<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 July 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 August 2, 1995 - 16,693,409 shares, $0.10 par value.
<PAGE> 2
KAYDON CORPORATION FORM 10-Q
FOR THE QUARTER ENDED JULY 1, 1995
INDEX
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Consolidated Condensed Balance Sheets -
July 1, 1995 and December 31, 1994 1
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended July 1, 1995
and July 2, 1994 2
Consolidated Condensed Statements of Cash Flows -
Six Months Ended July 1, 1995 and July 2, 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 5. - Other Information 8
Item 6. - Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibits E-1
</TABLE>
<PAGE> 3
KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 1, 1995 December 31, 1994
---------------- ------------------
(Unaudited)
<S> <C> <C>
Assets:
------
Cash and cash equivalents $ 27,731,000 $ 28,575,000
Marketable securities 28,278,000 11,092,000
Accounts receivable, net 30,354,000 27,230,000
Inventories 54,734,000 53,746,000
Other current assets 6,422,000 6,145,000
----------------------------------------
Total current assets 147,519,000 126,788,000
Plant and equipment, net 57,241,000 61,247,000
Cost in excess of net tangible
assets of purchased businesses, net 42,696,000 43,691,000
Other assets 11,624,000 11,858,000
----------------------------------------
Total assets $259,080,000 $243,584,000
========================================
Liabilities and Stockholders' Investment:
----------------------------------------
Accounts payable $ 8,848,000 $ 8,856,000
Accrued expenses 31,295,000 29,370,000
Federal income tax payable 1,478,000 2,676,000
----------------------------------------
Total current liabilities 41,621,000 40,902,000
Other long-term liabilities 28,649,000 28,112,000
Long-term debt 8,000,000 8,000,000
Stockholders' investment 180,810,000 166,570,000
----------------------------------------
Total liabilities and
stockholders' investment $259,080,000 $243,584,000
========================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE> 4
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $57,560,000 $52,032,000 $113,025,000 $102,157,000
Gross profit 22,782,000 19,966,000 43,813,000 37,878,000
Operating income 15,013,000 12,912,000 29,072,000 24,437,000
Interest income, net 683,000 79,000 1,211,000 107,000
---------- ----------- ------------ ------------
Income before income taxes and
cumulative prior year effect of
change in accounting principle 15,696,000 12,991,000 30,283,000 24,544,000
Provision for income taxes 5,981,000 4,968,000 11,532,000 9,329,000
----------- ----------- ------------ ------------
Income before cumulative prior
year effect of change in
accounting principle 9,715,000 8,023,000 18,751,000 15,215,000
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 $ 9,715,000 $ 8,023,000 $ 18,751,000 $ 13,215,000
=========== =========== ============ ============
Weighted average common shares 16,776,000 16,737,000 16,752,000 16,729,000
Earnings per share before cumulative
prior year effect of change in
accounting principle N/A N/A N/A $ 0.91
Earnings per share $ 0.58 $ 0.48 $ 1.12 $ 0.79
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
July 1, 1995 July 2, 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities $ 19,279,000 $ 19,398,000
------------ ------------
Cash flows from investing activities:
Increase in marketable securities (17,186,000) 0
Capital expenditures, net (4,162,000) (3,481,000)
Acquisition of businesses, net of cash acquired (759,000) (7,268,000)
Proceeds from sale of surplus building and automotive division assets 5,265,000 0
------------ ------------
Cash used in investing activities (16,842,000) (10,749,000)
------------ ------------
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 836,000 18,000
Dividends paid (3,666,000) (3,348,000)
Purchase of treasury stock (288,000) 0
------------ ------------
Cash used in financing activities (3,118,000) (10,642,000)
------------ ------------
Effect of exchange rate changes on cash
and cash equivalents (163,000) (67,000)
------------ ------------
Net decrease in cash and cash equivalents (844,000) (2,060,000)
Cash and cash equivalents - Beginning of period 28,575,000 24,528,000
------------ ------------
Cash and cash equivalents - End of period $ 27,731,000 $ 22,468,000
============ ============
Cash expended for income taxes $ 12,780,000 $ 8,308,000
============ ============
Cash expended for interest $ 170,000 $ 198,000
============ ============
</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 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 July 1,
1995 and the results of its operations and its cash flows for the six
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>
July 1, 1995 Dec 31, 1994
------------ ------------
<S> <C> <C>
Raw Material $14,203,000 $13,136,000
Work in Process 12,438,000 11,995,000
Finished Goods 28,093,000 28,615,000
----------- -----------
$54,734,000 $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.
4
<PAGE> 7
(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.
(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) 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
--------------------------------------------------------------------------------
Results of Operations
Kaydon Corporation and subsidiaries (the "Company") reported record sales of
$57,560,000 in the second quarter of 1995, up 10.6% compared to $52,032,000 in
the second quarter of 1994. The increase was attributable to improvements in
most operations.
Net income, also a record, was $9,715,000, up 21.1% compared to $8,023,000 in
the second quarter 1994. The resulting earnings per share of $0.58 were up
20.8% compared to $0.48 last year. Significant improvements in gross profit and
a substantial gain in interest income improved net earnings.
Gross profit as a percent of sales increased to 39.6% from 38.4% in the same
period last year. The increase was attributable to improved volume and good
operational results. Selling and administrative expenses as a percent of sales
were 13.5%, essentially flat with the 13.6% from the same period last year.
Interest income was up $604,000 over last year's $79,000, the result of much
larger cash and securities balances. The effective tax rate of 38.1% for the
second quarter was essentially flat with the 38.2% rate last year.
Six Months 1995 to 1994
Sales for the first six months of 1995 were $113,025,000 an increase of $10.6%
over last year's $102,157,000. Year to date net earnings were $18,751,000, a
gain of 23.2% over the 1994 earnings of $15,215,000 (before the mandated
accounting change for FASB 112). Earnings per share were up 23.1% to $1.12
versus $0.91 before accounting changes last year.
Liquidity and Capital Resources
Working capital was $105,898,000 at the end of the second quarter reflecting a
current ratio of 3.5 compared to $85,886,000 at year end with a current ratio
of 3.1. The increase of $20,012,000 is 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 offset by dividends, net capital expenditures
and a small product line acquisition made in the first quarter.
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
$56,009,000 exceeded total debt by $48,009,000 compared to $31,667,000 at year
end for an increase of $16,342,000.
6
<PAGE> 9
Cash generation from operating activities was $6,673,000 for second quarter
1995 compared to $8,421,000 in 1994. The decrease is primarily attributable to
a larger second quarter estimated tax payment made during 1995.
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. Year to date
there have been 600 treasury shares purchased on the open market for
approximately $14,000. The total number of shares acquired since the Board of
Directors authorized the original 1,000,000 share repurchase is 834,200 and in
April the Board of Directors approved a further repurchase of an additional
1,000,000 shares. The Company has $85,000,000 available under its multi-bank
revolving credit agreements that could be utilized to meet its liquidity needs.
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. Both of these sales were completed during the second quarter. 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.
Outlook
The Company's backlog of unfilled orders increased once again to $91,728,000
compared to $90,161,000 at the end of the prior quarter and $88,360,000 at last
year end. The increase occurred on top of record shipments. Given the Company's
first half results and its perception that current business conditions remain
strong through at least 1995, the Company is expecting a good second half of
the year.
7
<PAGE> 10
Part II
OTHER INFORMATION
Item 5. Other Information
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.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
A. Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C> <C>
(4) Shareholders Rights Plan adopted Incorporated by
June 21, 1995 reference to Form
8A filed on June
28, 1995.
(11) Schedule setting forth computation of earnings E-1
per common share for the six months ended
July 1, 1995 and July 2, 1994
(27) Financial Data Schedule (for SEC use only)
B. Reports on Form 8-K
-------------------
None
</TABLE>
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
August 10, 1995 /s/ Lawrence J. Cawley
---------------------------------
Lawrence J. Cawley
(Chief Executive Officer)
August 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 SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
--------------------------
Net income $ 9,715,000 $ 8,023,000 $18,751,000 $13,215,000
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 16,695,000 16,690,000 16,695,000 16,690,000
Net common shares issuable in respect
to common stock equivalents, with
a dilutive effect 81,000 47,000 57,000 39,000
----------- ----------- ----------- -----------
Total weighted average common and
common share equivalents 16,776,000 16,737,000 16,752,000 16,729,000
Primary earnings per common share $ 0.58 $ 0.48 $ 1.12 $ 0.79
Fully Diluted Earnings Per Share:
--------------------------------
Net income $9,715,000 $8,023,000 $18,751,000 $13,215,000
----------- ----------- ----------- -----------
Weighted average common
shares outstanding 16,695,000 16,690,000 16,695,000 16,690,000
Net common shares issuable in respect
to common stock equivalents, with
a dilutive effect 94,000 47,000 67,000 48,000
----------- ----------- ----------- -----------
Total weighted average common and
common share equivalents 16,789,000 16,737,000 16,762,000 16,738,000
Fully diluted earnings per common share $ 0.58 $ 0.48 $ 1.12 $ 0.79
</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 SIX MONTHS ENDED JUNE 1,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 27,731
<SECURITIES> 28,278
<RECEIVABLES> 31,579
<ALLOWANCES> 1,225
<INVENTORY> 54,734
<CURRENT-ASSETS> 147,519
<PP&E> 147,393
<DEPRECIATION> 90,152
<TOTAL-ASSETS> 259,080
<CURRENT-LIABILITIES> 41,621
<BONDS> 8,000
<COMMON> 1,760
0
0
<OTHER-SE> 179,050
<TOTAL-LIABILITY-AND-EQUITY> 259,080
<SALES> 113,025
<TOTAL-REVENUES> 113,025
<CGS> 69,212
<TOTAL-COSTS> 69,212
<OTHER-EXPENSES> 14,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,211)
<INCOME-PRETAX> 30,283
<INCOME-TAX> 11,532
<INCOME-CONTINUING> 18,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,751
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
