<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Kaydon Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3186040
- --------------------------------------------------------------------------------
(State of incorporation or organization) (IRS Employer
Identification Number)
19345 U.S. 19 North, Suite 500, Clearwater, Florida 34624
- --------------------------------------------------------------------------------
(Address of principal office executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title to each class Name of each exchange on
to be so registered: which each class is to be
registered:
Common stock, $.10 par value per share New York Stock Exchange
- -------------------------------------- ---------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE> 2
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Registrant's authorized capital stock consists of 19,150,590
shares of common stock, par value $.10 per share. Holders of common stock are
entitled to one vote per share on a non-cumulative basis with respect to the
election of directors and any other matters admitted to the vote of
shareholders. Each share of common stock is entitled to share pro rata in
dividends, if, as, and when declared by the Board of Directors from legally
available funds, and to share pro rata in any distribution of the Registrant's
assets upon liquidation after the payment of creditors and other liabilities.
Shares of common stock carry no pre-emptive or other rights to subscribe for
additional shares, and carry no conversion or redemption rights. Shares of
common stock are non-assessable, and no personal liability attaches to
ownership of such shares.
For additional information concerning the description of securities to
be reviewed hereunder, please refer to a Registration Statement filed on form
S-1 (Registration No. 2-89399) effective April 2, 1984, as amended.
ITEM 2. EXHIBITS
All exhibits required by instruction II to Item 2 will be filed with
each copy of the registration statement filed with the New York Stock Exchange.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
KAYDON CORPORATION
Dated: May 19, 1994 By /s/ Lawrence J. Cawley
----------------------
Its Chairman & CEO
<PAGE> 3
ITEM 2. EXHIBITS
EXHIBIT 99.A FORM 10-K / ANNUAL REPORT 1993
EXHIBIT 99.B FORM 10-Q - Q1, 1994
EXHIBIT 99.C PROXY
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended DECEMBER 31, 1993
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Commission file number 0-12640
KAYDON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3186040
(State or other jurisdiction of (IRS Employer
incorporation or organization) ID No.)
ARBOR SHORELINE OFFICE PARK, 19345 US 19 NORTH, CLEARWATER, FL 34624
(Address of principal executive offices)
Registrant's telephone number, including area code (813) 531-1101
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(Title of each class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Yes X No
--- ---
Based on the closing sales price of February 28, 1994, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$392,215,024.
The number of shares outstanding of the registrant's common stock, $0.10 par
value was 16,690,001 as of February 28, 1994.
DOCUMENTS INCORPORATED BY REFERENCE AND THE PART(S) OF THIS FORM 10-K INTO
WHICH EACH DOCUMENT IS INCORPORATED:
KAYDON CORPORATION 1993 ANNUAL REPORT TO STOCKHOLDERS - PARTS I, II AND IV
KAYDON CORPORATION PROXY STATEMENT - PART III
<PAGE> 2
KAYDON CORPORATION FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1993
INDEX
<TABLE>
<CAPTION>
Part I Page No.
- ------ ------------
<S> <C> <C>
Item 1. Business 1 - 10
Item 2. Properties 11 - 13
Item 3. Legal Proceedings 13 - 14
Item 4. Submission of Matters to Vote of Security Holders 14
Part II
- -------
Item 5. Market for the Registrant's Common Equity &
Related Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 16
Part III
- --------
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management 18
Item 13. Certain Relationships and Related Transactions 18
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) 1. Financial Statements 19
2. Financial Statement Schedules 19 - 20
3. Reference to Exhibits 20
(b) Reports on Form 8-K 20
Report of Independent Public Accountants 21
Financial Statement Schedules 22 - 25
Signatures 26
(c) 1. Exhibit Index 27 - 34
2. Exhibits E1 - E3
</TABLE>
<PAGE> 3
PART I
Item 1. BUSINESS
a. General Development of Business
Kaydon Corporation (the "Company" or "Kaydon") was formed in October
1983, as a wholly owned subsidiary of Bairnco Corporation ("Bairnco" or "former
parent"), when it acquired all of the assets and assumed certain liabilities,
other than amounts due from affiliates, from a subsidiary of Keene Corporation,
another wholly owned subsidiary of Bairnco, which was then known as Kaydon
Corporation and is now inactive.
The Company was spun off from Bairnco in April 1984 and is no longer a
member of its consolidated group. This spinoff was effected in the form of a
100 percent stock dividend to stockholders of the former parent's common stock.
On June 30, 1986, Kaydon Ring and Seal, Inc., a wholly owned
subsidiary of Kaydon, acquired for $29,600,000 certain assets and liabilities
of the Piston Ring and Seal Division of Koppers Company, Inc., a manufacturer
of piston rings and shaft seals. This acquisition was consummated by Kaydon
Ring and Seal, Inc. with loaned funds from Kaydon.
On July 17, 1987, Kaydon acquired for $5,100,000 certain assets and
liabilities of the Spirolox operation of TRW, Inc., a manufacturer of specialty
retaining rings. This acquisition was consummated with funds acquired through
bank credit obtained in the normal course of business.
On June 23, 1989, Kaydon Corporation, through its newly formed, wholly
owned subsidiaries, Kaydon Acquisition Corp. III and Kaydon Acquisition Corp.
IV, acquired for $22,710,000 all of the stock of I.D.M. Electronics Ltd., a
United Kingdom corporation, and KDI Electro-Tec Corp., a Delaware corporation,
from KDI Corporation. I.D.M. Electronics Ltd. and Electro-Tec Corp.
manufacture high-performance, precision slip-rings, slip-ring capsules and
slip-ring assemblies. Slip-rings are complex, electromechanical devices used
to transmit electric signals or electrical power between the rotating and
stationary members of an assembly, such as a gyro and its housing. The
purchase price was financed by credit obtained in the normal course of
business.
1
<PAGE> 4
On December 16, 1991, Kaydon Corporation, through its wholly owned
subsidiaries, Kaydon Acquisition Corp. III and Kaydon Acquisition Corp. U.K.
Ltd., acquired for L.24,000,000 (approximately $43,440,000 when translated at
the exchange rate in effect at the time of purchase) all of the capital stock
of Prizerandom Limited, a United Kingdom corporation, from Clairmont PLC, a
Scotland corporation. Prizerandom Limited is a wholly owned subsidiary of
Clairmont PLC and is the holding company for Cooper Bearings Limited, a United
Kingdom corporation, which was the primary subject of the acquisition.
Cooper Bearings Ltd. is a holding company consisting of the following
operating subsidiaries, all of which are manufacturers or distributors of
complete bearings and related components parts:
<TABLE>
<CAPTION>
COUNTRY OF
SUBSIDIARY INCORPORATION
- ------------------------------------------------------------ -------------
<S> <C>
Cooper Roller Bearings Company Limited ("Cooper U.K.") United Kingdom
Cooper Split Roller Bearings Corporation ("Cooper U.S.") U.S.A.
Cooper Geteilte Rollenlager GmbH ("Cooper Germany") Germany
</TABLE>
Cooper U.K. is a manufacturing operation located in King's Lynn,
Norfolk - U.K. that produces a range of split roller bearings including both a
standard line and custom-designed product. Split bearings are designed
specifically to aid the customer in solving problems where the application of
full round bearings would be impractical. Cooper U.S. and Cooper Germany are
distribution operations located in Virginia Beach, VA - U.S. and Krefeld,
Germany, respectively.
The purchase price was financed through Kaydon Corporation cash plus
bank loans from the National Bank of Detroit and Continental Bank, U.K.
2
<PAGE> 5
b. and c. Financial Information About Industry Segments
and Narrative Description of Business
The Company designs, manufactures and sells custom-engineered products
for a broad and diverse customer base. The Company's principal products
include antifriction bearings, bearing systems, filters, filter housings,
high-performance rings, sealing rings, specialty retaining rings, shaft seals
and slip-rings. These products are used by customers in a variety of medical,
instrumentation, material handling, machine tool positioning, aerospace,
defense, construction and other industrial applications.
Products
Kaydon works closely with its customers to engineer the required
solutions to their design problems. Design solutions are frequently unique to
a single customer or application. Depending upon the nature of the
application, the design may be used over a protracted time period and in large
numbers, or it may be for a single use.
The antifriction bearing products of Kaydon incorporate various types
of rolling elements. The ball, tapered roller, cylindrical roller and needle
roller bearings manufactured by Kaydon are made in sizes ranging from needle
bearings with a 1/2-inch outside diameter to heavy-duty ball bearings with an
outside diameter of 180 inches. These antifriction products are fabricated
from aluminum, bearing-quality steel, stainless steel or special tool steels.
They often incorporate a broad range of features such as gearing, special
sealing systems and mounting arrangements in combination with other mechanical
components.
As a custom manufacturer, many diverse applications are served.
Typical applications include large-diameter ball bearings for hydraulic cranes
and excavators; thin-section ball bearings for rotating joints of industrial
robots; lightweight airborne radar bearings; large-diameter aluminum roller
bearings for military vehicle turret systems; needle roller bearings for
passenger car transmissions; loose needle rollers for universal joints utilized
in light trucks, agricultural tractors
3
<PAGE> 6
and passenger cars; special coalescing elements and filter housings for diesel
fuel filtration on both commercial and military vehicles; hydraulic filter
elements for tractor-mounted farm implement units; and ultra high-precision
roller bearings for gear box applications.
Kaydon's subsidiary, Kaydon Ring and Seal, Inc., manufactures metallic
medium and large bore-size rings for low and medium-speed internal combustion
engines, steam engines, pumps and reciprocating compressors. Sealing rings are
engineered with metallic and nonmetallic products used to limit the leakage of
fluids and gases within engines and a wide variety of other mechanical
products. Sealing rings are used in industrial applications, such as:
compressors, transmissions, hydraulic and pneumatic cylinders, and commercial
and military aircraft, jet engines and control apparatus applications. Shaft
seals are used to seal gases or liquids usually under extreme conditions of
speed, pressure or temperature. Shaft seals are fabricated from a variety of
materials depending on the application.
Electro-Tec Corp. and I.D.M. Electronics Ltd., wholly owned
subsidiaries of Kaydon Corporation, design and manufacture precision,
high-performance slip-rings, slip-ring assemblies, capsules and related
electromechanical devices to meet customers' exact needs and specifications.
Slip-rings are manufactured from injection and transfer-molded plastics,
aluminum and stainless steel castings, bearings and electronic components and
connectors, and are sometimes subjected to an electro-deposition process. They
are used to transmit electrical signals or power between the rotating and
stationary members of an assembly and can be found in combat vehicles, aircraft
inertial guidance systems, telecommunications satellites, aircraft targeting
systems and medical diagnostic equipment.
Cooper Bearings Ltd., a wholly owned subsidiary of Kaydon Corporation,
designs and manufactures a range of split roller bearings, which include both
standard and custom-designed lines. Split bearings are designed specifically
to aid the customer in solving problems where the application of full round
bearings would be less desirable. The product is used in a wide range of
applications but particularly those where space and ease of change are
important selection criteria.
4
<PAGE> 7
Approximately 69 percent of Kaydon's sales are to original equipment
manufacturers, which incorporate the Kaydon products in the products they sell.
Many of the applications for the Company's products also provide the
opportunity for participation in the replacement or spare parts markets.
New Product and Industry Segment Information
On December 4, 1993 the Company acquired, for approximately $716,000,
the assets of Kenyon Power Transmission Ltd. of Manchester, England. Kenyon
manufactures pulleys and drive components which are complementary to the
product offering of the Company's subsidiary, Cooper U.K., into which it will
be absorbed.
Subsequent to year end, on January 28, 1994 the Company acquired, for
approximately $7,500,000, the assets of Industrial Tectonics Inc located in
Dexter, Michigan. This company has been in existence since 1946 and is noted
for the production of balls made of alloyed steel, plastic, tungsten carbide,
glass and an assortment of other materials which are used in gauges, floats,
measuring instruments, ball point pens and antifriction bearings.
The Company has not made any other public announcement of, or
otherwise made public information about, a new product or a new industry
segment which would require the investment of a material amount of the
Company's assets or which would otherwise result in a material cost.
Patents, Trademarks, Licenses, Etc.
The Company does not believe that any material part of its business is
dependent on the continued availability of any one or all of its patents or
trademarks.
Seasonal Nature of Business
The Company does not consider its business to be seasonal in nature.
5
<PAGE> 8
Working Capital Practices
The Company does not believe that it or the industry in general has
any special practices or special conditions affecting working capital items
that are significant for an understanding of the Company's business.
Customers
Kaydon sells its products to over 1,000 companies throughout the
world. The principal customers are generally large manufacturing corporations.
During 1993, 1992 and 1991, sales to no single customer exceeded 10% of total
sales.
6
<PAGE> 9
Customers can generally be divided into four major market groups:
Aerospace and Military, Replacement Parts and Exports, Special Industrial
Machinery and Heavy Industrial Equipment. Sales to these customer groups for
1993, 1992 and 1991 are set forth in the following table:
<TABLE>
<CAPTION>
Net Sales by Major Market Groups
(in thousands)
1993 1992 1991
-------------------- ------------------- -------------------
Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Aerospace and Military $ 40,838 22.2 $ 47,972 26.1 $ 48,905 30.4
Replacement Parts and Exports 68,624 37.3 71,865 39.1 54,649 33.9
Special Industrial Machinery 52,091 28.3 43,087 23.4 39,435 24.5
Heavy Industrial Equipment 22,507 12.2 20,980 11.4 18,000 11.2
-------- ----- -------- ----- -------- -----
Total $184,060 100.0% $183,904 100.0% $160,989 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
Replacement parts are sold mainly through specialized distributors.
Kaydon had export sales of $10,979,000 in 1993, $9,102,000 in 1992, and
$10,762,000 in 1991, with most of such sales concentrated in Canada, Europe and
Japan.
Marketing
Kaydon's sales organization consists of salespersons and
representatives located throughout the United States, Canada, Europe and Asia.
Salespersons are trained to provide technical assistance to customers, as well
as to provide liaison with factory engineering staffs.
A nationwide network of specialized distributors and agents provides
local availability of Kaydon products to serve the requirements of the
replacement market and small original equipment manufacturers.
7
<PAGE> 10
Manufacturing
Kaydon manufactures virtually all of the products it sells and
utilizes subcontractors only for occasional specialized services. Kaydon's
products require sophisticated processes and equipment, and many of its
products incorporate unique Kaydon-developed production techniques. Certain
satellite and aircraft-type bearing products must meet extraordinary mechanical
tolerances (for example, within 20 millionths of an inch) and many bearings and
slip-rings are assembled in quality-controlled "white room" conditions. Nearly
all of Kaydon's products require high levels of incoming quality control and
process quality control. The manufacturing equipment required for Kaydon's
operations entails a very high level of capital investment for any given level
of sales.
Suppliers
Kaydon and its subsidiaries purchase large quantities of raw
materials, mainly bearing-quality steel, special alloy steel, high-grade carbon
and filter media, aluminum alloy and stainless steel castings, plastics, wire
and electrical connectors, from multiple sources. Kaydon purchases large
amounts of certain types of bearing-quality steel from a number of foreign
suppliers. No significant supply problems have been encountered in recent
years as relationships with suppliers have generally been good.
Environmental Matters
Reference is made to "Management's Discussion and Analysis" on pages
15 and 16 of Kaydon's 1993 Annual Report to Stockholders which is incorporated
herein by reference.
8
<PAGE> 11
Employees
On December 31, 1993, Kaydon employed 1,671 employees. Hourly
employees at the Muskegon facilities (including Norton Shores) are represented
by the International Association of Machinists and Aerospace Workers. The
current collective bargaining agreement is effective until December 3, 1994.
The Baltimore hourly employees are also represented by the International
Association of Machinists and Aerospace Workers. The current collective
bargaining agreement is effective until November 5, 1995. Greeneville hourly
employees are represented by the United Steelworkers of America, with the
current collective bargaining agreement effective until February 2, 1996. The
remaining domestic factory employees, as well as all office employees, are
non-union.
Kaydon provides its employees with a full range of insurance, pension
and deferred compensation benefits. The Company believes its levels of total
compensation are equal to or better than comparable companies in communities
adjacent to each facility.
Backlog
Kaydon sells certain products on a build-to-order basis that requires
substantial order lead time. This results in a backlog of unshipped, scheduled
orders. Other products are manufactured on the basis of sales projections or
annual blanket purchase orders. Orders for such products are not entered into
backlog until explicit shipping releases are received. Kaydon's backlog was
$84,385,000 at December 31, 1993 and $83,296,000 at December 31, 1992. Based
on experience, management would expect to ship over the following twelve months
about 90 percent of the year-end backlog. The backlog increase reversed a
downward trend over the last several years. Backlog has become less indicative
of future results as the Company has made efforts to shorten manufacturing lead
times, creating a faster response to customer orders.
9
<PAGE> 12
Competition
Kaydon competes with divisions of SKF Industries, Timken Corporation,
Torrington/Fafnir, Rotek, FAG, EG&G Inc., Litton Poly-Scientific and numerous
other smaller companies.
The markets served by Kaydon are large and extremely competitive. The
major domestic competitors generally produce a wide line of standard products
and do not specialize in custom products. The major domestic bearing
manufacturers nonetheless do offer special-engineered bearings. The markets
for Kaydon's special-machined components, fabricated products, filters, rings
and seals are very diverse. Consequently, management feels that the size of
the total market for such products cannot be meaningfully estimated.
In all of the markets served by Kaydon, the principal methods of
competition involve price, product performance, engineering support and timely
delivery.
Many of Kaydon's domestic competitors are part of large, worldwide
manufacturing concerns and have significantly greater financial resources.
While foreign competition is intense and growing for all industrial components,
the special nature of Kaydon's products and the close working relationship with
its customers have somewhat limited the impact of foreign competition on
domestic business.
Government Contracts and Renegotiation
Various provisions of federal law and regulations require, under
certain circumstances, the renegotiation of military procurement contracts or
the refund of profits determined to be excessive. Based on Kaydon's experience
under such provisions, management believes that no material renegotiation or
refunds (if any) will be required.
d. Information About International Operations
Information with respect to operations by geographic area appears in
Note 15, "Business Segment Information" of the Notes to Consolidated Financial
Statements set forth on page 28 of the Annual Report to Stockholders, which is
incorporated herein by reference. Fluctuating exchange rates and factors
beyond the control of the Company, such as tariffs and foreign economic
policies, may affect future results of foreign operations.
10
<PAGE> 13
Item 2. PROPERTIES
The following chart lists the principal locations, activity (use) and
square footage of Kaydon's most significant facilities as of December 31, 1993
and indicates whether the property is owned or leased:
<TABLE>
<CAPTION>
Owned or
Location Activity Sq. Ft. Leased
-------- -------- ------ --------
<S> <C> <C> <C>
Clearwater, FL Corporate Headquarters 9,383 Leased
Muskegon, MI Engineering Laboratory 232,250 Owned
(Norton Shores) Manufacturing Facility
Muskegon, MI Manufacturing Facility 162,476 Owned
(Norton Shores)
Muskegon, MI Held For Sale 104,000 Owned
Newaygo, MI Assembly Facility 16,800 Owned
Sumter, SC Manufacturing Facility 168,400 Leased
Sumter, SC Manufacturing Facility 115,200 Owned
Greeneville, TN Manufacturing Facility 80,700 Owned
LaGrange, GA Manufacturing Facility 87,000 Owned
Baltimore, MD Manufacturing Facility 725,000 Owned
St. Louis, MO Manufacturing Facility 18,500 Leased
Blacksburg, VA Manufacturing Facility 111,400 Owned
Virginia Beach, VA Warehouse 28,713 Owned
Offices 9,855 Owned
Krefeld, Germany Warehouse 10,032 Leased
King's Lynn, England Manufacturing Facility 153,000 Owned
Reading, England Manufacturing Facility 26,000 Leased
Monterrey, NL, Mexico Manufacturing Facility 32,000 Owned
</TABLE>
Kaydon owns the two manufacturing facilities located in Muskegon
(Norton Shores), the assembly facility located in Newaygo, the manufacturing
facilities located in Sumter, Greeneville, LaGrange (lease option to purchase
exercised June 1, 1993), Baltimore, Blacksburg, Monterrey, Mexico, and King's
Lynn, England and the warehouse facility in Virginia Beach. The other property
11
<PAGE> 14
in Muskegon was leased (under a capitalized lease) in connection with a
$10,000,000 Industrial Revenue Bond (IRB) financing for a term expiring January
15, 2009, with an option to purchase the property during the pendency of the
lease and an obligation to purchase the property for nominal consideration upon
its expiration. The IRB's were paid off on January 4, 1993, the lease was
terminated, and the Company took title to the land. Due to the continuing
shrinkage of the military and aerospace markets, Kaydon consolidated its three
Muskegon, Michigan plants into two buildings and closed this plant which is
located within a modern industrial park during the year. Management does not
anticipate a material impact, if any, on earnings relating to the sale of this
facility and anticipates that the desirable location will allow the plant
facility to be sold for at least book value. Kaydon operates at two sites in
Sumter, one site is owned and the other is leased (under a capitalized lease)
in connection with a $4,000,000 Industrial Revenue Bond financing for a term
expiring April 1, 1997, with an option to purchase the property during the
pendency of the lease and an obligation to purchase the property for nominal
consideration upon its expiration. The St. Louis property is leased for a term
expiring July 31, 1997. The property in Reading, England, is leased for a term
expiring May 1, 2009. The Krefeld, Germany property is leased for a term
expiring September 30, 1994. The Corporate office located in Clearwater,
Florida is leased for a term expiring January 31, 1999.
12
<PAGE> 15
Kaydon Corporation is the sole shareholder of the following operating
subsidiaries:
<TABLE>
<CAPTION>
Date
Subsidiary Formed/Acquired
---------- ---------------
<S> <C>
Kaydon Ring and Seal, Inc. June 17, 1986
(a Delaware corporation)
Kaydon S.A. de C.V. April 10, 1987
(a Mexico corporation)
Electro-Tec Corp. June 23, 1989
(a Delaware corporation)
I.D.M. Electronics Ltd. June 23, 1989
(a United Kingdom corporation)
Cooper Roller Bearings Company Limited December 16, 1991
(a United Kingdom corporation)
Cooper Split Roller Bearings Corporation December 16, 1991
(a Virginia corporation)
Cooper Geteilte Rollenlager GmbH December 16, 1991
(a Germany corporation)
</TABLE>
Item 3. LEGAL PROCEEDINGS
The Company, together with other companies, certain former officers,
and certain current and former directors, has been named as a co-defendant in
lawsuits filed in the federal court in New York. The suits purport to be class
actions on behalf of all persons who have unsatisfied personal injury and
property damage claims against Keene Corporation. The premise of the suits is
that assets of Keene were transferred to Bairnco subsidiaries, of which Kaydon
was one in 1983, at less than fair value. The suits also allege that the
Company, among other named defendants, was a successor to and alter ego of
Keene. While the ultimate outcome of this litigation is unknown at the present
time, management believes that it has meritorious defenses to the asserted
claims. Accordingly, no provision has been reflected in the financial
statements for any alleged
13
<PAGE> 16
damages. Management believes that the outcome of this litigation will not have
a materially adverse effect on the Company's financial position.
Various other claims, lawsuits and environmental matters arising in
the normal course of business are pending against the Company. Management
believes that the outcome of these matters will not have a materially adverse
effect on the Company's financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1993.
14
<PAGE> 17
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY & RELATED STOCKHOLDER
MATTERS
a. and c. Market Information and Dividends
Information regarding the market price of Kaydon's common stock
appears in Note 14, "Quarterly Results of Operations" of the Notes to
Consolidated Financial Statements on page 27 of Kaydon's 1993 Annual Report to
Stockholders, which is incorporated herein by reference. During 1992, the
Company effected a two-for-one stock split; accordingly, all applicable
financial data has been restated to reflect the split. Kaydon's common stock
is listed on NASDAQ (over the counter) under the symbol KDON. Kaydon declared
cash dividends during 1991, 1992 and 1993 as follows (on a per-share basis):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
March $0.09 $0.075 $0.0625
June 0.09 0.075 0.0625
September 0.09 0.075 0.0625
December 0.10 0.09 0.075
</TABLE>
Effective with the cash dividend declared in December 1993 and paid in January
1994, Kaydon adopted a plan which calls for quarterly cash dividends of $0.10
per share. This recent increase in the dividend amount reflects Kaydon
management's continuing confidence in the growing financial strength of the
Company and their expectation of continued earnings growth.
b. Holders
The number of common equity security holders is as follows:
<TABLE>
<CAPTION>
Number of Holders
of Record
Title of Class As of December 31, 1993
- ------------------------------------------------------- -----------------------
<S> <C>
Common Stock, par value $0.10 per share 1,742
</TABLE>
15
<PAGE> 18
Item 6. SELECTED FINANCIAL DATA
Reference is made to "Financial History" on page 14 and "Management's
Discussion and Analysis" on pages 15 and 16 of Kaydon's 1993 Annual Report to
Stockholders, which is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to "To Our Stockholders" on pages 2 through 4 and
"Management's Discussion and Analysis" on pages 15 and 16 of Kaydon's 1993
Annual Report to Stockholders, which is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements and related notes
included on pages 18 through 28 and "Quarterly Results of Operations" on page
27 of Kaydon's 1993 Annual Report to Stockholders, which is incorporated herein
by reference. Financial statement schedules are included in Part IV of this
filing.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE> 19
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to directors of Kaydon is
included in the Proxy Statement for the 1994 Annual Meeting of Stockholders of
Kaydon, which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The information required with respect to
executive officers of the company is as follows:
<TABLE>
<CAPTION>
Name and Age of Data Pertaining to
Executive Officer Executive Officers
----------------- -------------------
<S> <C>
Lawrence J. Cawley (59) Chief Executive Officer, Chief Financial Officer and
Chairman of the Board. Mr. Cawley was appointed as President
and Chief Executive Officer of Kaydon Corporation in 1987
and relinquished the position of President in September
1989, at which time he was appointed Chairman of the Board.
Effective January of 1992, Mr. Cawley was appointed Chief
Financial Officer. He was President of the Bearings
Division of Kaydon Corporation from 1985 to 1987.
Stephen K. Clough (40) President and Chief Operating Officer. Mr. Clough was
appointed President and Chief Operating Officer of Kaydon
Corporation and was elected to the Board of Directors in
September 1989. He had been Vice President and General
Manager of Kaydon's Bearings Division since 1987, after
having joined Kaydon as Vice President of its Automotive
operation in April 1986.
John F. Brocci (51) Vice President of Administration and Secretary. Mr. Brocci
has been Vice President of Administration since joining
Kaydon in March, 1989. He was appointed Secretary in April,
1992. Prior to joining Kaydon, he was the Operations
Manager for the Sealed Power Division of SPX Corporation.
</TABLE>
17
<PAGE> 20
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included in the Proxy Statement
for the 1994 Annual Meeting of Stockholders of Kaydon, which has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is included in the Proxy Statement
for the 1994 Annual Meeting of Stockholders of Kaydon, which has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included in the Proxy Statement
for the 1994 Annual Meeting of Stockholders of Kaydon, which has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
18
<PAGE> 21
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
a. 1. Financial Statements
The following consolidated financial statements of the Company
are included in the Annual Report of the registrant to its
stockholders for the year ended December 31, 1993 which is
incorporated herein by reference in Part II, Item 8 of this
report.
<TABLE>
<CAPTION>
Page Number in
Annual Report
to Stockholders
---------------
<S> <C>
Report of Independent Public Accountants 17
Consolidated Balance Sheets
as of December 31, 1993 and 1992 18
Consolidated Statements of Income
for the years ended December 31, 1993, 1992 and 1991 19
Consolidated Statements of Stockholders' Investment
for the years ended December 31, 1993, 1992 and 1991 20
Consolidated Statements of Cash Flows
for the years ended December 31, 1993, 1992 and 1991 21
Notes to Consolidated Financial Statements 22 - 28
</TABLE>
2. Financial Statement Schedules
The following financial statement schedules and related Report
of Independent Public Accountants on Financial Statement
Schedules are included in this Form 10-K on the pages noted:
<TABLE>
<CAPTION>
Page Number in
this Form 10-K
--------------
<S> <C>
Report of Independent Public Accountants
on Financial Statement Schedules 21
Schedules for the years ended
December 31, 1993, 1992, and 1991:
Schedule V - Plant and Equipment 22
Schedule VI - Accumulated Depreciation and Amortization
of Plant and Equipment 23
Schedule IX - Short-term Borrowings 24
Schedule X - Supplementary Income Statement
Information 25
</TABLE>
19
<PAGE> 22
All other schedules required by Form 10-K Annual Report have
been omitted because they were inapplicable, the required
information is included in the notes to the consolidated
financial statements or otherwise is not required under
instructions contained in Regulation S-X.
Financial statements of the Company have been omitted since
the Company is primarily an operating company and all
subsidiaries included in the consolidated financial statements
filed are wholly owned subsidiaries.
3. Reference to Exhibits
Reference is made to the Exhibit Index which is found on pages
27 through 34 of this Form 10-K.
b. Reports on Form 8-K
No reports on Form 8-K have been filed during the fourth
quarter of 1993.
20
<PAGE> 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Stockholders and Board of Directors of Kaydon Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Kaydon Corporation
and Subsidiaries' annual report to stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 20, 1994. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed at Item 14.a.2. above are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen & Co.
- -------------------------
ARTHUR ANDERSEN & CO.
Grand Rapids, Michigan
January 20, 1994
21
<PAGE> 24
<TABLE>
<CAPTION>
Schedule V
KAYDON CORPORATION AND SUBSIDIARIES
PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
Balance at Additions Other Balance
Beginning at Changes at End
Classification of Year Costs Retirements Add (Deduct) of Year
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1991
----------------------------
Land and Improvements $ 2,250,000 -- ($ 11,000) $ 590,000 (a) $ 2,852,000
$ 23,000 (c)
Buildings and Leasehold Improvements $ 24,371,000 $ 366,000 ($ 13,000) $1,904,000 (a) $ 26,718,000
$ 90,000 (c)
Machinery and Equipment $106,758,000 $10,791,000 ($ 644,000) $1,703,000 (a) $118,886,000
$ 278,000 (c)
------------- ----------- ----------- ---------- ------------
Total $133,379,000 $11,157,000 ($ 668,000) $4,588,000 $148,456,000
============= =========== =========== ========== ============
Year Ended December 31, 1992
----------------------------
Land and Improvements $ 2,852,000 -- -- $ 239,000 (b) $ 3,019,000
($ 72,000)(c)
Buildings and Leasehold Improvements $ 26,718,000 $ 2,800,000 -- ($ 281,000)(b) $ 28,964,000
($ 273,000)(c)
Machinery and Equipment $118,886,000 $ 3,325,000 ($ 640,000) $ 42,000 (b) $120,531,000
($1,082,000)(c)
------------- ----------- ----------- ---------- ------------
Total $148,456,000 $ 6,125,000 ($ 640,000) ($1,427,000) $152,514,000
============= =========== =========== ========== ============
Year Ended December 31, 1993
----------------------------
Land and Improvements $ 3,019,000 $ 117,000 -- ($ 3,000)(c) $ 3,133,000
Buildings and Leasehold Improvements $ 28,964,000 $ 1,241,000 -- ($ 4,000)(c) $ 30,201,000
Machinery and Equipment $120,531,000 $ 4,274,000 ($2,850,000) $ 681,000 (a) $122,666,000
$ 30,000 (c)
------------- ----------- ----------- ---------- ------------
Total $152,514,000 $ 5,632,000 ($2,850,000) $ 704,000 $156,000,000
============= =========== =========== ========== ============
</TABLE>
(a) Plant and equipment of businesses acquired at date of acquisition.
(b) Reclassification of plant and equipment.
(c) Adjustment for change in foreign currency exchange rate.
22
<PAGE> 25
<TABLE>
<CAPTION>
Schedule VI
KAYDON CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes at End
Classification of Year Expenses Retirements Add (Deduct) of Year
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1991
----------------------------
Land and Improvements $ 233,000 $ 42,000 ($ 11,000) -- $ 264,000
Buildings and Leasehold Improvements $ 7,838,000 $ 960,000 ($ 1,000) -- $ 8,797,000
Machinery and Equipment $63,377,000 $7,851,000 ($ 634,000) $ 42,000 (a) $70,636,000
----------- ---------- ----------- -------- -----------
Total $71,448,000 $8,853,000 ($ 646,000) $ 42,000 $79,697,000
=========== ========== =========== ======== ===========
Year Ended December 31, 1992
----------------------------
Land and Improvements $ 264,000 $ 42,000 -- -- $ 306,000
Buildings and Leasehold Improvements $ 8,797,000 $1,232,000 -- ($ 4,000)(a) $10,025,000
Machinery and Equipment $70,636,000 $8,718,000 ($ 361,000) ($323,000)(a) $78,670,000
----------- ---------- ----------- --------- -----------
Total $79,697,000 $9,992,000 ($ 361,000) ($327,000) $89,001,000
=========== ========== =========== ========= ===========
Year Ended December 31, 1993
----------------------------
Land and Improvements $ 306,000 $ 40,000 -- -- $ 346,000
Buildings and Leasehold Improvements $10,025,000 $1,204,000 ($ 1,000) -- $11,228,000
Machinery and Equipment $78,670,000 $7,946,000 ($2,265,000) ($ 2,000)(a) $84,349,000
----------- ---------- ---------- ---------- -----------
Total $89,001,000 $9,190,000 ($2,266,000) ($ 2,000) $95,923,000
=========== ========== ========== ========== ===========
</TABLE>
(a) Adjustment for change in foreign currency exchange rate.
23
<PAGE> 26
<TABLE>
<CAPTION>
Schedule IX
KAYDON CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
Weighted
Balance Weighted Maximum Amount Average Amount Average
Category of Aggregate at End Average Outstanding Outstanding Interest Rate
Short-Term Borrowings Year Ended of Year Interest Rate During Year During Year (1) During Year (2)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amounts Payable to Banks December 31, 1991 $6,922,000 6.92% $7,651,000 $ 861,000 8.03%
-------------------------------------------------------------------------------------------------------------------------------
Amounts Payable to Banks December 31, 1992 $ 90,000 6.0% $8,269,000 $1,105,000 6.29%
-------------------------------------------------------------------------------------------------------------------------------
Amounts Payable to Banks December 31, 1993 $ 312,000 4.96% $4,211,000 $ 447,000 5.65%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based on daily balances.
(2) Calculated based on daily rates.
24
<PAGE> 27
<TABLE>
<CAPTION>
Schedule X
KAYDON CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
Charged to
Costs and
Item Year Ended Expenses
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Maintenance and Repairs December 31, 1991 $3,593,000
--------------------------------------------------------------------------------------------------
Maintenance and Repairs December 31, 1992 $3,526,000
--------------------------------------------------------------------------------------------------
Maintenance and Repairs December 31, 1993 $3,222,000
--------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Kaydon has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C> <C>
KAYDON CORPORATION
------------------------------------------------
Registrant
Date: March 18, 1994 By: /s/Lawrence J. Cawley
------------------------------------------------
Chief Executive Officer & Chief Financial Officer
Date: March 18, 1994 By: /s/Stephen K. Clough
------------------------------------------------
President and Chief Operating Officer
Date: March 18, 1994 By: /s/Thomas C. Sorrells III
------------------------------------------------
Corporate Controller
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of Kaydon and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/Glenn W. Bailey
----------------------------------------
Glenn W. Bailey - Director March 18, 1994
/s/Gerald J. Breen
----------------------------------------
Gerald J. Breen - Director March 18, 1994
/s/Lawrence J. Cawley
----------------------------------------
Lawrence J. Cawley - Chairman March 18, 1994
/s/Stephen K. Clough
----------------------------------------
Stephen K. Clough - Director March 18, 1994
/s/John H.F. Haskell, Jr.
----------------------------------------
John H.F. Haskell, Jr. - Director March 18, 1994
/s/Norton Stevens
----------------------------------------
Norton Stevens - Director March 18, 1994
</TABLE>
26
<PAGE> 29
c. 1. Exhibits Index
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(2) Stock and Asset Purchase Agreement between Exhibit 2 to Kaydon's Registration Statement
Kaydon Acquisition, Inc. (now Kaydon Ring on Form 8-K filed on July 15, 1986, as amended
and Seal, Inc.) and Koppers Company, Inc., by the Registration Statement filed on Form
dated June 26, 1986. 8-K on September 30, 1986 (SEC File
No. 0-12640).
(2) Agreement of Purchase and Sale between Exhibit 2 to Kaydon's Annual Report on Form
Kaydon Corporation and TRW Automotive 10-K for the year ended December 31, 1987 (SEC
Products, Inc., dated as of June 29, 1987. File No. 0-12640).
(2) Stock Purchase Agreement among Kaydon Exhibit 2 to Kaydon's Registration Statement
Corporation, Kaydon Acquisition Corp. III, on Form 8-K filed on July 7, 1989, as amended
Kaydon Acquisition Corp. IV, KDI Holdings, by the Registration Statement filed on Form
Inc. and KDI Corporation. 8-K on November 3, 1989 and Registration
Statement filed on Form 8-K on March 27, 1990
(SEC File No. 0-12640).
(2) Stock Purchase Agreement among Kaydon Exhibit 2 to Kaydon's Registration Statement
Corporation, Kaydon Acquisition Corp. U.K. on Form 8-K filed on December 31, 1991, as
Limited, Murray Ventures PLC and others amended by the Registration Statement filed on
and William Terence Blaney and others. Form 8-K on February 28, 1992 (SEC File
No. 0-12640).
(3) & (4) Certificate of Incorporation of the Exhibit 3 to Kaydon's Registration Statement
Registrant, dated October 21, 1983. on Form S-1 (No. 2-89399).
(3) & (4) Certificate of Amendment to the Exhibit 3 to Kaydon's Registration Statement
Certificate of Incorporation of the on Form S-1 (No. 2-89399).
Registrant, dated November 23, 1983.
(3) & (4) Certificate of Amendment to the Exhibit 3 to Kaydon's Registration Statement
Certificate of Incorporation of the on Form S-1 (No. 2-89399).
Registrant, dated February 6, 1984.
(3) & (4) Certificate of Correction to the Exhibit 3 to Kaydon's Registration Statement
Certificate of Amendment to the on Form S-1 (No. 2-89399).
Certificate of Incorporation of the
Registrant, dated February 17, 1984.
(3) & (4) Form of Restated Certificate of Exhibit 3 to Kaydon's Registration Statement
Incorporation of the Registrant, dated on Form S-1 (No. 2-89399).
March 1984.
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(3) Amendment to Certificate of Incorporation Exhibit 3 to Kaydon's Annual Report on
of the Registrant, dated February 24, Form 10-K for the year ended December 31, 1987
1987. (SEC File No. 0-12640).
(3) Bylaws of the Registrant, as adopted on Exhibit 3 to Kaydon's Registration Statement
October 27, 1983. on Form S-1 (No. 2-89399).
(3) Amended Bylaws of the Registrant, as Exhibit 3 to Kaydon's Annual Report on
adopted on February 19, 1986. Form 10-K for the year ended December 31, 1985
(SEC File No. 0-12640).
(3) Amendment to the Bylaws of the Registrant, Exhibit 3 to Kaydon's Annual Report on
dated as of September 19, 1989. Form 10-K for the year ended December 31, 1989
(SEC File No. 0-12640).
(3) & (4) Certificate of Amendment to the Exhibit 3 to Kaydon's Quarterly Report on
Certificate of Incorporation of the Form 10-Q for the quarter ended March 28, 1992
Registrant, dated April 27, 1992. (SEC File No. 0-12640).
(4) Form of Stock Certificate for Kaydon Exhibit 3 to Kaydon's Registration Statement
Common Stock. on Form S-1 (No. 2-89399).
(4) & (10) Amended and Restated Revolving Credit and Exhibit 4 to Kaydon's Annual Report on
Term Loan Agreement, dated March 14, 1990. Form 10-K for the year ended December 31, 1990
(SEC File No. 0-12640).
(4) & (10) First Amendment to the Amended and Exhibit 4 to Kaydon's Annual Report on
Restated Revolving Credit and Term Loan Form 10-K for the year ended December 31, 1991
Agreement, dated February 22, 1991. (SEC File No. 0-12640).
(4) & (10) Written notification, dated October 15, Exhibit 4 to Kaydon's Annual Report on
1986, from Kaydon Corporation to Form 10-K for the year ended December 31, 1986
Continental Bank and Trust Company, (SEC File No. 0-12640).
reducing available line of credit pursuant
to the Revolving Credit and Term Loan
Agreement between the Registrant and the
banks named therein.
(10) Demand Note, dated June 30, 1986, from Exhibit 10 to Kaydon's Annual Report on
Kaydon Ring and Seal, Inc., payable to Form 10-K for the year ended December 31, 1986
Kaydon Corporation. (SEC File No. 0-12640).
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(10) Lease Purchase Contract, as amended, Exhibit 10 to Kaydon's Registration Statement
between Keene Corporation and the Economic on Form S-1 (No. 2-89399).
Development Corporation of the County of
Muskegon, dated as of October 15, 1979
(assigned to the Registrant effective
October 31, 1983).
(10) Purchase and Put Agreement between Kaydon Exhibit 10 to Kaydon's Registration Statement
and the banks named therein, dated as of on Form S-1 (No. 2-89399).
March 15, 1984.
(10) First Amendment to Purchase and Put Exhibit 10 to Kaydon's Annual Report on
Agreement, dated as of March 15, 1984, Form 10-K for the year ended December 31, 1984
between Kaydon and the banks named (SEC File No. 0-12640).
therein, dated as of December 15, 1984.
(10) Second Amendment to Purchase and Put Exhibit 10 to Kaydon's Annual Report on
Agreement, dated as of March 15, 1984, Form 10-K for the year ended December 31, 1988
between Kaydon and the banks named (SEC File No. 0-12640).
therein, dated as of December 30, 1988.
(10) Amendment No. 1 to the Amended and Exhibit 10 to Kaydon's Annual Report on
Restated Purchase and Put Agreement, dated Form 10-K for the year ended December 31, 1987
as of May 30, 1985, between Kaydon and the (SEC File No. 0-12640).
banks named therein, dated as of
February 1, 1988.
(10) Loan Agreement between Kaydon and the City Exhibit 10 to Kaydon's Annual Report on
of Muskegon, dated as of August 20, 1984. Form 10-K for the year ended December 31, 1984
(SEC File No. 0-12640).
(10) Security Agreement between Kaydon and the Exhibit 10 to Kaydon's Annual Report on
City of Muskegon, dated as of August 20, Form 10-K for the year ended December 31, 1984
1984. (SEC File No. 0-12640).
(10) Guarantee Agreement between Kaydon and Exhibit 10 to Kaydon's Registration Statement
Security Pacific National Bank as Trustee, on Form S-1 (No. 2-89399).
delivered as of March 15, 1984.
(10) Mortgage and Trust Indenture between the Exhibit 10 to Kaydon's Registration Statement
Economic Development Corporation of the on Form S-1 (No. 2-89399).
City of Muskegon and Security Pacific
National Bank, dated as of October 15,
1979.
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(10) Supplement Number 1 to Mortgage and Trust Exhibit 10 to Kaydon's Annual Report on
Indenture between the Economic Development Form 10-K for the year ended December 31, 1984
Corporation of the County of Muskegon and (SEC File No. 0-12640).
Security Pacific National Bank, dated as
of December 15, 1984.
(10) Loan Agreement by and between Kaydon Exhibit 10 to Kaydon's Annual Report on
Corporation and the Economic Development Form 10-K for the year ended December 31, 1989
Corporation of the City of Norton Shores, (SEC File No. 0-12640).
dated as of January 1, 1990.
(10) Reimbursement Agreement by and between Exhibit 10 to Kaydon's Annual Report on
Kaydon Corporation and NBD Bank, N.A., Form 10-K for the year ended December 31, 1991
dated as of August 1, 1991. (SEC File No. 0-12640).
(10) Indenture of Trust between the Economic Exhibit 10 to Kaydon's Annual Report on
Development Corporation of the City of Form 10-K for the year ended December 31, 1989
Norton Shores and Manufacturers and (SEC File No. 0-12640).
Traders Trust Company, dated as of
January 1, 1990.
(10) First Supplemental Indenture of Trust Exhibit 10 to Kaydon's Annual Report on
between the Economic Development Form 10-K for the year ended December 31, 1991
Corporation of the City of Norton Shores (SEC File No. 0-12640).
and Manufacturers and Traders Trust
Company, dated as of August 1, 1991.
(10) Placement and Remarketing Agreement Exhibit 10 to Kaydon's Annual Report on
between the Economic Development Form 10-K for the year ended December 31, 1989
Corporation of the City of Norton Shores (SEC File No. 0-12640).
and Continental Bank N.A., dated as of
January 11, 1990.
(10) First Amendment to the Placement and Exhibit 10 to Kaydon's Annual Report on
Remarketing Agreement between the Economic Form 10-K for the year ended December 31, 1991
Development Corporation of the City of (SEC File No. 0-12640).
Norton Shores and Continental Bank N.A.
and LaSalle National Bank, dated as of
April 15, 1991.
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(10) Second Amendment to the Placement and Exhibit 10 to Kaydon's Annual Report on
Remarketing Agreement between the Economic Form 10-K for the year ended December 31, 1991
Development Corporation of the City of (SEC File No. 0-12640).
Norton Shores and First Commerce Capital,
dated as of August 14, 1991.
(10) Irrevocable Letter of Credit issued by NDB Exhibit 10 to Kaydon's Annual Report on
Bank, N.A., for the account of Kaydon Form 10-K for the year ended December 31, 1991
Corporation and for the benefit of (SEC File No. 0-12640).
Manufacturers and Traders Trust Company,
dated as of August 13, 1991.
(10) Loan Agreement by and between Kaydon Exhibit 10 to Kaydon's Annual Report on
Corporation and Sumter County, South Form 10-K for the year ended December 31, 1990
Carolina, dated as of March 1, 1990. (SEC File No. 0-12640).
(10) Reimbursement Agreement by and between Exhibit 10 to Kaydon's Annual Report on
Kaydon Corporation and NBD Bank, N.A., Form 10-K for the year ended December 31, 1991
dated as of August 1, 1991. (SEC File No. 0-12640).
(10) Indenture of Trust between Sumter County, Exhibit 10 to Kaydon's Annual Report on
South Carolina, and Manufacturers and Form 10-K for the year ended December 31, 1990
Traders Trust Company, dated as of (SEC File No. 0-12640).
March 1, 1990.
(10) First Supplemental Indenture of Trust Exhibit 10 to Kaydon's Annual Report on
between Sumter County, South Carolina, and Form 10-K for the year ended December 31, 1991
Manufacturers and Traders Trust Company, (SEC File No. 0-12640).
dated as of August 1, 1991.
(10) Placement and Remarketing Agreement Exhibit 10 to Kaydon's Annual Report on
between Sumter County, South Carolina, and Form 10-K for the year ended December 31, 1990
Continental Bank N.A., dated as of (SEC File No. 0-12640).
April 5, 1990.
(10) First Amendment to the Placement and Exhibit 10 to Kaydon's Annual Report on
Remarketing Agreement between Sumter Form 10-K for the year ended December 31, 1991
County, South Carolina, and Continental (SEC File No. 0-12640).
Bank N.A. and LaSalle National Bank, dated
as of April 15, 1991.
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(10) Second Amendment to the Placement and Exhibit 10 to Kaydon's Annual Report on
Remarketing Agreement between Sumter Form 10-K for the year ended December 31, 1991
County, South Carolina, and First Commerce (SEC File No. 0-12640).
Capital, dated as of August 14, 1991.
(10) Irrevocable Letter of Credit issued by NDB Exhibit 10 to Kaydon's Annual Report on
Bank, N.A., for the account of Kaydon Form 10-K for the year ended December 31, 1991
Corporation and for the benefit of (SEC File No. 0-12640).
Manufacturers and Traders Trust Company,
dated as of August 13, 1991.
(10) Letter, dated March 22, 1984, whereby the Exhibit 4 to Kaydon's Registration Statement
Registrant undertakes to furnish to the on Form S-1 (No. 2-89399).
Securities and Exchange Commission, upon
request, a copy of certain instruments as
provided in Item 601(b)(4)(iii)(A) of
Regulation S-K.
(10) Form of Stock Purchase Agreement between Exhibit 10 to Kaydon's Registration Statement
the Registrant and Purchasers of Class B on Form S-1 (No. 2-89399).
Stock of the Registrant, dated as of
February 7, 1984.
(10) Lease Assignment between Keene Corporation Exhibit 10 to Kaydon's Registration Statement
and Kaufman and Broad Home Systems, Inc., on Form S-1 (No. 2-89399).
et al, dated October 15, 1984 (assigned to
the Registrant effective October 31,
1983).
(10) Lease between Bowser, Inc. and the Town of Exhibit 10 to Kaydon's Registration Statement
Greeneville, Greene County, Tennessee, on Form S-1 (No. 2-89399).
dated October 3, 1961 (assigned to the
Registrant effective October 31, 1983).
(10) Kaydon Corporation Employee Stock Exhibit 4(a) to Kaydon's Registration
Ownership and Thrift Plan. Statement on Form S-8 (No. 2-92389), as
amended by filing with SEC pursuant to
Rule 424(c) of the Securities Act of 1933 on
November 1, 1985.
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(10) First Amendment to the Kaydon Corporation Exhibit 10 to Kaydon's Annual Report on
Employee Stock Ownership and Thrift Plan. Form 10-K for the year ended December 31, 1986
(SEC File No. 0-12640).
(10) Second Amendment to the Kaydon Corporation Exhibit 10 to Kaydon's Annual Report on
Employee Stock Ownership and Thrift Plan. Form 10-K for the year ended December 31, 1986
(SEC File No. 0-12640).
(10) Third Amendment to the Kaydon Corporation Exhibit 10 to Kaydon's Annual Report on
Employee Stock Ownership and Thrift Plan. Form 10-K for the year ended December 31, 1987
(SEC File No. 0-12640).
(10) Fourth Amendment to the Kaydon Corporation Exhibit 10 to Kaydon's Annual Report on
Employee Stock Ownership and Thrift Plan. Form 10-K for the year ended December 31, 1989
(SEC File No. 0-12640).
(10) Fifth Amendment to the Kaydon Corporation Exhibit 10 to Kaydon's Annual Report on
Employee Stock Ownership and Thrift Plan. Form 10-K for the year ended December 31, 1989
(SEC File No. 0-12640).
(10) Subsequent Fifth Amendment to the Kaydon Exhibit 10 to Kaydon's Annual Report on
Corporation Employee Stock Ownership and Form 10-K for the year ended December 31, 1991
Thrift Plan. (SEC File No. 0-12640).
(10) Management Incentive Compensation Plan. Exhibit 10 to Kaydon's Registration Statement
on Form S-1 (No. 2-89399).
(10) Kaydon Stock Option Plan, as amended Exhibit 28.1 to Kaydon's Registration
March 22, 1984. Statement on Form S-8 (No. 2-92778).
(10) Second Amendment to the Kaydon Stock Exhibit 10 to Kaydon's Annual Report on
Option Plan. Form 10-K for the year ended December 31, 1990
(SEC File No. 0-12640).
(10) Electro-Tec Corporation Employee Registration Statement as filed on Form S-8,
Retirement Benefit Plan. June 18, 1992 (No. 33-48762).
(11) Schedule of Computation of Net Income Per E-1
Share.
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO. INCORPORATED BY REFERENCE TO
------- ----------- -------- ----------------------------
<S> <C> <C> <C>
(13) Annual Report to Stockholders. 14
(22) Subsidiaries of Registrant. E-2
(24) Consent of Independent Public Accountants. E-3
</TABLE>
34
<PAGE> 37
EXHIBIT 11
KAYDON CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------
<S> <C> <C> <C>
Primary Earnings Per Share:
---------------------------
Net Income $27,695,000 $10,374,000 $25,455,000
----------- ----------- -----------
Average common shares outstanding 17,252,000 17,357,000 17,282,000
Net common shares issuable in respect to
common stock equivalents, with a dilu 61,000 82,000 54,000
----------- ----------- -----------
Total common and common share
equivalent shares 17,313,000 17,439,000 17,336,000
Primary earnings per common share $ 1.60 $ 0.59 $ 1.47
Fully Diluted Earnings Per Share:
---------------------------------
Net Income $27,695,000 $10,374,000 $25,455,000
----------- ----------- -----------
Average common shares outstanding 17,252,000 17,357,000 17,282,000
Net common shares issuable in respect to
common stock equivalents, with a dilu 66,000 91,000 64,000
----------- ----------- -----------
Total common and common share
equivalent shares 17,318,000 17,448,000 17,346,000
Fully diluted earnings per common share $ 1.60 $ 0.59 $ 1.47
</TABLE>
E-1
<PAGE> 38
FINANCIAL HISTORY
<TABLE>
<CAPTION>
Ten Year Summary (1) 1993 1992 1991(2) 1990 1989(3) 1988 1987 1986(4) 1985 1984
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations (dollars and shares in thousands)
Net Sales . . . . . . . . . . . . . $184,060 183,904 160,989 169,442 151,238 135,029 133,473 112,569 84,833 85,984
Gross Profit . . . . . . . . . . . $ 67,781 66,180 55,981 59,410 51,426 47,133 45,565 34,642 27,046 26,262
Operating Income . . . . . . . . . $ 44,314 42,222 39,827 42,648 37,973 35,556 33,940 23,729 19,608 17,225
Interest Income (Expense), net . . $ 142 (1,471) (389) (1,878) (2,026) (2,506) (3,638) (4,282) (5,127) (7,102)
Income Before Income Taxes and
Cumulative Prior Year Effect
of Accounting Changes . . . . . $ 44,456 40,751 39,438 40,770 35,947 33,050 29,903 19,687 14,481 10,123
Provision for Income Taxes . . . . $ 16,761 15,133 13,983 14,761 13,100 12,207 12,784 9,674 6,707 4,415
Cumulative Prior Year Effect of
Accounting Changes . . . . . . . $ -- 15,244 -- -- -- -- -- -- -- --
Net Income . . . . . . . . . . . . $ 27,695 10,374 25,455 26,009 22,847 20,843 17,119 10,013 7,774 5,708
Return on:
Net Sales . . . . . . . . . . . 15.0% 5.6% 15.8% 15.3% 15.1% 15.4% 12.8% 8.9% 9.2% 6.6%
Average Stockholders' Investment 19.8% 7.6% 20.3% 25.4% 28.5% 34.7% 40.8% 34.8% 38.9% 49.1%
Average Capital Employed . . . . 17.7% 6.8% 16.1% 20.8% 22.7% 24.5% 20.5% 13.6% 12.2% 11.7%
Earnings per Share . . . . . . . . $ 1.60 0.59 1.47 1.51 1.33 1.22 1.00 0.60 0.47 0.35
Dividends per Share . . . . . . . . $ 0.37 0.32 0.26 0.21 0.16 0.11 0.05 0.03 -- --
Weighted Average Shares and
Equivalents Outstanding . . . . 17,313 17,439 17,336 17,228 17,180 17,128 17,116 16,892 16,788 16,266
- ----------------------------------------------------------------------------------------------------------------------------
Year-end Position (in thousands)
Working Capital . . . . . . . . . . $ 71,810 56,754 59,171 62,867 42,989 31,921 23,944 30,866 20,426 17,542
Plant and Equipment, net . . . . . $ 60,077 63,513 68,759 61,931 64,012 48,613 49,888 51,009 38,232 37,752
Total Assets . . . . . . . . . . . $217,422 210,967 217,451 176,098 153,949 122,425 120,193 120,062 97,634 101,441
Capital Employed:
Total Debt . . . . . . . . . . . $ 15,312 18,090 40,634 27,069 29,815 22,457 40,371 62,661 59,295 72,807
Stockholders' Investment . . . . $143,840 136,076 137,501 113,757 90,686 69,874 50,327 33,629 23,891 16,068
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Capital Employed . . . . . . . $159,152 154,166 178,135 140,826 120,501 92,331 90,698 96,290 83,186 88,875
- ----------------------------------------------------------------------------------------------------------------------------
Other Data (dollars in thousands)
Backlog of Orders on Hand . . . . . $ 84,385 83,296 93,192 93,079 97,359 74,128 73,949 75,895 52,084 51,920
Depreciation and Amortization . . . $ 10,264 11,194 9,250 8,622 7,388 6,407 6,225 5,506 4,624 4,897
Capital Expenditures, net . . . . . $ 5,088 6,057 11,075 5,817 9,107 4,839 3,286 2,773 5,103 4,432
Net Cash/Funds Provided by
Operating Activities (5) . . . . $ 39,237 38,382 35,153 30,072 25,451 23,905 30,376 22,644 18,277 14,336
Current Ratio . . . . . . . . . . 3.1 2.4 2.6 3.1 2.6 2.3 1.8 2.4 2.4 2.1
Debt to Debt - Equity Ratio . . . . 9.6% 11.7% 22.8% 19.2% 24.7% 24.3% 44.5% 65.1% 71.3% 81.9%
Book Value per Share,
net of treasury stock . . . . . $ 8.62 7.83 7.94 6.63 5.31 4.13 3.01 2.03 1.46 0.98
- ----------------------------------------------------------------------------------------------------------------------------
Number of Common Stockholders . . . 1,742 1,929 2,010 2,199 2,241 2,519 2,718 2,888 3,237 3,547
Number of Shares - Year End,
net of treasury stock
(in thousands) . . . . . . . . . 16,690 17,377 17,326 17,168 17,068 16,939 16,709 16,551 16,422 16,372
Average Number of Employees . . . . 1,661 1,731 1,441 1,638 1,446 1,265 1,255 1,170 926 906
Net Sales per Employee . . . . . . $110,813 106,241 111,720 103,444 104,591 106,742 106,353 96,213 91,612 94,905
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All per share data presented in 1992 and prior years has been restated to
reflect the two-for-one stock split effected in 1992. See Note 2 to
Consolidated Financial Statements.
(2) Financial results include Cooper Bearings Ltd.'s December operating
results. See Note 3 to Consolidated Financial Statements.
(3) Financial results beginning June 24, 1989 include Electro-Tec Corp. and
I.D.M. Electronics Ltd.
(4) Financial results beginning June 30, 1986 include Kaydon Ring and Seal,
Inc.
(5) 1986 through 1993 are presented in accordance with Statement of Financial
Accounting Standards No. 95.
14
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
1993 Compared to 1992
Net sales increased slightly from $183,904,000 to $184,060,000 in 1993. The
backlog of unshipped orders at the end of the year also increased to
$84,385,000 from $83,296,000 last year. The backlog increase reversed a
downward trend over the last several years. Backlog has become less indicative
of future results as the Company has made efforts to shorten manufacturing lead
times creating a faster response to customer orders.
Gross profit as a percentage of sales in 1993 was 36.8% compared to 36.0% in
1992. The increase is attributable to improved manufacturing results.
Selling and administrative expenses decreased to $23,467,000 or 12.7% of
sales from $23,958,000 or 13.0% of sales. The slight decrease in selling and
administrative expenses as a percentage of sales represents the Company's
efforts to control expenses.
Net interest income this year of $142,000 compared to net interest expense
of $1,471,000 last year resulted from the repayment during late 1992 of the
Cooper Bearings acquisition debt and the repayment of $10,000,000 of Industrial
Revenue Bonds in early January of 1993.
The effective tax rate for 1993 was 37.7% compared to 37.1% in 1992. The
increase is a direct result of the increased corporate tax rates created by the
Omnibus Budget Reconciliation Act of 1993.
1992 Compared to 1991
Net sales increased by 14.2% from 1991 to $183,904,000. The 1992 sales
include a full year's sales from Cooper Bearings, acquired late in 1991.
Without the addition of Cooper, sales would have been essentially flat with the
prior year. The backlog of unshipped orders at the end of the year was
$83,296,000 as compared to $93,192,000 at the end of 1991. The decrease is due
in part to delays in the release of some large government orders for bearings
and slip-rings.
Gross profit as a percentage of sales in 1992 was 36.0% compared to 34.8% in
1991. The increase primarily reflects the full year addition of Cooper,
partially offset by the additional cost associated with the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 106. Cooper's line
of split bearings generally carries higher gross margins than do many of
Kaydon's other products.
Two accounting changes, SFAS 106 - "Employers' Accounting for Postretirement
Benefits Other Than Pensions", and SFAS No. 109 - "Accounting for Income Taxes"
were adopted in the fourth quarter of 1992. Both of the Standards require
retroactive restatement to the beginning of the year.
SFAS 106 requires recognition of employer-provided nonpension retirement
benefits on an accrual basis rather than on a cash basis, the previous standard
accounting practice. The effect of the adoption of SFAS 106 is two-fold; a
one-time portion that recognizes the cumulative effect of the change net of
tax; and an on-going portion that recognizes the Company's additional annual
expense. The former is $16,047,000 which is identified as a separate item on
the Company's consolidated statements of income. The latter, net of tax, is
$1,088,000.
SFAS 109 requires the Company to change its method of recognizing deferred
tax assets and liabilities. The change decreased the Company's overall
deferred tax liability and resulted in a one-time cumulative benefit of
$803,000 which is recorded as a separate item on the Company's consolidated
statements of income.
Operating profit increased by $2,395,000 to $42,222,000 in 1992. Operating
profit before the current year effects of SFAS 106 increased by $4,119,000 to
$43,946,000. Operating profit as a percentage of sales was 23.0% in 1992
compared to 24.7% in 1991. Operating profit as a percentage of sales before
the current year effects of SFAS 106 would have been 23.9%. The decrease in
operating profit percentage is due primarily to higher selling and
administrative expenses associated with the Cooper Bearings operation and the
amortization of the goodwill associated with the acquisition.
Net interest expense increased $1,082,000, to $1,471,000 from $389,000 in
1991. The increase is a direct result of debt associated with the Cooper
Bearing acquisition in December of 1991. This debt was paid off in late 1992.
The effective tax rate for 1992 was 37.1%, as compared to 35.5% in 1991.
The adoption of SFAS 109 had no effect on the current year effective tax rate.
The increase was due to higher overall state income tax.
Liquidity and Capital Resources
Working capital was $71,810,000 at December 31, 1993, as compared to
$56,754,000 at December 31, 1992, reflecting current ratios of 3.1 and 2.4,
respectively. The increase in working capital primarily reflects the increase
of cash and securities of $10,864,000 from 1992 to 1993 and the decrease in
current debt of $8,466,000, partially offset by increases in payables and
accrued expenses of $2,403,000.
Total debt decreased $2,778,000 from December 31, 1992, to a level of
$15,312,000. The components of the debt at year-end are short-term bank
borrowings of $312,000, current portion of long-term debt of $1,312,000 and
long-term debt of $13,688,000. Cash and securities on hand of $24,528,000
exceed total debt by $9,216,000 whereas last year debt exceeded cash and
securities by $4,426,000. The Company's cash generation from operating
activities was a record at $39,237,000. Net capital expenditures during the
year relating to plant and equipment were $5,088,000, and the Company spent
approximately $14,400,000 to repurchase 760,000 shares of its stock on the open
market. The Company's stock purchase was pursuant to an authorization to
purchase up to 1,000,000 shares approved by its Board of Directors in September
of 1993.
15
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The Company's planned capital requirements for 1994 consist principally of
capital expenditures relating to plant and equipment, cash dividends to
stockholders and the potential purchase of the remaining 240,000 shares of the
Company's stock, pursuant to the plan discussed in the previous paragraph.
Planned capital expenditures relating to environmental issues are not expected
to be material, however, such expenditures could be influenced by new and
revised environmental regulations and laws. It is expected that these capital
requirements will be financed by operating activities.
The Company is actively seeking potential acquisitions and, depending upon
the size and structure of such acquisitions, financing may be required. On
January 28, 1994, the Company completed the purchase of the assets of
Industrial Tectonics Inc for approximately $7,500,000.
The Company had in place at December 31, 1993, short-term lines of credit of
$31,000,000 with $30,688,000 available and revolving credit and term loan
agreements in the amount of $62,500,000 with $55,500,000 available.
Other
Effect of Foreign Currency Translation
A portion of the Company's sales, income and cash flows is derived from its
international operations. The financial position and the results of operations
of the Company's foreign subsidiaries are measured using the local currency of
the countries in which they operate and are translated into U.S. dollars.
Accordingly, the Company's consolidated operating results and net assets will
fluctuate depending upon the strengthening or weakening of the U.S. dollar.
Supplemental Information on Changing Prices
The impact of inflation on the Company has been moderate over the last
several years and is believed to be consistent with that of the industry as a
whole.
Impact of Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" ("SFAS 112"), was issued in November 1992 and
requires companies to accrue, during the period an employee renders service,
the expense of providing certain post-employment benefits. Currently, the
Company recognizes the expense of such benefits, to the extent provided, at the
time payment is deemed probable. Adoption of SFAS 112 is required no later
than 1994. The Company will adopt SFAS 112 effective January 1, 1994. The
Company estimates an after tax charge of approximately $2,000,000 relating to
the adoption.
Environmental
Environmental protection laws continue to affect the Company's manufacturing
operations. The Company has complied with these laws by making various capital
expenditures for pollution control equipment and through plant operational
practices. This compliance has not had, nor does the Company expect it to
have, a material effect on financial results. Of course, the Company cannot
assess the possible effect of compliance with future regulations and laws.
During May of 1993, Kaydon Ring & Seal, Inc., a wholly owned subsidiary of
the Company, elected to close a chrome plating line due to the discovery of a
possible wastewater/groundwater interface problem. The unilateral decision by
Ring & Seal was not prompted by government order, but rather was precautionary
to ensure compliance with environmental laws and regulations. A temporary
plating line was built, resulting in little impact on Ring & Seal's operations.
The cost of approximately $650,000 associated with this situation was charged
to operations during 1993. Currently, the Company is evaluating future plans
for its chrome plating line. A permanent above ground line would result in a
capital expenditure of approximately $1,000,000.
In late 1985, Kaydon entered into discussions with the Michigan Department
of Natural Resources ("MDNR") to develop a remedial cleanup plan for one of its
plant sites in Muskegon, Michigan, which is on the Environmental Protection
Agency's ("EPAS") National Priority List. In 1986, Kaydon took measures
necessary to clean up the site according to the plan approved by the MDNR.
These measures included the removal and disposal of contaminated soils and the
drilling of groundwater monitoring wells, the results of which have been
continually reported to the MDNR. Management believes that it has worked with
the MDNR and EPA to the letter and spirit of the law. The site is being
evaluated to determine if further action is required. While it is impossible
to forecast the ultimate future cost, management believes, based upon nine
years of evaluating the site, that such cost will not be material to its
operating results.
Litigation
The Company, together with other companies, certain former officers, and
certain current and former directors, has been named as a co-defendant in
lawsuits filed in the federal court of New York. The suits purport to be class
actions on behalf of all persons who have unsatisfied personal injury and
property damage claims against Keene Corporation. The premise of the suits is
that assets of Keene were transferred to Bairnco subsidiaries, of which Kaydon
was one in 1983, at less than fair value. The suits also allege that the
Company, among other named defendants, were successors to and alter egos of
Keene. While the ultimate outcome of this litigation is unknown at the present
time, management believes that it has meritorious defenses to the asserted
claims. Accordingly, no provision has been reflected in the consolidated
financial statements for any alleged damages. Management believes that the
outcome of this litigation will not have a materially adverse effect on the
Company's financial position.
Various other claims, lawsuits and environmental matters arising in the
normal course of business are pending against the Company. Management believes
that the outcome of these matters will not have a materially adverse effect on
the Company's financial position or results of operations.
16
<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
______________________________________________________________________________
To the Stockholders and Board of Directors of Kaydon Corporation:
We have audited the accompanying consolidated balance sheets of Kaydon
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kaydon Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As explained in Notes 5 and 11 to the consolidated financial statements,
effective January 1, 1992, the Company changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
Grand Rapids, Michigan,
January 20, 1994
17
<PAGE> 42
CONSOLIDATED BALANCE SHEETS
KAYDON CORPORATION AND SUBSIDIARIES
December 31, 1993 and 1992
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________________
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,528,000 $ 13,664,000
Accounts receivable, less allowances of
$1,077,000 in 1993 and $1,036,000 in 1992 . . . . . . . . . . . . . . 24,543,000 21,833,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,529,000 55,347,000
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,920,000 6,683,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 106,520,000 97,527,000
----------- -----------
Plant and Equipment, at cost:
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,133,000 3,019,000
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . 30,201,000 28,964,000
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,666,000 120,531,000
----------- -----------
156,000,000 152,514,000
Less - accumulated depreciation and amortization . . . . . . . . . . . . . . (95,923,000) (89,001,000)
----------- -----------
60,077,000 63,513,000
----------- -----------
Cost in excess of net tangible assets of purchased businesses, net . . . . . . . 43,628,000 44,772,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,197,000 5,155,000
----------- -----------
$217,422,000 $210,967,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 1,312,000 $ 10,000,000
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312,000 90,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,724,000 5,903,000
Accrued expenses -
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,449,000 3,750,000
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,224,000 6,547,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,103,000 3,999,000
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 10,586,000 10,484,000
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 34,710,000 40,773,000
----------- -----------
Long-term postretirement benefit obligation . . . . . . . . . . . . . . . . . . . 25,184,000 26,118,000
----------- -----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,688,000 8,000,000
----------- -----------
Stockholders' Investment:
Preferred stock -
($.10 par value, 2,000,000 shares authorized; none issued) -- --
Common stock -
($.10 par value, 48,000,000 shares authorized; 17,509,265 and 17,435,640
shares issued in 1993 and 1992) . . . . . . . . . . . . . . . . . . . . . 1,751,000 1,743,000
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,179,000 13,672,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,214,000 127,442,000
Less - treasury stock, at cost (819,624 and 58,442 shares in 1993 and 1992). . (15,396,000) (963,000)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . (5,908,000) (5,818,000)
----------- -----------
143,840,000 136,076,000
----------- -----------
$217,422,000 $210,967,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 43
CONSOLIDATED STATEMENTS OF INCOME
KAYDON CORPORATION AND SUBSIDIARIES
For the years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________
1993 1992 1991
------------ ----------- -------------
<S> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $184,060,000 $183,904,000 $160,989,000
Cost of Sales . . . . . . . . . . . . . . . . . . . 116,279,000 117,724,000 105,008,000
------------ ------------ ------------
Gross Profit . . . . . . . . . . . . . . . . . . . . . 67,781,000 66,180,000 55,981,000
Selling and Administrative Expenses . . . . . . . . 23,467,000 23,958,000 16,154,000
------------ ------------ ------------
Operating Income . . . . . . . . . . . . . . . . . . . 44,314,000 42,222,000 39,827,000
Interest expense . . . . . . . . . . . . . . . . . . (270,000) (1,823,000) (1,587,000)
Interest income . . . . . . . . . . . . . . . . . . 412,000 352,000 1,198,000
------------ ------------ ------------
Income Before Income Taxes and Cumulative
Prior Year Effect of Changes in Accounting
Principles . . . . . . . . . . . . . . . . . . . 44,456,000 40,751,000 39,438,000
Provision for income taxes . . . . . . . . . . . . 16,761,000 15,133,000 13,983,000
------------ ------------ ------------
Income Before Cumulative Prior Year Effect of
Changes in Accounting Principles . . . . . . . . . 27,695,000 25,618,000 25,455,000
Cumulative Prior Year Effect of Changes in
Accounting Principles for:
Postretirement benefits, net of income tax
benefit of $9,547,000 . . . . . . . . . . . . -- (16,047,000) --
Income taxes . . . . . . . . . . . . . . . . . . . -- 803,000 --
------------ ------------ ------------
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 27,695,000 $ 10,374,000 $ 25,455,000
============ ============ ============
Earnings Per Share Before Cumulative Prior Year
Effect of Changes in Accounting Principles . . . . . $ 1.60 $ 1.47 $ 1.47
Cumulative Prior Year Effect of Changes
in Accounting Principles for:
Postretirement benefits . . . . . . . . . . . . . -- (0.92) --
Income taxes . . . . . . . . . . . . . . . . . . . -- 0.04 --
------------ ------------ ------------
Earnings Per Share . . . . . . . . . . . . . . . . . . $ 1.60 $ 0.59 $ 1.47
============ ============ ============
Dividends Per Share . . . . . . . . . . . . . . . . . $ .37 $ .32 $ .26
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 44
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
KAYDON CORPORATION AND SUBSIDIARIES
For the years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________________________
Cumulative
Common Paid-in Retained Treasury Translation
Stock Capital Earnings Stock Adjustment Total
-------- ----------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 . . $ 861,000 $11,714,000 $101,801,000 $ (684,000) $ 65,000 $113,757,000
Net income, 1991 . . . . . . -- -- 25,455,000 -- -- 25,455,000
Cash dividends declared . . -- -- (4,533,000) -- -- (4,533,000)
Issuance of 85,700 shares of
common stock under
stock option plan . . . . 8,000 1,878,000 -- -- -- 1,886,000
Purchase of 6,957 shares of
treasury stock . . . . . -- -- -- (279,000) -- (279,000)
Current year translation
adjustment . . . . . . . -- -- -- -- 1,215,000 1,215,000
---------- ----------- ------------ ------------ ------------- ------------
Balance, December 31, 1991 . . 869,000 13,592,000 122,723,000 (963,000) 1,280,000 137,501,000
Net income, 1992 . . . . . . -- -- 10,374,000 -- -- 10,374,000
Cash dividends declared . . -- -- (5,465,000) -- -- (5,465,000)
Two-for-one stock split . . 869,000 (869,000) -- -- -- --
Issuance of 51,450 shares of
common stock under
stock option plan . . . . 5,000 949,000 -- -- -- 954,000
Current year translation
adjustment . . . . . . . -- -- -- -- (7,098,000) (7,098,000)
Adjustment for minimum
pension liability . . . . -- -- (190,000) -- -- (190,000)
---------- ----------- ------------ ------------ ------------- ------------
Balance, December 31, 1992 . . 1,743,000 13,672,000 127,442,000 (963,000) (5,818,000) 136,076,000
Net income, 1993 . . . . . . -- -- 27,695,000 -- -- 27,695,000
Cash dividends declared . . -- -- (6,387,000) -- -- (6,387,000)
Issuance of 73,625 shares of
common stock under
stock option plan . . . . 8,000 1,507,000 -- -- -- 1,515,000
Purchase of 761,182 shares
of treasury stock . . . . -- -- -- (14,433,000) -- (14,433,000)
Current year translation
adjustment . . . . . . . -- -- -- -- (90,000) (90,000)
Adjustment for minimum
pension liability . . . . -- -- (536,000) -- -- (536,000)
---------- ----------- ------------ ------------ ------------- ------------
Balance, December 31, 1993 . . $1,751,000 $15,179,000 $148,214,000 $(15,396,000) $(5,908,000) $143,840,000
========== =========== ============ ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 45
CONSOLIDATED STATEMENTS OF CASH FLOWS
KAYDON CORPORATION AND SUBSIDIARIES
For the years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________________
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 27,695,000 $ 10,374,000 $ 25,455,000
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization . . . . . . . . . . . 10,264,000 11,194,000 9,250,000
Cumulative prior year effect of changes
in accounting principles -
postretirement benefits. . . . . . . . . . . . . -- 25,594,000 --
Deferred taxes . . . . . . . . . . . . . . . . . . (2,625,000) (13,339,000) (509,000)
Changes in assets and liabilities, net of
effects of acquisitions of businesses:
Accounts receivable . . . . . . . . . . . . . (2,710,000) 3,603,000 3,412,000
Inventories . . . . . . . . . . . . . . . . . 4,290,000 (75,000) 2,298,000
Other current assets . . . . . . . . . . . . . 1,236,000 (983,000) (563,000)
Accounts payable . . . . . . . . . . . . . . 819,000 (2,778,000) 377,000
Accrued expenses . . . . . . . . . . . . . . . 1,202,000 4,268,000 (4,567,000)
Long-term postretirement benefit
obligation . . . . . . . . . . . . . . . . . (934,000) 524,000 --
------------ ------------ ------------
Net cash provided by operating activities . 39,237,000 38,382,000 35,153,000
------------ ------------ ------------
Cash Flows from Investing Activities:
Decrease in short-term investments . . . . . . . . . . . -- -- 13,000,000
Additions to plant and equipment, net . . . . . . . . . (5,088,000) (6,057,000) (11,075,000)
Acquisitions of businesses . . . . . . . . . . . . . . . (716,000) -- (42,793,000)
------------ ------------ ------------
Net cash used in investing activities . . . (5,804,000) (6,057,000) (40,868,000)
------------ ------------ ------------
Cash Flows from Financing Activities:
Principal payments of long-term debt . . . . . . . . . . (10,000,000) (14,275,000) (1,034,000)
Cash dividends paid . . . . . . . . . . . . . . . . . . (6,270,000) (5,202,000) (4,308,000)
Net borrowings (payments) under lines of credit . . . . 222,000 (6,783,000) 1,489,000
Proceeds from issuance of common stock . . . . . . . . . 1,189,000 789,000 1,388,000
Purchase of treasury stock . . . . . . . . . . . . . . . (14,433,000) -- (279,000)
Proceeds from issuance of long-term debt . . . . . . . . 7,000,000 -- 11,765,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (484,000)
------------ ------------ ------------
Net cash (used in) provided by
financing activities . . . . . . . . . . . (22,292,000) (25,471,000) 8,537,000
------------ ------------ ------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents . . . . . . . . . . . . . . . . . . (277,000) (1,052,000) 305,000
------------ ------------ ------------
Net Increase in Cash and Cash Equivalents . . . . . . . . . 10,864,000 5,802,000 3,127,000
Cash and Cash Equivalents - Beginning of Year . . . . . . . 13,664,000 7,862,000 4,735,000
------------ ------------ ------------
Cash and Cash Equivalents - End of Year . . . . . . . . . . $ 24,528,000 $ 13,664,000 $ 7,862,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KAYDON CORPORATION AND SUBSIDARIES
________________________________________________________________________________
(1) Summary of Significant Accounting Policies
Principles of Consolidation:
The consolidated financial statements include the accounts of Kaydon
Corporation (the "Company") and its domestic and foreign subsidiaries, all of
which are wholly-owned. All significant intercompany accounts and transactions
have been eliminated.
Description of Business:
The Company designs, manufactures and sells custom-engineered products
for a broad and diverse customer base. The Company's principal products
include antifriction bearings, bearing systems, filters, filter housings, high
performance rings, sealing rings, specialty retaining rings, shaft seals and
slip rings. These products are used by customers in a variety of medical,
instrumentation, material handling, machine tool positioning, aerospace,
defense, construction and other industrial applications.
Cash and Cash Equivalents:
Cash and cash equivalents consist of $3,860,000 of cash held in banks
and $20,668,000 in highly liquid investments with maturity dates of three
months or less from the date of purchase. Due to the short maturities of these
investments, the carrying amount approximates fair market value. Cash
equivalents are high-credit quality financial instruments of which
approximately $17,000,000 are short-term United States Treasury Bills.
Inventories:
Inventories are valued at the lower of cost or market and include
material, labor and overhead. Cost is determined using the first-in, first-out
("FIFO") method for substantially all inventories. Inventories are summarized
as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992
------------- -----------
<S> <C> <C>
Raw material ............. $12,251,000 $12,591,000
Work in process ............. 10,347,000 14,678,000
Finished goods ............. 28,931,000 28,078,000
----------- -----------
$51,529,000 $55,347,000
=========== ===========
</TABLE>
Plant and Equipment:
Plant and equipment are stated at cost. The cost is depreciated over
the estimated useful lives of the assets using the straight line method. Useful
lives vary among the classifications, but generally fall within the following
ranges:
<TABLE>
<S> <C>
Buildings, land improvements and
leasehold improvements .......................... 10 - 40 years
Machinery and equipment .......................... 4 - 15 years
</TABLE>
Leasehold improvements are amortized over the terms of the respective
leases or over their useful lives, whichever is shorter. Renewals and
betterments are capitalized while maintenance and repairs are charged to
operations in the year incurred.
Research and Development Costs:
Research and development costs, which are not material to the
consolidated statements of income, are expensed as incurred.
Cost in Excess of Net Tangible Assets of Purchased
Businesses:
Cost in excess of net tangible assets of purchased businesses totaling
$16,239,000 arose prior to 1971 and is not being amortized since, in the
opinion of management, there has been no diminution in value. Cost in excess
of net tangible assets of purchased businesses acquired after 1970 is being
amortized straight line over a period of 40 years and is stated net of
accumulated amortization of $1,971,000 and $1,132,000 at December 31, 1993 and
1992, respectively.
Other Assets:
Other assets include, among other items, deferred tax assets and
various patents and noncompete agreements. Deferred tax assets are further
discussed in Note 5. Patents and noncompete agreements are being amortized on
a straight line basis over 15 years and 7 years, respectively. They are stated
net of accumulated amortization of $2,118,000 and $1,883,000 at December 31,
1993 and 1992, respectively.
Foreign Currency Translation:
The financial position and results of operations of the Company's
United Kingdom and German subsidiaries are measured using the local currency as
the functional currency. Assets and liabilities are translated at the exchange
rate in effect at year end. Income statement accounts are translated at the
average rate of exchange in effect during the year. The resulting translation
adjustment is recorded as a separate component of stockholders' investment.
Fair Value of Financial Instruments:
The carrying amount of financial instruments included in current
assets and current liabilities approximates fair value due to the short-term
nature of these instruments. The stated value of the Company's long-term debt
approximates fair value as interest rates on that debt are tied to the prime
commercial rate and adjust frequently to prevailing market conditions.
Reclassifications:
Certain reclassifications of prior years' amounts have been made to
conform to 1993 classifications.
(2) Capital Stock
On April 16, 1992, the Company's stockholders approved an amendment to
the Articles of Incorporation increasing the authorized common stock from
12,000,000 to 48,000,000 shares of $.10 par value stock. Subsequent to
receiving approval to increase the authorized shares, on April 16, 1992, the
Board of Directors approved a two-for-one stock split for stockholders of record
at April 30, 1992. Common stock was
22
<PAGE> 47
_______________________________________________________________________________
increased by $869,000 with an offsetting reduction to additional paid-in
capital, to reflect the $.10 par value per share for each additional share
issued.
Where applicable, references in the financial statements with regard
to number of shares of common stock or related per share amounts have been
restated to reflect the stock split.
(3) Acquisitions
On December 16, 1991, the Company acquired all of the capital stock of
Prizerandom Limited, a United Kingdom corporation for $43,440,000. Prizerandom
Limited is a holding company for Cooper Bearings Limited, a United Kingdom
corporation, that was the primary subject of the acquisition. Cooper Bearings
Limited is itself a holding company comprised of three subsidiaries, all of
which are manufacturers or distributors of complete bearings and related
component parts. The acquisition was financed by Kaydon Corporation cash plus
bank loans obtained in the normal course of business.
The acquisition was accounted for using the purchase method of
accounting, and, accordingly, the net assets and results of operations of
Cooper Bearings Limited are included in the 1991 consolidated financial
statements since November 23, 1991, the effective date of the acquisition for
financial reporting purposes.
In accordance with the purchase method of accounting, the purchase
price was allocated to the underlying assets and liabilities acquired based on
their respective estimated fair values at the effective date of the
acquisition. The excess of the purchase price over the estimated fair value of
net assets acquired of $30,988,000 was recorded as Cost in Excess of Net
Tangible Assets of Purchased Businesses and is being amortized on a
straight-line basis over 40 years.
The cash paid for the acquisition is summarized as follows:
<TABLE>
<S> <C>
Fair value of assets acquired . . . . . . . . . . . . . . . . . $ 52,975,000
Liabilities assumed or created . . . . . . . . . . . . . . . (24,585,000)
------------
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,390,000
============
</TABLE>
Pro forma unaudited operating results of the Company and its subsidiaries,
assuming the acquisition had been made on January 1, 1991, are summarized
below:
<TABLE>
<S> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $ 188,722,000
Net income . . . . . . . . . . . . . . . . . . . . 25,983,000
Earnings per share . . . . . . . . . . . . . . . . 1.50
</TABLE>
(4) Earnings Per Share
Earnings per share of common stock are based on the weighted average
of outstanding common shares and common share equivalents to the extent they
are dilutive during the three years presented (approximately 17,313,000
17,439,000, 17,336,000 in 1993, 1992 and 1991, respectively).
(5) Income Taxes
Effective January 1, 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
As of January 1, 1992, the Company recorded a tax credit of
approximately $803,000 or $.04 per share, which represents the net decrease to
the deferred tax liability as of that date. Such amount has been reflected
in the 1992 consolidated statement of income as a cumulative prior year effect
of a change in accounting principle. There was no significant effect on 1992
pre-tax income resulting from the adoption of SFAS 109.
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Current:
U.S. Federal . . . . . . . . . . $15,263,000 $13,031,000 $12,985,000
State . . . . . . . . . . . . . . 2,060,000 2,046,000 1,444,000
Foreign . . . . . . . . . . . . . 1,401,000 1,461,000 45,000
U.S. Federal
Rate Change . . . . . . . . . . 445,000 -- --
----------- ----------- -----------
19,169,000 16,538,000 14,474,000
----------- ----------- -----------
Deferred:
U.S. Federal . . . . . . . . . . (2,188,000) (1,281,000) (442,000)
State . . . . . . . . . . . . . . (43,000) (124,000) (49,000)
U.S. Federal
Rate Change . . . . . . . . . . (177,000) -- --
----------- ----------- -----------
(2,408,000) (1,405,000) (491,000)
----------- ----------- -----------
$16,761,000 $15,133,000 $13,983,000
=========== =========== ===========
</TABLE>
The deferred component of the provision for income taxes arose from
the reflection of certain items in different periods for financial reporting
and income tax purposes. The significant components of the net deferred income
tax credits during the year ending December 31, 1991 were as follows:
<TABLE>
<S> <C>
Financial accruals and reserves
not currently deductible . . . . . . . . . . . . . . . . . . . . . . . . $ 306,000
Inventory accounting method differences . . . . . . . . . . . . . . . . . . (119,000)
Differences in financial reporting and
allowable income tax depreciation
and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . (669,000)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,000)
----------
$(491,000)
==========
</TABLE>
23
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
KAYDON CORPORATION AND SUBSIDIARIES
______________________________________________________________________________
In 1993, 1992 and 1991, the Company's effective tax rates were 37.7%,
37.1% and 35.5%, respectively, of income before income taxes and differed from
the U.S. federal statutory income tax rate primarily due to the effect of state
income taxes, net of the federal tax benefit.
Cash expended for income taxes totaled $19,603,000 in 1993,
$15,164,000 in 1992 and $16,085,000 in 1991.
The tax effect and type of significant temporary differences by
component which give rise to the net deferred tax asset as of December 31, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
----------- ----------
<S> <C> <C>
Deferred tax assets:
Inventory accounting method
and basis differences . . . . . . . . . . . . . . . . $2,969,000 $3,422,000
Financial accruals and reserves
not currently deductible . . . . . . . . . . . . . . . 3,857,000 2,211,000
Plant and equipment basis
differences . . . . . . . . . . . . . . . . . . . . . 65,000 128,000
Intangible and other assets . . . . . . . . . . . . . . 462,000 553,000
Postretirement benefit
obligation . . . . . . . . . . . . . . . . . . . . . 10,077,000 10,190,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . 53,000 308,000
Valuation allowance . . . . . . . . . . . . . . . . . . -- --
---------- ----------
17,483,000 16,812,000
---------- ----------
Deferred tax liabilities:
Inventory accounting method
and basis differences . . . . . . . . . . . . . . . . (579,000) (1,494,000)
Plant and equipment basis
differences, including
depreciation and
amortization . . . . . . . . . . . . . . . . . . . . (7,889,000) (8,324,000)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (5,000) (392,000)
---------- -----------
(8,473,000) (10,210,000)
---------- -----------
$9,010,000 $6,602,000
========== ==========
</TABLE>
The Company has not provided for United States income taxes on
undistributed earnings of foreign subsidiaries. Recording of deferred income
taxes on these undistributed earnings is not required as these earnings have
been permanently reinvested. The amounts subject to U.S taxation upon
remittance of these earnings as dividends would be substantially offset by
available foreign tax credits.
(6) Short-Term Debt
The Company has short-term lines of credit with banks totaling
$31,000,000 with approximately $312,000 and $90,000 outstanding at December 31,
1993 and 1992, respectively. The rates of interest on the outstanding balances
of each of these lines are at or slightly below the applicable prime commercial
rate (as defined in the respective agreements), which was 6.0% at December 31,
1993.
(7) Long-Term Debt
The Company's long-term debt consists of the following at December 31,:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Revolving credit line . . . . . . . . . . . . . $ 7,000,000 $ --
Industrial Revenue Bonds . . . . . . . . . . . 8,000,000 18,000,000
----------- -----------
15,000,000 18,000,000
Less-current portion . . . . . . . . . . . . . (1,312,000) (10,000,000)
----------- -----------
$13,688,000 $ 8,000,000
=========== ===========
</TABLE>
The revolving credit line represents borrowings under a $60,000,000
domestic revolving credit and term loan agreement. The interest rate in effect
at December 31, 1993, was 3.94%. The borrowing rate is defined in the
agreements and is adjusted quarterly based upon a debt-to-equity ratio. The
borrowing rate is generally the prime commercial rate or lower. Commitment
fees ranging from 1/4% to 1/2% of the unused portion of credit are charged
quarterly. The Company also has available a $2,500,000 foreign line of credit.
The Industrial Revenue Bonds ("IRBs") are due from 1997 through 1999
and provide for monthly interest payments at a floating rate derived from the
prime commercial rate, market conditions and the credit rating of the bank
issuing the letter of credit collateralizing the bonds. The IRB's are subject
to purchase and put agreements whereby the bondholders may, at their option,
sell the bonds to the Company at face value in 1996.
The annual maturities for long-term debt, assuming the Industrial
Revenue bondholders do not exercise their option to sell the bonds to the
Company, are summarized as follows:
Year ending December 31,
<TABLE>
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,312,000
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,750,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
</TABLE>
Provisions of the IRB and revolving credit agreements contain
covenants which require, among other things, the maintenance of a minimum
working capital ratio and a specified level of stockholders' investment. At
December 31, 1993, the Company was in compliance with these provisions under
its debt agreements.
Cash expended for interest on debt totaled $349,000 in 1993,
$1,943,000 in 1992 and $1,586,000 in 1991.
(8) Stock Options
On April 21, 1993, the Company's stockholders approved two new stock
option plans, the 1993 Stock Option Plan and the 1993 Non-Employee Directors
Stock Option Plan. The Company's previous stock option plan, created in 1984
with a term of ten years, was terminated. No grants were made from the 1984
24
<PAGE> 49
plan during 1993 and the plan terminated with approximately 300,000
shares available for grant. The 1993 Stock Option Plan has a maximum 1,000,000
shares available for grant of which 885,250 remain available for grant at
December 31, 1993. The 1993 Non-Employee Directors Stock Option Plan has a
maximum 100,000 shares available for grant of which 90,000 remain available for
grant at December 31, 1993. Under the terms of both Plans, the purchase price
of shares subject to each option granted will not be less than fair market value
at the date of grant. Options granted become exercisable at the rate of 25% per
year, commencing one year after the date of grant and expiring five years from
the date of grant. No charges to operations are recorded with respect to
authorization, grants or exercise of these options.
A summary of stock option information is as follows:
<TABLE>
<CAPTION>
Options Price Range
------- -----------
<S> <C> <C>
Outstanding at
December 31, 1990 378,600 $ 7.19-$16.88
Granted . . . . . . . . . . . . . . . . . . . . 439,200 $19.38-$23.75
Exercised . . . . . . . . . . . . . . . . . . . (171,400) $ 7.19-$16.25
Cancelled . . . . . . . . . . . . . . . . . . . (12,000) 12.69-$16.88
--------- -------------
Outstanding at
December 31, 1991 . . . . . . . . . . . . . . 634,400 $12.63-$23.75
Granted . . . . . . . . . . . . . . . . . . . . 73,000 $19.38-$24.25
Exercised . . . . . . . . . . . . . . . . . . . (51,450) $12.63-$19.38
Cancelled . . . . . . . . . . . . . . . . . . . (24,250) $19.38
--------- --------------
Outstanding at
December 31, 1992 631,700 $12.69-$24.25
Granted . . . . . . . . . . . . . . . . . . . . 124,750 $22.00-$27.00
Exercised . . . . . . . . . . . . . . . . . . . (73,625) $12.69-$19.38
Cancelled . . . . . . . . . . . . . . . . . . . (17,250) $19.38-$24.25
--------- -------------
Outstanding at
December 31, 1993 . . . . . . . . . . . . . . 665,575 $16.25-$27.00
========= =============
Exercisable at
December 31, 1993 . . . . . . . . . . . . . . 294,600 $16.25-$24.25
</TABLE>
(9) Plant Consolidation
During 1993, the Company closed one of its plants and moved the
operations to two existing plants. This consolidation did not result in the
discontinuation of any product lines. In addition to severance and relocation
costs incurred of approximately $900,000, the consolidation generated a
$2,158,000 reduction in the accrued postretirement benefit obligation, offset
by a $1,163,000 increase in accrued pension cost. The net effect of the plant
consolidation was not significant to the operating results or financial
position of the Company.
(10) Employee Benefit Plans
The Company maintains several defined benefit pension plans which cover
substantially all employees. Benefits paid under these plans are based
generally on employees' years of service and compensation during the final years
of employment. The Company's policy is to fund the minimum amounts required by
ERISA. Plan assets consist principally of publicly traded equity and debt
securities which included 80,000 shares of Kaydon Corporation common stock at
December 31, 1993 and 1992.
Net pension cost included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits
earned during the year $1,187,000 $1,280,000 $1,143,000
Interest cost on projected
benefit obligation . . . . . . . . 2,288,000 2,217,000 1,860,000
Actual return on plan
assets . . . . . . . . . . . . . . (3,314,000) (1,761,000) (4,402,000)
Net amortization and
deferral-
Amortization of
unrecognized net
transition obligation . . . . . 49,000 48,000 49,000
Deferral of unrecogniz-
ed net gain (loss) . . . . . . 1,290,000 (197,000) 2,833,000
One-time curtailment
loss (Note 9) . . . . . . . . 1,163,000 -- --
---------- ---------- ----------
Net pension cost . . . . . . . . . . $2,663,000 $1,587,000 $1,483,000
========== ========== ==========
</TABLE>
The funded status of the plans as of September 30, 1993 and amounts
recognized in the accompanying consolidated balance sheet as of December 31,
1993 are as follows:
<TABLE>
<CAPTION>
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
-------- -------
<S> <C> <C>
Accumulated present value of
benefit obligation -
Vested benefits . . . . . . . . . . . . . . $(11,374,000) $ (15,396,000)
Nonvested benefits . . . . . . . . . . . . (537,000) (1,519,000)
------------ -------------
Accumulated benefit
obligation . . . . . . . . . . . . . . . (11,911,000) (16,915,000)
Effect of projected
future salary increases . . . . . . . . . (3,177,000) --
------------ -------------
Projected benefit obligation . . . . . . . . . (15,088,000) (16,915,000)
Fair value of plan assets . . . . . . . . . . . 16,153,000 10,940,000
------------ -------------
Plan assets in excess of (less than)
projected benefit obligation . . . . . . . . 1,065,000 (5,974,000)
Unrecognized net transition
(asset) obligation . . . . . . . . . . . . . (369,000) 595,000
Unrecognized prior service cost . . . . . . . . (398,000) 1,198,000
Unrecognized net (gain) loss . . . . . . . . . (998,000) 1,469,000
Adjustments required to
recognize minimum liability . . . . . . . . . -- (3,001,000)
------------ --------------
Pension costs accrued as of
September 30,1993 . . . . . . . . . . . . . . (700,000) (5,714,000)
Accrual for fourth
quarter 1993 . . . . . . . . . . . . . . . . (113,000) (261,000)
Contributions for fourth
quarter 1993 . . . . . . . . . . . . . . . . -- 145,000
------------ -------------
Pension costs accrued as of
December 31, 1993 . . . . . . . . . . . . . . $ (813,000) $ (5,829,000)
============ =============
</TABLE>
25
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
KAYDON CORPORATION AND SUBSIDIARIES
____________________________________________________________________________
The funded status of the plans as of September 30, 1992 and amounts
recognized in the accompanying consolidated balance sheet as of December 31,
1992 are as follows:
<TABLE>
<CAPTION>
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
----------- ------------
<S> <C> <C>
Accumulated present value of
benefit obligation-
Vested benefits . . . . . . . . . . . . . . $(9,702,000) $(13,153,00)
Nonvested benefits . . . . . . . . . . . . (548,000) (1,183,00)
----------- ------------
Accumulated benefit
obligation . . . . . . . . . . . . . . . . (10,250,000) (14,336,00)
Effect of projected
future salary increases . . . . . . . . . (3,337,000) --
------------ ------------
Projected benefit obligation . . . . . . . . . (13,587,000) (14,336,000)
Fair value of plan assets . . . . . . . . . . . 14,731,000 9,891,000
------------ ------------
Plan assets in excess of (less than)
projected benefit obligation . . . . . . . . 1,144,000 (4,445,000)
Unrecognized net transition
(asset) obligation . . . . . . . . . . . . (440,000) 1,045,000
Unrecognized prior service cost . . . . . . . 34,000 1,703,000
Unrecognized net (gain) loss. . . . . . . . . . (974,000) 422,000
Adjustments required to
recognize minimum liability . . . . . . . . -- (2,971,000)
------------ ------------
Pension costs accrued as of
September 30, 1992 . . . . . . . . . . . . (236,000) (4,246,000)
Accrual for fourth quarter 1992 . . . . . . . . (134,000) (249,000)
Contributions for fourth
quarter 1992 . . . . . . . . . . . . . . . . -- 149,000
----------- ------------
Pension costs accrued as of
December 31, 1992 . . . . . . . . . . . . . $ (370,000) $ (4,346,000)
=========== ============
</TABLE>
The assumptions used in the determination of net pension cost are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ----------
<S> <C> <C> <C>
Discount rate . . . . . . . . . . . . 7.50% 8.25% 8.25%
Rate of salary progression . . . . . 4.50% 5.00% 5.00%
Long-term rate of return on assets . 9.00% 9.00% 9.00%
</TABLE>
The Company and its domestic subsidiaries also offer their employees a
401(k) savings plan in which substantially all of their employees may
participate. For Kaydon Corporation and its subsidiary, Kaydon Ring and Seal,
Inc., the plan is for employee contributions only. For the Company's
subsidiary, Electro-Tec Corp., the employer matches employee contributions in
accordance with a formula defined by the plan. Electro-Tec Corp. contributed
$209,000 in 1993 and 1992 and $186,000 in 1991 to the 401(k) plan in the form
of matching contributions.
(11) Other Postretirement Benefits
The Company provides certain retiree health care and life insurance
benefits covering the majority of U.S. salaried and hourly employees.
Employees are generally eligible for benefits upon retirement or long-term
disability and completion of a specified number of years of credited service.
These benefits are subject to cost-sharing provisions and other limitations.
The Company does not pre-fund these benefits and has the right to modify or
terminate certain of these benefits in the future.
During the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," retroactive to January 1, 1992.
This statement requires the accrual of the cost of providing postretirement
benefits for medical, dental and life insurance coverage over the active
service period of the employee. The Company elected to immediately recognize
the accumulated liability, measured as of January 1, 1992 which totaled
$16,047,000 or $.92 per share after tax. In addition, this change in
accounting principle also decreased 1992 income after tax by $1,088,000 or $.06
per share. Prior to 1992, the Company recognized retiree health care and life
insurance costs in the year the benefits were paid. Postretirement medical,
dental and life insurance costs charged to operating expense totaled
$1,115,000 in 1991.
The components of net postretirement benefit cost are as follows:
The plans' funded status at December 31, 1993 and 1992, is as follows:
<TABLE>
<CAPTION>
1993 1992
----------- ------------
<S> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . $ 689,000 $ 733,000
Interest cost on accumulated benefit obligation . 1,850,000 2,090,000
Amortization of unrecognized prior service
cost . . . . . . . . . . . . . . . . . . . . (301,000) (28,000)
One-time gain due to curtailment (Note 9) . . . . (2,158,000) --
----------- ------------
Net postretirement benefit cost . . . . . . . . . $ 80,000 $ 2, 795,000
=========== ============
</TABLE>
<TABLE>
<CAPTION>
1993 1992
-------------- -------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees . . . . . . . . . . . . . . . . . . $ (12,085,000) $ (10,840,000)
Fully eligible active plan participants . . . (100,000) (3,844,000)
Other active plan participants . . . . . . . (9,757,000) (9,980,000)
-------------- --------------
Projected benefit obligation . . . . . . . (21,942,000) (24,664,000)
Plan assets . . . . . . . . . . . . . . . . . . -- --
-------------- --------------
Funded status . . . . . . . . . . . . . . . . . (21,942,000) (24,664,000)
Unrecognized prior service cost . . . . . . . . (3,288,000) (2,654,000)
Unrecognized net gain . . . . . . . . . . . . . (1,154,000) --
-------------- --------------
Accrued postretirement benefit obligation . . . $ (26,384,000) $ (27,318,000)
============== ==============
</TABLE>
26
<PAGE> 51
_______________________________________________________________________________
The accrued postretirement benefit obligation is reflected in the
Company's consolidated balance sheets as follows:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Current liability . . . . . . . . . . . . . . . $ (1,200,000) $ (1,200,000)
Long-term liability . . . . . . . . . . . . . . (25,184,000) (26,118,000)
------------ ------------
Total obligation . . . . . . . . . . . . . . . $(26,384,000) $(27,318,000)
============= =============
</TABLE>
The accumulated postretirement benefit obligation ("APBO") was
actuarially determined based on assumptions regarding the discount rate and
projected future increases in postretirement benefit costs (the health care
cost trend rate). The discount rate used in the valuation of the APBO was
7.50% and 8.25% for 1993 and 1992, respectively. The health care cost trend
rate for 1994 was estimated at 15% (16% in 1993) for participants under the age
of 65 and 10.5% (11.5% in 1993) for those age 65 and older. Both rates are
assumed to decrease ratably to 6% (7% in 1993) by 2002 and remain at that level
thereafter. A 1% increase in the health care cost trend rate would have
increased the accumulated postretirement benefit obligation by approximately
$2,765,000, and the net postretirement benefit cost by approximately $314,000
in 1993.
(12) Postemployment Benefits
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". This statement requires employers to accrue, no
later than fiscal 1994, for benefits provided to former or inactive employees
after employment but prior to retirement. For the Company, this statement
primarily applies to costs associated with disability-related benefits.
Management estimates that adoption of the new statement will reduce net income
by approximately $2,000,000 in 1994.
(13) Lease Commitments
Total minimum rentals payable under operating leases that have initial
or remaining noncancellable lease terms in excess of one year as of December
31, 1993 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 588,000
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,000
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 2,418,000
</TABLE>
Aggregate rental expense charged to operations was $1,249,000,
$1,339,000 and $1,121,000 in 1993, 1992 and 1991, respectively.
(14) Quarterly Results of Operations (Unaudited):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Quarters (amounts in thousands except per share data)
----------------------------------------------------------------------------------------
1st 2nd 3rd 4th Total
---------------- --------------- --------------- --------------- ----------------
1993 1992 1993 1992 1993 1992 1993 1992 1993 1992
------- ------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........................ $48,035 45,598 47,195 48,903 44,023 43,398 44,807 46,005 184,060 183,904
Gross Profit..................... $16,506 15,401 17,294 17,806 16,487 14,940 17,494 18,033 67,781 66,180
Income Before Cumulative Prior
Year Effect of Changes In
Accounting Principles.......... $ 6,770 5,617 7,013 6,843 6,811 6,088 7,101 7,070 27,695 25,618
Net Income (Loss)(2)............. $ 6,770 (9,627) 7,013 6,843 6,811 6,088 7,101 7,070 27,695 10,374
Earnings per Share (1):
Income Before Cumulative Prior
Year Effect of Changes in
Accounting Principles........ $ 0.39 0.32 0.40 0.39 0.39 0.35 0.42 0.41 1.60 1.47
Net Income (Loss)(2)........... $ 0.39 (0.56) 0.40 0.39 0.39 0.35 0.42 0.41 1.60 0.59
Market Price:
High (1)....................... $ 31.75 26.63 28.00 26.50 26.75 25.50 22.25 26.25 31.75 26.63
Low (1)........................ $ 23.50 21.75 24.75 21.75 18.00 19.50 18.50 21.50 18.00 19.50
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All per share data for 1992 has been restated to reflect the
two-for-one stock split effected in 1992. See Note 2 to Consolidated
Financial Statements.
(2) Net Income (loss) and per share amounts reflect the 1992 cumulative
prior year effect of changes in accounting principles relating to SFAS
106 and SFAS 109 which resulted in a charge of $15,244,000 or $0.88
per share.
27
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
KAYDON CORPORATION AND SUBSIDIARIES
________________________________________________________________________________
(15) Business Segment Information
The Company operates predominately in one industry segment, the design,
manufacture and sale of custom-engineered products. During 1993, 1992 and
1991, no sales to a single customer exceeded 10% of total sales. Transfers
between geographic areas represent the selling price of sales to affiliates,
which is generally based on cost plus a mark-up. Corporate assets are those
assets maintained for general purposes, principally cash, cash equivalents and
goodwill. All other assets have been identified with domestic or foreign
operations. Prior to 1992, the Company's operations in Europe amounted to less
than 10% of consolidated sales, operating profit and assets. Information
regarding the Company's operations in the United States and Europe for 1993 and
1992 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
United
Year ended December 31, 1993 States Europe Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers . . . . . . . . $165,611,000 $18,449,000 $ -- $184,060,000
Transfers between geographic areas . . . . . . -- 4,503,000 (4,503,000) --
------------ ----------- ----------- ------------
Total sales . . . . . . . . . . . . . . . . $165,611,000 $22,952,000 $(4,503,000) $184,060,000
============ =========== ============ ============
Operating income . . . . . . . . . . . . . . . $ 40,267,000 $ 4,764,000 $ (717,000) $ 44,314,000
Interest income, net . . . . . . . . . . . . . 142,000
------------
Income before taxes . . . . . . . . . . . . . . $ 44,456,000
============
Identifiable assets . . . . . . . . . . . . . . 131,918,000 21,783,000 -- $153,701,000
Corporate assets . . . . . . . . . . . . . . . 63,721,000
------------
Total assets . . . . . . . . . . . . . . . $217,422,000
============
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
United
Year ended December 31, 1992 States Europe Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers . . . . . . . . . . . $161,646,000 $22,258,000 $ -- $183,904,000
Transfers between geographic areas . . . . . . . . . -- 6,229,000 (6,229,000) --
------------ ----------- ------------ ------------
Total sales . . . . . . . . . . . . . . . . . . . $161,646,000 $28,487,000 $(6,229,000) $183,904,000
============ =========== ============ ============
Operating income . . . . . . . . . . . . . . . . . . $ 36,941,000 $ 5,952,000 $ (671,000) $ 42,222,000
Interest expense, net . . . . . . . . . . . . . . . . (1,471,000)
-------------
Income before taxes and cumulative prior year effect
of changes in accounting principles . . . . . . . . $ 40,751,000
============
Identifiable assets . . . . . . . . . . . . . . . . . 132,067,000 17,659,000 -- $149,726,000
Corporate assets . . . . . . . . . . . . . . . . . . 61,241,000
------------
Total assets . . . . . . . . . . . . . . . . . . $210,967,000
============
</TABLE>
(16) Contingencies
The Company, together with other companies, certain former officers, and
certain current and former directors, has been named as a co-defendant in
lawsuits filed in the federal court of New York. The suits purport to be class
actions on behalf of all persons who have unsatisfied personal injury and
property damage claims against Keene Corporation. The premise of the suits is
that assets of Keene were transferred to Bairnco subsidiaries, of which Kaydon
was one in 1983, at less than fair value. The suits also allege that the
Company, among other named defendants, were successors to and alter egos of
Keene. While the ultimate outcome of this litigation is unknown at the present
time, management believes that it has meritorious defenses to the asserted
claims. Accordingly, no provision has been reflected in the consolidated
financial statements for any alleged damages. Management believes that the
outcome of this litigation will not have a materially adverse effect on the
Company's financial position.
Various other claims, lawsuits and environmental matters arising in the
normal course of business are pending against the Company. Management believes
that the outcome of these matters will not have a materially adverse effect on
the Company's financial position or results of operations.
28
<PAGE> 53
CORPORATE INFORMATION
DIRECTORS
Glenn W. Bailey
Chairman
Keene Corporation
Gerald J. Breen
President and C.E.O.
Cuyam Corporation
Lawrence J. Cawley
Chairman and Chief
Executive Officer
Kaydon Corporation
Stephen K. Clough
President and Chief
Operating Officer
Kaydon Corporation
John H. F. Haskell, Jr.
Managing Director
Dillon, Read & Co., Inc.
Norton Stevens
Private Investor
CORPORATE OFFICES
KAYDON CORPORATION
Arbor Shoreline Office Park
19345 U.S. 19 North*
Clearwater, FL 34624
813-531-1101
FAX 813-530-9247
*New Address
OPERATING LOCATIONS
Baltimore, Maryland
Blacksburg, Virginia
Dexter, Michigan
Greeneville, Tennessee
King's Lynn, U.K.
Krefeld, Germany
LaGrange, Georgia
Monterrey, NL, Mexico
Newaygo, Michigan
Norton Shores, Michigan
Reading, U.K.
St. Louis, Missouri
Sumter, South Carolina
Virginia Beach, Virginia
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer
and Trust Co.
2 Broadway
New York, NY 10004
212-509-4000
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co.
300 Ottawa Avenue, N.W.
Grand Rapids, MI 49503
STOCK LISTING
Kaydon common stock is listed on
NASDAQ and traded under the
National Market System
Symbol - KDON
ANNUAL MEETING
The Annual Stockholders' Meeting
will be held at the Tampa
Airport Marriott Hotel in
Tampa, Florida on April 27,
1994 at 10:00 A.M.
FORM 10-K
Stockholders may obtain a copy of
Kaydon's 10-K report to the Securities
and Exchange Commission by writing
to the Investor Relations Department.
INVESTOR RELATIONS INFORMATION
Contact Mrs. Shelley Schwemley
at the corporate office.
813-531-1101
<PAGE> 54
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
<TABLE>
<S> <C> <C>
1. Name: Kaydon International, Inc.
Place of Incorporation: United States Virgin Islands
Date of Incorporation: July 16, 1991
2. Name: Kaydon Ring and Seal, Inc.
Place of Incorporation: Delaware
Date of Incorporation: June 30, 1986
3. Name: Kaydon S.A. de C.V.
Place of Incorporation: Nuevo Leon, United Mexican States
Date of Incorporation: April 10, 1987
4. Name: I.D.M. Electronics Ltd.
Place of Incorporation: United Kingdom
Date of Incorporation: July 1, 1957
5. Name: Electro-Tec Corp.
Place of Incorporation: Delaware
Date of Incorporation: October 27, 1967
6. Name: Cooper Roller Bearings Company Limited
Place of Incorporation: United Kingdom
Date of Incorporation: June 16, 1982
7. Name: Cooper Split Roller Bearings Corporation
Place of Incorporation: Virginia
Date of Incorporation: January 1, 1974
8. Name: Cooper Geteilte Rollenlager GmbH
Place of Incorporation: Germany
Date of Incorporation: March 19, 1974
</TABLE>
E-2
<PAGE> 55
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaydon Corporation:
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in this
Form 10-K, into the Company's previously filed Form S-8 Registration Statement
Numbers 2-89399, 2-92778, 33-48762, 33-61646, and 33-61648.
/s/ Arthur Andersen & Co.
- -------------------------
ARTHUR ANDERSEN & CO.
Grand Rapids, Michigan
March 18, 1994
E-3
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended April 2, 1994 Commission File No. 0-12640
------------------------------- ---------------------------
KAYDON CORPORATION
------------------
A Delaware Corporation IRS Employer ID No. 13-3186040
---------------------------------------------------------------------
19345 US 19 North, Clearwater, FL 34624 Phone: 813/531-1101
-------------------------------------------------------------------------
Kaydon Corporation:
(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.
Yes X No
--- ---
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Common Stock Outstanding at May 2, 1994 - 16,690,141 shares, $0.10 par value.
<PAGE> 2
<TABLE>
<CAPTION>
KAYDON CORPORATION FORM 10-Q
FOR THE QUARTER ENDED APRIL 2, 1994
INDEX
- ----------------------------------------------------------------------------------------------------------
Page No.
--------
<S> <C>
Part I - Financial Information:
Consolidated Condensed Balance Sheets -
April 2, 1994 and December 31, 1993 1
Consolidated Condensed Statements of Income -
Three Months Ended April 2, 1994 and April 3, 1993 2
Consolidated Condensed Statements of Cash Flows -
Three Months Ended April 2, 1994 and April 3, 1993 3
Notes to Consolidated Condensed Financial
Statements 4 - 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 7
Part II - Other Information:
Item 4. - Submission of Matters to a Vote of Security Holders 8
Item 5. - Other Information 9
Item 6. - Exhibits and Reports on Form 8-K 9
Signatures 10
Exhibits E-1
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------
April 2, 1994 December 31, 1993
------------------ -----------------
(Unaudited)
<S> <C> <C>
Assets:
- ------
Cash and cash equivalents $ 17,608,000 $ 24,528,000
Accounts receivable, net 28,002,000 24,543,000
Inventories 53,889,000 51,529,000
Other current assets 6,261,000 5,920,000
----------------------------------------
Total current assets 105,760,000 106,520,000
Plant and equipment, net 63,778,000 60,077,000
Cost in excess of net tangible
assets of purchased businesses, net 43,418,000 43,628,000
Other assets 9,413,000 7,197,000
----------------------------------------
Total assets $222,369,000 $217,422,000
========================================
Liabilities and Stockholders' Investment:
- ----------------------------------------
Short-term debt $ 693,000 $ 1,624,000
Accounts payable 7,813,000 6,724,000
Accrued expenses 25,389,000 23,988,000
Federal income tax payable 5,552,000 2,374,000
---------------------------------------
Total current liabilities 39,447,000 34,710,000
Other long-term liabilities 27,598,000 25,184,000
Long-term debt 8,000,000 13,688,000
Stockholders' investment 147,324,000 143,840,000
----------------------------------------
Total liabilities and
stockholders' investment $222,369,000 $217,422,000
========================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
April 2, 1994 April 3, 1993
------------- -------------
<S> <C> <C>
Net Sales $50,125,000 $48,035,000
Gross Profit 17,912,000 16,506,000
Operating Income 11,525,000 10,781,000
Interest (Income) Expense, Net (28,000) 6,000
----------- -----------
Income Before Income Taxes and Cumulative Prior
Year Effect of Change in Accounting Principle 11,553,000 10,775,000
Provision for Income Taxes 4,361,000 4,005,000
----------- -----------
Income Before Cumulative Prior
Year Effect of Change in Accounting Principle 7,192,000 6,770,000
Cumulative Prior Year Effect of Change in
Accounting Principle For Postemployment
Benefits, Net of Income Tax
Benefit of $1,200,000 (2,000,000) 0
----------- -----------
Net Income $ 5,192,000 $ 6,770,000
=========== ===========
Weighted Average Common Shares 16,720,000 17,539,000
Earnings Per Share Before Cumulative Prior Year
Effect of Change in Accounting Principle $ 0.43 $ 0.39
Earnings Per Share $ 0.31 $ 0.39
Dividends Per Share $ 0.10 $ 0.09
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
<TABLE>
<CAPTION>
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
April 2, 1994 April 3, 1993
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $10,977,000 $ 10,849,000
----------- ------------
Cash flows from investing activities:
Capital expenditures, net (2,292,000) (1,227,000)
Acquisition of business, net of cash acquired (7,268,000) 0
----------- ------------
Net cash used in investing activities (9,560,000) (1,227,000)
----------- ------------
Cash flows from financing activities:
Net borrowings under line of credit 381,000 15,000
Principal payments of long-term debt (7,000,000) (10,000,000)
Proceeds from issuance of common stock 0 979,000
Dividends paid (1,679,000) (1,562,000)
Other (39,000) (63,000)
----------- ------------
Net cash used in financing activities (8,337,000) (10,631,000)
----------- ------------
Effect of exchange rate changes on cash
and cash equivalents 0 (25,000)
----------- ------------
Net decrease in cash and cash equivalents (6,920,000) (1,034,000)
Cash and cash equivalents - Beginning of period 24,528,000 13,664,000
----------- ------------
Cash and cash equivalents - End of period $17,608,000 $ 12,630,000
=========== ============
Cash expended for income taxes $ 1,161,000 $ 2,492,000
=========== ============
Cash expended for interest $ 122,000 $ 169,000
=========== ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 6
KAYDON CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) The consolidated condensed financial statements included herein have
been prepared by Kaydon Corporation and subsidiaries (the "Company"),
without audit, pursuant to the rules and regulation of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures made in this document are
adequate to make the information presented not misleading. It is
suggested that these consolidated condensed financial statements be
read in conjunction with the consolidated financial statements and
notes thereto in the Company's 1993 Annual Report on Form 10-K.
(2) In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of April 2,
1994 and the results of its operations and its cash flows for the
three months then ended. However, interim results are not necessarily
indicative of results of a full year.
(3) Inventories are valued at the lower of cost or market and include
material, labor and overhead. Cost is determined under the first-in,
first-out ("FIFO") method for substantially all inventories.
Inventories are summarized as follows:
April 2, 1994 Dec 31, 1993
------------- ------------
Raw Material $13,740,000 $12,251,000
Work in Process 10,852,000 10,347,000
Finished Goods 29,297,000 28,931,000
----------- -----------
$53,889,000 $51,529,000
=========== ===========
(4) The consolidated condensed financial statements reflect the Company's
acquisition of certain assets and certain liabilities of Industrial
Tectonics Inc ("ITI"). The acquisition was accounted for using the
purchase method of accounting and, accordingly, the results of
operations of ITI have been included in the 1994 first quarter
consolidated financial statements since January 28, 1994, the
effective date of the acquisition. The cash consideration for the
acquisition, net of cash acquired, was approximately $7,268,000.
4
<PAGE> 7
(5) The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 112, (SFAS 112) "Employers' Accounting for
Postemployment Benefits." The cumulative effect of the change in the
accounting principle resulted in an after-tax charge of $2,000,000.
(6) The Company, together with other companies, certain former officers,
and certain current and former directors, has been named as a
co-defendant in lawsuits filed in the federal court of New York. The
suits purport to be class actions on behalf of all persons who have
unsatisfied personal injury and property damage claims against Keene
Corporation. The premise of the suits is that assets of Keene were
transferred to Bairnco subsidiaries, of which Kaydon was one in 1983,
at less than fair value. The suits also allege that the Company,
among other named defendants, was a successor to and alter ego of
Keene. While the ultimate outcome of this litigation is unknown at
the present time, management believes that it has meritorious defenses
to the asserted claims. Accordingly, no provision has been reflected
in the consolidated financial statements for any alleged damages.
Management believes that the outcome of this litigation will not have
a materially adverse effect on the Company's financial position.
Various other claims, lawsuits and environmental matters arising in
the normal course of business are pending against the Company.
Management believes that the outcome of these matters will not have a
materially adverse effect on the Company's financial position or
results of operations.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Results of Operations
Kaydon Corporation and subsidiaries (the "Company") reported sales of
$50,125,000 in the first quarter 1994, up 4.4% compared to $48,035,000 in the
first quarter 1993. The increase was mainly due to the Company's acquisition of
Industrial Tectonics Inc on January 28, 1994.
Net income, prior to the mandated accounting change for SFAS 112, was
$7,192,000, up 6.2% compared to $6,770,000 in first quarter 1993 despite a
higher tax rate in the current year. In November 1992, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 112 (SFAS 112) - "Employers' Accounting for Postemployment Benefits." This
statement requires employers to accrue, no later than fiscal 1994, for benefits
provided to former or inactive employees after employment but prior to
retirement. The net effect of the adoption of SFAS 112 was a charge to first
quarter 1994 earnings of $2,000,000. The adoption of SFAS 112 has no effect on
the Company's cash flows.
Gross profit as a percent of sales increased to 35.7% from 34.4% in the same
period last year. The increase was attributable to improved manufacturing
results.
Selling and administrative expenses were 12.7% of sales, up slightly from 11.9%
last year. The slight increase is partially related to ITI's higher SG&A costs
as a percent of sales compared to that of the Company's other businesses.
The effective tax rate of 37.8% during the first quarter of 1994 was comparable
with the 1993 annual effective rate. The first quarter 1993 effective rate did
not reflect the approximate 1% U.S. tax rate increase enacted during the third
quarter of 1993.
Liquidity and Capital Resources
Debt at April 2, 1994 totaled $8,693,000, a reduction during the first quarter
of $6,619,000. Cash and cash equivalents on-hand now exceed debt by $8,915,000
compared to $9,216,000 at year end. The $8,000,000 of long term debt is
Industrial Revenue Bonds issued at favorable interest rates which we do not
anticipate paying ahead of schedule. Working capital at the end of the quarter
totaled $66,313,000, down $5,497,000 from year end. The decrease in working
capital is attributable to the repayment of long term debt, net capital
expenditures, dividends and the ITI acquisition, partially offset by the
quarter's cash flow from operations.
6
<PAGE> 9
Management expects that the Company's planned capital requirements for the
remainder of 1994, which consist of capital expenditures, dividend payments and
its stock repurchase program, will be financed by operations. However, the
Company has $85,000,000 available under its new multi-bank revolving credit
agreements that could be utilized to meet acquisition or liquidity needs. The
new revolving credit agreements, put in place during the first quarter, replace
the Company's previous agreements that totaled $60,000,000.
Outlook
The Company's backlog of unfilled orders increased to $86,279,000 compared to
$84,385,000 in the prior quarter, aided by the incorporation of Industrial
Tectonics' backlog. Total backlog is up substantially from last year's
$80,372,000 which was the low point in the last two years. Industrial
Tectonics Inc, like many of the Company's other businesses, operates with a low
backlog relative to sales, reflecting the modern, just-in-time inventory
philosophy adopted by many of the Company's customers.
Generally, the Company's overall business shows increasing strength in the
order backlog. There has been a marked increase in the level of inquiry and
quotation for military-oriented products, particularly for repair and
replacement. The reason for the increased military activity is not clear, but
the Company believes it will eventually result in a greater order flow later
this year.
7
<PAGE> 10
Part II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The tenth Annual Stockholders' Meeting of Kaydon Corporation was held
at the Tampa Airport Marriott on April 27, 1994. Represented at this
meeting in person or by proxy were 13,899,521 shares of Kaydon common
stock, representing 83% of the total outstanding as of the February
28, 1994 record date.
The stockholders elected Glenn W. Bailey, Gerald J. Breen, Lawrence J.
Cawley, Stephen K. Clough, John H.F. Haskell, Jr. and Norton Stevens
to serve as Directors until the 1995 Annual Meeting. The results of
the votes are as follow:
Election of Directors For Withhold
--------------------- ----------- --------
G. Bailey 13,875,627 23,894
G. Breen 13,875,767 23,754
L. Cawley 13,877,193 22,328
S. Clough 13,877,193 22,328
J. Haskell 13,877,467 22,054
N. Stevens 13,875,167 24,354
There was no other official business to come before the meeting.
8
<PAGE> 11
Item 5. Other Information
On January 5, 1994, the Company announced that it had signed an
agreement with Axel Johnson Inc., headquartered in Stamford,
Connecticut, to acquire the assets and business of Industrial
Tectonics Inc located in Dexter, Michigan. The company manufactures
specialty balls used in measuring devices, floats, valves, ball point
pens and anti-friction bearings. Annual sales for the operation are
slightly over $10 million. The effective date of the purchase was
January 28, 1994.
The Company further announced that it had acquired the assets of
Kenyon Power Transmission Ltd. effective December 4, 1993. Kenyon is
a small manufacturer of pulleys and drive components and is located in
Manchester, England, with annualized sales of approximately $2
million. The Kenyon business will be relocated to and absorbed by the
Company's subsidiary, Cooper Roller Bearings Co. Ltd. in King's Lynn,
England.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit No. Description Page No.
(11) Schedule setting forth computation of E-1
earnings per common share for the three
months ended April 2, 1994 and April 3, 1993.
B. Reports on Form 8-K
On January 5, 1994, the Company filed a report on Form
8-K under Item 5. relating to its agreement to acquire
the assets and business of Industrial Tectonics Inc,
effective on or about January 31, 1994, and the
completion of the acquisition of the assets of Kenyon
Power Transmission Ltd. on December 4, 1993.
9
<PAGE> 12
SIGNATURES
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.
KAYDON CORPORATION
May 10, 1994 /s/ Lawrence J. Cawley
--------------------------------
Lawrence J. Cawley
(Chief Executive Officer)
May 10, 1994 /s/ Thomas C. Sorrells III
--------------------------------
Thomas C. Sorrells III
(Corporate Controller)
10
<PAGE> 13
Exhibit 11
<TABLE>
<CAPTION>
KAYDON CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
THREE MONTHS ENDED APRIL 2, 1994 AND APRIL 3, 1993
- ---------------------------------------------------------------------------------------------------------------------------
April 2, 1994 April 3, 1993
------------- -------------
<S> <C> <C>
Primary Earnings Per Share:
- --------------------------
Net income $ 5,192,000 $ 6,770,000
----------- -----------
Weighted average common shares outstanding 16,690,000 17,436,000
Net common shares issuable in respect to
common stock equivalents, with a
dilutive effect 30,000 103,000
----------- -----------
Total weighted average common and
common share equivalents 16,720,000 17,539,000
Primary earnings per common share $ 0.31 $ 0.39
Fully Diluted Earnings Per Share:
- --------------------------------
Net income $ 5,192,000 $ 6,770,000
----------- -----------
Weighted average common shares outstanding 16,690,000 17,436,000
Net common shares issuable in respect to
common stock equivalents, with a
dilutive effect 42,000 103,000
----------- -----------
Total weighted average common and
common share equivalents 16,732,000 17,539,000
Fully diluted earnings per common share $ 0.31 $ 0.39
</TABLE>
E - 1
<PAGE> 1
KAYDON CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
Tampa, Florida
March 14, 1994
To Shareholders:
The Annual Meeting of Shareholders of Kaydon Corporation ("Kaydon") will be
held at Tampa Airport Marriott, Tampa International Airport, Tampa, Florida on
Wednesday, April 27, 1994 at 10:00 a.m. for the following purposes:
(1) to elect a Board of Directors;
(2) to transact such other business as may properly come before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on February 28, 1994 are
entitled to notice of and to vote at the meeting.
JOHN F. BROCCI
Vice President Administration
Corporate Secretary
THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND IMMEDIATE RETURN OF THE
ACCOMPANYING PROXY.
You can help avoid the necessity and expense of sending a follow-up letter by
the prompt completion and return of the enclosed proxy whether or not you expect
to attend the Annual Meeting of Shareholders. For your convenience, there is
enclosed a self-addressed envelope requiring no postage if mailed in the United
States.
<PAGE> 2
KAYDON CORPORATION
ARBOR SHORELINE OFFICE PARK
19345 U.S. 19 NORTH, SUITE 500
CLEARWATER, FLORIDA 34624
---------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1994
---------------------
PROXY STATEMENT
---------------------
March 14, 1994
INTRODUCTION
The Annual Meeting of Shareholders of Kaydon Corporation ("Kaydon") will be
held on Wednesday, April 27, 1994, at the Tampa Airport Marriott, Tampa
International Airport, Tampa, Florida at 10:00 a.m. for the purposes set forth
in the accompanying notice. This statement is furnished in connection with the
solicitation by Kaydon's Board of Directors of proxies to be voted at such
meeting and at any and all adjournments thereof. Proxies properly executed, duly
returned and not revoked will be voted at the Annual Meeting (including
adjournments) in accordance with the specifications therein.
Participants in the Kaydon Corporation Employee Stock Ownership and Thrift
Plan and the Electro-Tec Corp. Employee Retirement Benefit Plan will receive
separate voting instruction cards covering the shares held for participants in
those Plans. Voting instruction cards must be returned or the shares will not be
voted by the trustee.
If a proxy in the accompanying form is executed and returned, it may
nevertheless be revoked at any time prior to the exercise thereof by executing
and returning a proxy bearing a later date, by giving notice of revocation to
the Secretary of Kaydon, or by attending the Annual Meeting and voting in
person.
At the Annual Meeting, holders of Kaydon's Common Stock shall have one vote
per share.
ELECTION OF DIRECTORS
The persons designated as proxies in the accompanying proxy have been
selected by the Board of Directors of Kaydon and have indicated that they intend
to vote all proxies received by them for the election of each of the following
nominees for the office of director of Kaydon, unless instructed otherwise, each
to serve until the Annual Meeting of Shareholders next succeeding their election
and until their successors have been duly elected and qualified.
The Directors shall be elected by a plurality of votes validly cast in
person or by proxy at any meeting at which a quorum is present. The presence in
person or by proxy of the holders of record of a majority of the shares entitled
to vote at a meeting of stockholders constitutes a quorum. Votes are counted at
the meeting by the Inspector of Elections. Abstentions will be counted as votes
for the election of all nominees as Directors. Broker non-votes will be voted
for the election of all nominees as Directors.
If for any reason any of the following nominees is not a candidate when the
election occurs, which is not anticipated, it is intended that the proxies will
be voted for the election of a substitute nominee designated by the Board of
Directors.
<PAGE> 3
NAME AND AGE OF NOMINEES
Glenn W. Bailey (68)....... Mr. Bailey was the Chairman of the Board of Kaydon
Corporation from its organization in October 1983
until April 1987. He was the Chairman and President
of Bairnco from its organization in January 1981
through May 1990. Mr. Bailey has been Chairman of
Keene Corporation since 1967. He is also on the
Board of Directors of the Genlyte Group Inc.
Gerald J. Breen (48)....... Mr. Breen has been the owner, President and Chief
Executive Officer of Cuyam Corporation since 1986.
From 1983 to 1986, Mr. Breen was the President and
General Manager of Hendrickson International, and
was with Imperial Clevite, Inc. from 1972 to 1983,
his last position being that of Vice President,
Replacement Marketing. He has been a Director of
Kaydon since January 1992.
Lawrence J. Cawley (59).... Mr. Cawley has been Chairman of the Board and Chief
Executive Officer of Kaydon Corporation since
September 1989. From November 1987 to September
1989, he was President and Chief Executive Officer
of Kaydon. He served as Kaydon's President and
Chief Operating Officer from April 1987 to November
1987 and was President of the Bearing Division of
Kaydon from October 1985 to April 1987. Prior to
joining Kaydon, Mr. Cawley was President and
General Manager of Clevite, a division of Imperial
Clevite Corporation.
Stephen K. Clough (40)..... Mr. Clough has been President and Chief Operating
Officer of Kaydon Corporation and a member of
Kaydon's Board of Directors since September 1989.
Prior to that he was Vice President and General
Manager of Kaydon's Bearing Division from April
1987 to October 1989 and was Vice President of
Operations of the Automotive Division of Kaydon
from April 1986 to April 1987. Prior to joining
Kaydon, Mr. Clough was a Plant Manager in the
Engine Parts Division of Imperial Clevite
Corporation.
John H.F. Haskell, Jr.
(61)....................... Mr. Haskell has served as a Managing Director of
Dillon, Read & Co. Inc. since 1975. Mr. Haskell is
a member of the Board of Directors of Dillon, Read
& Co. Inc., and Chairman of the Supervisory Board
of Dillon, Read (France) Gestion, an indirect
subsidiary of Dillon, Read & Co. Inc. located in
France. Mr. Haskell is a Director of The Equitable
Companies Incorporated and The Equitable Life
Assurance Society of the United States. He is also
a member of the Council on Foreign Relations. He
has been a Director of Kaydon since December 1984.
Norton Stevens (63)........ Mr. Stevens is a private investor located in New
York City. From 1958-1985, he was Chairman and CEO
of Norlin Corporation and its predecessor companies
including the Ecuadorian Corporation, Limited in
Ecuador. He is a Director of the Inter-American
Foundation, the International Rescue Committee, and
is a member of The Council on Foreign Relations. He
has been a Director of Kaydon since December 1987.
2
<PAGE> 4
DIRECTOR COMPENSATION AND BOARD COMMITTEES
During 1993, Kaydon's Board of Directors met six times for regular meetings
and once for a telephone conference call meeting. Each outside Director received
$1,750 for each attendance of the Board of Directors regular meeting and $300
for attendance at the telephone conference call meeting. Each outside Director
was paid $12,000 as a retainer for the year, which amount is paid quarterly.
During the year options for 10,000 shares of Kaydon stock were awarded to the
outside Directors in total. Each Director attended more than 75% of the
aggregate of the total meetings of the Board of Directors, and the total number
of meetings held by all committees of the Board of Directors on which the
Directors served.
The Board of Directors has an Audit Committee and a Compensation Committee.
The principal responsibilities of the Audit Committee are to ensure for the
Board of Directors: (a) that generally accepted accounting principles are being
followed; and (b) that the total audit coverage of the Corporation and its
subsidiaries is satisfactory. The Audit Committee provides an open avenue of
communication between management and the external auditors and the Board of
Directors. The Committee reviews the nature of all services performed by the
external auditors, including the scope and extent of their audit, the results of
their audit, and their compensation. The Committee met two times during the
year. The members of the Committee are: Glenn W. Bailey and John H.F. Haskell,
Jr.
The principal responsibilities of the Compensation Committee are to: (a)
review and advise management on broad compensation policies, incentive programs,
stock option and stock purchase plans, deferred compensation and retirement
plans; (b) approve and recommend to the Board of Directors base salaries, salary
increases and other benefits for elected officers; (c) take certain actions
required or permitted to be taken by the Board of Directors under the stock
option plan and incentive compensation plans of Kaydon; and (d) review
recommendations for major changes in compensation, benefit and retirement plans
which have application to significant numbers of Kaydon's total employees and
which require review or approval of the Board of Directors. The Committee met
three times during the year. The members of the Committee are Norton Stevens and
Gerald J. Breen.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
NUMBER OF SHARES OUTSTANDING, RECORD DATE AND LIST OF SHAREHOLDERS
Only shareholders of record at the close of business on February 28, 1994
are entitled to notice of and to vote at the Annual Meeting. At the close of
business on such date there were 16,689,641 shares of common stock of Kaydon
outstanding. A shareholders list will be available for examination by
shareholders at the Annual Meeting in accordance with Section 219 of the
Delaware Corporation Law.
3
<PAGE> 5
COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 31, 1993,
concerning the only persons known to Kaydon to be the beneficial owners of more
than 5% of Kaydon's issued and outstanding stock:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS AMOUNT AND NATURE ISSUED AND OUTSTANDING
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) COMMON STOCK
- ----------------------------------------------------- -------------------------- ----------------------
<S> <C> <C>
Neuberger and Berman................................. 995,000 5.9%
605 Third Avenue
New York, NY 10158
First Pacific Advisors, Inc.......................... 1,249,700 7.5%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, CA 90064
The Prudential Insurance Company of America.......... 1,391,325 8.3%
751 Broad Street
Newark, NJ 07102
</TABLE>
- ---------------
(1) These shares are owned by various individual and institutional investors for
which Neuberger and Berman, First Pacific Advisors, Inc. and The Prudential
Insurance Company of America, respectively, serve as investment advisors
with power to direct investments and/or shared power to vote the shares.
For purposes of the reporting requirements of the Securities Exchange Act
of 1934, Neuberger and Berman, First Pacific Advisors, Inc. and The
Prudential Insurance Company of America are deemed to be beneficial owners
of such shares; however, each expressly disclaims that they are, in fact,
the beneficial owners of such shares.
The following table presents information regarding beneficial ownership of
Kaydon's common stock by each member of the Board of Directors and other
Executive Officers as of February 28, 1994.
<TABLE>
<CAPTION>
PERCENTAGE OF ISSUED
AMOUNT AND NATURE OF AND OUTSTANDING
BENEFICIAL OWNERSHIP OF COMMON STOCK ON
BOARD OF DIRECTORS COMMON STOCK FEBRUARY 28, 1994
- ------------------------------------------------------ ------------------------ ---------------------
<S> <C> <C>
Glenn W. Bailey....................................... 597,076(1) 3.57%
230 Park Ave.
New York, NY 10169
Gerald J. Breen....................................... 5,000(2) .03%
5200 Harvard Ave.
Cleveland, OH 44105
Lawrence J. Cawley.................................... 165,568(3) .99%
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624
Stephen K. Clough..................................... 94,288(4) .56%
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624
John H.F. Haskell, Jr................................. 20,500(5) .12%
535 Madison Ave., 15th Floor
New York, NY 10022
Norton Stevens........................................ 5,700(6) .03%
780 3rd Avenue, Suite 1401
New York, NY 10017
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
PERCENTAGE OF ISSUED
AMOUNT AND NATURE OF AND OUTSTANDING
BENEFICIAL OWNERSHIP OF COMMON STOCK ON
BOARD OF DIRECTORS COMMON STOCK FEBRUARY 28, 1994
- ------------------------------------------------------ ------------------------ ---------------------
<S> <C> <C>
OTHER EXECUTIVE OFFICERS
John F. Brocci........................................ 27,964(7) .17%
19345 U.S. 19 North, Suite 500
Clearwater, FL 34624
All officers and directors as a group, 7 persons...... 916,096 5.49%
</TABLE>
- ---------------
Note: Common Stock amounts represented above have been adjusted to reflect the
stock split of April 30, 1992.
(1) Included in these shares are 7,500 shares which are acquirable under the
Stock Option Plans in 1994.
(2) Included in these shares are 5,000 shares which are acquirable under the
Stock Option Plans in 1994.
(3) Included in these shares are 14,000 shares owned by Mrs. Cawley as to which
Mr. Cawley disclaims beneficial ownership, and 120,400 shares which are
acquirable under the Stock Option Plans in 1994.
(4) Included in these shares are 78,500 shares which are acquirable under the
Stock Option Plans in 1994.
(5) Included in these shares are 7,500 shares which are acquirable under the
Stock Option Plans in 1994.
(6) Included in these shares are 2,500 shares which are acquirable under the
Stock Option Plans in 1994.
(7) Included in these shares are 20,000 shares which are acquirable under the
Stock Option Plans in 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- ----------------------- PAYOUTS
OTHER SECURITIES -------
ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPEN- STOCK OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) SATION ($) AWARDS ($) SARS (#) ($) ($)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ------------------------- ---- -------- -------- ---------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. Cawley,...... 1993 $259,519 $176,800 0 0 30,000 0 0
Chairman and Chief 1992 $235,808 $147,500 0 0 0 0 0
Executive Officer 1991 $219,692 $187,500 0 0 97,200 0 0
Stephen K. Clough,....... 1993 $192,615 $130,100 0 0 20,000 0 0
President and Chief 1992 $177,115 $ 94,400 0 0 0 0 0
Operating Officer 1991 $155,769 $114,700 0 0 58,000 0 0
John F. Brocci,.......... 1993 $ 92,181 $ 46,500 0 0 10,000 0 0
Vice President 1992 $ 84,631 $ 33,300 0 0 10,000 0 0
Administration 1991 $ 78,875 $ 21,000 0 0 20,000 0 0
</TABLE>
- ---------------
Column (C): Includes deferrals into the 401(k) plan.
Column (G): Reflects the number of Non-qualified Stock Options granted and
accounts for the stock split on April 30, 1992. Kaydon does not have
a Stock Appreciation Rights (SAR) Plan.
The Company has not entered into any employment contract with any of the
named Officers or Directors nor does it have any compensatory plan or
arrangement for said Officers or Directors.
REPORT OF THE KAYDON CORPORATION COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely
of independent outside directors. The Committee is responsible for establishing
and administering the Company's Executive Compensation program.
5
<PAGE> 7
(A) COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's compensation philosophy is designed to support the overall
objective of creating value for our shareholders through:
- Hiring, developing, rewarding and retaining talented and productive
employees;
- Emphasizing pay-for-performance by having a significant portion of
cash compensation for senior executives at-risk through performance bonus
plans based upon financial, operating, strategic and growth objectives; and
- Providing equity-based incentives for selected employees to ensure
they are motivated over the long-term to respond to the Company's business
challenges and opportunities as owners, as well as employees.
(B) THE PROGRAM IN GENERAL
Kaydon Corporation's executive pay program is made up of the following
elements:
- Base Salary
Salaries of officers are listed in the Summary Compensation Table.
Each executive officer's performance and salary is reviewed annually by the
Compensation Committee. The following considerations are used in
determining the appropriate salary level: (a) the individual's sustained
performance and contribution to the company; (b) their experience and job
mastery; (c) their level of responsibility; (d) internal equity; and (e)
external pay practices.
The Base Pay component of annual compensation is based upon
competitive pay practices of other industrial companies of similar size and
scope for persons of comparable positions and experiences. The Hewitt
Associates Middle Market Index and other national independent published
surveys are used to establish salary midpoints for comparable positions
within Kaydon. The salary surveys used by Kaydon may or may not contain
information from companies represented in the comparator group index graph.
Salary range midpoints are generally set at the 50th percentile of the
market. An individual executive's base salary may be above or below the
salary midpoint depending on such variables as the individual's performance
and achievement, their experience and job mastery, time in position and
their contributions. The weight given these factors or other performance
objectives during the annual review in setting each executive officer's
base salary is determined subjectively by the Compensation Committee.
Kaydon believes that maximum performance can be encouraged through the
use of substantial annual incentive programs based upon attaining planned
operating and growth goals, with increased proportional rewards for
exceeding targets. Except for base pay, all other elements of executive
compensation are at risk.
- Annual Incentive Compensation Program
Kaydon believes in results. Its incentive compensation program is
designed to reward results.
Kaydon's Management Incentive Compensation (MIC) Program is a
combination of Management by Objectives (MBO) and profit sharing that
focuses the Corporation and Operating Units on performance objectives
relative to financial, operating and strategic business unit and corporate
growth goals which are considered fundamental to the future success of our
business(es) and which build shareholder value. Officers and certain other
salaried employees are eligible to participate.
Management's performance, and hence its rewards, are measured in such
stockholder terms as Earnings Per Share (EPS), Earnings Before Interest and
Taxes (EBIT), and Return On Capital Employed (ROCE).
At Kaydon's Corporate office, the annual bonus pool for the MIC
program for eligible employees is generated at the rate of $80,000 for each
1% improvement in Kaydon's EPS over the prior year. The non-
6
<PAGE> 8
employee Directors may add to, or delete from, the formula generated pool
up to $250,000 at their discretion, based upon their subjective evaluation
of non-EPS performance factors. In 1993, Kaydon's EPS improved 8.8%. The
non-employee directors neither added to, nor deleted from, the formula
generated pool.
At the various operating units, the annual bonus pool for the MIC
program for eligible employees is a formula measuring Return On Capital
Employed (ROCE) and Earnings Before Interest and Taxes (EBIT) which have a
minimum threshold achievement requirement of 80% of plan.
Total payout from the Annual Incentive Compensation Program is limited
to no more than 15% of Kaydon's pre-tax earnings.
The actual award to executive officers under this program is a
function of the number of points each has been awarded under the program
multiplied by the dollar amount produced by the Earnings Per Share formula
described above. The points assigned to executive officers and the
comparison of performance to goals are determined subjectively for each
executive officer by the Compensation Committee and approved by the Board
of Directors.
All awards under this program are subject to review by the
Compensation Committee and approval of the Board of Directors.
- Employee Stock Options
Stock options encourage and reward effective management that results
in long term corporate financial success as measured by stock price
appreciation. Stock options only have value if the price of Kaydon's stock
appreciates in value from the date the stock options are granted.
Stockholders of Kaydon also benefit from such stock price appreciation.
Kaydon's Employee Stock Option Plan has two components: incentive
stock options and non-qualified stock options. No incentive stock options
have been awarded since 1986. To encourage a longer-term perspective, the
options cannot be exercised immediately. Further, grants have not been made
at an option price less than the market value on the day of the grant.
Stock options may be awarded annually consistent with the Company's
objective to weight total compensation toward long-term equity interest for
managers and executive officers with greater opportunity for reward if
long-term performance is sustained.
The Employee Stock Option Plan is overseen by the Compensation
Committee (which consists of non-employee directors who are disinterested
persons under the Plan). The Plan terms are supplemented by administrative
guidelines and internal policies which govern the day-to-day workings of
the Plan. However, consideration for and/or the granting of any stock
option is within the subjective determination of the Committee. In 1993,
the Committee granted awards totalling 124,750 options based on
considerations such as performance, length of time since last grant, level
of accountability, contribution to the Company's growth and the options
previously granted to the recipient. The Committee did not attach any
particular weight to any factor and the final grant, if any, was
subjectively determined by the Committee for each executive officer. Each
employee stock option award requires approval by the Compensation Committee
and the Board of Directors.
- CEO Compensation
Lawrence J. Cawley is Chairman and Chief Executive Officer. He has
been Chief Executive Officer since November, 1987.
- Base Salary
Mr. Cawley's base pay range and midpoint is established in the
manner described above.
Mr. Cawley's performance is reviewed annually by the Compensation
Committee. In 1993, Mr. Cawley's base salary was increased based on a
consideration of attainment of financial, operating
7
<PAGE> 9
and strategic corporation objectives and on consideration of an
independent survey of executive compensation performed for the
Compensation Committee by Hewitt Associates. No particular weight was
attached to any single factor or performance objective, and the final
determination was based on the Committee's subjective judgment regarding
the application of the Hewitt study and Mr. Cawley's attainment of the
designated financial, operating and strategic objectives.
- Annual Incentive Compensation
Mr. Cawley's annual incentive compensation is determined in the
manner described above (percentage improvement of Earnings Per Share
over the prior year) under the Annual Incentive Compensation Program.
Mr. Cawley's actual award is a function of the number of points he has
been awarded under the program (his points were established in 1987 and
remain unchanged) multiplied by the dollar amount produced by the
program formula. Mr. Cawley's 1993 incentive compensation award was not
adjusted by the Compensation Committee.
- Stock Options
In 1993 Mr. Cawley was granted options for 30,000 shares of Kaydon
stock based on his performance, overall contributions to the Company,
length of time since his last grant and the options previously granted
Mr. Cawley. No particular weight was attached to any single factor and
the final determination was based on the Committee's subjective judgment
regarding Mr. Cawley's performance, overall contributions to the Company
and other factors.
COMPENSATION COMMITTEE:
Norton Stevens
Gerald J. Breen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer, Director or member of the Compensation Committee of
the Company had any interlocking relationship which would require disclosure in
this Proxy Statement.
OPTION/SAR GRANTS TABLE
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES of Alternative to
STOCK PRICE (F) and (G):
APPRECIATION for Grant Date
INDIVIDUAL GRANTS OPTION TERM Value
- -------------------------------------------------------------------------- --------------- ---------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($) VALUE($)
- --------------------- ------------ ------------ ----------- ---------- ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. Cawley... 30,000 26% 22.00 11/3/98 -- -- 8.18
Stephen K. Clough.... 20,000 17% 22.00 11/3/98 -- -- 8.18
John F. Brocci....... 10,000 9% 22.00 11/3/98 -- -- 8.18
</TABLE>
(Footnotes on following page)
8
<PAGE> 10
- ---------------
(1) Column (H) calculation made in accordance with the Black-Scholes option
pricing model.
The model assumes:
(a) An option term of five (5) years which is the life of the grant.
(b) Expected volatility which is calculated using the daily closing
price of the stock for the six (6) months immediately preceding
the option grant.
(c) Dividend yield at $.40 per share which is the annualized dividend
paid to shareholders on the date of the grant.
(d) The risk-free rate of return is the average monthly U.S. Treasury
note with a maturity date corresponding to the option term (i.e.,
5 years).
(e) No adjustments for non-transferability or risk of forfeiture.
(2) The material terms of the option are as follows: 25% of the option is
exercisable one year from the date of the grant and an additional 25% is
exercisable each of the following three years. The right to purchase is
cumulative. Exercisability may be accelerated upon death, disability,
retirement, certain mergers or other corporate events, or a change in
control of Kaydon. The option price may be paid in stock or cash.
(3) Column (B) and (C) -- Kaydon does not have a Stock Appreciation Rights (SAR)
Plan.
(4) (a) Mr. Cawley received a single option grant of 30,000 shares for the last
fiscal year.
(b) Mr. Clough received a single option grant of 20,000 shares for the last
fiscal year.
(c) Mr. Brocci received a single option grant of 10,000 shares for the last
fiscal year.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION/SAR VALUE
- --------------------------------------------------------------------------------------------------------
(D)
NUMBER OF (E)
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
(B) OPTIONS/SARS OPTIONS/SARS
SHARES (C) AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE ------------- -------------
(A) EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Lawrence J. Cawley........................... 30,000 375,000 (E) 81,100 158,512
(U) 86,100 58,387
Stephen K. Clough............................ 2,500 34,217 (E) 54,000 102,500
(U) 54,000 34,250
John F. Brocci............................... 16,300 213,525 (E) 20,000 26,375
(U) 22,500 (31,875)
</TABLE>
- ---------------
Note: All values reflect two-for-one stock split on April 30, 1992. Kaydon stock
closed at $20.75 on 12/31/93.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS
(B) (C) --------------------------------
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL (D) (E) (F)
(A) OR OTHER RIGHTS MATURATION OR THRESHOLD TARGET ($ MAXIMUM
NAME (#) PAYOUT ($ OR #) OR #) ($ OR #)
- --------------------------------------- --------------- ------------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Lawrence J. Cawley..................... 0 0 0 0 0
Stephen K. Clough...................... 0 0 0 0 0
John F. Brocci......................... 0 0 0 0 0
</TABLE>
9
<PAGE> 11
COMPARISON OF FIVE YEAR CUMULATIVE RETURNS (1989-1993) TABLE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MACHINERY
(FISCAL YEAR COVERED) KAYDON INDEX S&P 500
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 119.38 110.93 131.49
1990 129.47 101.32 127.32
1991 170.67 129.29 166.21
1992 183.74 144.12 179.30
1993 164.83 183.59 197.23
</TABLE>
- Assumes $100 Invested in Common Stock on January 1, 1989.
- Total Return Assumes Reinvestment of Dividends.
- Based Upon Fiscal Year Ending December 31, 1993.
- Industry Index Based On Value Line Machinery Industry Index.
PENSION PLAN TABLE
The following table presents information regarding estimated annual
benefits payable as a straight life annuity upon retirement to persons in
specified remuneration and years of service classifications, under the present
plan formula.
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE AT RETIREMENT
AVERAGE ------------------------------------------------------------
PAY 5 10 15 20 25 30 OR MORE
- ---------------------------------------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000................................ $ 3,291 $ 6,582 $ 9,874 $13,165 $16,456 $ 19,747
75,000................................ 5,266 10,532 15,799 21,065 26,331 31,597
100,000................................ 7,241 14,482 21,724 28,965 36,206 43,447
125,000................................ 9,216 18,432 27,649 36,865 46,081 55,297
150,000................................ 11,191 22,382 33,574 44,765 55,956 67,147
175,000................................ 13,166 26,332 39,499 52,665 65,831 78,997
200,000................................ 15,141 30,282 45,424 60,565 75,706 90,847
225,000................................ 17,116 34,232 51,349 68,465 85,581 102,697
250,000 or more........................ 17,973 35,945 53,918 71,890 89,863 107,836
</TABLE>
- ---------------
(1) Salary used for benefit calculations is limited to $235,840 per year as of
January 1, 1993 as prescribed by the IRS.
(2) Certain individuals, including the named officers discussed here, may not
receive the full benefit described here to the extent the regulations
require limitation or modification of the benefit formula.
(3) The benefits described herein are not subject to further deduction for
Social Security or other offset amounts.
10
<PAGE> 12
Remuneration covered by the Retirement Plan in a particular year includes
(1) that year's salary (base pay, overtime, and commissions), and (2)
compensation received in that year under the Management Incentive Compensation
Plan in an amount up to 50% of the participant's base pay as of December 31 of
the preceding calendar year. The 1993 remuneration covered by the Retirement
Plan for each participant, therefore, includes management incentive compensation
(up to such 50% ceiling) paid during 1993 in respect of 1992 awards.
For each of the following officers of Kaydon, the credited Years of Service
under the Retirement Plan, as of December 31, 1993, and the remuneration
received during 1993 covered by the Retirement Plan, were, respectively, as
follows: Mr. Cawley, 8 years and $235,840; Mr. Clough, 8 years and $235,840; Mr.
Brocci, 5 years and $125,481.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of Kaydon has selected Arthur Andersen & Co.,
independent public accountants, to audit Kaydon's consolidated financial
statements for the year ending December 31, 1993. A representative of Arthur
Andersen & Co. will be present at the Annual Meeting of Shareholders with an
opportunity to make a statement, if desired, and will be available to respond to
appropriate questions from shareholders present.
PROPOSALS BY HOLDERS OF COMMON STOCK
Any proposal which a shareholder of Kaydon desires to have included in the
proxy relating to the 1995 Annual Meeting of Shareholders must be received by
Kaydon at its Corporate offices (sent to the attention of the Corporate
Secretary) no later than October 31, 1994. The Corporate offices of Kaydon are
located at 19345 U.S. 19 North, Suite 500, Clearwater, Florida 34624.
EXPENSES AND OTHER MATTERS
EXPENSES OF SOLICITATION
Kaydon will pay the costs of preparing, assembling and mailing this proxy
statement and the material enclosed herewith. Kaydon has requested brokers,
nominees, fiduciaries and other custodians who hold shares of its common stock
in their names to solicit proxies from their clients who own such shares, and
Kaydon has agreed to reimburse them for their expenses in so doing.
In addition to the use of the mails, certain officers, directors and
regular employees of Kaydon, at no additional compensation, may request the
return of proxies by personal interview or by telephone or telegraph.
OTHER ITEMS OF BUSINESS
The management does not intend to present any further items of business to
the meeting, and knows of no such items which will or may be presented by
others. However, if any other matter properly comes before the meeting, the
persons named in the enclosed proxy form will vote thereon in such manner as
they may in their discretion determine.
John F. Brocci
Vice President Administration
Corporate Secretary
March 14, 1994
PLEASE SIGN, DATE AND IMMEDIATELY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ADDRESSED ENVELOPE.
11
<PAGE> 13
PROXY KAYDON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, APRIL 27, 1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KAYDON CORPORATION
The undersigned hereby appoints LAWRENCE J. CAWLEY and JOHN F. BROCCI, and
each of them, the proxies of the undersigned, with power of substitution in
each, to vote all stock of Kaydon Corporation that the undersigned is entitled
to vote at the Annual Meeting of Shareholders of such Corporation to be held at
Tampa Airport Marriott, Tampa International Airport, Tampa, Florida on
Wednesday, April 27, 1994 at 10:00 AM, Eastern time, and at any adjournment
thereof.
Your vote for the six directors may be indicated on the reverse side. Glenn
W. Bailey, Gerald J. Breen, Lawrence J. Cawley, Stephen K. Clough, John H.F.
Haskell, Jr. and Norton Stevens have been nominated for election as Directors.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO CONTRARY SPECIFICATION IS INDICATED, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AS DIRECTORS. PLEASE MARK BOX OR /X/ .
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
1. Election of Directors: (duly nominated and named on the reverse side of this
proxy)
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / FOR all nominees (except as / / AUTHORITY WITHHELD for all. / / AUTHORITY WITHHELD for the following
listed to the contrary). only (write each nominee's name in
the space below)
</TABLE>
- --------------------------------------------------------------------------------
Name(s)
(Continued and to be signed on the reverse side)
2. In their discretion, on other matters which properly come before the
meeting or any postponement or adjournment thereof.
You are urged to date, sign, and return promptly this proxy in the envelope
provided. It is important for you to be represented at the Meeting. The
execution of this proxy will not affect your right to vote in person if you are
present at the Meeting and wish to so vote.
Dated: ,1994
----------------
-------------------------
Signature
-------------------------
Signature if held jointly
IMPORTANT: Please sign
exactly as your name or names
appear hereon. If signing as
an attorney, executor,
administrator, trustee,
guardian, or in some other
representative capacity, or
as officer of a corporation,
please indicate your capacity
or full title. For joint
accounts, all tenants should
sign.
