<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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
------------------------------------------
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:
KAYDON CORPORATION EMPLOYEE STOCK
OWNERSHIP AND THRIFT 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 33764
<PAGE> 2
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
The following documents are attached hereto as exhibits:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants A
Statement of Net Assets Available for Benefits as of
December 31, 1997 1
Statement of Net Assets Available for Benefits as of
December 31, 1996 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1996 4-5
Notes to Financial Statements 6-11
Schedule I - Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1997 12
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1997 13
Consent of Independent Public Accountants 14
</TABLE>
In accordance with the instruction 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.
Kaydon Corporation Employee Stock
Ownership and Thrift Plan
Date: June 26, 1998
By: The Plan Administrative Committee
---------------------------------
By: /s/ John F. Brocci
----------------------------------
John F. Brocci
Chairman
Plan Administrative Committee
<PAGE> 4
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
<PAGE> 5
Report of Independent Public Accountants
To the Administrative Committee of the
Kaydon Corporation Employee Stock Ownership and Thrift Plan:
We have audited the accompanying statements of net assets available for benefits
of the KAYDON CORPORATION EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for 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 benefits of the Plan as of
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed 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.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
May 22, 1998.
<PAGE> 6
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Statement of Net Assets Available for Benefits as of
December 31, 1997 1
Statement of Net Assets Available for Benefits as of
December 31, 1996 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1996 4-5
Notes to Financial Statements 6-11
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1997 12
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1997 13
</TABLE>
-(i)-
<PAGE> 7
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
CIGNA Warburg Pincus
CIGNA Actively Fidelity Fidelity Advisor
Guaranteed Managed INVESCO Growth and Advisor Emerging
Short-Term Fixed Income Total Return Income Equity Growth Growth
Fund Fund Fund Fund Fund Fund
---------- ------------ ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $2,709,778 $1,593,879 $1,589,000 $4,821,841 $569,860 $4,025,868
Kaydon Corporation
common stock - - - - - -
---------- ---------- ---------- ---------- -------- ----------
Total investments 2,709,778 1,593,879 1,589,000 4,821,841 569,860 4,025,868
---------- ---------- ---------- ---------- -------- ----------
Dividend receivable - - - - - -
---------- ---------- ---------- ---------- -------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $2,709,778 $1,593,879 $1,589,000 $4,821,841 $569,860 $4,025,868
========== ========== ========== ========== ======== ==========
<CAPTION>
Fidelity
CIGNA Advisor
International Growth Fidelity AIM
Equity Opportunities Magellan Value Stock
Fund Fund Fund Fund Fund Total
------------- ------------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $197,611 $524,313 $199,028 $345,703 $ - $16,576,881
Kaydon Corporation
common stock - - - - 22,778,238 22,778,238
-------- -------- -------- -------- ----------- -----------
Total investments 197,611 524,313 199,028 345,703 22,778,238 39,355,119
-------- -------- -------- -------- ----------- -----------
Dividend receivable - - - - 62,476 62,476
-------- -------- -------- -------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $197,611 $524,313 $199,028 $345,703 $22,840,714 $39,417,595
======== ======== ======== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-1-
<PAGE> 8
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR 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>
ASSETS
Cash $ 52 $ 1,454 $ 1,428 $ 714 $ 714 $ 714
---------- ---------- -------- ---------- -------- --------
Investments:
Mutual funds 2,854,071 1,375,151 827,628 3,861,882 432,813 181,357
Kaydon Corporation
common stock - - - - - -
---------- ---------- -------- ---------- -------- --------
Total investments 2,854,071 1,375,151 827,628 3,861,882 432,813 181,357
---------- ---------- -------- ---------- -------- --------
Dividend receivable - - - - - -
---------- ---------- -------- ---------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS $2,854,123 $1,376,605 $829,056 $3,862,596 $433,527 $182,071
========== ========== ======== ========== ======== ========
<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>
ASSETS
Cash $ 1,428 $ 714 $ - $ - $ 52 $ 7,270
---------- -------- -------- ------- ----------- -----------
Investments:
Mutual funds 3,787,717 247,274 208,150 69,785 - 13,845,828
Kaydon Corporation
common stock - - - - 16,468,720 16,468,720
---------- -------- -------- ------- ----------- -----------
Total investments 3,787,717 247,274 208,150 69,785 16,468,720 30,314,548
---------- -------- -------- ------- ----------- -----------
Dividend receivable - - - - 48,875 48,875
---------- -------- -------- ------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $3,789,145 $247,988 $208,150 $69,785 $16,517,647 $30,370,693
========== ======== ======== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-2-
<PAGE> 9
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<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>
Contributions:
Participants $ 167,289 $ 134,645 $ 151,273 $ 390,415 $ 97,923 $ 8,574
---------- ---------- ---------- ---------- -------- --------
Investment earnings:
Interest and dividends - - - - - -
Net appreciation (depreciation)
in current value of investments 109,721 119,128 267,690 1,120,886 112,675 (3,568)
---------- ---------- ---------- ---------- -------- --------
109,721 119,128 267,690 1,120,886 112,675 (3,568)
---------- ---------- ---------- ---------- -------- --------
277,010 253,773 418,963 1,511,301 210,598 5,006
Benefit payments (544,535) (138,633) (36,693) (410,441) (92,208) -
Administrative expenses (5,286) (3,864) (230) (1,099) (569) -
Fund transfers 128,466 105,998 377,904 (140,516) 18,512 (187,077)
---------- ---------- ---------- ---------- -------- --------
Change in net assets
available for benefits (144,345) 217,274 759,944 959,245 136,333 (182,071)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 2,854,123 1,376,605 829,056 3,862,596 433,527 182,071
---------- ---------- ---------- ---------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $2,709,778 $1,593,879 $1,589,000 $4,821,841 $569,860 $ -
========== ========== ========== ========== ======== ========
<CAPTION>
Warburg Pincus Fidelity
Advisor CIGNA Advisor
Emerging International Growth Fidelity AIM
Growth Equity Opportunities Magellan Value Stock
Fund Fund Fund Fund Fund Fund Total
------------- ------------- -------------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 416,421 $ 46,994 $ 78,731 $44,202 $ 28,651 $ 615,757 $ 2,180,875
---------- -------- -------- ------- -------- ---------- -----------
Investment earnings:
Interest and dividends - - - - - 207,400 207,400
Net appreciation (depreciation)
in current value of investments 651,672 (10,177) 107,424 26,981 28,268 6,342,098 8,872,798
---------- -------- -------- ------- -------- ---------- -----------
651,672 (10,177) 107,424 26,981 28,268 6,549,498 9,080,198
---------- -------- -------- ------- -------- ---------- -----------
1,068,093 36,817 186,155 71,183 56,919 7,165,255 11,261,073
Benefit payments (213,633) (3,715) (1,595) (16,822) (618) (734,706) (2,193,599)
Administrative expenses (3,432) (752) (128) (470) (3) (4,739) (20,572)
Fund transfers (614,305) (82,727) 131,731 75,352 289,405 (102,743) -
---------- -------- -------- ------- -------- ---------- -----------
Change in net assets
available for benefits 236,723 (50,377) 316,163 129,243 345,703 6,323,067 9,046,902
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 3,789,145 247,988 208,150 69,785 - 16,517,647 30,370,693
---------- -------- -------- ------- -------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $4,025,868 $197,611 $524,313 $199,028 $345,703 $22,840,714 $39,417,595
========== ======== ======== ======== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE> 10
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR 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:
Participants $ 202,212 $ 115,724 $105,387 $ 342,084 $ 31,217
---------- ---------- -------- ---------- --------
Investment earnings:
Interest and dividends - - - - -
Net appreciation in current
value of investments 101,266 33,828 79,859 544,934 22,860
---------- ---------- -------- ---------- --------
101,266 33,828 79,859 544,934 22,860
---------- ---------- -------- ---------- --------
303,478 149,552 185,246 887,018 54,077
Benefit payments (221,156) (71,866) (10,454) (76,943) (1,663)
Administrative expenses (4,090) (2,364) (110) (806) (222)
Fund transfers 2,775,891 1,301,283 654,374 3,053,327 381,335
---------- ---------- -------- ---------- --------
Change in net assets
available for benefits 2,854,123 1,376,605 829,056 3,862,596 433,527
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - - - - -
---------- ---------- -------- ---------- --------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $2,854,123 $1,376,605 $829,056 $3,862,596 $433,527
========== ========== ======== ========== ========
<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:
Participants $ 9,114 $ 436,034 $ 19,959 $ 11,781 $14,852
-------- ---------- -------- -------- -------
Investment earnings:
Interest and dividends - - - - -
Net appreciation in current
value of investments 14,103 253,275 6,702 6,470 4,832
-------- ---------- -------- -------- -------
14,103 253,275 6,702 6,470 4,832
-------- ---------- -------- -------- -------
23,217 689,309 26,661 18,251 19,684
Benefit payments (585) (63,887) (185) - (310)
Administrative expenses - (3,129) (203) (30) (205)
Fund transfers 159,439 3,166,852 221,715 189,929 50,616
-------- ---------- -------- -------- -------
Change in net assets
available for benefits 182,071 3,789,145 247,988 208,150 69,785
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - - - - -
-------- ---------- -------- -------- -------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $182,071 $3,789,145 $247,988 $208,150 $69,785
======== ========== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE> 11
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Continued)
<TABLE>
<CAPTION>
Small High Income Government Prime
Stock Capitalization Equity Bond Obligations Obligations
Fund Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 622,059 $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------ ------------
Investment earnings:
Interest and dividends 188,266 -- -- -- -- 7,703
Net appreciation in current
value of investments 6,619,300 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
6,807,566 -- -- -- -- 7,703
------------ ------------ ------------ ------------ ------------ ------------
7,429,625 -- -- -- -- 7,703
Benefit payments (814,685) -- -- -- -- --
Administrative expenses (4,384) -- -- -- -- --
Fund transfers 9,907,091 (3,064,107) (2,575,644) (989,318) (231,077) (1,795,276)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets
available for benefits 16,517,647 (3,064,107) (2,575,644) (989,318) (231,077) (1,787,573)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year -- 3,064,107 2,575,644 989,318 231,077 1,787,573
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 16,517,647 $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ============ ============
<CAPTION>
Income Common
Balanced Advantage Stock
Fund Fund Fund Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contributions:
Participants $ -- $ -- $ -- $ 1,910,423
------------ ------------ ------------ ------------
Investment earnings:
Interest and dividends 56 2,147 -- 198,172
Net appreciation in current
value of investments -- -- -- 7,687,429
------------ ------------ ------------ ------------
56 2,147 -- 7,885,601
------------ ------------ ------------ ------------
56 2,147 -- 9,796,024
Benefit payments -- -- -- (1,261,734)
Administrative expenses -- -- -- (15,543)
Fund transfers (525,716) (468,372) (12,212,342) --
------------ ------------ ------------ ------------
Change in net assets
available for benefits (525,660) (466,225) (12,212,342) 8,518,747
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 525,660 466,225 12,212,342 21,851,946
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ -- $ -- $ -- $ 30,370,693
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE> 12
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The financial statements of the Kaydon Corporation Employee Stock
Ownership and Thrift Plan (the "Plan") are presented 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 Management
and Research Company, Warburg Pincus Asset Management, Inc., INVESCO
Funds Group, Inc., Twentieth Century Investors, Inc. and AIM Advisor,
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 (depreciation) in the Statement of Changes in Net Assets
Available for 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
The following description of the major provisions of the Plan, a
defined contribution plan, is provided for general information purposes
only. Reference should be made to the Plan document, as amended, for
more complete information.
-6-
<PAGE> 13
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Eligibility requirements - All employees of Kaydon Corporation and
subsidiaries (the "Company" or "Employer"), excluding employees of its
Electro-Tec Corp., Seabee Corporation, Gold Star Manufacturing, Victor
Fluid Power, Inc., Great Bend Industries, Inc. and foreign
subsidiaries, who are 21 years of age and have completed at least 1,000
hours of service during a one-year period (500 hours of service during
a six-month period for individuals first hired prior to January 1,
1997) are eligible to participate in the Plan on the January 1st, April
1st, July 1st, and October 1st coincident with or immediately following
such period.
Contributions - Participants may authorize the Company to make salary
deferral contributions on their behalf of not less than 1% nor more
than 15% of their compensation, not to exceed the limitations
established by the Internal Revenue Code. In addition, the Company may
contribute to the Plan for each plan year an amount approved by the
Board of Directors. There were no discretionary employer contributions
in 1997 or 1996.
Allocation of investment earnings - Individual accounts are maintained
for each participant to reflect the participant's contributions, the
discretionary employer contributions, forfeitures, investment earnings
and administrative expenses. Investment earnings are allocated based on
each participant's relative account balance within the respective fund.
Vesting - Participants have a nonforfeitable right to their
contributions and any earnings thereon. Discretionary employer
contributions vest over a seven year period in annual increments
ranging from ten to twenty percent.
A participant who terminates employment due to death, disability or
normal retirement shall be 100% vested in their entire discretionary
employer contributions.
Forfeitures - A participant forfeits the unvested portion of their
discretionary employer contributions upon five consecutive breaks in
service (a single break in service defined as a plan year during which
a participant fails to complete 500 hours of service). Forfeited
amounts are applied to reduce employer discretionary contributions.
-7-
<PAGE> 14
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Investment of participant accounts - Plan participants may direct the
investment of their account balances in the following investment
options:
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 and variable 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. This fund was replaced by the AIM Value Fund, effective April
1, 1997.
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.
-8-
<PAGE> 15
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
The Fidelity Advisor Growth Opportunities Fund invests primarily in
common stocks and securities convertible into common stock of companies
believed to have long-term growth potential. 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 AIM Value Fund invests primarily in common stocks, convertible
bonds and convertible preferred stocks of undervalued companies. This
fund replaced the Twentieth Century Heritage Investors Fund, effective
April 1, 1997.
The Stock Fund invests solely in Kaydon Corporation Common Stock.
The CIGNA International Equity Fund and the Fidelity Magellan Fund are
no longer investment options as of January 1, 1998. Participant
balances will transfer directly to the Templeton Foreign Fund and the
Fidelity Advisor Equity Growth Fund, respectively, unless participants
direct otherwise. In addition, the Lazard Small Cap Portfolio Fund will
be an investment option as of January 1, 1998.
-9-
<PAGE> 16
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Payment of benefits - Benefits are paid in the form of a lump-sum
payment via distribution of the Company's common stock, cash or a
combination thereof, as directed by the participant for those
participants who have investments in the Stock Fund. Benefits for
participants in other funds are paid in cash. The payment date
generally will not be later than the 60th day following the end of the
plan year in which the participant attains age 65, retires, terminates
or dies, as applicable.
Administrative expenses - Although not required to do so, the Employer
paid certain administrative expenses of the Plan during 1997 and 1996.
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 Employer has the right under the provisions of
the Plan to terminate the Plan, although it has not expressed an intent
to do so. In the event of the termination of the Plan or a complete
discontinuance of contributions to the Plan, each participant shall
have a nonforfeitable interest in the entire amount credited to his
separate account in the trust fund; and, after providing for the
payment of all debts and administrative expenses, the amounts standing
to such participants' credit shall be distributed to such participants
in accordance with the Plan and the Internal Revenue Code.
-10-
<PAGE> 17
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(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.
(5) TAX STATUS
The Internal Revenue Service issued a determination letter dated April
4, 1996, 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>
1997 1996
----------- -----------
<S> <C> <C>
CIGNA Guaranteed Short-Term Fund $ 2,709,778 $ 2,854,071
Fidelity Growth and Income Fund 4,821,841 3,861,882
Warburg Pincus Advisor Emerging
Growth Fund 4,025,868 3,787,717
Stock Fund 22,778,238 16,468,720
</TABLE>
-11-
<PAGE> 18
SCHEDULE I
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
EIN: 13-3186040
PLAN NUMBER: 002
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Current
Identity of Issuer Description of Investment Cost Value
------------------ ------------------------- ---- -----
<S> <C> <C> <C>
Mutual Funds:
*Connecticut General Life CIGNA Guaranteed Short-Term
Insurance Company Fund, 62,605 units $ 2,709,778 $ 2,709,778
*Connecticut General Life CIGNA Actively Managed
Insurance Company Fixed Income Fund,
13,302 units 1,470,556 1,593,879
*Connecticut General Life INVESCO Total Return Fund,
Insurance Company 47,912 units 1,264,674 1,589,000
*Connecticut General Life Fidelity Growth and Income
Insurance Company Fund, 104,817 units 3,410,884 4,821,841
*Connecticut General Life Fidelity Advisor Equity
Insurance Company Growth Fund, 9,891 units 472,775 569,860
*Connecticut General Life Warburg Pincus Advisor
Insurance Company Emerging Growth Fund,
91,699 units 3,246,202 4,025,868
*Connecticut General Life CIGNA International Equity
Insurance Company Fund, 3,115 units 205,207 197,611
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Fund,
8,823 units 419,241 524,313
*Connecticut General Life Fidelity Magellan Fund,
Insurance Company 1,595 units 181,237 199,028
*Connecticut General Life AIM Value Fund,
Insurance Company 9,244 units 322,046 345,703
----------- -----------
13,702,600 16,576,881
Common Stock:
*Kaydon Corporation Stock Fund, 698,070 shares 11,636,851 22,778,238
----------- -----------
$25,339,451 $39,355,119
=========== ===========
</TABLE>
* Represents a party-in-interest
-12-
<PAGE> 19
SCHEDULE II
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
EIN: 13-3186040
PLAN NUMBER: 002
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Purchases Sales or Maturities
------------------------- --------------------------------------------------
Identity of Issuer and Number of Purchase Number of Cost of
Description of Investment Transactions Price Transactions Proceeds Asset Net Gain
- ------------------------- ------------ --------- ------------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
*Connecticut General Life
Insurance Company:
CIGNA Guaranteed Short-Term Fund 72 $ 844,572 59 $1,098,586 $1,098,586 $ -
Fidelity Growth and Income Fund 105 875,585 64 1,036,512 800,854 235,658
Warburg Pincus Advisor Emerging
Growth Fund 88 697,963 68 1,111,484 1,007,639 103,845
*Kaydon Corporation:
Stock Fund 99 2,068,963 81 2,101,543 1,243,729 857,814
</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 aggregate, exceed 5% of the net assets of the Plan
at the beginning of the period.
-13-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaydon Corporation:
As independent public accountants, we hereby consent to the incorporation
of our report dated May 22, 1998, included in this Form 11-K, into the Company's
previously filed S-8 Registration Statement Numbers 2-89399 and 33-61646.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
June 26, 1998.
-14-
