<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 March 30, 1996 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 May 1, 1996 - 16,501,115 shares, $0.10 par value.
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KAYDON CORPORATION FORM 10-Q
FOR THE QUARTER ENDED MARCH 30, 1996
INDEX
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Page No.
--------
Part I - Financial Information:
Consolidated Condensed Balance Sheets -
March 30, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Income -
Three Months Ended March 30, 1996 and April 1, 1995 2
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 30, 1996 and April 1, 1995 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 2. - Changes in Securities 8
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 - E-2
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KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 30, 1996 December 31, 1995
--------------- -----------------
(Unaudited)
Assets:
- -------
<S> <C> <C>
Cash and cash equivalents $ 25,730,000 $ 4,808,000
Marketable securities 23,844,000 42,351,000
Accounts receivable, net 38,756,000 30,186,000
Inventories 52,539,000 50,145,000
Other current assets 8,878,000 7,964,000
-------------------------------
Total current assets 149,747,000 135,454,000
Plant and equipment, net 75,378,000 72,345,000
Cost in excess of net tangible
assets of purchased businesses, net 50,696,000 49,909,000
Other assets 11,401,000 9,967,000
-------------------------------
Total assets $287,222,000 $267,675,000
===============================
Liabilities and Stockholders' Investment:
- ----------------------------------------
Accounts payable $ 11,056,000 $ 8,877,000
Accrued expenses 34,683,000 33,119,000
Federal income tax payable 7,430,000 2,051,000
-------------------------------
Total current liabilities 53,169,000 44,047,000
Other long-term liabilities 27,972,000 27,723,000
Long-term debt 8,000,000 8,000,000
Stockholders' investment 198,081,000 187,905,000
-------------------------------
Total liabilities and
stockholders' investment $287,222,000 $267,675,000
</TABLE> ===============================
See accompanying notes to consolidated condensed financial statements.
1
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KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 30, 1996 April 1, 1995
-------------- -------------
<S> <C> <C>
Net Sales $73,395,000 $55,465,000
Gross Profit 28,736,000 21,031,000
Operating Income 19,340,000 14,059,000
Interest Income, net 499,000 528,000
----------- -----------
Income Before Income Taxes 19,839,000 14,587,000
Provision for Income Taxes 7,559,000 5,551,000
----------- -----------
Net Income $12,280,000 $ 9,036,000
=========== ===========
Weighted Average Common Shares 16,505,000 16,730,000
Earnings Per Share $ 0.74 $ 0.54
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
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KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 30, 1996 April 1, 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities $16,286,000 $12,606,000
----------- -----------
Cash flows from investing activities:
Purchases of marketable securities (23,267,000) (4,305,000)
Maturities of marketable securities 41,774,000 0
Capital expenditures, net (1,601,000) (1,998,000)
Acquisition of businesses, net of cash acquired (10,782,000) (759,000)
----------- -----------
Cash provided by (used in) investing activities 6,124,000 (7,062,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,370,000 744,000
Dividends paid (1,964,000) (1,831,000)
Purchase of treasury stock (290,000) (288,000)
Payment of short term debt (349,000) 0
----------- -----------
Cash used in financing activities (1,233,000) (1,375,000)
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents (255,000) (65,000)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 20,922,000 4,104,000
Cash and cash equivalents - Beginning of period 4,808,000 28,575,000
----------- -----------
Cash and cash equivalents - End of period $25,730,000 $32,679,000
=========== ===========
Cash expended for income taxes $ 2,155,000 $ 2,084,000
=========== ===========
Cash expended for interest $ 117,000 $ 25,000
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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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
1995 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 March 30, 1996 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:
Mar 30, 1996 Dec 31, 1995
------------ ------------
Raw Material $14,825,000 $13,764,000
Work in Process 17,160,000 13,040,000
Finished Goods 20,554,000 23,341,000
----------- -----------
$52,539,000 $50,145,000
=========== ===========
(4) 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 in 1993. The suits purport
to be class actions on behalf of all persons who have unsatisfied personal
injury and property damage claims against Keene Corporation which filed for
bankruptcy under Chapter 11. 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
4
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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. In June 1995,
the creditors' committee filed a complaint in the same bankruptcy court
asserting claims against the Company similar to those previously filed. If
Keene Corporation's current plan of reorganization is approved by the
bankruptcy court, the lawsuits filed in 1993 would be permanently stayed
and replaced by the creditors' committee complaint. 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
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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 sales of
$73,395,000 in the first quarter 1996, up 32.3% from $55,465,000 in the first
quarter last year. The increase was attributable to strong growth in our base
operations as well as contributions made by our new fluid power division. This
division began last September with the acquisition of Seabee Corporation and
continued with the acquisition of Victor Fluid Power Co. and Benton Harbor
Engineering Co., Inc. in February of this year.
Net income, also a record, was $12,280,000, a 35.9% increase over $9,036,000
last year. The increase was primarily attributable to increased sales and
improvements in operating margin in our base operations. The resulting
earnings per share of $0.74 were up 37.0% compared to $0.54 in 1995.
Gross profit as a percent of sales increased to 39.2% from 37.9% in the first
quarter of last year. Although the increase was attributable to most
operations, the Bearings division showed significant gains resulting from the
plant consolidation which took place last year.
Selling and administrative expenses were 12.8% of sales, essentially flat, in
percentage terms, with the 12.6% in the same period last year.
The effective tax rate of 38.1% during the first quarter of 1996 was comparable
with the 1995 annual effective rate of 38.2%.
Liquidity and Capital Resources
Working capital was $96,578,000 at the end of the first quarter reflecting a
current ratio of 2.8 compared to $91,407,000 at year end with a current ratio
of 3.1. The increase in the actual working capital was primarily attributable
to operating cash flow during the quarter offset by dividends, capital
expenditures and the business acquisition. The decrease in the working capital
ratio resulted primarily from the acquisition.
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 $49,574,000
exceeded the $8,000,000 IRB debt by $41,574,000 compared to $39,159,000 at year
end for an increase of $2,415,000. This increase is net of the $10,782,000
spent on the acquisition during the quarter.
6
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Cash generation from operating activities was $16,286,000, up 29.2% from
$12,606,000 in the first quarter of 1995. The increase is a direct reflection
of the increase in net income.
Management expects that the Company's planned capital requirements for the
remainder of 1996, 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 $119,933,000
compared to $101,852,000 at year end and $90,161,000 this time last year. The
acquisition added approximately $7,000,000 during the quarter. The backlog in
our other operations grew approximately $11,037,000 in a quarter of record
shipments. Assuming economic conditions in our market continue at a favorable
pace, the Company expects to report both a good second quarter and full year
1996.
7
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Part II
OTHER INFORMATION
Item 2. Changes in Securities
On May 3, 1996, the Company's Certificate of Incorporation were
amended to increase the authorized number of shares of common stock
from 48 million to 98 million shares. As discussed in Item 4, the
amendment was authorized at the annual meeting of shareholders on April
24, 1996. Except for the increase in the number of authorized shares
of common stock, the amendment does not change any of the other
provisions of the Company's Certificate of Incorporation. The
additional shares of common stock authorized by the amendment have the
same rights and privileges as the shares of common stock previously
authorized and outstanding.
Item 4. Submission of Matters to a Vote of Security Holders
The twelfth Annual Stockholders' Meeting of Kaydon Corporation
was held at the Tampa Airport Marriott on April 24, 1996. Represented
at this meeting in person or by proxy were 12,664,386 shares of Kaydon
common stock, representing 77% of the total outstanding as of the
February 23, 1996 record date.
The stockholders elected Gerald J. Breen, Brian P. Campbell,
Lawrence J. Cawley, Stephen K. Clough and John H.F. Haskell, Jr. to
serve as Directors until the 1997 Annual Meeting. The results of the
votes are as follow:
Election of Directors For Withhold
--------------------- ---------- --------
G. Breen 12,434,220 230,166
B. Campbell 12,434,520 229,866
L. Cawley 12,435,670 228,716
S. Clough 12,438,748 225,638
J. Haskell 12,435,466 228,920
In addition, the stockholders approved an increase in the
number of authorized common shares from 48 million to 98 million
shares. The results of the vote to increase the number of authorized
common shares are as follows:
For 9,591,580
Against 3,023,303
Abstain 49,503
----------
12,664,386
==========
There was no other official business to come before the meeting.
8
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Item 5. Other Information
Effective February 1, 1996, the Company acquired the assets of Victor
Fluid Power Co. and Benton Harbor Engineering Co., Inc. Both companies
manufacture hydraulic cylinders and an assortment of fluid control
devices. The product lines are similar to those of our September 1995
acquisition, Seabee Corporation, but have limited overlap. They
specialize in very large, unusual cylinders which are difficult to
manufacture and require a great deal of engineering expertise to design.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit No. Description Page No.
----------- ----------- --------
(3) Certificate of Amendment to the Certificate E-1
of Incorporation of Kaydon Corporation.
(11) Schedule setting forth computation of earnings E-2
per common share for the three months ended
March 30, 1996 and April 1, 1995.
(27) Financial Data Schedule (for SEC use only)
B. Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended March 30, 1996.
9
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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 8, 1996 /s/ Lawrence J. Cawley
--------------------------------------
Lawrence J. Cawley
(Chief Executive Officer & Chief Financial Officer)
May 8, 1996 /s/ Stephen K. Clough
--------------------------------------
Stephen K. Clough
(President & Chief Operating Officer)
10
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EXHIBIT 3
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF KAYDON CORPORATION
Kaydon Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware ("Kaydon"), does hereby certify that:
FIRST: That at a meeting of the Board of Directors of Kaydon Corporation,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting for the proposed amendment is as
follows:
"RESOLVED, that the Certificate of Incorporation of this corporation
be amended by changing the Article thereof numbered "FOURTH. A." so that,
as amended, said Article shall be read as follows:
FOURTH: CAPITAL STOCK
A.
The total number of shares of stock which the Corporation shall
have authority to issue is one hundred million (100,000,000), of
which ninety eight million (98,000,000) shall be Common Stock, par
value $.10 per share and two million (2,000,000) shall be Preferred
Stock, par value $.10 per share.
Shares of capital stock of the Corporation may be issued for
such consideration, not less than par value thereof, as shall be
fixed from time to time by the Board of Directors, and shares issued
for such consideration shall be fully paid and non-assessable.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, at
the annual meeting of stockholders of said corporation, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said Kaydon Corporation has caused this Certificate to be
signed and attested by Lawrence J. Cawley, an Authorized Officer, this 3rd
day of May, A.D. 1996.
By: /s/ Lawrence J. Cawley
-------------------------------
Lawrence J. Cawley
Chairman and Chief Executive
Officer
E-1
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EXHIBIT 11
KAYDON CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 30, 1996 AND APRIL 1, 1995
- --------------------------------------------------------------------------------
Mar 30, 1996 Apr 1, 1995
------------ -----------
Primary Earnings Per Share:
- --------------------------
Net income $ 12,280,000 $ 9,036,000
------------ -----------
Weighted average common shares outstanding 16,430,000 16,690,000
Net common shares issuable in respect to
common stock equivalents, with a
dilutive effect 75,000 40,000
----------- -----------
Total weighted average common and
common share equivalents 16,505,000 16,730,000
Primary earnings per common share $ 0.74 $ 0.54
Fully Diluted Earnings Per Share:
- --------------------------------
Net income $12,280,000 $ 9,036,000
----------- -----------
Weighted average common shares outstanding 16,430,000 16,690,000
Net common shares issuable in respect to
common stock equivalents, with a
dilutive effect 92,000 50,000
----------- -----------
Total weighted average common and
common share equivalents 16,522,000 16,740,000
Fully diluted earnings per common share $ 0.74 $ 0.54
E-2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 25,730
<SECURITIES> 23,844
<RECEIVABLES> 40,252
<ALLOWANCES> 1,496
<INVENTORY> 52,539
<CURRENT-ASSETS> 149,747
<PP&E> 172,316
<DEPRECIATION> 96,938
<TOTAL-ASSETS> 287,222
<CURRENT-LIABILITIES> 53,169
<BONDS> 8,000
0
0
<COMMON> 1,770
<OTHER-SE> 196,311
<TOTAL-LIABILITY-AND-EQUITY> 287,222
<SALES> 73,395
<TOTAL-REVENUES> 73,395
<CGS> 44,659
<TOTAL-COSTS> 44,659
<OTHER-EXPENSES> 9,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (499)
<INCOME-PRETAX> 19,839
<INCOME-TAX> 7,559
<INCOME-CONTINUING> 12,280
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,280
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
