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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
----------------- --------------------
Commission file number 0-12640
----------------------
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
KAYDON CORPORATION
ARBOR SHORELINE OFFICE PARK
19345 U.S. 19 NORTH
CLEARWATER, FL 34624
<PAGE> 2
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
The following documents are attached hereto as exhibits:
Page
----
Report of Independent Public Accountants A
Statement of Net Assets Available for Plan Benefits as of
December 31, 1996 1
Statement of Net Assets Available for Plan Benefits as of
December 31, 1995 2
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1996 3-4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1995 5
Notes to Financial Statements 6-11
Schedule I - Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1996 12
Schedule II - Item 27d - Schedule of Reportable Transactions 13
for the Year Ended December 31, 1996
Consent of Independent Public Accountants 14
In accordance with the instructions to this Form 11-K, "plans subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") may file plan
financial statements and schedules prepared in accordance with the financial
reporting requirements of ERISA." As the plan is subject to the filing
requirements of ERISA, the aforementioned financial statements and schedules of
the Plan have been prepared in accordance with such requirements.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the Administrative Committee of this plan have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
Electro-Tec Corporation Employee
Retirement Benefit Plan
Date: June 27, 1997
By: The Plan Administrative Committee
---------------------------------
By: /s/ Lawrence J. Cawley
------------------------------------
Lawrence J. Cawley
Chairman and Chief Financial Officer
Plan Administrative Committee
<PAGE> 4
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE> 5
Report of Independent Public Accountants
To the Administrative Committee of the
Electro-Tec Corporation Employee Retirement Benefit Plan:
We have audited the accompanying statements of net assets available for plan
benefits of ELECTRO-TEC CORPORATION EMPLOYEE RETIREMENT BENEFIT PLAN as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
and the schedules referred to below are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 net assets available for plan benefits as of December
31, 1996 and 1995, and the changes in net assets available for plan benefits for
the years then ended, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in the
statements of net assets available for benefits and the statements of changes in
net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits of each fund. The supplemental
schedules and fund information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Grand Rapids, Michigan,
June 11, 1997
<PAGE> 6
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Page
Statement of Net Assets Available for Plan Benefits
as of December 31, 1996 1
Statement of Net Assets Available for Plan Benefits
as of December 31, 1995 2
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1996 3-4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1995 5
Notes to Financial Statements 6-11
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1996 12
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1996 13
-(i)-
<PAGE> 7
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
CIGNA Twentieth
CIGNA Actively Fidelity Fidelity Century
Guaranteed Managed INVESCO Growth and Advisor Heritage
Short-Term Fixed Income Total Return Income Equity Growth Investors
Fund Fund Fund Fund Fund Fund
---------- ------------ ------------ ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments:
Mutual funds $2,054,863 $439,592 $376,521 $1,171,572 $95,896 $7,203
Kaydon Corporation common stock - - - - - -
---------- -------- -------- ---------- ------- ------
Total Investments 2,054,863 439,592 376,521 1,171,572 95,896 7,203
---------- -------- -------- ---------- ------- ------
Dividend receivable - - - - - -
---------- -------- -------- ---------- ------- ------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $2,054,863 $439,592 $376,521 $1,171,572 $95,896 $7,203
========== ======== ======== ========== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Warburg Pincus Fidelity
Advisor CIGNA Advisor
Emerging International Growth Fidelity
Growth Equity Opportunities Magellan Stock
Fund Fund Fund Fund Fund Total
-------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments:
Mutual funds $1,126,094 $24,465 $96,137 $7,419 $ - $5,399,762
Kaydon Corporation common stock - - - - 681,237 681,237
---------- ------- ------- ------ -------- ----------
Total Investments 1,126,094 24,465 96,137 7,419 681,237 6,080,999
---------- ------- ------- ------ -------- ----------
Dividend receivable - - - - 2,017 2,017
---------- ------- ------- ------ -------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $1,126,094 $24,465 $96,137 $7,419 $683,254 $6,083,016
========== ======= ======= ====== ======== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-1-
<PAGE> 8
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
High Intermediate
Small Income Government
Capitalization Equity Bond Obligations
Fund Fund Fund Fund
-------------- ------- -------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash $ - $ - $ - $ -
---------- ---------- -------- -------
Investments:
Mutual funds 1,041,571 1,076,527 447,998 28,611
Common collective fund - - - -
Kaydon Corporation common stock - - - -
---------- ---------- -------- -------
Total Investments 1,041,571 1,076,527 447,998 28,611
---------- ---------- -------- -------
Dividend receivable - - - -
---------- ---------- -------- -------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $1,041,571 $1,076,527 $447,998 $28,611
========== ========== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Prime Income Common
Obligations Balanced Advantage Stock
Fund Fund Fund Fund Total
----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS: $ - $ - $ - $ 1,018 $ 1,018
Cash -------- -------- ---------- -------- ----------
Investments: 996,830 294,336 - - 3,885,873
Mutual funds - - 1,284,703 - 1,284,703
Common collective fund - - - 425,589 425,589
Kaydon Corporation common stock -------- -------- ---------- -------- ----------
996,830 294,336 1,284,703 425,589 5,596,165
Total Investments -------- -------- ---------- -------- ----------
- - - 1,674 1,674
Dividend receivable -------- -------- ---------- -------- ----------
$996,830 $294,336 $1,284,703 $428,281 $5,598,857
NET ASSETS AVAILABLE FOR PLAN BENEFITS ======== ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-2-
<PAGE> 9
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CIGNA
CIGNA Actively Fidelity Fidelity
Guaranteed Managed INVESCO Growth and Advisor
Short-Term Fixed Income Total Return Income Equity Growth
Fund Fund Fund Fund Fund
---------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Contributions:
Employer $ 64,620 $ 14,360 $ 11,542 $ 36,535 $ 2,415
Participants 89,918 20,506 16,109 57,626 3,586
---------- -------- -------- ---------- -------
154,538 34,866 27,651 94,161 6,001
---------- -------- -------- ---------- -------
Investment earnings:
Dividends - - - - -
Net appreciation in current value
of investments 93,381 6,615 37,623 194,868 6,764
---------- -------- -------- ---------- -------
93,381 6,615 37,623 194,868 6,764
---------- -------- -------- ---------- -------
247,919 41,481 65,274 289,029 12,765
Benefit payments (352,563) (184,535) (15,144) (78,979) (216)
Administrative expenses (35) (427) - - -
Fund transfers 2,159,542 583,073 326,391 961,522 83,347
---------- -------- -------- ---------- -------
Change in net assets
available for plan benefits 2,054,863 439,592 376,521 1,171,572 95,896
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year - - - - -
---------- -------- -------- ---------- -------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $2,054,863 $439,592 $376,521 $1,171,572 $95,896
========== ======== ======== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Twentieth Warburg Pincus Fidelity
Century Advisor CIGNA Advisor
Heritage Emerging International Growth Fidelity
Investors Growth Equity Opportunities Magellan
Fund Fund Fund Fund Fund
---------- -------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Contributions:
Employer $ 732 $ 42,880 $ 1,806 $ 1,203 $1,122
Participants 912 67,389 2,410 1,898 1,552
------ ---------- -------- ------- ------
1,644 110,269 4,216 3,101 2,674
------ ---------- -------- ------- ------
Investment earnings:
Dividends - - - - -
Net appreciation in current value
of investments 519 83,851 437 10,579 551
------ ---------- -------- ------- ------
519 83,851 437 10,579 551
------ ---------- -------- ------- ------
2,163 194,120 4,653 13,680 3,225
Benefit payments (210) (56,840) (166) (4,658) -
Administrative expenses - (163) (35) (35) -
Fund transfers 5,250 988,977 20,013 87,150 4,194
------ ---------- -------- ------- ------
Change in net assets
available for plan benefits 7,203 1,126,094 24,465 96,137 7,419
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year - - - - -
------ ---------- -------- ------- ------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $7,203 $1,126,094 $ 24,465 $96,137 $7,419
====== ========== ======== ======= ======
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE> 10
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Continued)
<TABLE>
<CAPTION>
Intermediate
Small High Income Government
Stock Capitalization Equity Bond Obligations
Fund Fund Fund Fund Fund
---------- -------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Contributions:
Employer $ 25,296 $ - $ - $ - $ -
Participants 37,757 - - - -
-------- ----------- ----------- --------- --------
63,053 - - - -
-------- ----------- ----------- --------- --------
Investment earnings:
Dividends 7,260 - - - -
Net appreciation in current value
of investments 243,939 - - - -
-------- ----------- ----------- --------- --------
251,199 - - - -
-------- ----------- ----------- --------- --------
314,252 - - - -
Benefit payments (20,604) - - - -
Administrative expenses (35) - - - -
Fund transfers 389,641 (1,041,571) (1,076,527) (447,998) (28,611)
-------- ----------- ----------- --------- --------
Change in net assets
available for plan benefits 683,254 (1,041,571) (1,076,527) (447,998) (28,611)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year - 1,041,571 1,076,527 447,998 28,611
-------- ----------- ----------- --------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $683,254 $ - $ - $ - $ -
======== =========== =========== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Prime Income Common
Obligations Balanced Advantage Stock
Fund Fund Fund Fund Total
------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Contributions:
Employer $ - $ - $ - $ - $ 202,511
Participants - - - - 299,663
----------- --------- ----------- --------- ----------
- - - - 502,174
----------- --------- ----------- --------- ----------
Investment earnings:
Dividends - - - - 17,503
Net appreciation in current value
of investments 4,527 - 5,716 - 679,127
----------- --------- ----------- --------- ----------
4,527 - 5,716 - 696,630
----------- --------- ----------- --------- ----------
4,527 - 5,716 - 1,198,804
Benefit payments - - - - (713,915)
Administrative expenses - - - - (730)
Fund transfers (1,001,357) (294,336) (1,290,419) (428,281) -
----------- --------- ----------- --------- ----------
Change in net assets
available for plan benefits (996,830) (294,336) (1,284,703) (428,281) 484,159
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 996,830 294,336 1,284,703 428,281 5,598,857
----------- --------- ----------- --------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ - $ - $ - $ - $6,083,016
=========== ======== =========== ========= ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE> 11
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
High
Common Small Income
Stock Capitalization Equity Bond
Fund Fund Fund Fund
---------- ------------- --------- --------
<S> <C> <C> <C> <C>
Contributions:
Employer $ 24,143 $ 37,648 $ 34,635 $ 16,981
Participants 39,495 58,922 53,497 23,425
-------- ---------- ---------- --------
63,638 96,570 88,132 40,406
-------- ---------- ---------- --------
Investment earnings:
Interest and dividends 7,473 135,251 51,132 28,237
Net appreciation in current value
of investments 68,078 133,953 173,187 45,447
-------- ---------- ---------- --------
75,551 269,204 224,319 73,684
-------- ---------- ---------- --------
139,189 365,774 312,451 114,090
Benefit payments (558) (72,968) (61,164) (77,969)
Administrative expenses (758) (910) (1,024) (364)
Fund transfers 79,731 21,068 33,922 (56,315)
-------- ---------- ---------- --------
Change in net assets
available for plan benefits 217,604 312,964 284,185 (20,558)
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 210,677 728,607 792,342 468,556
-------- ---------- ---------- --------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $428,281 $1,041,571 $1,076,527 $447,998
======== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Intermediate
Government Prime Income
Obligations Obligations Balanced Advantage
Fund Fund Fund Fund Total
---------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Contributions:
Employer $ 7,200 $ 32,725 $ 8,074 $ 36,889 $ 198,295
Participants 9,538 42,947 10,849 58,915 297,588
--------- ---------- -------- ---------- ----------
16,738 75,672 18,923 95,804 495,883
--------- ---------- -------- ---------- ----------
Investment earnings:
Interest and dividends 9,933 54,196 19,925 58,985 365,132
Net appreciation in current value
of investments 15,839 - 32,749 - 469,253
--------- ---------- -------- ---------- ----------
25,772 54,196 52,674 58,985 834,385
--------- ---------- -------- ---------- ----------
42,510 129,868 71,597 154,789 1,330,268
Benefit payments (33,379) (272,486) (57,151) (138,530) (714,205)
Administrative expenses (205) (2,002) (336) (1,627) (7,226)
Fund transfers (271,142) (183,878) 53,323 323,291 -
--------- ---------- -------- ---------- ----------
Change in net assets
available for plan benefits (262,216) (328,498) 67,433 337,923 608,837
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 290,827 1,325,328 226,903 946,780 4,990,020
--------- ---------- -------- ---------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $ 28,611 $ 996,830 $294,336 $1,284,703 $5,598,857
========= ========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE> 12
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying financial statements of the Electro-Tec Corporation
Employee Retirement Benefit Plan (the "Plan") have been prepared
on the accrual basis of accounting. The Plan is subject to the
applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended. Investments are stated at current value,
which is based on the quoted market price.
Effective January 1, 1996, the Company changed trustees from First of
America Investment Corporation to CG Trust Company (a CIGNA
company). As a result, the Plan assets were transferred into funds
with comparable investment options administered by Connecticut
General Life Insurance Company (a CIGNA company).
In order to provide a variety of investment options, CIGNA has
developed alliances with other companies, including Fidelity
Investments, Warburg Pincus Funds, INVESCO Funds Group, Inc. and
Twentieth Century Investors, Inc. Plan assets are invested in a
CIGNA Separate Account (measured in units) which holds investments
in funds offered by these alliance companies.
The investment funds offered by CIGNA through the CIGNA Separate
Account do not pay dividends or interest, nor do they produce
realized or unrealized gains. Rather, the plan participates in
investment earnings through an increase or decrease in the unit
values of each fund. As a result, the funds' investment earnings
are reported as net appreciation in the Statement of Changes in
Net Assets Available for Plan Benefits, except for the Stock Fund
in which the participants have a direct interest in the underlying
stock.
Conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts in the Plan's financial statements. Actual
results may differ from those estimates.
(2) DESCRIPTION OF THE PLAN
Electro-Tec Corporation (the "Company" or "Employer"), a wholly-owned
subsidiary of Kaydon Corporation, sponsors the Plan, a defined
contribution plan. The following brief description of the Plan is
provided for general information purposes only. Participants
should refer to the Plan document, as amended, for more complete
information.
-6-
<PAGE> 13
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) DESCRIPTION OF THE PLAN, continued
Eligibility requirements - All employees of the Company who are 21
years of age and have completed at least 500 hours of service
during a six-month period are eligible to participate in the Plan
on the January 1st, April 1st, July 1st and October 1st coincident
with or immediately following such six-month period.
Contributions - Participants may elect to make, through payroll
deductions, both tax-deferred contributions, which may not exceed
15% of compensation, and after-tax voluntary contributions. The
maximum contributions for the year, which includes pre-tax,
after-tax voluntary and Company matching and discretionary
contributions is 25% of compensation less tax-deferred
contributions. Under the terms of the Plan, the Company
contributes to the Plan an amount equal to the payroll deduction
contribution by each participant up to 3% of the participant's
compensation, as defined by the Plan, and 75% of each
participant's contribution in excess of 3% of compensation, not to
exceed an additional 4% of each participant's compensation, as
defined. In addition, the Company may, with the approval of the
Board of Directors, make discretionary contributions to the Plan.
There were no discretionary Employer contributions in 1996 or
1995.
Allocation of investment earnings - Individual accounts are
maintained for each participant to reflect the participant's
contributions, the Company's contributions, forfeitures,
investment earnings and administrative expenses. Investment
earnings are allocated based on each participant's relative
account balance within the respective fund.
Vesting - All participant contributions are fully vested and
nonforfeitable. Company matching and discretionary contributions
become fully vested and nonforfeitable either upon attainment of
age 65, upon the employee's death or disability or ratably over
seven years of service, as defined by the Plan. Forfeitures are
used to reduce Employer contributions.
Investment of participant accounts - During 1996, plan participants
directed the investment of their account balances in the following
11 investment options:
-7-
<PAGE> 14
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) DESCRIPTION OF THE PLAN, continued
The CIGNA Guaranteed Short-Term Fund invests in a portfolio of
high quality money market instruments with a guarantee of
principal and interest, including U.S. Treasury securities,
U.S. Government securities, certificates of deposit, time
deposits, repurchase agreements, and commercial paper issued by
major domestic and foreign corporations.
The CIGNA Actively Managed Fixed Income Fund invests in a
portfolio of predominately high quality corporate and
Government fixed income securities including issues of the U.S.
Government and its Agencies, U.S. corporate bonds, Yankee
bonds, mortgage-backed securities and asset-backed securities.
The INVESCO Total Return Fund invests in a combination of equity
and fixed income securities including common stock and
securities that are convertible into common stock, issues of
the U.S. Government and its Agencies, and investment-grade
corporate debt obligations.
The Fidelity Growth and Income Fund invests in equity securities
of domestic and foreign companies including preferred stocks
and investment-grade debt instruments, and all types of foreign
securities.
The Fidelity Advisor Equity Growth Fund invests primarily in the
common and preferred stock and securities convertible into the
common stock of companies of all sizes with above-average
growth characteristics. The Fund may also invest in foreign
securities.
The Twentieth Century Heritage Investors Fund invests primarily in
common stocks of small to medium-sized companies. The Fund may
also invest in the securities of foreign companies, primarily in
developed markets.
The Warburg Pincus Advisor Emerging Growth Fund invests in equity
securities of small to medium-sized domestic companies with
emerging or renewed growth potential. The Fund may also invest
in foreign securities, investment-grade debt securities, and
domestic and foreign short-term or medium-term money market
obligations.
The CIGNA International Equity Fund invests primarily in non-U.S.
stocks in European, Australian and Far East stock markets. The
Fund may also invest in U.S. and non-U.S. cash equivalents.
-8-
<PAGE> 15
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) DESCRIPTION OF THE PLAN, continued
The Fidelity Advisor Growth Opportunities Fund invests primarily
in common stocks and securities convertible into common stock.
The Fund may also invest in other securities such as preferred
stocks and bonds that may produce capital growth, and
securities of foreign companies.
The Fidelity Magellan Fund invests primarily in common stocks and
securities convertible into common stock. The Fund may invest in
securities of domestic, foreign and multinational issuers.
The Stock Fund invests solely in Kaydon Corporation Common Stock.
During 1995, plan participants may direct the investment of their
account balances in eight investment options. All but the Common
Stock and Income Advantage Funds are part of the Parkstone group
of mutual funds.
The Common Stock Fund invests solely in Kaydon Corporation Common
Stock.
The Small Capitalization Fund invests primarily in a diversified
portfolio of common stocks and securities covertible into common
stock of small and medium sized companies.
The High Income Equity Fund invests primarily in stocks and securities
convertible into common stock of all size companies.
The Bond Fund invests in a portfolio of medium and high-grade debt
securities with fixed maturity dates and interest rates.
The Intermediate Government Obligations Fund invests primarily in
U.S. Government securities with remaining maturities of twelve
years or less.
The Prime Obligations Fund invests primarily in short-term obligations
issued by the U.S. Government, high quality money market
instruments and corporate promissory notes.
The Balanced Fund invests in common stocks of U.S. companies with
market capitalization of $1 billion and greater, bonds of U.S.
government agencies, mortgage-related bonds and corporate bonds.
The Income Advantage Fund invests primarily in guaranteed investment
contracts, bank investment contracts and commercial paper.
-9-
<PAGE> 16
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) DESCRIPTION OF THE PLAN, continued
Payment of benefits - Amounts credited to an individual participant's
account are distributed at termination of employment, generally as
a lump sum or in installments. Distributions may be deferred until
the participant reaches the age of 65 if the value of the
distribution exceeds $3,500. As described in the Plan, in certain
hardship situations, participants may withdraw a portion of their
account balances while actively employed.
Administrative expenses - Although not required to do so, the
Employer paid certain administrative expenses of the Plan during
1996 and 1995. The remaining expenses were paid for out of Plan
assets by CG Trust Company.
Voting rights - Each participant is entitled to exercise voting
rights attributable to the Kaydon Corporation common shares
allocated to his or her account and is notified by the trustee
prior to the time that such rights are to be exercised. The
trustee is not permitted to vote any share for which instructions
have not been given by a participant.
Plan termination - The Company has the right to terminate the Plan at
any time, although it has not expressed an intent to do so. Upon
termination of the Plan, participants will become fully vested.
Expenses arising from the termination would be allocated to the
participants' accounts in accordance with the Plan and the
Internal Revenue Code.
(3) TRUST FUND
A trust fund is maintained by the trustee for all purposes of the
Plan; and the monies and other assets thereof are held,
administered, invested and distributed in accordance with the
terms of the Plan, as it may be amended from time to time, for the
exclusive benefit of the participants and their beneficiaries.
(4) RELATED PARTY TRANSACTIONS
Plan investments include interests in mutual funds managed by
Connecticut General Life Insurance Company (a CIGNA company). CG
Trust Company (a CIGNA company) is the trustee as defined by the
Plan.
-10-
<PAGE> 17
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) TAX STATUS
The Internal Revenue Service issued a determination dated October 12,
1995, stating that the Plan was in accordance with applicable plan
design requirements as of that date. The Plan has been amended
since receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the Plan
and underlying trust are currently designed and being operated in
compliance with the applicable requirements of the Internal
Revenue Code. Therefore, they believe that the Plan was qualified
and the related trust was tax-exempt as of the financial statement
date.
(6) INVESTMENTS
The fair market value of investments that represent 5% or more of the
Plan's total net assets is as follows as of December 31,:
<TABLE>
<CAPTION>
1 9 9 6 1 9 9 5
---------- ------------
<S> <C> <C>
Guaranteed Short-Term Fund $2,054,863 $ -
Actively Managed Fixed Income Fund 439,592 -
INVESCO Total Return Fund 376,521 -
Fidelity Growth and Income Fund 1,171,572 -
Warburg Pincus Advisor Emerging
Growth Fund 1,126,094 -
Stock Fund 681,237 -
Small Capitalization Fund - 1,041,571
High Income Equity Fund - 1,076,527
Bond Fund - 447,998
Prime Obligations Fund - 996,830
Balanced Fund - 294,336
Income Advantage Fund - 1,284,703
Common Stock Fund - 425,589
</TABLE>
-11-
<PAGE> 18
SCHEDULE I
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
EIN: 59-1226757
PLAN NUMBER: 001
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Description of Current
Identity of Issuer Investment Cost Value
- --------------------------- -------------------------- ----------- ------------
<S> <C> <C> <C>
Mutual Funds:
*Connecticut General Life CIGNA Guaranteed Short-
Insurance Company Term Fund, 49,336 units $2,054,863 $2,054,863
*Connecticut General Life CIGNA Actively Managed
Insurance Company Fixed Income Fund,
3,955 units 431,446 439,592
*Connecticut General Life INVESCO Total Return Fund,
Insurance Company 14,055 units 338,665 376,521
*Connecticut General Life Fidelity Growth and Income
Insurance Company Fund, 32,826 units 1,005,647 1,171,572
*Connecticut General Life Fidelity Advisor Equity
Insurance Company Growth Fund, 2,043 units 88,773 95,896
*Connecticut General Life Twentieth Century Heritage
Insurance Company Investors Fund, 508 units 6,568 7,203
*Connecticut General Life Warburg Pincus Advisor
Insurance Company Emerging Growth Fund,
30,667 units 1,045,168 1,126,094
*Connecticut General Life CIGNA International Equity
Insurance Company Fund, 374 units 23,782 24,465
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Fund,
2,060 units 85,909 96,137
*Connecticut General Life Fidelity Magellan Fund,
Insurance Company 75 units 6,676 7,419
---------- ----------
5,087,497 5,399,762
Common Stock:
*Kaydon Corporation Stock Fund, 14,456 shares 456,448 681,237
---------- ----------
$5,543,945 $6,080,999
========== ==========
</TABLE>
*Represents a party-in-interest
-12-
<PAGE> 19
SCHEDULE II
ELECTRO-TEC CORPORATION EMPLOYEE RETIREMENT BENEFIT PLAN
EIN: 59-1226757
PLAN NUMBER: 001
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<Caption
Purchases Sales or Maturities
------------------------- -----------------------------------------------------
Number of Purchase Number of Cost of Net Gain
Transactions Price Transactions Proceeds Asset (Loss)
------------ --------- ------------ --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
*Connecticut General Life Insurance
Company:
CIGNA Guaranteed Short-Term Fund 52 $ 2,564,101 22 $ 602,619 $ 602,619 $ -
CIGNA Actively Managed Fixed
Income Fund 52 625,546 18 192,569 192,970 (401)
INVESCO Total Return Fund 52 357,281 13 18,383 17,658 725
Fidelity Growth and Income Fund 54 1,289,693 22 312,989 280,885 32,104
Warburg Pincus Advisor Emerging
Growth Fund 53 1,155,640 22 113,397 106,876 6,521
*First of America Investment
Corporation:
Parkstone Small Capitalization
Fund - - 1 1,041,571 860,679 180,892
Parkstone High Income Equity Fund - - 1 1,076,527 960,149 116,378
Parkstone Bond Fund - - 1 447,998 451,165 (3,167)
Parkstone Prime Obligations Fund - - 1 1,001,357 996,830 4,527
Parkstone Balanced Fund - - 1 294,336 276,218 18,118
Lasalle National Trust:
Income Advantage Fund - - 1 1,290,419 1,284,703 5,716
*Kaydon Corporation:
Stock Fund 56 508,016 17 77,978 56,784 21,194
Common Stock Fund - - 1 428,281 351,271 77,010
</TABLE>
*Represents a party-in-interest
NOTE: This schedule was prepared in accordance with the regulations of the
Employee Retirement Income Security Act of 1974 to report all
transactions involving securities of the same issue which, in the
aggregate, exceed 5% of the net assets of the Plan at the beginning of
the period.
-13-
<PAGE> 20
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaydon Corporation:
As independent public accountants, we hereby consent to the incorporation
of our report, dated June 11, 1997, included in this Form 11-K, into the
Company's previously filed Form S-8 Registration Statement Number 33-48762.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
June 27, 1997
-14-
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