<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:
FLUID POWER COMPANIES' PENSION
AND RETIREMENT SAVINGS 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
FLUID POWER COMPANIES' PENSION
AND RETIREMENT SAVINGS 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
Notes to Financial Statements 5-9
Schedule I - Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1997 10
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1997 11
Consent of Independent Public Accountants 12
</TABLE>
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.
Fluid Power Companies' Pension and
Retirement Savings Plan
Date: June 26, 1998
By: The Plan Administrative Committee
-------------------------------------
By: /s/ John F. Brocci
-------------------------------------
John F. Brocci
Chairman
Plan Administrative Committee
<PAGE> 4
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS 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
Fluid Power Companies' Pension and Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the FLUID POWER COMPANIES' PENSION AND RETIREMENT SAVINGS 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
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS 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
Notes to Financial Statements 5-9
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1997 10
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1997 11
</TABLE>
<PAGE> 7
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
CIGNA Fidelity Fidelity Warburg Pincus
CIGNA Actively INVESCO Growth Advisor Advisor CIGNA
Guaranteed Managed Total and Equity Emerging International
Short-Term Fixed Income Return Income Growth Growth Equity
Fund Fund Fund Fund Fund Fund Fund
----------- ------------ -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ -- $ 52 $ 177 $ 226 $ 91 $ 216 $ 173
---------- ------------ -------- -------- -------- ------------ ------------
Investments:
Mutual funds 1,745,240 1,472,887 957,504 839,849 577,806 441,220 259,698
Kaydon Corporation
common stock -- -- -- -- -- -- --
---------- ------------ -------- -------- -------- ------------ ------------
Total investments 1,745,240 1,472,887 957,504 839,849 577,806 441,220 259,698
---------- ------------ -------- -------- -------- ------------ ------------
Dividend receivable -- -- -- -- -- -- --
---------- ------------ -------- -------- -------- ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,745,240 $ 1,472,939 $957,681 $840,075 $577,897 $ 441,436 $ 259,871
========== ============ ======== ======== ======== ============ ============
<CAPTION>
Fidelity
Advisor
Growth Fidelity AIM
Opportunities Magellan Value Stock
Fund Fund Fund Fund Total
------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 139 $ -- $ 177 $ 474 $ 1,725
------------ -------- -------- ---------- ----------
Investments:
Mutual funds 374,206 314,762 468,332 -- 7,451,504
Kaydon Corporation
common stock -- -- -- 1,241,655 1,241,655
------------ -------- -------- ---------- ----------
Total investments 374,206 314,762 468,332 1,241,655 8,693,159
------------ -------- -------- ---------- ----------
Dividend receivable -- -- -- 3,274 3,274
------------ -------- -------- ---------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $ 374,345 $314,762 $468,509 $1,245,403 $8,698,158
============ ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-1-
<PAGE> 8
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
CIGNA Fidelity Fidelity Twentieth Warburg Pincus
CIGNA Actively INVESCO Growth Advisor Century Advisor
Guaranteed Managed Total and Equity Heritage Emerging
Short-Term Fixed Income Return Income Growth Investors Growth
Fund Fund Fund Fund Fund Fund Fund
---------- ------------ -------- -------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 14,152 $ 30,906 $ 18,691 $ 17,848 $ 16,046 $ 10,209 $ 15,216
---------- ------------ -------- -------- -------- --------- --------------
Investments:
Mutual funds 1,904,704 1,303,956 485,777 229,567 254,661 154,806 178,503
Kaydon Corporation
common stock -- -- -- -- -- -- --
---------- ------------ -------- -------- -------- --------- --------------
Total investments 1,904,704 1,303,956 485,777 229,567 254,661 154,806 178,503
---------- ------------ -------- -------- -------- --------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,918,856 $ 1,334,862 $504,468 $247,415 $270,707 $ 165,015 $ 193,719
========== ============ ======== ======== ======== ========= ==============
<CAPTION>
Fidelity
CIGNA Advisor
International Growth Fidelity
Equity Opportunities Magellan Stock
Fund Fund Fund Fund Total
------------ ------------ -------- ------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 10,287 $ 10,403 $ 17,816 $1,851 $ 163,425
------------ ------------ -------- ------ ----------
Investments:
Mutual funds 159,671 85,674 120,014 -- 4,877,333
Kaydon Corporation
common stock -- -- -- 1,596 1,596
------------ ------------ -------- ------ ----------
Total investments 159,671 85,674 120,014 1,596 4,878,929
------------ ------------ -------- ------ ----------
NET ASSETS AVAILABLE
FOR BENEFITS $ 169,958 $ 96,077 $137,830 $3,447 $5,042,354
============ ============ ======== ====== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-2-
<PAGE> 9
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CIGNA Fidelity Fidelity Twentieth
CIGNA Actively INVESCO Growth Advisor Century
Guaranteed Managed Total and Equity Heritage
Short-Term Fixed Income Return Income Growth Investors
Fund Fund Fund Fund Fund Fund
----------- ------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 71,829 $ 177,939 $ 75,395 $ 70,200 $ 57,599 $ 2,225
Participants 422,665 207,561 333,550 372,315 202,703 10,453
----------- ----------- --------- --------- --------- ---------
494,494 385,500 408,945 442,515 260,302 12,678
----------- ----------- --------- --------- --------- ---------
INVESTMENT EARNINGS:
Interest and dividends -- -- -- -- -- --
Net appreciation (depreciation)
in current value of investments 73,943 96,367 137,710 100,712 65,683 (2,550)
----------- ----------- --------- --------- --------- ---------
73,943 96,367 137,710 100,712 65,683 (2,550)
----------- ----------- --------- --------- --------- ---------
568,437 481,867 546,655 543,227 325,985 10,128
BENEFIT PAYMENTS (112,265) (50,928) (28,640) (22,303) (20,649) (10,364)
ADMINISTRATIVE EXPENSES -- (870) (113) -- (227) --
FUND TRANSFERS (629,788) (291,992) (69,884) 66,301 (614) (164,779)
TRANSFERS FROM OTHER PLAN -- -- 5,195 5,435 2,695 --
----------- ----------- --------- --------- --------- ---------
Change in net assets available
for benefits (173,616) 138,077 453,213 592,660 307,190 (165,015)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 1,918,856 1,334,862 504,468 247,415 270,707 165,015
----------- ----------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 1,745,240 $ 1,472,939 $ 957,681 $ 840,075 $ 577,897 $ --
=========== =========== ========= ========= ========= =========
<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
------------ ------------- ------------- --------- -------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 57,133 $ 11,629 $ 39,997 $ 14,374 $ 39,694 $ 47,170 $ 665,184
Participants 196,475 169,837 188,460 102,467 190,621 89,116 2,486,223
------------ ------------- ------------ --------- -------- ----------- -----------
253,608 181,466 228,457 116,841 230,315 136,286 3,151,407
------------ ------------- ------------ --------- -------- ----------- -----------
INVESTMENT EARNINGS:
Interest and dividends -- -- -- -- -- 7,480 7,480
Net appreciation (depreciation)
in current value of investments 46,868 (22,872) 46,688 38,490 39,865 229,361 850,265
------------ ------------- ------------ --------- -------- ----------- -----------
46,868 (22,872) 46,688 38,490 39,865 236,841 857,745
------------ ------------- ------------ --------- -------- ----------- -----------
300,476 158,594 275,145 155,331 270,180 373,127 4,009,152
BENEFIT PAYMENTS (51,124) (19,791) (44,779) (27,033) (1,152) (2,876) (391,904)
ADMINISTRATIVE EXPENSES -- (540) (71) -- -- -- (1,821)
FUND TRANSFERS (6,354) (48,350) 45,278 48,634 199,481 852,067 --
TRANSFERS FROM OTHER PLAN 4,719 -- 2,695 -- -- 19,638 40,377
------------ ------------- ------------ --------- -------- ---------- ----------
Change in net assets available
for benefits 247,717 89,913 278,268 176,932 468,509 1,241,956 3,655,804
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 193,719 169,958 96,077 137,830 -- 3,447 5,042,354
------------ ------------- ------------ --------- -------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 441,436 $ 259,871 $ 374,345 $ 314,762 $468,509 $1,245,403 $8,698,158
============ ============= ============ ========= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE> 10
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CIGNA Fidelity Fidelity Twentieth Warburg Pincus
CIGNA Actively INVESCO Growth Advisor Century Advisor
Guaranteed Managed Total and Equity Heritage Emerging
Short-Term Fixed Income Return Income Growth Investors Growth
Fund Fund Fund Fund Fund Fund Fund
----------- ------------ --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 40,910 $ 47,341 $ 66,350 $ 61,841 $ 52,017 $ 30,714 $ 56,743
Participants 37,327 72,061 51,029 47,299 42,660 27,472 42,046
----------- ----------- --------- --------- --------- --------- ------------
78,237 119,402 117,379 109,140 94,677 58,186 98,789
----------- ----------- --------- --------- --------- --------- ------------
INVESTMENT EARNINGS:
Interest and dividends -- -- -- -- -- -- --
Net appreciation in current value
of investments 16,903 42,529 18,471 12,236 4,003 5,017 358
----------- ----------- --------- --------- --------- --------- ------------
16,903 42,529 18,471 12,236 4,003 5,017 358
----------- ----------- --------- --------- --------- --------- ------------
95,140 161,931 135,850 121,376 98,680 63,203 99,147
BENEFIT PAYMENTS (315) (536,627) (1,052) (1,115) (1,453) (1,378) (1,445)
ADMINISTRATIVE EXPENSES (35) (467) (35) -- -- -- (46)
FUND TRANSFERS 1,824,066 1,710,025 369,705 127,154 173,480 103,190 96,063
----------- ----------- --------- --------- --------- --------- ------------
Change in net assets
available for benefits 1,918,856 1,334,862 504,468 247,415 270,707 165,015 193,719
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year -- -- -- -- -- -- --
----------- ----------- --------- --------- --------- --------- ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 1,918,856 $ 1,334,862 $ 504,468 $ 247,415 $ 270,707 $ 165,015 $ 193,719
=========== =========== ========= ========= ========= ========= ============
<CAPTION>
Fidelity
CIGNA Advisor Seabee
International Growth Fidelity Corporation
Equity Opportunities Magellan Stock Employee Stock
Fund Fund Fund Fund Ownership Plan Total
------------ ------------- --------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 42,354 $ 34,893 $ 61,592 $ -- $ -- $ 494,755
Participants 29,851 28,025 48,479 3,447 -- 429,696
------------ ------------ --------- -------- ----------- -----------
72,205 62,918 110,071 3,447 -- 924,451
------------ ------------ --------- -------- ----------- -----------
INVESTMENT EARNINGS:
Interest and dividends -- -- -- -- 84,268 84,268
Net appreciation in current value
of investments 2,223 6,101 6,315 -- 421,097 535,253
------------ ------------ --------- -------- ----------- -----------
2,223 6,101 6,315 -- 505,365 619,521
------------ ------------ --------- -------- ----------- -----------
74,428 69,019 116,386 3,447 505,365 1,543,972
BENEFIT PAYMENTS (1,034 (537) (471) -- (17,641) (563,068)
ADMINISTRATIVE EXPENSES (127) (25) -- -- -- (735)
FUND TRANSFERS 96,691 27,620 21,915 -- (4,549,909) --
------------ ------------ --------- -------- ----------- -----------
Change in net assets
available for benefits 169,958 96,077 137,830 3,447 (4,062,185) 980,169
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year -- -- -- -- 4,062,185 4,062,185
------------ ------------ --------- -------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 169,958 $ 96,077 $ 137,830 $ 3,447 $ -- $ 5,042,354
============ ============ ========= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE> 11
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying financial statements of the Fluid Power Companies'
Pension and Retirement Savings Plan (previously called the Seabee
Corporation Pension and Retirement Savings 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 Management and
Research Company, Warburg Pincus Asset Management, Inc., INVESCO Funds
Group, Inc., Twentieth Century Investors, Inc. and AIM Advisors, 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 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
As a result of the acquisition of Seabee Corporation by Kaydon
Corporation ("Kaydon") in September, 1995, the Seabee Corporation
Employee Stock Ownership Plan ceased to operate as an employee stock
ownership plan, and effective January 1, 1996, was amended and restated
to become the Seabee Corporation Pension and Retirement Savings Plan, a
401(k) profit-sharing plan. The amended plan provides for
participant-directed investment of their accounts.
-5-
<PAGE> 12
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Seabee Corporation, Gold Star Manufacturing, Victor Fluid Power, Inc. and
Great Bend Industries, Inc., collectively the Fluid Power Companies
(the "Company" or "Employer"), and which are wholly-owned subsidiaries
of Kaydon, sponsor the Plan, a defined contribution plan. The following
description of the major provisions of the Plan is provided for general
information purposes only. Reference should be made to the Plan
document, as amended, for more complete information.
Plan amendment - Effective July 1, 1997, the Plan was amended to include
Great Bend Industries, Inc., which was acquired by Kaydon on May 29,
1997. Effective October 1, 1997, the Plan was amended to include Gold
Star Manufacturing, which was acquired by Kaydon on March 11, 1997.
Effective February 16, 1996, the Plan was amended to include Victor
Fluid Power, Inc., which was acquired by Kaydon on February 1, 1996.
Eligibility requirements - All employees of the Company who are 18 years
of age and have completed at least 1,000 hours of service during a one
year 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 one year period.
Contributions - Participants may elect to make, through payroll
deductions, tax-deferred contributions which may not exceed 15% of
compensation. The maximum contributions for the year, which includes
pre-tax, employer matching and discretionary profit sharing
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 25% of the contribution by each participant not to
exceed $1,600 ($800 prior to January 1, 1997). Effective January 1,
1998, the maximum matching contribution is equal to 25% of the maximum
salary deferral contribution allowed participants for the year. In
addition, the Company may, with the approval of the Board of Directors
of Kaydon, make discretionary contributions to the Plan. There were no
discretionary employer contributions in 1997. Discretionary employer
contributions were approximately $160,000 during 1996.
Allocation of investment earnings - Individual accounts are maintained
for each participant to reflect the participant's contributions, the
employer'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.
-6-
<PAGE> 13
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS 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.
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.
-7-
<PAGE> 14
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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.
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 the Plan assets by CG Trust
Company.
Voting rights - Each participant is entitled to exercise voting rights
attributable to the Kaydon 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.
-8-
<PAGE> 15
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) TAX STATUS
The Internal Revenue Service issued a determination dated April 7, 1997,
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 $1,745,240 $1,904,704
CIGNA Actively Managed Fixed Income Fund 1,472,887 1,303,956
INVESCO Total Return Fund 957,504 485,777
Fidelity Growth and Income Fund 839,849 --
Fidelity Advisor Equity Growth Fund 577,806 254,661
Warburg Pincus Advisor Emerging Growth Fund 441,220 --
AIM Value Fund 468,332 --
Stock Fund 1,241,655 --
</TABLE>
-9-
<PAGE> 16
SCHEDULE I
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
EIN: 59-3339512
PLAN NUMBER: 009
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-
Insurance Company Term Fund, 40,322 units $1,745,240 $1,745,240
*Connecticut General Life CIGNA Actively Managed
Insurance Company Fixed Income Fund,
12,293 units 1,375,763 1,472,887
*Connecticut General Life INVESCO Total Return Fund,
Insurance Company 28,872 units 816,408 957,504
*Connecticut General Life Fidelity Growth and Income
Insurance Company Fund, 18,256 units 732,081 839,849
*Connecticut General Life Fidelity Advisor Equity
Insurance Company Growth Fund, 10,030 units 511,567 577,806
*Connecticut General Life Warburg Pincus Advisor
Insurance Company Emerging Growth Fund,
10,050 units 398,861 441,220
*Connecticut General Life CIGNA International Equity
Insurance Company Fund, 4,094 units 280,065 259,698
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Fund,
6,297 units 328,066 374,206
*Connecticut General Life Fidelity Magellan Fund,
Insurance Company 2,523 units 272,640 314,762
*Connecticut General Life AIM Value Fund
Insurance Company 12,524 units 430,219 468,332
---------- ----------
6,890,910 7,451,504
Common Stock:
*Kaydon Corporation Stock Fund, 38,058 shares 977,124 1,241,655
---------- ----------
$7,868,034 $8,693,159
========== ==========
</TABLE>
* Represents a party-in-interest
-10-
<PAGE> 17
SCHEDULE II
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
EIN: 59-3339512
PLAN NUMBER: 009
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 Net Gain
Description of Investment Transactions Price Transactions Proceeds Asset (Loss)
------------------------- ------------ ---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
*Connecticut General Life Insurance Company:
CIGNA Guaranteed Short-Term Fund 100 $ 651,195 41 $870,450 $870,450 $ --
CIGNA Actively Managed Fixed Income Fund 95 488,595 45 385,073 371,215 13,858
INVESCO Total Return Fund 95 480,647 31 127,762 114,495 13,267
Fidelity Growth and Income Fund 110 580,545 25 52,901 48,841 4,060
Fidelity Advisor Equity Growth Fund 97 305,883 16 32,284 29,881 2,403
Warburg Pincus Advisor Emerging Growth Fund 102 299,561 29 68,280 64,005 4,275
CIGNA International Equity Fund 87 202,333 29 68,974 69,744 (770)
Fidelity Advisor Growth Opportunities Fund 98 310,267 13 57,881 51,798 6,083
AIM Value Fund 75 446,391 14 17,746 15,994 1,752
*Kaydon Corporation:
Stock Fund 108 1,086,763 6 70,466 64,982 5,484
</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.
-11-
<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 Form S-8 Registration Statement Number 333-15903.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
June 26, 1998.
-12-
