<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 September 30, 1995 Commission File No. 0-12640
KAYDON CORPORATION
------------------
A Delaware Corporation IRS Employer ID No. 13-3186040
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19345 US 19 North, Clearwater, FL 34624 Phone: 813/531-1101
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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 November 8, 1995 - 16,560,359 shares, $0.10 par
value.
<PAGE> 2
KAYDON CORPORATION FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX
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<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I - Financial Information:
Consolidated Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 1
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended September 30, 1995
and October 1, 1994 2
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1995 and October 1, 1994 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 6. - Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibits E-1
</TABLE>
<PAGE> 3
KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
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<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
-------------------- ------------------
(Unaudited)
<S> <C> <C>
Assets:
- ------
Cash and cash equivalents $ 13,646,000 $ 28,575,000
Marketable securities 28,534,000 11,092,000
Accounts receivable, net 34,144,000 27,230,000
Inventories 55,097,000 53,746,000
Other current assets 6,260,000 6,145,000
--------------------------------------
Total current assets 137,681,000 126,788,000
Plant and equipment, net 73,094,000 61,247,000
Cost in excess of net tangible
assets of purchased businesses, net 47,870,000 43,691,000
Other assets 14,255,000 11,858,000
--------------------------------------
Total assets $272,900,000 $243,584,000
======================================
Liabilities and Stockholders' Investment:
- ----------------------------------------
Accounts payable $ 10,088,000 $ 8,856,000
Accrued expenses 36,034,000 29,370,000
Federal income tax payable 2,753,000 2,676,000
--------------------------------------
Total current liabilities 48,875,000 40,902,000
Other long-term liabilities 27,496,000 28,112,000
Long-term debt 8,000,000 8,000,000
Stockholders' investment 188,529,000 166,570,000
--------------------------------------
Total liabilities and
stockholders' investment $272,900,000 $243,584,000
======================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE> 4
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30, 1995 Oct 1, 1994 Sept 30, 1995 Oct 1, 1994
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Net sales $56,087,000 $50,279,000 $169,112,000 $152,436,000
Gross profit 21,434,000 18,871,000 65,247,000 56,749,000
Operating income 14,533,000 12,263,000 43,605,000 36,700,000
Interest income, net 695,000 173,000 1,906,000 280,000
----------- ----------- ------------ ------------
Income before income taxes and
cumulative prior year effect of
change in accounting principle 15,228,000 12,436,000 45,511,000 36,980,000
Provision for income taxes 5,813,000 4,726,000 17,345,000 14,055,000
----------- ----------- ------------ ------------
Income before cumulative prior
year effect of change in
accounting principle 9,415,000 7,710,000 28,166,000 22,925,000
Cumulative prior year effect of change
in accounting principle for
postemployment benefits, net of
income tax benefit of $1,200,000 0 0 0 (2,000,000)
----------- ----------- ------------- ------------
Net income $ 9,415,000 $ 7,710,000 $ 28,166,000 $ 20,925,000
=========== =========== ============ ============
Weighted average common shares 16,810,000 16,735,000 16,770,000 16,736,000
Earnings per share before cumulative
prior year effect of change in
accounting principle N/A N/A N/A $ 1.37
Earnings per share $ 0.56 $ 0.46 $ 1.68 $ 1.25
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
Sept 30, 1995 Oct 1, 1994
------------- -----------
<S> <C> <C>
Cash flows from operating activities $ 31,474,000 $ 27,390,000
------------ ------------
Cash flows from investing activities:
Increase in marketable securities (17,442,000) 0
Capital expenditures, net (5,738,000) (4,513,000)
Acquisition of businesses, net of cash acquired (23,512,000) (7,268,000)
Proceeds from sale of surplus building and
automotive division assets 5,265,000 0
------------ ------------
Cash used in investing activities (41,427,000) (11,781,000)
------------ ------------
Cash flows from financing activities:
Net payments under line of credit 0 (312,000)
Principal payments of long-term debt 0 (7,000,000)
Proceeds from issuance of common stock 1,293,000 393,000
Dividends paid (5,501,000) (5,017,000)
Purchase of treasury stock (623,000) (176,000)
------------ ------------
Cash used in financing activities (4,831,000) (12,112,000)
------------ ------------
Effect of exchange rate changes on cash
and cash equivalents (145,000) (96,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (14,929,000) 3,401,000
Cash and cash equivalents - Beginning of period 28,575,000 24,528,000
------------ ------------
Cash and cash equivalents - End of period $ 13,646,000 $ 27,929,000
============ ============
Cash expended for income taxes $ 20,455,000 $ 15,925,000
============ ============
Cash expended for interest $ 262,000 $ 238,000
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 6
KAYDON CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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(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 regulations 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 1994 Annual Report on Form 10-K.
(2) In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, of a normal
and recurring nature, necessary to present fairly the financial
position of the Company as of September 30, 1995 and the results of
its operations and its cash flows for the nine 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:
<TABLE>
<CAPTION>
Sept 30, 1995 Dec 31, 1994
------------- ------------
<S> <C> <C>
Raw Material $15,231,000 $13,136,000
Work in Process 12,734,000 11,995,000
Finished Goods 27,132,000 28,615,000
----------- -----------
$55,097,000 $53,746,000
=========== ===========
</TABLE>
(4) In the first quarter of 1994 the Company 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.
(5) During the second quarter the Company sold for cash the surplus
building which resulted from the 1993 plant consolidation and
substantially all of the assets of its automotive division. There was
no material effect on second quarter net income from either of these
dispositions, however the sales generated cash of $5,265,000 during
the quarter.
4
<PAGE> 7
(6) On June 21, 1995, the Board of Directors of the Company adopted a
Shareholders Rights Plan which attaches one Right to each share of
Kaydon Common Stock to shareholders of record at the close of business
on July 7, 1995. When the Right becomes exercisable, each registered
holder will be entitled to purchase from the Company additional common
stock having a value of twice the exercise price upon payment of the
exercise price. The exercise price, subject to adjustment, is thirty
dollars ($30.00) per Right. The Rights will become exercisable eight
days following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding
shares of common stock (the "Stock Acquisition Date"). The Rights are
not exercisable until the Stock Acquisition Date and will expire at
the close of business on July 7, 2000, unless earlier redeemed by
Kaydon.
(7) On August 31, 1995, Kaydon Corporation purchased the stock of Seabee
Corporation for approximately $22,753,000, net of cash received.
Seabee, located in Hampton, Iowa, is a manufacturer of large hydraulic
cylinders and alloy steel castings. This acquisition was accounted
for using the purchase method of accounting and, accordingly, the
results of operations of Seabee have been included in the consolidated
financial statements since August 31, 1995, the effective date of the
acquisition.
(8) 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. In 1994, an examiner was appointed by a bankruptcy court to
examine the issues at stake. On September 23, 1994, the "Preliminary
Report of the Examiner" was made public. In the report, the examiner
stated that the alleged fraudulent conveyance claims against the
Company appear to be time-barred by the statute of limitations,
subject to certain possible exceptions which the Company does not
believe are significant or factual. Although the examiner has made
certain recommendations regarding a mechanism to resolve the claims
against the Company, the Court has not taken any action related to the
report. Nevertheless, in the Company's opinion, the report reinforces
management's original view that the claims will ultimately not be
sustained. 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 material
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
material 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
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Results of Operations
Kaydon Corporation and subsidiaries (the "Company") reported record third
quarter sales of $56,087,000, up 11.6% compared to $50,279,000 in the third
quarter of 1994. The increase was attributable to improvements in most
operations as well as the addition of Seabee Corporation ("Seabee") on August
31, 1995. Sales were approximately 7% higher without the $2,306,000 of sales
contributed by Seabee in September.
Net income, also a third quarter record, was $9,415,000, up 22.1% compared to
$7,710,000 last year. The resulting earnings per share of $0.56 were up 21.7%
compared to $0.46 in 1994. Improvements in both gross margin and selling,
general and administrative (SG&A) spending as a percent of sales combined with
a substantial gain in interest income to improve net income. The Seabee
acquisition made a nominal contribution to net income for the quarter.
Gross profit as a percent of sales increased to 38.2% from 37.5% in the same
period last year. The increase was attributable to operating efficiencies on
higher volumes and the continued positive impact of our new South Carolina
facility. SG&A expenses as a percent of sales were 12.3%, down from 13.1% last
year. The percentage improvement generally relates from increased sales volume
as the actual SG&A costs incurred increased slightly from $6,608,000 last year
to $6,901,000 this year.
Interest income was $695,000, up $522,000 over last year's $173,000. The
increase in interest income is the result of much larger cash and securities
balances. The effective tax rate of 38.2% for the third quarter was
essentially unchanged compared to 38.0% last year.
Nine Months 1995 to 1994
Sales for the first nine months of 1995 were $169,112,000, an increase of 10.9%
over last year's $152,436,000. Year to date net income was $28,166,000, a gain
of 22.9% over the 1994 net income of $22,925,000 (before the mandated
accounting change for FASB 112). Earnings per share were up 22.6% to $1.68
versus $1.37 before accounting changes last year.
6
<PAGE> 9
Liquidity and Capital Resources
Working capital was $88,806,000 at the end of the third quarter reflecting a
current ratio of 2.8 compared to $85,886,000 at year end with a current ratio
of 3.1. The decrease in the working capital ratio results primarily from
acquisition spending of $23,512,000 during the year. The increase in working
capital in absolute dollars of $2,920,000 is primarily the result of operating
cash flow and cash generated by the sale of the surplus building and
substantially all of the assets of the automotive division (both in the second
quarter) offset by dividends, net capital expenditures and acquisitions.
Total debt remained at $8,000,000 consisting of long-term debt Industrial
Revenue Bonds (IRB) issued at favorable interest rates which we do not
anticipate paying ahead of schedule. Cash and securities of $42,180,000
exceeded the $8,000,000 IRB debt by $34,180,000 compared to $31,667,000 at year
end for an increase of $2,513,000.
Cash generation from operating activities was $31,474,000 for the three
quarters of 1995 compared to $27,390,000 in 1994. The increase of $4,084,000
is primarily attributable to the increase in net income.
Management expects that the Company's planned capital requirements for the
remainder of 1995, which consist of capital expenditures, dividend payments and
its stock repurchase program, will be financed by operations. The Company has
$85,000,000 available under its multi-bank revolving credit agreements that
could be utilized to meet its liquidity needs.
Outlook
The Company's backlog of unfilled orders increased once again to $98,061,000
compared to $91,728,000 in the prior quarter and $88,360,000 at year end. The
acquisition of Seabee, which operates on a short lead-time basis, added
approximately $3,500,000 to the gain while Kaydon's other businesses increased
approximately $2,800,000. The increase occurred on top of record shipments.
Given the Company's year to date results and its perception that current
business conditions remain strong through at least 1995, the Company is
expecting a good year end finish. It should be noted, however, that on
November 5, 1995 the hourly workforce at the Baltimore facility voted to
strike. The Company does not anticipate this having a material impact on
fourth quarter earnings.
7
<PAGE> 10
Part II
OTHER INFORMATION
Item 5. Other Information
Brian P. Campbell was appointed to Kaydon's Board of Directors
to fill the position of the late Norton Stevens who passed
away in May. Mr. Campbell is the President and Director of
TriMas Corporation which he founded in 1986. TriMas is a
leading diversified manufacturer of proprietary, leadership
products for commercial, industrial and consumer markets.
On November 5, 1995 the members of the International
Association of Machinists and Aerospace Workers at the
Baltimore, Maryland plant voted to strike. The Company does
not anticipate a material impact on earnings in the fourth
quarter as a result of the strike.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
A. Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
(11) Schedule setting forth computation of earnings E-1
per common share for the nine months ended
September 30, 1995 and October 1, 1994.
(27) Financial Data Schedule (for SEC use only)
</TABLE>
B. Reports on Form 8-K
On September 6, 1995 the Company filed a Form 8-K to announce
the agreement to obtain the stock of Seabee Corporation
located in Hampton, Iowa. Seabee Corporation has been the
premier manufacturer of large hydraulic cylinders customized
for specific applications on construction and safety equipment
since 1977. It is also a supplier of alloy steel castings to
a broad assortment of industries. Annual sales in 1995 are
expected to be over $20 million, however only the last four
months of 1995 will be included in Kaydon results.
8
<PAGE> 11
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
November 10, 1995 /s/ Lawrence J. Cawley
-----------------------------
Lawrence J. Cawley
(Chief Executive Officer)
November 10, 1995 /s/ Thomas C. Sorrells III
-----------------------------
Thomas C. Sorrells III
(Corporate Controller)
9
<PAGE> 1
Exhibit 11
KAYDON CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
THREE MONTHS AND NINE MONTHS ENDED SEPT 30, 1995 AND OCT 1, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30, 1995 Oct 1, 1994 Sept 30, 1995 Oct 1, 1994
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
- --------------------------
Net income $ 9,415,000 $ 7,710,000 $28,166,000 $20,925,000
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 16,721,000 16,714,000 16,721,000 16,698,000
Net common shares issuable in respect
to common stock equivalents, with
a dilutive effect 89,000 21,000 49,000 38,000
----------- ----------- ----------- -----------
Total weighted average common and
common share equivalents 16,810,000 16,735,000 16,770,000 16,736,000
Primary earnings per common share $ 0.56 $ 0.46 $1.68 $ 1.25
Fully Diluted Earnings Per Share:
- --------------------------------
Net income $ 9,415,000 $ 7,710,000 $28,166,000 $20,925,000
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 16,721,000 16,714,000 16,721,000 16,698,000
Net common shares issuable in respect
to common stock equivalents, with
a dilutive effect 100,000 29,000 60,000 46,000
----------- ----------- ----------- -----------
Total weighted average common and
common share equivalents 16,821,000 16,743,000 16,781,000 16,744,000
Fully diluted earnings per common share $ 0.56 $ 0.46 $ 1.68 $ 1.25
</TABLE>
E - 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF KAYDON CORPORATION FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 13,646
<SECURITIES> 28,534
<RECEIVABLES> 35,377
<ALLOWANCES> 1,233
<INVENTORY> 55,097
<CURRENT-ASSETS> 137,681
<PP&E> 165,124
<DEPRECIATION> 92,030
<TOTAL-ASSETS> 272,900
<CURRENT-LIABILITIES> 48,875
<BONDS> 8,000
<COMMON> 1,762
0
0
<OTHER-SE> 186,767
<TOTAL-LIABILITY-AND-EQUITY> 272,900
<SALES> 169,112
<TOTAL-REVENUES> 169,112
<CGS> 103,865
<TOTAL-COSTS> 103,865
<OTHER-EXPENSES> 21,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,906)
<INCOME-PRETAX> 45,511
<INCOME-TAX> 17,345
<INCOME-CONTINUING> 28,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,166
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.68
</TABLE>
