<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 1, 1995 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 3, 1995 -- 16,679,659 SHARES, $0.10 PAR VALUE.
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<PAGE> 2
KAYDON CORPORATION FORM 10-Q
FOR THE QUARTER ENDED APRIL 1, 1995
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
Part I -- Financial Information:
Consolidated Condensed Balance Sheets -- April 1, 1995 and December 31,
1994.................................................................... 2
Consolidated Condensed Statements of Income -- Three Months Ended April 1,
1995 and April 2, 1994.................................................. 3
Consolidated Condensed Statements of Cash Flows -- Three Months Ended April
1, 1995 and April 2, 1994............................................... 4
Notes to Consolidated Condensed Financial Statements........................ 5
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 6
Part II -- Other Information:
Item 4. -- Submission of Matters to a Vote of Security Holders.............. 7
Item 6. -- Exhibits and Reports on Form 8-K................................. 7
Signatures.................................................................. 8
Exhibits.............................................................................. E-1
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 1, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents....................................... $ 32,679,000 $ 28,575,000
Marketable securities........................................... 15,397,000 11,092,000
Accounts receivable, net........................................ 28,428,000 27,230,000
Inventories..................................................... 56,657,000 53,746,000
Other current assets............................................ 5,808,000 6,145,000
------------ ------------
Total current assets.................................. 138,969,000 126,788,000
Plant and equipment, net........................................ 60,719,000 61,247,000
Cost in excess of net tangible assets of purchased businesses,
net........................................................... 42,921,000 43,691,000
Other assets.................................................... 11,716,000 11,858,000
------------ ------------
Total assets.......................................... $254,325,000 $243,584,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT:
Accounts payable................................................ $ 9,335,000 $ 8,856,000
Accrued expenses................................................ 29,538,000 29,370,000
Federal income tax payable...................................... 6,110,000 2,676,000
------------ ------------
Total current liabilities............................. 44,983,000 40,902,000
Other long-term liabilities..................................... 28,406,000 28,112,000
Long-term debt.................................................. 8,000,000 8,000,000
Stockholders' investment........................................ 172,936,000 166,570,000
------------ ------------
Total liabilities and stockholders' investment........ $254,325,000 $243,584,000
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 4
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
APRIL 1, APRIL 2,
1995 1994
----------- -----------
<S> <C> <C>
Net Sales......................................................... $55,465,000 $50,125,000
Gross Profit...................................................... 21,031,000 17,912,000
Operating Income.................................................. 14,059,000 11,525,000
Interest Income, net.............................................. 528,000 28,000
----------- -----------
Income Before Income Taxes and Cumulative Prior Year Effect of
Change in Accounting Principle.................................. 14,587,000 11,553,000
Provision for Income Taxes........................................ 5,551,000 4,361,000
----------- -----------
Income Before Cumulative Prior Year Effect of Change in Accounting
Principle....................................................... 9,036,000 7,192,000
Cumulative Prior Year Effect of Change in Accounting Principle For
Postemployment Benefits, Net of Income Tax Benefit of
$1,200,000...................................................... 0 (2,000,000)
----------- -----------
Net Income........................................................ $ 9,036,000 $ 5,192,000
========== ==========
Weighted Average Common Shares.................................... 16,730,000 16,720,000
Earnings Per Share Before Cumulative Prior Year Effect of Change
in Accounting Principle......................................... $ 0.54 $ 0.43
Earnings Per Share................................................ $ 0.54 $ 0.31
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 5
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
APRIL 1, APRIL 2,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities.............................. $12,606,000 $10,977,000
----------- -----------
Cash flows from investing activities:
Increase in marketable securities............................... (4,305,000) 0
Capital expenditures, net....................................... (1,998,000) (2,292,000)
Acquisition of businesses, net of cash acquired................. (759,000) (7,268,000)
----------- -----------
Cash provided by (used in) investing activities................. (7,062,000) (9,560,000)
----------- -----------
Cash flows from financing activities:
Net borrowings under line of credit............................. 0 381,000
Principal payments of long-term debt............................ 0 (7,000,000)
Proceeds from issuance of common stock.......................... 744,000 0
Dividends paid.................................................. (1,831,000) (1,679,000)
Purchase of treasury stock...................................... (288,000) 0
----------- -----------
Cash used in financing activities............................... (1,375,000) (8,298,000)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents...... (65,000) (39,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents.............. 4,104,000 (6,920,000)
Cash and cash equivalents -- Beginning of period.................. 28,575,000 24,528,000
----------- -----------
Cash and cash equivalents -- End of period........................ $32,679,000 $17,608,000
========== ==========
Cash expended for income taxes.................................... $ 2,084,000 $ 1,161,000
========== ==========
Cash expended for interest........................................ $ 25,000 $ 122,000
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<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 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 necessary to present
fairly the financial position of the Company as of April 1, 1995 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:
<TABLE>
<CAPTION>
APRIL 1, DECEMBER 31,
1995 1994
----------- ------------
<S> <C> <C>
Raw Material...................................... $12,427,000 $ 13,136,000
Work in Process................................... 14,316,000 11,995,000
Finished Goods.................................... 29,914,000 28,615,000
----------- ------------
$56,657,000 $ 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) 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> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Kaydon Corporation and subsidiaries (the "Company") reported record sales
of $55,465,000 in the first quarter 1995, up 10.7% compared to $50,125,000 in
the first quarter 1994. The increase was attributable primarily to improvements
in most operations.
Net income was also a record at $9,036,000, up 25.6% from $7,192,000
(before the $2,000,000 charge for SFAS 112) in the first quarter 1994. The
increase is attributable to both increased operating income and increased
interest income.
Gross profit as a percent of sales increased to 37.9% from 35.7% in the
same period last year. The increase was generally attributable to improved
manufacturing results.
Selling and administrative expenses were 12.6% of sales, essentially flat,
in percentage terms, with the 12.7% in the same period last year.
The effective tax rate of 38.1% during the first quarter of 1995 was
comparable with the 1994 annual effective rate of 38.0%.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $93,986,000 at the end of the first quarter as compared
to $85,886,000 at year end reflecting current ratios of 3.1 for both periods.
The increase of $8,100,000 resulted primarily from an increase of $8,409,000 in
cash and marketable securities reflecting strong operating cash flow.
Total debt remained at the $8,000,000 level from 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. Cash and securities of
$48,076,000 exceeded total debt by $40,076,000 compared to $31,667,000 at year
end for an increase of $8,409,000.
Cash generation from operating activities was $12,606,000, up 14.8% from
$10,977,000 in the first quarter of 1994. Net capital expenditures during the
quarter were $1,998,000 and $759,000 was spent for a small product line
acquisition for the I.D.M. Electronics subsidiary located in Reading, England.
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. During the
quarter, 600 treasury shares were purchased on the open market for approximately
$14,000 bringing the total number of shares acquired under the original
1,000,000 share repurchase authorized to 834,200. In April, the Board of
Directors approved a further repurchase of 1,000,000 shares. No price or time
limit was established. The Company has $85,000,000 available under its
multi-bank revolving credit agreements that could be utilized to meet its
liquidity needs.
Subsequent to the quarter end, the Company agreed to sell the surplus
building which resulted from the 1993 plant consolidation. In addition, the
Company agreed to sell its small automotive operation. The impact of these items
is not reflected in the financial position of the Company for the first quarter
and will have no effect on second quarter net income.
OUTLOOK
The Company's backlog of unfilled orders increased once again to
$90,161,000 compared to $88,360,000 at the end of the prior quarter. As the
backlog gains suggest, we see no reasons not to expect a continuing improvement
in Kaydon's performance in the second quarter of 1995 over 1994 as we continue
to see improvement in our diversified customer base.
6
<PAGE> 8
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The eleventh Annual Stockholders' Meeting of Kaydon Corporation was held at
the Tampa Airport Marriott on April 26, 1995. Represented at this meeting in
person or by proxy were 15,092,152 shares of Kaydon common stock, representing
91% of the total outstanding as of the February 27, 1995 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 1996 Annual Meeting. The results of the votes are as
follows:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS FOR WITHHOLD
------------------------------------------------------ ----------- --------
<S> <C> <C>
G. Bailey............................................. 14,720,669 371,483
G. Breen.............................................. 14,798,277 293,875
L. Cawley............................................. 14,722,522 369,630
S. Clough............................................. 14,722,822 369,330
J. Haskell............................................ 14,799,177 292,975
N. Stevens............................................ 14,798,977 293,175
</TABLE>
There was no other official business to come before the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
---------- ------------------------------------------------------------------- --------
<C> <S> <C>
(11) Schedule setting forth computation of earnings per common share for E-1
the three months ended April 1, 1995 and April 2, 1994.
(27) Financial Data Schedule (for SEC use only)
</TABLE>
B. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April 1, 1995.
7
<PAGE> 9
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 11, 1995 /s/ LAWRENCE J. CAWLEY
--------------------------------------
Lawrence J. Cawley
(Chief Executive Officer)
May 11, 1995 /s/ THOMAS C. SORRELLS III
--------------------------------------
Thomas C. Sorrells III
(Corporate Controller)
8
<PAGE> 1
EXHIBIT 11
KAYDON CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1995 1994
---------- ----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income.......................................................... $9,036,000 $5,192,000
---------- ----------
Weighted average common shares outstanding.......................... 16,690,000 16,690,000
Net common shares issuable in respect to common stock equivalents,
with a dilutive effect............................................ 40,000 30,000
---------- ----------
Total weighted average common and common share equivalents.......... 16,730,000 16,720,000
Primary earnings per common share................................... $ 0.54 $ 0.31
FULLY DILUTED EARNINGS PER SHARE:
Net income.......................................................... $9,036,000 $5,192,000
---------- ----------
Weighted average common shares outstanding.......................... 16,690,000 16,690,000
Net common shares issuable in respect to common stock equivalents,
with a dilutive effect............................................ 50,000 42,000
---------- ----------
Total weighted average common and common share equivalents.......... 16,740,000 16,732,000
Fully diluted earnings per common share............................. $ 0.54 $ 0.31
</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 THREE MONTHS ENDED APRIL 1,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 32,679
<SECURITIES> 15,397
<RECEIVABLES> 29,644
<ALLOWANCES> 1,216
<INVENTORY> 56,657
<CURRENT-ASSETS> 138,969
<PP&E> 165,473
<DEPRECIATION> 104,754
<TOTAL-ASSETS> 254,325
<CURRENT-LIABILITIES> 44,983
<BONDS> 8,000
<COMMON> 1,759
0
0
<OTHER-SE> 171,177
<TOTAL-LIABILITY-AND-EQUITY> 254,325
<SALES> 55,465
<TOTAL-REVENUES> 55,465
<CGS> 34,434
<TOTAL-COSTS> 34,434
<OTHER-EXPENSES> 6,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (528)
<INCOME-PRETAX> 14,587
<INCOME-TAX> 5,551
<INCOME-CONTINUING> 9,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,036
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
