Business Acquisitions:

On September 3, 2004, 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 $9,056, with additional amounts payable contingent upon the sales
levels of products under sales contracts purchased by the Company. ABM had been
one of the Company's distributors in Italy since 1982. The asset purchase
agreement includes the purchase of customer lists, distributorship rights, as
well as the inventory and specified tender contracts associated with the sale by
ABM of the Company's products. The Company began selling directly in Italy
through its subsidiary, Arrow Italy S.p.A., in the first quarter of fiscal 2005.
As of February 28, 2006, pursuant to the asset purchase agreement, the Company
has paid $8,845 in cash and recorded a current liability of $211 for additional
payment installments. The purchase price for this acquisition did not exceed the
estimated fair value of the net assets acquired and, therefore, no goodwill has
been recorded by the Company in connection therewith. Intangible assets acquired
of $5,835, consisting of customer lists and distributorship rights, are being
amortized over five years based on the anticipated period over which the Company
expects to benefit from the transaction. Included in the first quarter of fiscal
2005 was a $1,467 charge to cost of goods sold, or $990 against net income, for
the step-up of inventory purchased from ABM. The results of operations of this
business are included in the Company's consolidated financial statements from
the date of acquisition. The purchase price for this acquisition was allocated
as follows:

        Inventories                                     $      3,221
        Intangible assets                                      5,835
                                                        ------------
          Total purchase price                          $      9,056
                                                        ============

Pro forma amounts are not presented as the acquisition described above did not
have any material effect on the Company's results of operations or financial
condition for any of the periods presented.

Note 7 - Warranty

The Company's primary warranty obligation relates to sales of its intra-aortic
balloon pumps, for which the Company offers a warranty of one year to its U.S.
customers and two years to its international customers. As of February 28, 2006
and February 28, 2005, the Company's total estimated product warranty obligation
was $574 and $614, respectively. Because this estimate is based primarily on
historical experience, actual costs may differ from the amounts estimated. The
change in the warranty obligation for the three and six months ended February
28, 2006 and February 28, 2005 is as follows:


                                             For the Three Months Ended
                                   --------------------------------------------
                                       February 28,            February 28,
                                           2006                    2005
                                   --------------------    --------------------
Balance as of December 1           $                600    $                659
Additional warranties issued                        285                     269
Expenditures/Expirations                           (311)                   (314)
                                   --------------------    --------------------
Balance as of February 28          $                574    $                614
                                   ====================    ====================


                                             For the Six Months Ended
                                   --------------------------------------------
                                       February 28,            February 28,
                                           2006                    2005
                                   --------------------    --------------------
Balance as of September 1          $                660    $                740
Additional warranties issued                        558                     498
Expenditures/Expirations                           (644)                   (624)
                                   --------------------    --------------------
Balance as of February 28          $                574    $                614
                                   ====================    ====================


                                      (17)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)


Note 8 - Retirement Benefits

Pension Plans:

The Company has three noncontributory pension plans that cover substantially all
employees. Benefits under the plans are based upon an employee's compensation
and years of service and, where applicable, the provisions of negotiated labor
contracts. It is the Company's policy to make contributions to these plans
sufficient to meet the minimum funding requirements of applicable laws and
regulations plus such additional amounts, if any, as the Company's actuarial
consultants advise to be appropriate. The projected unit credit method is
utilized for determination of actuarial amounts.

Plan assets consist principally of U.S. government securities, short-term
investments, other equity securities and cash equivalents.

On September 1, 2000, the Company established a Defined Benefit Supplemental
Executive Retirement Plan to provide pension benefits to selected executives and
retired executives/directors of the Company. The plan is unfunded and the
benefits provided under the plan are intended to be in addition to other
employee retirement benefits offered by the Company, including but not limited
to tax-qualified employee retirement plans.

Post-retirement Benefits Other Than Pensions:
The Company provides limited amounts of post-retirement health and life
insurance benefit plan coverage for some of its employees. The determination of
the cost of post-retirement health benefit plans is based on comprehensive
hospital, medical surgical and dental benefit provisions ("Other Benefits"). The
determination of the cost of post-retirement life insurance benefits is based on
stated policy amounts.

Early Retirement Plan:
On October 27, 2004, the Company's Board of Directors approved a voluntary early
retirement program for all of the Company's salaried exempt and non-exempt
employees in its three locations in the Reading, Pennsylvania area who attained
age 57 or older and had at least five years of service with the Company as of
January 31, 2005. The program provided that each such eligible employee who made
an election to retire from the Company on or between November 10, 2004 and
January 31, 2005 would (1) receive payments equal to two weeks pay for each year
of his or her service with the Company and a lump sum payment of $20,000, (2) be
treated as if such employee retired under the salaried pension plan at his or
her normal retirement date without any additional years of service being
credited, but without any reduction for early commencement of benefits, and (3)
have their stock options issued under the Company's stock incentive plans, which
were unvested as of the effective date of his or her retirement, accelerated so
as to vest and become fully exercisable as of such date.

During the second quarter of fiscal 2005, the Company recorded $1,860 related to
pension and $814 related to other post-retirement benefits related to the early
retirement program, which are not included in the net periodic benefit costs
below. These charges to expense and credit to prepaid pension and accrued
post-retirement benefit obligations resulted from the Company's waiver in
connection with the early retirement program of the normal discount that
customarily would have applied to a participant's benefits if the participant
had otherwise elected to retire prior to his/her normal retirement date.

The following summarizes the components of the net periodic benefit costs for
the three and six months ended February 28, 2006 and 2005:


                                      (18)
<PAGE>
<TABLE>
<CAPTION>

                                               ARROW INTERNATIONAL, INC.

                                      Notes to Consolidated Financial Statements
                                       (In thousands, except per share amounts)
                                                      (unaudited)


                                                  Pension Benefits                          Other Benefits
                                        ------------------------------------     ------------------------------------
                                             For the Three Months Ended               For the Three Months Ended
                                        ------------------------------------     ------------------------------------
                                          February 28,        February 28,         February 28,        February 28,
                                              2006                2005                 2006                2005
                                        ----------------    ----------------     ----------------    ----------------
<S>                                     <C>                 <C>                  <C>                 <C>
Service cost                            $          1,126    $          1,665     $            138    $             88

Interest cost                                      1,301               2,580                  261                 225

Expected return on plan assets                    (1,951)             (3,402)                   -                   -

Amortization of prior service costs                  279                 625                   (3)                 (3)

Amortization of transition obligation
  (asset)                                            (29)                (69)                  11                  12

Amortization of net actuarial (gain)
  loss                                               464                 571                  139                  25

Plan acquisition differential                          -                   -                    -                  (7)
                                        ----------------    ----------------     ----------------    ----------------
  Net periodic (benefit) cost           $          1,190    $          1,970     $            546    $            340
                                        ================    ================     ================    ================


                                                 Pension Benefits                          Other Benefits
                                        ------------------------------------     ------------------------------------
                                             For the Six Months Ended                 For the Six Months Ended
                                        ------------------------------------     ------------------------------------
                                          February 28,        February 28,         February 28,        February 28,
                                              2006                2005                 2006                2005
                                        ----------------    ----------------     ----------------    ----------------
Service cost                            $          2,333    $          2,550     $            299    $            199

Interest cost                                      2,827               3,941                  574                 484

Expected return on plan assets                    (4,097)             (5,205)                   -                   -

Amortization of prior service costs                  569                 927                   (6)                (43)

Amortization of transition obligation
  (asset)                                            (48)               (105)                  23                  25

Amortization of net actuarial (gain)
  loss                                             1,145                 850                  319                  78

Plan acquisition differential                          -                   -                    -                 (14)
                                        ----------------    ----------------     ----------------    ----------------
  Net periodic (benefit) cost           $          2,729    $          2,958     $          1,209    $            729
                                        ================    ================     ================    ================
</TABLE>

Note 9 - Restructuring Charges:

In August 2004, the Company initiated the consolidation of its operations at its
Winston-Salem, North Carolina and San Antonio, Texas facilities into other
existing manufacturing facilities. These steps are part of the Company's overall
manufacturing realignment and capacity increases announced in June 2004.
Severance payments relate to 53 employees primarily in manufacturing at both
facilities and the remaining accrual balance is expected to be paid later in
fiscal 2006. All other restructuring costs are expected to be paid over the
remainder of fiscal 2006. Restructuring charges related to this manufacturing
realignment are summarized in the table below:


                                      (19)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                       Actual Costs Expensed
                                                    ---------------------------------------------------------
                                                                                                                      Costs
                                                                                         For the                    expensed
                                    Estimate of                        For the           Three                      but not
                                      Total                          Three Months        Months                     yet paid
                                     Expected           As of           Ended             Ended         Total        as of
                                   Restructuring       August        November 30,       February         to         February
                                      Charges         31, 2005           2005           28, 2006        Date        28, 2006
                                  ---------------   ------------    --------------    ------------    --------    ------------
<S>                               <C>               <C>             <C>               <C>             <C>         <C>
Severance and related Expenses    $           763   $        763    $            -    $          -    $    763    $         87

Property, plant and equipment
  carrying cost, costs of
  disposal, and gain on sale*                (227)            48                 -            (275)       (227)              -

Other, including equipment and
  inventory moving costs,
  employee relocation costs,
  and external consulting fees                119            118                 1               -         119               -
                                  ---------------   ------------    --------------    ------------    --------    ------------
Total restructuring charges       $           655   $        929    $            1    $       (275)   $    655    $         87
                                  ===============   ============    ==============    ============    ========    ============
</TABLE>

* On December 2, 2005, the Company sold its San Antonio, Texas facility and
certain related equipment and, as a result, recognized a pre-tax gain of $275 in
the second quarter of fiscal 2006.

As part of its plans to rationalize its production operations and related
logistics in Europe, in November 2004, the Company determined to move its
European Distribution Center, previously situated in Weesp, Netherlands, to a
more centralized European location in the Limberg region of Belgium in order to
have better access to existing carrier transportation networks and allow for
more cost-competitive expansion of its European operations in the future. The
Company continued to implement its rationalization plan in the first half of
fiscal 2006 and expects to complete the relocation and related logistics by the
end of fiscal 2006, at an estimated total cost of $1,654. Restructuring charges
related to this distribution center relocation and related logistics are
summarized below:


                                      (20)
<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  Actual Costs Expensed
                                                                     --------------------------------------------
                                                        For the         For the                                           Costs
                                    Estimate of         Twelve          Three                                         expensed but
                                       Total            Months          Months        For the Three                  not yet paid
                                      Expected          Ended           Ended          Months Ended                      as of
                                   Restructuring        August         November        February 28,       Total       February 28,
                                      Charges          31, 2005        30, 2005           2006           to Date          2006
                                  ---------------    ------------    ------------    ---------------    ---------    --------------
<S>                               <C>                <C>             <C>             <C>                <C>          <C>
Severance and related expenses    $           868    $        618    $          -    $             -    $     618    $          337

Lease termination costs                       253             227               -                  -          227                56

Property, plant and equipment
  carrying cost and costs of
  disposal                                    120              38               9                  6           53                 -

Other, including equipment and
  inventory moving costs,
  employee relocation costs,
  and external consulting fees                413             282               3                  -          285                 -
                                  ---------------    ------------    ------------    ---------------    ---------    --------------
Total restructuring charges       $         1,654    $      1,165    $         12    $             6    $   1,183    $          393
                                  ===============    ============    ============    ===============    =========    ==============
</TABLE>

Note 10 - Earnings Per Share

The following is a reconciliation of weighted average common shares outstanding
assuming dilution used in the calculation of earnings per share for the three
months ended February 28, 2006 and 2005:

<TABLE>
<CAPTION>
                                                          For the Three Months         For the Three Months
                                                                 Ended                        Ended
                                                           February 28, 2006            February 28, 2005
                                                       -------------------------    -------------------------
<S>                                                    <C>                          <C>
Net income                                             $                  12,634    $                   5,354

Weighted average common shares outstanding                                44,729                       44,214

Incremental common shares issuable: stock options
  and awards                                                                 547                          796
                                                       -------------------------    -------------------------

Weighted average common shares outstanding
  assuming dilution                                                       45,276                       45,010
                                                       =========================    =========================

Basic earnings per common share                        $                    0.29    $                    0.12
                                                       =========================    =========================

Diluted earnings per common share                      $                    0.28    $                    0.12
                                                       =========================    =========================
</TABLE>


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<PAGE>

                            ARROW INTERNATIONAL, INC.

                   Notes to Consolidated Financial Statements
                    (In thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       -------------------------    -------------------------
                                                           For the Six Months           For the Six Months
                                                                 Ended                        Ended
                                                           February 28, 2006            February 28, 2005
                                                       -------------------------    -------------------------
<S>                                                    <C>                          <C>
Net income                                             $                  24,464    $                  18,637

Weighted average common shares outstanding                                44,688                       44,024

Incremental common shares issuable: stock options
   and awards                                                                534                          743
                                                       -------------------------    -------------------------

Weighted average common shares outstanding
   assuming dilution                                                      45,222                       44,767
                                                       =========================    =========================

Basic earnings per common share                        $                    0.55    $                    0.42
                                                       =========================    =========================

Diluted earnings per common share                      $                    0.54    $                    0.42
                                                       =========================    =========================
</TABLE>

Stock options outstanding to purchase 44,000 and 0 shares of common stock were
not included in the computation of earnings per share assuming dilution because
the options' exercise price was higher than the average market price of the
Company's common stock for the three months ended February 28, 2006 and 2005,
respectively.

Note 11 - Early Retirement Program

On October 27, 2004, the Company's Board of Directors approved a voluntary early
retirement program for all of the Company's salaried exempt and non-exempt
employees in its three locations in the Reading, Pennsylvania area who attained
age 57 or older and had at least five years of service with the Company as of
January 31, 2005. The program provided that each such eligible employee who made
an election to retire from the Company on or between November 10, 2004 and
January 31, 2005 would (1) receive payments equal to two weeks pay for each year
of his or her service with the Company and a lump sum payment of $20,000, (2) be
treated as if such employee retired under the salaried pension plan at his or
her normal retirement date without any additional years of service being
credited, but without any reduction for early commencement of benefits, and (3)
have their stock options issued under the Company's stock incentive plans, which
were unvested as of the effective date of his or her retirement, accelerated so
as to vest and become fully exercisable as of such date.

During the second quarter of fiscal 2005, the Company recorded $6,839 in total
costs with respect to this program, of which $1,883 was recorded to cost of
sales and $4,956 to selling, general and administrative expenses. Of the $6,839
in total costs, $2,674 was related to pension and other post-retirement
benefits, and $3,023 was a cash charge related to severance and related costs.
The remaining $1,142 was incurred as a non-cash charge for accelerated vesting
of stock options held by participants in this program. A total of 28
participants elected into the program.

Note 12 - LionHeart Impairment Charge

As announced on April 7, 2005, the Company's Board of Directors unanimously
voted to discontinue the development, sales and marketing programs related to
its LionHeart Left Ventricular Assist System (LVAS).

As reported on March 21, 2005, there were no sales of the Company's LionHeart
devices during either of the first two quarters of fiscal year 2005. As a
result, the Company made a provision in the second fiscal quarter ended February
28, 2005 of $2,079 for LionHeart inventory in excess of anticipated
requirements. In addition, the Company wrote off in that quarter its remaining
investment in the LionHeart program, which included $2,824 in equipment and
components. The write off of equipment was recorded in accordance with the
provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The Company reached its conclusion that its LionHeart
equipment was impaired based on the completion of a study during the second
quarter of fiscal year 2005 by an outside consulting firm, which included the
use of future cash flow analyses to estimate the fair value of these assets.
This conclusion was confirmed by the Board of Directors' decision on April 6,
2005. The total write off in the second quarter of fiscal year 2005 related to
the LionHeart was $4,903, of which $4,562 was recorded to cost of sales and $341
to research and development expenses.


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                            ARROW INTERNATIONAL, INC.


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
          of Operations

THE FOLLOWING DISCUSSION INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF FACTORS, INCLUDING
MATERIAL RISKS, UNCERTAINTIES AND CONTINGENCIES, WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS. FOR A
DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS, SEE ITEM 1. BUSINESS - "CERTAIN
RISKS RELATING TO ARROW" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED AUGUST 31, 2005 AND THE COMPANY'S OTHER PERIODIC REPORTS AND
DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

RESULTS OF OPERATIONS

THREE MONTHS ENDED FEBRUARY 28, 2006 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
2005

NET SALES.
Net sales for the three months ended February 28, 2006 increased by $7.3
million, or 6.7%, to $116.5 million from $109.2 million in the same period of
last year due primarily to an increase in critical care product sales in the
second quarter of fiscal 2006 and the impact of a $4.3 million reduction to net
sales in the second quarter of fiscal 2005 related to the Company's change in
the accounting treatment for its shipping terms to U.S. and international
customers. This increase was offset in part by an unfavorable foreign exchange
impact during the second quarter of fiscal 2006 as a result of the strength of
the U.S. dollar relative to currencies of countries in which the Company
operates direct sales subsidiaries. This foreign exchange impact resulted in
decreased sales for the quarter of $2.4 million or 2.2% of total Company sales.
Net sales represent gross sales invoiced to customers, less certain related
charges, discounts, returns and rebates. The following is a summary of the
Company's sales by product platform:

   Sales by Product Platform
   (in millions)                                    Quarter ended
                                                    -------------
                                       February 28, 2006     February 28, 2005
                                       -----------------     -----------------

     Central Venous Catheters                $60.9                 $57.0
     Specialty Catheters                      36.6                  34.3
     Stepic distributed products               1.9                   1.9
                                               ---                   ---
       Subtotal Critical Care                 99.4                  93.2
     Cardiac Care                             17.1                  16.0
                                              ----                  ----
       TOTAL                                $116.5                $109.2
                                            ======                ======

Sales of critical care products increased by 6.7% to $99.4 million in the second
quarter of fiscal 2006 from $93.2 million in the comparable prior year period
due primarily to increased sales of central venous and specialty catheters.
Sales of central venous catheters increased in the second quarter of fiscal 2006
due to a continued increase in the number of hospitals that are purchasing the
Company's procedure kits featuring its safety devices and ARROWg+ard(R)
antiseptic surface treatments. Sales of specialty catheters increased in the
second quarter of fiscal 2006 due to improved sales of peripheral nerve block
products, epidural products and arterial products. Sales of cardiac care
products increased to $17.1 million in the second quarter of fiscal 2006 from
$16.0 million in the comparable prior year period due to increased sales of
intra-aortic balloon pumps. Total Company U.S. sales increased by 6.0% to $72.0
million from $67.9 million in the prior year period due primarily to increased
sales of central venous and specialty catheters, and intra-aortic balloon pumps.
International sales increased by 7.7% to $44.5 million in the second quarter of
fiscal 2006 from $41.3 million in the comparable prior year period principally
as a result of increased sales of central venous catheters, specialty catheters
and intra-aortic balloon pumps offset in part by the effect of foreign currency
exchange rates, as noted above. International sales represented 38.2% of net
sales in the second quarter of fiscal 2006 compared to 37.8% in the same prior
year period.

The ARROWg+ard(R) conversion percentages, which are the number of units sold
with the ARROWg+ard(R) antiseptic surface treatments as a percentage of the
Company's total multilumen and hemodialysis unit sales, decreased to 36% of
total Company sales in second quarter of fiscal 2006 from 38% in the comparable
prior year period. The ARROWg+ard(R) conversion percentages for the U.S. market
increased to 65% in the second quarter of fiscal 2006 from 64% in the comparable
prior year period.

The safety device procedure kits conversion percentages, which are the number of
units sold with the Company's procedure kits featuring its safety devices as a
percentage of the total number of units sold of the Company's products that
could potentially include safety device procedure kits, increased to 10% of
total Company sales in the second quarter of fiscal 2006 compared to 9% in
fiscal 2005. The safety device procedure kit conversion percentages for the U.S.
market in the second quarter of fiscal 2006 increased to 20% from 17% in the
comparable prior year period.

During the second quarter of fiscal 2006, as part of its ongoing efforts to meet
growing customer interest in safety and risk reduction, the Company began
selling a new "Maximal Barrier" central venous access kit, which consists of a
tray that includes a full body drape,


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                            ARROW INTERNATIONAL, INC.


a catheter treated with the Company's latest ARROWg+ard(R) antimicrobial
technology, and other accessories. This new kit addresses the new guidelines for
reducing catheter-related bloodstream infections promulgated by the Centers for
Disease Control and the Institute for Healthcare Improvement's `100,000 Lives'
initiative and has received an enthusiastic response by customers who recognized
the product's value and contribution to their needs for safety and the
management of risk for infection in the hospital setting. The Company plans to
expand its marketing program in support of this upgrade to its existing product
line, and anticipates increased sales of this kit on the basis of its benefits
to patients and healthcare workers alike.

GROSS PROFIT.
Gross profit increased by 12.0% to $56.8 million in the three months ended
February 28, 2006 from $50.7 million in the same period of fiscal 2005. As a
percentage of net sales, gross profit increased to 48.8% during the three months
ended February 28, 2006 from 46.4% in the comparable prior year period. The
increase in gross margin was due primarily to (1) the recording of a provision
to cost of sales of $4.6 million in the second quarter of fiscal 2005 for
inventory and manufacturing equipment related to the Company's LionHeart Left
Ventricular Assist System (LVAS) as a consequence of the Board of Directors'
decision in April 2005 to discontinue the development, sales and marketing
program related to the LionHeart; and (2) incremental cost of sales of $1.9
million in the second quarter of fiscal 2005 related to the Company's voluntary
early retirement program. Gross margin in the second quarter of fiscal 2005
would have been 6 percentage points higher but for the aggregate impact of these
fiscal 2005 items. This increase was offset in part by higher manufacturing
costs recognized in the second quarter of fiscal 2006 associated with short-term
inefficiencies, the training of new employees in connection with the Company's
manufacturing capital investment program and, as noted above, by the effect of
foreign currency exchange rates.

PRODUCT RECALL.
As previously reported, on December 3, 2004, the Company announced a voluntary
nationwide recall of all of its NEO?PICC(R) 1.9 FR Peripherally Inserted Central
Catheters (the "NeoPICC Catheters") as a result of having received several
reports of adverse events involving the utilization of the NeoPICC Catheters.
The NeoPICC Catheter is part of the Company's NEOCare product line of catheters
and related procedure kits for neonatal intensive care that it acquired from
Klein Baker Medical, Inc. in March 2003. The Company cooperated with the Food
and Drug Administration (the "FDA") in conducting the voluntary recall.

In the first quarter of fiscal 2005, the Company recorded a charge against net
sales of $0.5 million, representing its issued sales credits as of January 7,
2005 and an estimate for those sales credits yet to be issued relating to
returned NeoPICC Catheters. As of February 28, 2006, the Company had issued
sales credits totaling the full $0.5 million and does not anticipate the need to
issue any additional credits.

To address the inspectional observations of the FDA, the Company in January 2005
temporarily ceased the manufacture, shipment and sale of its entire NEOCare
product line, including the NeoPICC Catheters. In addition, the Company moved
its NEOCare manufacturing operations into its existing manufacturing structure
and suspended sales until it implements all corrective actions related to the
FDA's December 2004 inspections of the Company's facilities in San Antonio,
Texas (which facility and certain related equipment the Company sold in December
2005) and Reading, Pennsylvania. Shipments of the NEOCare product line, other
than the NeoPICC Catheters, are presently expected to resume prior to the end of
calendar year 2006. Shipment of the NeoPICC Catheters will resume after receipt
of FDA clearance of a new 510(k) premarket notification for these products,
which is also presently expected to occur prior to the end of calendar year
2006.

The Company's NEOCare product line sales were $7.6 million for all of fiscal
2004 and were $2.0 million in fiscal 2005 through January 2005, when it
temporarily suspended all NEOCare product sales as described above. Inventories
of NeoPICC Catheters at February 28, 2006 amounted to $0.3 million, which the
Company had fully reserved for as of February 28, 2006. Inventories of other
NEOCare products were approximately $1.4 million at February 28, 2006.

RESEARCH AND DEVELOPMENT.
Research and development expenses were $7.1 million in each of the three months
ended February 28, 2006 and February 28, 2005. There were no research and
development expenses in the second quarter of fiscal 2006 for the LionHeart
program as a result of the Company's Board of Directors' decision to discontinue
the development, sales and marketing programs related to its LionHeart LVAS
during the third quarter of fiscal 2005, whereas there was $2.1 million of
LionHeart-related spending in the second quarter of fiscal 2005. Offsetting this
decrease in research and development spending were increased expenditures for
the Company's critical care product line and increased compliance-related
consulting fees related to the NEOCare product line. As a percentage of net
sales, these expenses were 6.1% in the second quarter of fiscal 2006 compared to
6.5% in the same period of fiscal 2005, but were 4.6% in the second quarter of
fiscal 2005 excluding the LionHeart-related spending. A description of the
current status of the Company's major research and development programs is
provided below under "Six Months Ended February 28, 2006 Compared to Six Months
Ended February 28, 2005 - Research and Development."

SELLING, GENERAL AND ADMINISTRATIVE.
Selling, general and administrative expenses decreased by 10.1% to $31.9 million
during the three months ended February 28, 2006 from $35.5 million in the
comparable prior year period and, as a percentage of net sales, decreased to
27.4% in the second quarter of fiscal 2006 from 32.5% in the comparable period
of fiscal 2005. This decrease was due primarily to decreased spending of $5.0
million related to the Company's voluntary early retirement program in fiscal
2005 and decreased expenses of $0.9 million related to the Company's pension and
post-retirement welfare plans based on adjusting certain estimated data to
actual data received in the second quarter of each fiscal year. This decrease
was offset in part by increased expenses of (1) $0.8 million for the cost of
equity-based compensation incurred as a result of the Company's adoption of SFAS
No. 123R in September 2005, (2) $0.7 million related to


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<PAGE>

                            ARROW INTERNATIONAL, INC.


the Company's officers' life insurance policies, (3) $0.5 million in connection
with the Company's annual sales team incentive award, and (4) $0.5 million
related to consulting fees for various information system infrastructure
enhancements.

RESTRUCTURING CHARGES.
The Company recorded $0.3 million of restructuring income in the second quarter
of fiscal 2006 compared to $0.9 million of expense ($0.6 million after tax, or
$0.01 diluted earnings per share) in the second quarter of fiscal 2005. The
restructuring income recorded in the second quarter of fiscal 2006 related
primarily to a pre-tax gain of $0.3 million from the sale of the Company's San
Antonio, Texas facility and certain related equipment. The restructuring
expenses recorded in the second quarter of fiscal 2005 related primarily to
accrued severance payments associated with the Company's consolidation of
operations at its Winston-Salem, North Carolina and San Antonio, Texas
facilities into other existing manufacturing facilities and severance, lease
termination and other costs associated with the relocation of its European
Distribution Center from Weesp, Netherlands to a more centralized European
location in the Limberg region of Belgium. See "-Liquidity and Capital Resources
- Investing Activities - Multi-Year Capital Investment Plan."

OPERATING INCOME.

Principally due to the above factors, operating income increased in the second
quarter of fiscal 2006 by 154.9% to $18.1 million from $7.1 million in the
comparable prior year period.

OTHER EXPENSES (INCOME), NET.
Other expenses (income), net, was $0.6 million of income in the second quarter
of fiscal 2006 as compared to $0.2 million of income in the same prior year
period due primarily to the Company's having earned a higher amount of interest
in the second quarter of fiscal 2006 on its investments of cash balances. Other
expenses (income), net, consist principally of interest expense, interest income
and foreign exchange gains and losses associated with the Company's direct sales
subsidiaries.

INCOME BEFORE INCOME TAXES.
As a result of the factors discussed above, income before income taxes increased
during the second quarter of fiscal 2006 by 156.2% to $18.7 million from $7.3
million in the comparable prior year period. For the second quarter of fiscal
2006, the Company's effective income tax rate increased to 32.5% from 26.5% in
the comparable prior year period due to a lower effective tax rate for the
second quarter of fiscal 2005 attributable to more favorable than expected
fiscal year 2004 research and development tax credits resulting from the
completion of the Company's analysis of these credits during the second quarter
of fiscal 2005.

U.S. TAX MATTERS
In October 2004, the President signed The American Jobs Creation Act of 2004
(the "Act"). The Act included some of the most significant changes to corporate
taxation since 1996 and, among other things, eliminates the Extraterritorial
Income Regime (the "ETI") over a three-year phase out period beginning in 2005.
However, the phase out will still allow the Company to obtain a significant
percentage of the ETI benefit for fiscal 2005 and 2006 with a somewhat smaller
benefit for fiscal 2007. The ETI will be totally phased out by the Company's
2008 fiscal year end. Additionally, the Act provides for a deduction for U.S.
domestic manufacturers beginning in the Company's fiscal year 2006. This new
deduction begins at 3% of U.S. domestic manufacturer's income for the Company's
fiscal years 2006 and 2007, increasing to 6% for the Company's fiscal years 2008
to 2010 and achieves its maximum rate of 9% for the Company's fiscal years 2010
and beyond. While the Company is not yet able to make an exact calculation of
the overall effect of these changes, management believes that the phased out
repeal of the ETI benefit during fiscal 2005 and 2006 combined with the phase in
of the new manufacturing deduction benefit from fiscal 2006 to 2011 should not
have a material adverse effect on the Company's effective tax rate, although it
believes that the net effect will be less of an income tax benefit to the
Company for the remainder of fiscal 2006 and beyond.

CZECH REPUBLIC TAX HOLIDAY.
During the second quarter of fiscal 2006, the Company's effective income tax
rate continued to reflect a benefit from a tax holiday in respect of the
Company's Czech Republic operations. This tax holiday is effective through
August 2006 and is limited by the amount of capital permanently invested in the
Czech Republic by way of property, plant and equipment purchased.

JAPANESE TAX MATTER
In March 2004, the Company made a payment of $10.0 million to settle a tax
assessment related to an ongoing Japanese government tax audit of the Company's
transfer pricing with its Japanese subsidiary. The Company has initiated
competent authority proceedings with the Internal Revenue Service in the U.S. to
recover a majority of this required Japanese tax payment and, when a resolution
is reached, a one-time favorable or unfavorable item will be recorded as part of
the Company's provision for income taxes. At this time, the Company is unable to
predict the timing, the amount or the effect of this future tax item on its
effective tax rate. The Company believes that the net amount of tax liability
ultimately resulting from these proceedings has been fully provided for as of
February 28, 2006 and, therefore, will not materially adversely affect its
future results of operations.

NET INCOME.
Net income in the second quarter of fiscal 2006 increased by 135.2% to $12.7
million from $5.4 million in the comparable fiscal 2005 period. As a percentage
of net sales, net income represented 10.9% in the three months ended February
28, 2006 compared to 4.9% in the same period of fiscal 2005.

PER SHARE INFORMATION.
Basic earnings per common share were $0.29 in the three months ended February
28, 2006, up 141.7%, or $0.17 per share, from $0.12 in the comparable prior year
period. Diluted earnings per common share were $0.28 in the three months ended
February 28,


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                            ARROW INTERNATIONAL, INC.


2006, up 133.3%, or $0.16 per share, from $0.12 in the comparable prior year
period. Weighted average shares of common stock outstanding used in computing
basic earnings per common share increased to 44,729,478 in the second quarter of
fiscal 2006 from 44,213,584 in the comparable prior year period primarily as a
result of additional stock option exercises since February 28, 2005. Weighted
average shares of common stock outstanding used in computing diluted earnings
per common share increased to 45,275,773 in second quarter of fiscal 2006 from
45,009,506 in the comparable prior year period also primarily as a result of the
additional stock option exercises since February 28, 2005.

SIX MONTHS ENDED FEBRUARY 28, 2006 COMPARED TO SIX MONTHS ENDED FEBRUARY 28,
2005

NET SALES.
Net sales for the six months ended February 28, 2006 increased by $8.2 million,
or 3.7%, to $230.1 million from $221.9 million in the same period of last year
due primarily to an increase in critical care product sales in the first six
months of fiscal 2006 and the impact of a $4.3 million reduction to net sales in
the first half of fiscal 2005 related to the Company's change in the accounting
treatment for its shipping terms to U.S. and international customers. This
increase was offset in part by an unfavorable foreign exchange impact during the
first half of fiscal 2006 as a result of the strength of the U.S. dollar
relative to currencies of countries in which the Company operates direct sales
subsidiaries. This foreign exchange impact resulted in decreased sales for the
six months ended February 28, 2006 of $3.5 million or 1.6% of total Company
sales. The following is a summary of the Company's sales by product platform:

  Sales by Product Platform
  (in millions)                                    Six months ended
                                                   ----------------
                                       February 28, 2006     February 28, 2005
                                       -----------------     -----------------

    Central Venous Catheters                 $119.6                $116.3
    Specialty Catheters                        72.7                  69.1
    Stepic distributed products                 4.0                   3.8
                                                ---                   ---
      Subtotal Critical Care                  196.3                 189.2
    Cardiac Care                               33.8                  32.7
                                               ----                  ----
      TOTAL                                  $230.1                $221.9
                                             ======                ======

Sales of critical care products increased by 3.8% to $196.3 million in the first
half of fiscal 2006 from $189.2 million in the comparable prior year period due
primarily to increased sales of specialty catheters and central venous
catheters. Sales of specialty catheters increased in the first half of fiscal
2006 due to improved sales of epidural products, peripheral nerve block products
and arterial products. Sales of central venous catheters increased in the first
half of fiscal 2006 due to a continued increase in the number of hospitals that
are purchasing the Company's procedure kits featuring its safety devices and
ARROWg+ard(R) antiseptic surface treatments. Offsetting this increase in central
venous catheters was the fact that there were no sales of neonatal products in
the first half of fiscal 2006 as a result of the Company's previously reported
decision in January 2005 to temporarily cease manufacturing, shipping and
selling of its NEOCare product line until it completes the integration of its
NEOCare manufacturing operations and implementation of all corrective actions in
response to previously reported compliance concerns of the FDA. NEOCare product
sales in the first half of fiscal 2005 were $2.1 million. Sales of cardiac care
products increased to $33.8 in the first half of fiscal 2006 from $32.7 in the
comparable prior year period due to increased sales of intra-aortic balloon
pumps. Total Company U.S. sales increased by 4.0% to $142.0 million from $136.6
million in the prior year period due primarily to increased sales of specialty
catheters and central venous catheters. International sales increased by 3.3% to
$88.1 million in the first half of fiscal 2006 from $85.3 million in the
comparable prior year period principally as a result of increased sales of
central venous catheters, specialty catheters and intra-aortic balloon pumps,
offset in part by the effect of foreign currency exchange rates, as noted above.
International sales represented 38.3% of net sales in the first half of fiscal
2006 compared to 38.4% in the same prior year period.

The ARROWg+ard(R) conversion percentages, which are the number of units sold
with the ARROWg+ard(R) antiseptic surface treatments as a percentage of the
Company's total multilumen and hemodialysis unit sales, decreased to 37% of
total Company sales in the first half of fiscal 2006 from 38% in the comparable
prior year period. The ARROWg+ard(R) conversion percentages for the U.S. market
increased to 66% in the first half of fiscal 2006 from 64% in the comparable
prior year period.

The safety device procedure kits conversion percentages, which are the number of
units sold with the Company's procedure kits featuring its safety devices as a
percentage of the total number of units sold of the Company's products that
could potentially include safety device procedure kits, increased to 9% of total
Company sales in the first half of fiscal 2006 from 8% in the comparable prior
year period. The safety device procedure kit conversion percentages for the U.S.
market in the first half of fiscal 2006 increased to 19% from 16% in the
comparable prior year period.

GROSS PROFIT.
Gross profit increased by 5.4% to $112.9 million in the six months ended
February 28, 2006 from $107.1 million in the same period of fiscal 2005. As a
percentage of net sales, gross profit increased to 49.1% during the six months
ended February 28, 2006 from 48.3% in the comparable prior year period. The
increase in gross margin was due primarily to (1) the recording of a provision
to cost of sales of $4.6 million in the second quarter of fiscal 2005 for
inventory and manufacturing equipment related to the Company's LionHeart LVAS as
a consequence of the Board of Directors' decision in April 2005 to discontinue
the development, sales and marketing


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                            ARROW INTERNATIONAL, INC.


programs related to the LionHeart; (2) incremental cost of sales of $1.9 million
in the second quarter of fiscal 2005 related to the Company's voluntary early
retirement program; and (3) lower margins realized in the first half of fiscal
2005 on the sale of inventories of products acquired as part of the Company's
purchase of the net assets of AB Medica, the Company's former Italian
distributor, in September 2004, as further discussed below under "Liquidity and
Capital Resources - Investing Activities". Gross margin in the first half of
fiscal 2005 would have been 3.6 percentage points higher but for the aggregate
impact of these fiscal 2005 items. Also contributing to the increase in gross
margin was unfavorable inventory adjustments in the first six months of fiscal
2005 resulting from the scrapping of returned goods and cycle counting of
finished goods inventory quantities in the Company's U.S. distribution center.
This increase was offset in part by higher manufacturing costs recognized in the
first half of fiscal 2006 associated with short-term inefficiencies, the
training of new employees in connection with the Company's manufacturing capital
investment program and, as noted above, by the effect of foreign currency
exchange rates.

RESEARCH AND DEVELOPMENT.
Research and development expenses decreased by 10.0% to $13.5 million in the six
months ended February 28, 2006 from $15.0 million in the comparable prior year
period. This decrease was due primarily to there being no research and
development spending in the first half of fiscal 2006 on the Company's LionHeart
LVAS as a result of its Board of Directors' decision to discontinue the
development, sales and marketing programs related to its LionHeart program
during the third quarter of fiscal 2005, whereas there was $4.2 million of
LionHeart-related spending in the first half of fiscal 2005. Offsetting this
decrease in part was an increase in compliance-related consulting fees related
to the NEOCare product line. As a percentage of net sales, these expenses were
5.9% in the first half of fiscal 2006 compared to 6.8% in the same period of
fiscal 2005, but were 4.9% in the first half of fiscal 2005 excluding the
LionHeart-related spending.

AUTOCAT(R)2 WAVE. The Company continues to market and make improvements to its
AutoCAT(R)2 WAVETM intra-aortic balloon pump and associated LightWAVE(TM)
catheter system, which utilizes fiber optic pressure-sensing catheter
instrumentation and provides total automation of the pumping process for all
patients, including those with severely arrhythmic heartbeats. This product
continues to generate interest, resulting in increased customer feedback
providing the Company with valuable information for making additional product
enhancements. This customer feedback has enabled the Company to upgrade the
software for this product and implement related hardware changes, which it
believes have increased the overall competitiveness of the device. In the first
quarter of fiscal 2006, the Company released a new upgrade of the software for
this product, which it anticipates will result in increased customer demand for
the device. Development of the AutoCAT(R)2 WAVETM is an ongoing process, with
product improvements constantly being made and introduced as the underlying
technology advances and the Company learns more about customer requirements. The
number of AutoCAT(R)2 WAVETM Pump Console and LightWaveTM units in use by
customers continues to increase, both in the U.S. and internationally, and the
Company expects to introduce this new product in Japan during the third quarter
of fiscal year 2006.

Although the Company is encouraged by the early sales results of its AutoCAT(R)2
WAVETM and related LightWAVE(TM) catheter system, the selling cycle for IAB
pumps is long and involves a number of decision-makers in any given hospital. As
a result, the Company is cautiously optimistic about the time frame for this
product's future sales growth. The Company continues to believe that this new
technology represents a major step forward in IAB pumping and should enable the
Company to gain market share based on superior performance across a range of
cardiac requirements.

CORAIDE(TM) LVAS. During the second quarter of fiscal 2006, the Company
continued its previously reported European clinical trials of the
CorAide(TM)LVAS. The clinical trial results to date have been encouraging,
showing that the CorAide is operating as expected. Since the resumption of the
European clinical trials in February 2005 through the latest implant of the
device in February 2006, there have been no issues with hemolysis, thrombosis or
with the performance of the device itself. In addition, the device has provided
patients with a much improved quality of life, in many cases allowing them to
live at home. The Company recognizes that while the clinical investigators are
pleased with the performance of the device, these results are relatively
preliminary and the number of patients is small, making it too early in the
trial process to draw definitive conclusions regarding the long-term viability
of the device. The Company plans to continue these clinical trials throughout
the remainder of fiscal year 2006.

The Company views the CorAide(TM) LVAS as a long-term development program. The
current version of the CorAide(TM) device is not fully implantable and is
intended to provide support for patients waiting for heart transplantation or
considered candidates for bridging to natural recovery of ventricular function.
The Company believes that the CorAide(TM)'s smaller size, less invasive surgical
approach and inherently simpler design promises better opportunities for broader
market acceptance than currently marketed LVAS devices.

HEMOSONIC(TM). During the second quarter of fiscal 2006, the Company continued
to support its Hemsonic(TM) cardiac output monitoring system that continuously
measures descending aortic blood flow using a non-invasive esophageal ultrasound
probe. The Company is continuing its development of a second generation version
of the device that will have a more extensive feature set, which the Company
believes will be more user-friendly and better able to meet the needs of a
broader range of clinicians. The Company expects to initiate market testing of
its product improvements during the 2007 fiscal year.

SELLING, GENERAL AND ADMINISTRATIVE.
Selling, general and administrative expenses increased by 0.3% to $64.5 million
during the six months ended February 28, 2006 from $64.3 million in the
comparable prior year period and, as a percentage of net sales, decreased to
28.0% in the first half of fiscal 2006 from 29.0% in the comparable period of
fiscal 2005. These expenses were impacted in the first half of fiscal 2005 by
$5.0 million of costs related to the Company's voluntary early retirement
program and, in the first half of fiscal 2006, by incremental expenses of $1.4
million for the cost of equity-based compensation incurred as a result of the
Company's adoption of SFAS No. 123R in September 2005. In addition, there were
the following additional expenses in the first half of fiscal 2006 as compared
to the same prior year period: (1) incremental expenses related to the
continuation of various Company-wide programs, including $0.6 million in
connection


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                            ARROW INTERNATIONAL, INC.


with the Company's corporate brand re-positioning program, $0.5 million incurred
as a result of the Company's previously reported Project Operational Excellence
program, $0.4 million for audit fees and $0.3 million related to the Company's
review of its internal control over financial reporting in compliance with
Section 404 of the Sarbanes-Oxley Act of 2002; (2) $0.9 million related to the
Company's officers' life insurance policies; (3) $0.7 million in connection with
the Company's annual sales team incentive award; (4) $0.6 million related to
consulting fees for various information technology infrastructure enhancements;
(5) $0.6 million in legal costs associated with the Company's various ongoing
patent infringement lawsuits; and (6) $0.4 million related to the timing of the
recognition of expenses for the Company's annual global sales team meeting in
fiscal 2006 versus fiscal 2005. These increases were offset in part by decreased
expenses of (1) $0.9 million related to the Company's pension and
post-retirement welfare plans based on adjusting certain estimated data received
in the second quarter of each fiscal year, and (2) $0.7 million due to reduced
bonuses payable under the Company's income growth bonus plan for its executive
officers and key management employees.

RESTRUCTURING CHARGES.
The Company recorded $0.3 million of restructuring income in the first half of
fiscal 2006 compared to $1.3 million of expense ($0.9 million after tax, or
$0.02 diluted earnings per share) in the first half of fiscal 2005. The
restructuring income recorded in the first half of fiscal 2006 related primarily
to a pre-tax gain of $0.3 million from the sale of the Company's San Antonio,
Texas facility and certain related equipment. The restructuring expenses
recorded in the first half of fiscal 2005 related primarily to accrued severance
payments associated with the Company's consolidation of operations at its
Winston-Salem, North Carolina and San Antonio, Texas facilities into other
existing manufacturing facilities and severance, lease termination and other
costs associated with the relocation of its European Distribution Center from
Weesp, Netherlands to a more centralized European location in the Limberg region
of Belgium. See "-Liquidity and Capital Resources - Investing Activities -
Multi- Year Capital Investment Plan."

OPERATING INCOME.
Principally due to the above factors, operating income increased in the first
half of fiscal 2006 by 10.8% to $35.2 million from $26.5 million in the
comparable prior year period.

OTHER EXPENSES (INCOME), NET.
Other expenses (income), net, was $1.0 million of income in the first half of
fiscal 2006 as compared to $0.5 million of income in the same prior year period
due primarily to the Company's having earned a higher amount of interest in the
first half of fiscal 2006 on its investments of cash balances. Other expenses
(income), net, consist principally of interest expense, interest income and
foreign exchange gains and losses associated with the Company's direct sales
subsidiaries.

INCOME BEFORE INCOME TAXES.
As a result of the factors discussed above, income before income taxes increased
during the first half of fiscal 2006 by 34.1% to $36.2 million from $27.0
million in the comparable prior year period. For the first six months ended
February 28, 2006, the Company's effective income tax rate increased to 32.5%
from 30.9% in the comparable prior year period due to a lower effective tax rate
for the first half of fiscal 2005 attributable to more favorable than expected
fiscal year 2004 research and development tax credits resulting form the
completion of the Company's analysis of these credits during the second quarter
of fiscal 2005.

NET INCOME.
Net income in the first half of fiscal 2006 increased by 31.7% to $24.5 million
from $18.6 million in the comparable fiscal 2005 period. As a percentage of net
sales, net income represented 10.6% in the six months ended February 28, 2006
compared to 8.4% in the same period of fiscal 2005.

PER SHARE INFORMATION.
Basic earnings per common share were $0.55 in the six months ended February 28,
2006, up 31.0%, or $0.13 per share, from $0.42 in the comparable prior year
period. Diluted earnings per common share were $0.54 in the six months ended
February 28, 2006, up 28.6%, or $0.12 per share, from $0.42 in the comparable
prior year period. Weighted average shares of common stock outstanding used in
computing basic earnings per common share increased to 44,687,708 in the first
half of fiscal 2006 from 44,023,659 in the comparable prior year period
primarily as a result of additional stock option exercises since February 28,
2005. Weighted average shares of common stock outstanding used in computing
diluted earnings per common share increased to 45,221,520 in first half of
fiscal 2006 from 44,766,807 in the comparable prior year period also primarily
as a result of the additional stock option exercises since February 28, 2005.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES.
CASH FROM OPERATIONS. Arrow's primary source of funds continues to be cash
generated from operations, as shown in the Company's consolidated statements of
cash flows included in Item 1 of this report. For the six months ended February
28, 2006, net cash provided by operations was $18.5 million, a decrease of $10.5
million from the comparable prior year period, due primarily to changes in
certain working capital and other accounts, including accrued liabilities,
accrued post-retirement benefit and pension obligation, deferred income taxes,
and inventories, all as described below, offset in part by increases in net
income, as described above under "Six Months Ended February 28, 2006 compared to
Six Months Ended February 28, 2005", and prepaid expenses and other.

ACCRUED LIABILITIES. Accrued liabilities decreased $4.1 million in the first six
months of fiscal 2006 compared to a $1.7 million decrease in the same period of
fiscal 2005 due primarily to the payment of (1) $2.0 million in November 2005
related to the settlement of a claim for indemnification related to a divested
business and (2) professional service fees accrued at August 31, 2005 associated
with the Company's review of its internal controls over financial reporting in
compliance with Section 404 of the Sarbanes Oxley Act of 2002.


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                            ARROW INTERNATIONAL, INC.


ACCRUED POST-RETIREMENT AND PENSION BENEFIT OBLIGATION. Accrued post-retirement
benefit and pension obligation decreased $2.8 million in the first half of
fiscal 2006 compared to a $2.1 million increase in the first half of fiscal 2005
primarily as a result of payments in the first quarter of fiscal 2006 required
to fund the Company's post-retirement and pension benefit plans.

INCOME TAXES. Accrued income taxes increased $0.7 million in the first half of
fiscal 2006 compared to a $0.5 million decrease in the same period of fiscal
2005 and the Company's net deferred income tax asset increased $0.4 million in
the six months ended February 28, 2006 compared to a $4.1 million decrease in
the same period of fiscal 2005, due primarily to a change in classification
between accrued income tax and deferred income tax in the first half of fiscal
2005 for a depreciation deduction that was not originally anticipated in the
Company's fiscal year 2004 U.S. federal tax filing.

INVENTORIES. Inventories increased $7.2 million in the first half of fiscal 2006
compared to a $6.5 million increase in the same period of fiscal 2005. The
increase in fiscal 2006 is primarily due to an increase in finished goods as a
result of increased output from the Company's U.S. and Czech manufacturing
facilities attributable to improvements in production technology implemented as
part of the Company's manufacturing capital investment program, and the
continuation of the Company's initiative to produce and maintain sufficient
levels of inventory required to meet customer demand. The Company expects these
increases in manufacturing output to continue as its new Chihuahua, Mexico
manufacturing facility, which began production of multi-lumen central venous
catheters in the second quarter of fiscal 2006, gradually reaches full
production capacity throughout the remainder of calendar 2006. The increase in
fiscal 2005 was primarily due to inventory acquired in connection with the
Company's acquisition of AB Medica during the first quarter of fiscal 2005, as
further discussed below.

PREPAID EXPENSES AND OTHER. Prepaid expenses and other increased $5.7 million in
the six months ended February 28, 2006 compared to a $10.7 million increase in
the same period of fiscal 2005, due primarily to a $6.3 million increase in
fiscal 2005 related to a change in the current U.S. federal income tax balance
resulting from an unanticipated depreciation adjustment, as described above.

ACCOUNTS RECEIVABLE. Accounts receivable, measured in days sales outstanding
during the period, decreased to 72 days at February 28, 2006, from 73 days at
August 31, 2005, respectively.

As of February 28, 2006, the Company had an accounts receivable balance from its
Italian customers of $9.8 million, of which approximately 75% is related to
Italian Government-backed hospital customers. The Company increased its direct
sales in this region following its acquisition of AB Medica In September 2004.
As of February 28, 2006, the days sales outstanding was currently 287 days,
which is significantly higher than that of the Company's overall February 28,
2006 average customer days sales outstanding of 72 days. However, according to
information provided by Italy's National Health Service as of March 19, 2005,
which represents the most recent data the Company has been able to obtain, the
average days sales outstanding for medical equipment supply companies in the
Italian market ranges from approximately 300 to 330 days, which represents
little change from the range of 285 to 318 days in 1990. The Company's payment
terms in this market are generally 90 days. The Company has concluded that the
Government of Italy typically delays payments to its government-backed
hospitals, which in turn has impacted the Company's overall days sales
outstanding. The Italian Government-backed hospitals have historically paid
customers 100% of their outstanding receivables. As a result, the Company
currently believes that the ultimate collectibility of these receivables, net of
discounts, is not a significant risk. However, because the Company's assessment
of this situation is based in part on political factors beyond its control, the
Company cannot assure that all of these receivables will be collected or when
they will be collected, and will continue to evaluate their collectibility and
establish reserves when and to the extent necessary. As of February 28, 2006,
the Company had recorded an allowance of $0.1 million to reserve for
specifically identified, potentially uncollectible, private Italian customer
balances.

The Company currently evaluates all of its trade receivables on a regular basis,
including those with its Italian customers, to ensure that each receivable is
recorded at net realizable value.

EARLY RETIREMENT PROGRAM. As previously reported, on October 27, 2004, the
Company's Board of Directors approved a voluntary early retirement program for
all of the Company's salaried exempt and non-exempt employees in its three
locations in the Reading, Pennsylvania area who attained age 57 or older and had
at least five years of service with the Company as of January 31, 2005. The
program provided that each such eligible employee who made an election to retire
from the Company on or between November 10, 2004 and January 31, 2005 would (1)
receive payments equal to two weeks pay for each year of his or her service with
the Company and a lump sum payment of $20,000, (2) be treated as if such
employee retired under the salaried pension plan at his or her normal retirement
date without any additional years of service being credited, but without any
reduction for early commencement of benefits, and (3) have their stock options
issued under the Company's stock incentive plans, which were unvested as of the
effective date of his or her retirement, accelerated so as to vest and become
fully exercisable as of such date.

During the second quarter of fiscal 2005, the Company recorded $6.8 million in
total costs with respect to this program, of which $1.9 million was recorded to
cost of sales and $4.9 million to selling, general and administrative expenses.
Of the $6.8 million in total costs, $2.7 million was related to pension and
other post-retirement benefits, and $3.0 million was a cash charge related to
severance and related costs. The remaining $1.1 million was incurred as a
non-cash charge for accelerated vesting of stock options held by participants in
this program. A total of 28 participants elected to participate in this program,
including, as previously reported, the Company's former President and Chief
Operating Officer and its Executive Vice President - Global Business
Development.


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                            ARROW INTERNATIONAL, INC.


INVESTING ACTIVITIES.
Net cash used in the Company's investing activities decreased to $17.7 million
in the six months ended February 28, 2006 from $25.6 million in the comparable
period of fiscal 2005, due primarily to the Company's acquisition, as further
discussed below, of AB Medica in the first half of fiscal 2005, and costs
incurred in the first half of fiscal 2005 to expand the Company's finished goods
warehouse and distribution center in Asheboro, North Carolina offset in part by
the investment of its cash in short-term marketable securities during the first
half of fiscal 2006.

ACQUISITION OF AB MEDICA. On September 3, 2004, 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 $9.1 million, with additional amounts
payable contingent upon the sales levels of products under sales contracts
purchased by the Company. ABM had been one of the Company's distributors in
Italy since 1982. The asset purchase agreement includes the purchase of customer
lists, distributorship rights, as well as the inventory and specified tender
contracts associated with the sale by ABM of the Company's products. The Company
began selling directly in Italy through its subsidiary, Arrow Italy S.p.A., in
the first quarter of fiscal 2005. As of February 28, 2006, pursuant to the asset
purchase agreement, the Company has paid $8.9 million in cash and recorded a
current liability of $0.2 million for additional payment installments. The
purchase price for this acquisition did not exceed the estimated fair value of
the net assets acquired and, therefore, no goodwill has been recorded by the
Company in connection therewith. Intangible assets acquired of $5.9 million,
consisting of customer lists and distributorship rights, are being amortized
over five years based on the anticipated period over which the Company expects
to benefit form the transaction. Included in the first quarter of fiscal 2005
was a $1.5 million charge to cost of goods sold, or $1.0 million against net
income ($0.02 diluted earnings per share), for the step-up of inventory
purchased from ABM. The results of operations of this business are included in
the Company's consolidated financial statements from the date of acquisition.
The purchase price for this acquisition was allocated as follows:

        (in millions)
        Inventories                                $       3.2
        Intangible assets                                  5.9
                                                   -----------
           Total purchase price                    $       9.1
                                                   ===========

MULTI-YEAR CAPITAL INVESTMENT PLAN. As previously reported, in April 2004 the
Company's Board of Directors authorized the initiation of a multi-year capital
investment plan to increase its worldwide manufacturing capacity and rationalize
its production operations. This plan is being initiated to support projections
for future growth and to integrate operations acquired in recent years. The
first phase of this effort includes the construction or acquisition of
additional manufacturing facilities in Zdar, Czech Republic and Chihuahua,
Mexico, which commenced in the first quarter of fiscal 2005 and is ongoing.
During the second quarter of fiscal 2006, production of multi-lumen central
venous catheters began at the new Chihuahua facility and the Company currently
anticipates that construction of its new Zdar facility will be completed by the
end of fiscal 2006. The Company currently estimates the total cost of this
capacity increase to be between $22.0 million and $28.0 million over a
three-year period, subject to variations in foreign exchange rates during this
period. In addition, the Company also anticipates spending between $13.0 million
and $17.0 million over the same three-year period for equipment related to this
expansion of its manufacturing capacity, which is also subject to fluctuations
in foreign exchange rates. As of February 28, 2006, the Company had spent $21.0
million in connection with this capital investment program.

As part of its plans to rationalize its operations in the United States, in
August 2004 the Company initiated the consolidation of its operations at its
Winston-Salem, North Carolina and San Antonio, Texas facilities into other
existing manufacturing facilities. To date, the Company has accrued costs of
$0.7 million in connection with this restructuring, consisting primarily of
severance payments. Severance payments relate to 53 employees primarily in
manufacturing at both facilities. All remaining restructuring costs are expected
to be paid during the remainder of fiscal 2006. Additionally, on December 2,
2005, the Company sold its San Antonio, Texas facility and certain related
equipment and, as a result, recognized a pre-tax gain of $0.3 million in other
income in the second quarter of fiscal 2006.

As part of its plans to rationalize its production operations and related
logistics in Europe, in November 2004 the Company determined to move its
European Distribution Center, previously situated in Weesp, Netherlands, to a
more centralized European location in the Limberg region of Belgium in order to
have better access to existing carrier transportation networks and allow for
more cost-competitive expansion of its European operations in the future. The
Company continued its rationalization plan in the second quarter of fiscal 2006
and estimates it will incur a total of $1.7 million related to this plan. As of
February 28, 2006, the Company had accrued costs of $1.2 million related to this
re-location, of which $0.8 million had been paid.

PROJECT OPERATIONAL EXCELLENCE. During the second quarter of fiscal 2006, the
Company continued to take additional steps in implementing its Project
Operational Excellence program designed to help it achieve operational process
excellence in four key areas: product quality, safety, customer service and
cost. This program includes (1) as discussed above under "Multi-Year Capital
Investment Plan," restructuring the Company's manufacturing to increase
production capacity and better align its production facilities with the
geographical markets they serve, (2) improving the effectiveness of the
Company's production technology by investing in new, state-of-the-art
manufacturing equipment and processes, and (3) developing and implementing
enhanced good manufacturing practices and quality systems to maintain and
establish process excellence.

In connection with the Company's efforts to enhance its good manufacturing
practices and quality system compliance, it has incurred $0.6 million of outside
consulting costs in the first six months of fiscal 2006 and anticipates spending
an additional $1.0 million during the remainder of fiscal 2006. The Company
incurred $3.5 million of costs related to this program in fiscal 2005.


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<PAGE>

                            ARROW INTERNATIONAL, INC.


FINANCING ACTIVITIES.
Financing activities used $3.2 million of net cash in the six months ended
February 28, 2006 compared to providing $3.8 million in the same prior year
period, primarily as a result of an increase in dividend payments following the
Company's increase in the amount of its quarterly dividend in the second quarter
of fiscal 2005 and a decrease in proceeds from stock option exercises, offset in
part by the Company's increased borrowing under its revolving credit facilities.

CREDIT FACILITIES.
To provide additional liquidity and flexibility in funding its operations, the
Company from time to time also borrows amounts under credit facilities and other
external sources of financing. At February 28, 2006, the Company had a revolving
credit facility providing a total of $65.0 million in available revolving credit
for general business purposes, of which $27.9 million was outstanding, all of
which is owed by its foreign subsidiaries. Under this credit facility, the
Company is required to comply with, among others, the following financial
covenants: maintain a ratio of total liabilities to tangible net worth (total
assets less total liabilities and intangible assets) of no more than 1.5 to 1; a
limitation on certain mergers, consolidations and sales of assets by the Company
or its subsidiaries; a limitation on the Company's and its subsidiaries'
incurrence of liens; and a requirement that the lender approve the incurrence of
additional indebtedness unrelated to the revolving credit facility when the
aggregate principal amount of such new additional indebtedness exceeds $75.0
million. At February 28, 2006, the Company was in compliance with all such
covenants. Failure to remain in compliance with these covenants could trigger an
acceleration of the Company's obligation to repay all outstanding borrowings
under this credit facility.

Certain other foreign subsidiaries of the Company had revolving credit
facilities totaling the U.S. dollar equivalent of $31.9 million, of which $4.7
million was outstanding as of February 28, 2006.

Interest rate terms for both U.S. and foreign bank credit facilities are based
on either bids provided by the lender or the prime rate, London Interbank
Offered Rates (LIBOR) or Certificate of Deposit Rates, plus applicable margins.
Certain of these borrowings, primarily those with U.S. banks, are due on demand.
Interest is payable monthly during the revolving credit period. Combined
borrowings under these facilities increased $5.7 million and $3.0 million during
the six months ended February 28, 2006 and February 28, 2005, respectively.

CONTRACTUAL OBLIGATIONS.
A summary of all of the Company's contractual obligations and commercial
commitments as of February 28, 2006 were as follows:

<TABLE>
<CAPTION>
                                                                           PAYMENTS DUE OR COMMITMENT
                                                                              EXPIRATION BY PERIOD
                                                     ------------------------------------------------------------------------
           CONTRACTUAL OBLIGATIONS AND
              COMMERCIAL COMMITMENTS                                 LESS THAN         1 - 3         3 - 5         MORE THAN
                  (IN MILLIONS)                         TOTAL          1 YEAR          YEARS         YEARS          5 YEARS
--------------------------------------------------   -----------    -------------    ----------    -----------    -----------
<S>                                                  <C>            <C>              <C>           <C>            <C>
Current maturities of long-term debt                 $      1.0     $        1.0     $       -     $        -     $        -
Operating leases                                            9.6              3.2           4.0            1.9            0.5
Purchase obligations (1)                                   33.2             33.2             -              -              -
Other long-term obligations                                 0.5              0.1           0.1            0.1            0.2
Lines of credit (2)                                        32.6             32.6             -              -              -
Standby letters of credit                                   2.3              2.3             -              -              -
                                                     -----------    -------------    ----------    -----------    -----------

Total cash contractual obligations and
  commercial commitments                             $     79.2     $       72.4     $     4.1     $      2.0     $      0.7
                                                     ===========    =============    ==========    ===========    ===========
</TABLE>

(1)     Includes open purchase orders primarily relating to purchases of raw
        materials, equipment and certain consulting and information system
        services.

(2)     Includes short-term indebtedness of the Company and its subsidiaries
        under various revolving credit facilities, as discussed above.

OUTLOOK.
Based upon its present plans, the Company believes that cash generated from its
operations and available credit resources, including its ability to extend
maturities of borrowings outstanding under its lines of credit in the ordinary
course consistent with past practice, will be adequate to repay current portions
of long-term debt, to finance currently planned capital expenditures, including
those pursuant to the Company's multi-year capital investment plan and other
initiatives related to its Project Operational Excellence, as discussed above,
and to meet the currently foreseeable liquidity needs of the Company.

During the periods discussed above, the overall effects of inflation and
seasonality on the Company's business were not significant.


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<PAGE>

                            ARROW INTERNATIONAL, INC.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company has disclosed in Note 1 to its consolidated financial statements in
its Annual Report on Form 10-K for the fiscal year ended August 31, 2005 those
accounting policies that it considers to be significant in determining its
results of operations and financial position. Other than the Company's
compliance with the new accounting requirements of SFAS No. 123R, as described
below under "- New Accounting Standards," there have been no material changes to
the critical accounting policies previously identified and described in the
Company's 2005 Form 10-K. The accounting principles utilized by the Company in
preparing its consolidated financial statements conform in all material respects
to generally accepted accounting principles in the United States of America.

The preparation of these consolidated financial statements requires the
Company's management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, as well as the disclosure
of contingent assets and liabilities at the date of its financial statements.
The Company bases its estimates on historical experience, actuarial valuations
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Some of those judgments can be subjective and complex and,
consequently, actual results may differ from these estimates under different
assumptions or conditions. While for any given estimate or assumption made by
the Company's management there may be other estimates or assumptions that are
reasonable, the Company believes that, given the current facts and
circumstances, it is unlikely that applying any such other reasonable estimate
or assumption would materially impact the financial statements.

NEW ACCOUNTING STANDARDS

The FASB issued SFAS No. 151, "Inventory Costs, an Amendment of Accounting
Research Bulletin (ARB) No. 43, Chapter 4", in November 2004. This statement
amends the guidance in ARB No. 43 Chapter 4 "Inventory Pricing" to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS No. 151 requires that those items be recognized
as current period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The Company has adopted the provisions of SFAS No.
151 effective September 1, 2005. The impact of this statement on the Company's
financial statements was not material to its results of operations.

The FASB issued SFAS No. 123R, "Share-Based Payment, an Amendment of SFAS No.
123 and 95", in December 2004. This statement requires that the cost of all
forms of equity-based compensation granted to employees, excluding employee
stock ownership plans, be recognized in a company's income statement and that
such cost be measured at the fair value of the stock options. This statement
replaces the guidance in SFAS No. 123, Accounting for Stock-Based Compensation,
and APB No. 25, Accounting for Stock Issued to Employees. In addition, the SEC
issued SAB No. 107 "Share Based Payment" in March 2005, which provides
supplemental SFAS No. 123R guidance based on the views of the SEC. The Company
adopted the provisions of SFAS No. 123R effective September 1, 2005 using the
modified prospective method. The adoption of this statement resulted in a charge
of $1.8 million in the first half of fiscal 2006 to income from continuing
operations and income before income taxes, of which $0.2 million was recorded to
cost of sales, $0.2 million to research and development, and $1.4 million to
selling, general and administrative expenses. These charges impacted net income
by $1.5 million, or $0.03 basic and diluted earnings per share, in the first
half of fiscal 2006. The tax benefit from this stock option expense is less than
the statutory tax benefit because the Company cannot recognize the tax benefit
on future disqualifying dispositions of incentive stock options until such time
as these dispositions occur.

CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in this report or in other written or oral
statements made from time to time by the Company may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934 (the "Exchange Act"). Such statements
may use words such as "anticipate," "estimate," "expect," "believe," "may,"
"intend" and similar words or terms. Although the Company believes that the
expectations in such forward-looking statements are reasonable, the Company
cannot assure you that such expectations will prove to have been correct. The
forward-looking statements are based upon a number of assumptions and estimates
that, while presented with specificity and considered reasonable by the Company,
are inherently subject to significant business, economic and competitive risks,
uncertainties and contingencies which are beyond the control of the Company, and
upon assumptions with respect to future business decisions which are subject to
change. Accordingly, the forward-looking statements are only an estimate, and
actual results will vary from the forward-looking statements, and these
variations may be material. The Company is not obligated to update any
forward-looking statement, but investors are urged to consult any further
disclosures the Company makes in its filings with the Securities and Exchange
Commission (the "SEC"). Consequently, the inclusion of the forward-looking
statements should not be regarded as a representation by the Company of results
that actually will be achieved. Forward-looking statements are necessarily
speculative in nature, and it is usually the case that one or more of the
assumptions in the forward-looking statements do not materialize. Investors are
cautioned not to place undue reliance on the forward-looking statements. The
Company cautions investors that the factors set forth below, which are described
in further detail in Item 1. Business - "Certain Risks Relating to Arrow" in the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2005
and in its other filings with the SEC, could cause the Company's results to
differ materially from those stated in the forward-looking statements. These
factors include: (1) stringent regulation of the Company's products by the U.S.
Food and Drug Administration and, in some jurisdictions, by state, local and
foreign governmental authorities; (2) the highly competitive market for medical
devices and the rapid pace of product development and technological change in
this market; (3) pressures imposed by the health care industry to reduce the
cost or usage of medical products and services; (4) dependence on patents and
proprietary rights to protect the Company's trade secrets and technology, and
the need for litigation to enforce or defend these rights; (5) risks associated
with the Company's international operations; (6) potential product liability
risks inherent in the design, manufacture and marketing of medical devices; (7)
risks relating to interruptions in the supply of or increases in the price of
essential raw materials or components; (8) risks associated


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<PAGE>

                            ARROW INTERNATIONAL, INC.


with the Company's use of derivative financial instruments; and (9) dependence
on the continued service of key members of the Company's management.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Financial Instruments:

During the six month periods ended February 28, 2006 and 2005, the percentage of
the Company's sales invoiced in currencies other than U.S. dollars was 26.3% and
26.8%, respectively. In addition, a part of the Company's cost of goods sold is
denominated in foreign currencies. The Company enters into foreign currency
forward contracts and foreign currency option contracts, which are derivative
financial instruments, with major financial institutions to reduce the effect of
these foreign currency risk exposures, primarily on U.S. dollar cash inflows
resulting from the collection of intercompany receivables denominated in foreign
currencies and to hedge anticipated sales in foreign currencies to foreign
subsidiaries. Such transactions occur throughout the year and are probable, but
not firmly committed. Foreign currency forward contracts are marked to market
each accounting period, and the resulting gains or losses on these contracts are
recorded in Other (Income) / Expense of the Company's consolidated statements of
income. Gains and losses on these contracts are offset by changes in the U.S.
dollar value of the foreign currency denominated assets, liabilities and
transactions being hedged. The premiums paid on the foreign currency option
contracts are recorded as assets and amortized over the life of the option.
Other than the risk associated with the financial condition of the
counterparties, the Company's maximum exposure related to foreign currency
options is limited to the premiums paid. The total premiums authorized to be
paid in any fiscal year cannot exceed $1.0 million pursuant to the terms of the
Foreign Currency Management Policy Statement approved by the Company's Board of
Directors in fiscal 2001. Gains and losses on purchased option contracts result
from changes in intrinsic or time value. Both time value and intrinsic value
gains and losses are recorded in shareholders' equity (as a component of
comprehensive income) until the period in which the underlying sale by the
foreign subsidiary to an unrelated third party is recognized, at which point
those deferred gains and losses are recognized in net sales. By their nature,
all such contracts involve risk, including the risk of nonperformance by
counterparties. Accordingly, losses relating to these contracts could have a
material adverse effect upon the Company's business, financial condition and
results of operations. Based upon the Company's knowledge of the financial
condition of the counterparties to its existing foreign currency forward
contracts, the Company believes that it does not have any material exposure to
any individual counterparty. The Company's policy prohibits the use of
derivative instruments for speculative purposes. The Company expects to continue
to utilize foreign currency forward contracts to manage its exposure, although
there can be no assurance that the Company's efforts in this regard will be
successful. As of February 28, 2006, outstanding foreign currency forward
contracts totaling the U.S. dollar equivalent of $14.6 million matured at
various dates through September 2006. As of February 28, 2006, the Company had
no foreign currency option contracts outstanding. The Company expects to
continue to utilize foreign currency forward contracts and foreign currency
option contracts to manage its exposure, although there can be no assurance that
the Company's efforts in this regard will be successful.

The Company's exposure to credit risk consists principally of trade receivables.
Hospitals and international dealers account for a substantial portion of trade
receivables and collateral is generally not required. The Company believes its
risk associated with this concentration is limited due to its ongoing credit
review procedures.

At February 28, 2006, the Company had foreign currency forward contracts to sell
foreign currencies which matured at various dates through April 2006. The
following table identifies foreign currency forward contracts to sell foreign
currencies at February 28, 2006 and August 31, 2005:

<TABLE>
<CAPTION>
                                                          February 28, 2006                         August 31, 2005
                                                    Notional          Fair Market            Notional           Fair Market
                                                    Amounts              Value                Amounts              Value
                                                ---------------    -------------------    ----------------   ------------------
<S>                                             <C>                <C>                    <C>                <C>
  Foreign currency: (U.S. Dollar Equivalents)
  Japanese yen                                  $         1,721    $             1,731    $            672   $              680
  Canadian dollar                                           958                    969                 584                  590
  Euro                                                    1,073                  1,074              11,322               11,424
  Mexican peso                                                -                      -                 905                  912
  African rand                                              495                    486                 444                  470
                                                ---------------    -------------------    ----------------   ------------------
                                                $         4,247    $             4,260    $         13,927   $           14,076
                                                ===============    ===================    ================   ==================
</TABLE>

At February 28, 2006, the Company also had foreign currency forward contracts to
buy foreign currencies which mature at various dates through September 2006. The
following table identifies forward exchange contracts to buy foreign currencies
at February 28, 2006 and August 31, 2005:


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<PAGE>

                            ARROW INTERNATIONAL, INC.

<TABLE>
<CAPTION>
                                                          February 28, 2006                         August 31, 2005
                                                    Notional          Fair Market            Notional           Fair Market
                                                    Amounts              Value                Amounts              Value
                                                ---------------    -------------------    ----------------   ------------------
<S>                                             <C>                <C>                    <C>                <C>
  Foreign currency: (U.S. Dollar Equivalents)
  Czech koruna                                  $        10,249    $            10,373    $          2,666   $            2,727
</TABLE>

From time to time, the Company purchases foreign currency option contracts to
hedge anticipated sales in foreign currencies to foreign subsidiaries. The
option premiums paid are recorded as assets and amortized over the life of the
option. Other than the risk associated with the financial condition of the
counterparties, the Company's maximum exposure related to foreign currency
options is limited to the premiums paid. During the three and six months ended
February 28, 2006 and 2005, the Company did not recognize any time value or
intrinsic value losses against cost of sales. At February 28, 2005, the Company
had an unrealized holding loss of less than $0.1 million related to these
foreign currency option contracts. The Company had no foreign currency option
contracts outstanding at February 28, 2006 and August 31, 2005.

Item 4.  Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of
the Company's management, including its Chief Executive Officer, or CEO, and its
Chief Financial Officer, or CFO, of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) as of February 28, 2006. Based on that evaluation, the Company's
management, including its CEO and CFO, have concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that the Company files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and is
accumulated and communicated to the Company's management, including its CEO and
CFO, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in the Company's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred
during the three months ended February 28, 2006 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.

PART II    OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders.

(a) The Company held its annual meeting of shareholders on January 18, 2006.

(c) At the annual meeting, the following matters were voted upon: (1) the
approval of amendments to the Company's Restated Articles of Incorporation and
By-Laws to declassify the Company's Board of Directors and provide for the
annual election of all the Company's directors; (2) the election of eleven
directors (in connection with which (i) proxies were solicited pursuant to
Regulation 14 under the Exchange Act, (ii) there was no solicitation in
opposition to the management's nominees as listed in the proxy statement, and
(iii) all such nominees were elected); (3) the adoption of the Company's 2006
Directors Stock Incentive Plan; and (4) the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's registered independent accounting
firm for the current fiscal year ending August 31, 2006.

        With respect to the election of directors, votes were cast as follows:

                                                     CARL G. ANDERSON, JR.
           Votes for                                            42,549,051
           Withheld                                                576,852

                                                    JOHN H. BROADBENT, JR.
           Votes for                                            40,621,972
           Withheld                                              2,503,951

                                                         GEORGE W. EBRIGHT
           Votes for                                            42,617,952
           Withheld                                                507,951

                                                            JOHN E. GURSKI
           Votes for                                            41,762,354
           Withheld                                              1,363,549


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<PAGE>

                            ARROW INTERNATIONAL, INC.


                                                        T. JEROME HOLLERAN
           Votes for                                            41,837,273
           Withheld                                              1,288,630

                                                         R. JAMES MACALEER
           Votes for                                            41,736,219
           Withheld                                              1,389,684

                                                        MARLIN MILLER, JR.
           Votes for                                            32,968,552
           Withheld                                             10,157,351

                                                              RAYMOND NEAG
           Votes for                                            40,894,842
           Withheld                                              2,231,061

                                                          RICHARD T. NINER
           Votes for                                            42,570,502
           Withheld                                                555,401

                                                              ANNA M. SEAL
           Votes for                                            42,652,657
           Withheld                                                473,246

                                                          ALAN M. SEBULSKY
           Votes for                                            42,149,542
           Withheld                                                976,361


With respect to the other matters, votes were cast as follows:

                                              Approval of Amendments to the
                                                Company's Restated Articles
                                               OF INCORPORATION AND BY-LAWS
            Votes For                                            43,066,206
            Votes Against                                            43,152
            Abstentions                                              16,545

                                                           Adoption of 2006
                                             DIRECTORS STOCK INCENTIVE PLAN
            Votes For                                            27,942,409
            Votes Against                                        13,282,679
            Abstentions                                             188,843
            Non-Votes                                             1,711,972

                                             Ratification of Appointment of
                                                     Registered Independent
                                                     PUBLIC ACCOUNTING FIRM
            Votes For                                            42,992,252
            Votes Against                                           129,024
            Abstentions                                               4,627


Item 6.  Exhibits

        (a) Exhibits

            See Exhibit Index on page 37 for a list of the Exhibits filed as
            part of this report.


                                      (35)
<PAGE>

                                    SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                        ARROW INTERNATIONAL, INC.




Date: April 10, 2006                    By:  /s/ Frederick J. Hirt
                                             -----------------------------------
                                             Frederick J. Hirt
                                             Chief Financial Officer and
                                             Senior Vice President of Finance
                                             (Principal Financial Officer and
                                             Chief Accounting Officer)




                                      (36)
<PAGE>


                                  EXHIBIT INDEX


EXHIBIT        DESCRIPTION
NUMBER         OF EXHIBIT                                     METHOD OF FILING
------         ----------                                     ----------------


31.1           Rule 13a-14(a)/15d-14(a) Certification of     Furnished herewith
               the Chief Executive Officer

31.2           Rule 13a-14(a)/15d-14(a) Certification of     Furnished herewith
               the Chief Financial Officer

32.1           Section 1350 Certification of the Chief       Furnished herewith
               Executive Officer

32.2           Section 1350 Certification of the Chief       Furnished herewith
               Financial Officer




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