<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, 1998
------------------------------------
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
315 E. EISENHOWER PARKWAY
SUITE 300
ANN ARBOR, MI 48108
<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:
Page
Report of Independent Public Accountants A
Statement of Net Assets Available for Benefits as of
December 31, 1998 1
Statement of Net Assets Available for Benefits as of
December 31, 1997 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1998 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997 4
Notes to Financial Statements 5-10
Schedule I - Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1998 11
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1998 12
Consent of Independent Public Accountants Exhibit 23
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 28, 1999
By: The Plan Administrative Committee
-------------------------------------
By: 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, 1998 AND 1997
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 (the "Plan")
as of December 31, 1998 and 1997, 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, 1998 and 1997, 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.
Grand Rapids, Michigan,
June 11, 1999.
<PAGE> 6
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Page
Statement of Net Assets Available for Benefits as of
December 31, 1998 1
Statement of Net Assets Available for Benefits as of
December 31, 1997 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1998 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997 4
Notes to Financial Statements 5-10
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1998 11
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1998 12
-(i)-
<PAGE> 7
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter Warburg Pincus Fidelity
Guaranteed Actively INVESCO Advisor Advisor
Short-Term Managed Total Emerging Growth
Securities Fixed Income Return Growth Opportunities
Fund Fund Account Account Account
---------- ------------ ---------- -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $2,114,877 $ 2,128,610 $1,856,778 $ 3,649,408 $ 893,094
Kaydon Corporation
common stock - - - - -
---------- ------------ ---------- -------------- -------------
Total investments 2,114,877 2,128,610 1,856,778 3,649,408 893,094
---------- ------------ ---------- -------------- -------------
Dividend receivable - - - - -
---------- ------------ ---------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $2,114,877 $ 2,128,610 $1,856,778 $ 3,649,408 $ 893,094
========== ============ ========== ============== =============
</TABLE>
<TABLE>
<CAPTION>
CIGNA
Charter
AIM Templeton Lazard Janus Large Company
Value Foreign Small Cap Worldwide Stock-Growth Stock
Account Account Account Account Fund Fund Total
--------- --------- --------- --------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $ 671,767 $ 245,175 $ 64,711 $ 9,898 $ 7,720,577 $ - $19,354,895
Kaydon Corporation
common stock - - - - - 25,888,274 25,888,274
--------- --------- --------- --------- ------------- ----------- -----------
Total investments 671,767 245,175 64,711 9,898 7,720,577 25,888,274 45,243,169
--------- --------- --------- --------- ------------- ----------- -----------
Dividend receivable - - - - - 64,613 64,613
--------- --------- --------- --------- ------------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 671,767 $ 245,175 $ 64,711 $ 9,898 $ 7,720,577 $25,952,887 $45,307,782
========= ========= ========= ========= ============= =========== ===========
</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, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter Fidelity Warburg Pincus
Guaranteed Actively INVESCO Fidelity Advisor Advisor
Short-Term Managed Total Growth and Equity Emerging
Securities Fixed Income Return Income Growth Growth
Fund Fund Account Account Account Account
---------- ------------ ---------- ----------- --------- --------------
<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
========== ============ ========== =========== ========= ==============
</TABLE>
<TABLE>
<CAPTION>
Fidelity
CIGNA Advisor
International Growth Fidelity AIM
Equity Opportunities Magellan Value Stock
Account Account Account Account 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.
-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, 1998
<TABLE>
<CAPTION>
CIGNA
CIGNA Charter Warburg
Charter Actively Fidelity Fidelity Pincus
Guaranteed Managed INVESCO Growth Advisor Advisor
Short-Term Fixed Total and Equity Emerging
Securities Income Return Income Growth Growth
Fund Fund Account Account Account Account
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 161,980 $ 144,030 $ 202,326 $ 322,485 $ 138,153 $ 371,622
----------- ---------- ---------- ---------- ---------- ----------
Investment earnings:
Interest and dividends - - - - - -
Net appreciation (depreciation)
in current value of investments 77,463 121,951 198,286 114,927 32,533 94,151
----------- ---------- ---------- ---------- ---------- ----------
77,463 121,951 198,286 114,927 32,533 94,151
----------- ---------- ---------- ---------- ---------- ----------
239,443 265,981 400,612 437,412 170,686 465,773
Benefit payments (646,560) (421,758) (305,236) (566,221) (156,451) (301,437)
Administrative expenses (5,038) (4,709) (506) (748) (1,619) (3,786)
Fund transfers (182,746) 695,217 172,908 (4,692,284) (582,476) (537,010)
----------- ---------- ---------- ---------- ---------- ----------
Change in net assets
available for benefits (594,901) 534,731 267,778 (4,821,841) (569,860) (376,460)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 2,709,778 1,593,879 1,589,000 4,821,841 569,860 4,025,868
----------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 2,114,877 $2,128,610 $1,856,778 $ - $ - $3,649,408
=========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Fidelity
CIGNA Advisor
International Growth Fidelity AIM Templeton Lazard Janus
Equity Opportunities Magellan Value Foreign Small Cap Worldwide
Account Account Account Account Account Account Account
------------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ - $ 129,318 $ - $ 93,134 $ 63,325 $ 25,815 $ 1,268
------------- ------------- --------- --------- --------- --------- ---------
Investment earnings:
Interest and dividends - - - - - - -
Net appreciation (depreciation)
in current value of investments (475) 154,550 553 130,519 (14,659) (16,201) 991
------------- ------------- --------- --------- --------- --------- ---------
(475) 154,550 553 130,519 (14,659) (16,201) 991
------------- ------------- --------- --------- --------- --------- ---------
(475) 283,868 553 223,653 48,666 9,614 2,259
Benefit payments - (57,594) - (8,855) (29,829) (3,073) -
Administrative expenses - (438) - (115) (209) - -
Fund transfers (197,136) 142,945 (199,581) 111,381 226,547 58,170 7,639
------------- ------------- --------- --------- --------- --------- ---------
Change in net assets
available for benefits (197,611) 368,781 (199,028) 326,064 245,175 64,711 9,898
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 197,611 524,313 199,028 345,703 - - -
------------- ------------- --------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ - $ 893,094 $ - $ 671,767 $ 245,175 $ 64,711 $ 9,898
============= ============= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CIGNA
Charter
Large
Company
Stock-
Growth Stock
Fund Fund Total
---------- ----------- -----------
<S> <C> <C> <C>
Contributions:
Participants $ 131,401 $ 853,924 $ 2,638,781
---------- ----------- -----------
Investment earnings:
Interest and dividends - 242,916 242,916
Net appreciation (depreciation)
in current value of investments 1,886,075 5,425,691 8,206,355
---------- ----------- -----------
1,886,075 5,668,607 8,449,271
---------- ----------- -----------
2,017,476 6,522,531 11,088,052
Benefit payments (81,911) (2,596,116) (5,175,041)
Administrative expenses (641) (5,015) (22,824)
Fund transfers 5,785,653 (809,227) -
---------- ----------- -----------
Change in net assets
available for benefits 7,720,577 3,112,173 5,890,187
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - 22,840,714 39,417,595
---------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $7,720,577 $25,952,887 $45,307,782
========== =========== ===========
</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, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter
Guaranteed Actively INVESCO Fidelity Fidelity
Short-Term Managed Total Growth and Advisor
Securities Fixed Income Return Income Equity Growth
Fund Fund Account Account Account
------------ ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 167,289 $ 134,645 $ 151,273 $ 390,415 $ 97,923
------------ ------------ ----------- ----------- --------------
Investment earnings:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments 109,721 119,128 267,690 1,120,886 112,675
------------ ------------ ----------- ----------- --------------
109,721 119,128 267,690 1,120,886 112,675
------------ ------------ ----------- ----------- --------------
277,010 253,773 418,963 1,511,301 210,598
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
------------ ------------ ----------- ----------- --------------
Change in net assets
available for benefits (144,345) 217,274 759,944 959,245 136,333
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 2,854,123 1,376,605 829,056 3,862,596 433,527
------------ ------------ ----------- ----------- --------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 2,709,778 $ 1,593,879 $ 1,589,000 $ 4,821,841 $ 569,860
============ ============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Twentieth Warburg Pincus Fidelity
Century Advisor CIGNA Advisor
Heritage Emerging International Growth Fidelity
Investors Growth Equity Opportunities Magellan
Account Account Account Account Account
---------- -------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 8,574 $ 416,421 $ 46,994 $ 78,731 $ 44,202
---------- -------------- -------------- ------------- --------
Investment earnings:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments (3,568) 651,672 (10,177) 107,424 26,981
---------- -------------- -------------- ------------- --------
(3,568) 651,672 (10,177) 107,424 26,981
---------- -------------- -------------- ------------- --------
5,006 1,068,093 36,817 186,155 71,183
Benefit payments - (213,633) (3,715) (1,595) (16,822)
Administrative expenses - (3,432) (752) (128) (470)
Fund transfers (187,077) (614,305) (82,727) 131,731 75,352
---------- -------------- -------------- ------------- --------
Change in net assets
available for benefits (182,071) 236,723 (50,377) 316,163 129,243
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 182,071 3,789,145 247,988 208,150 69,785
---------- -------------- -------------- ------------- --------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ - $ 4,025,868 $ 197,611 $ 524,313 $199,028
========== ============== ============== ============= ========
</TABLE>
<TABLE>
<CAPTION>
AIM
Value Stock
Account Fund Total
---------- ---------- -----------
<S> <C> <C> <C>
Contributions:
Participants $ 28,651 $ 615,757 $ 2,180,875
---------- ---------- -----------
Investment earnings:
Interest and dividends - 207,400 207,400
Net appreciation (depreciation)
in current value of investments 28,268 6,342,098 8,872,798
---------- ---------- -----------
28,268 6,549,498 9,080,198
---------- ---------- -----------
56,919 7,165,255 11,261,073
Benefit payments (618) (734,706) (2,193,599)
Administrative expenses (3) (4,739) (20,572)
Fund transfers 289,405 (102,743) -
---------- ---------- -----------
Change in net assets
available for benefits 345,703 6,323,067 9,046,902
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - 16,517,647 30,370,693
---------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 345,703 $22,840,714 $39,417,595
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE> 11
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.
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., AIM Advisor, Inc., Templeton Global Advisors Limited, Lazard
Asset Management, Janus Capital Corporation and Putnam
Investments. 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.
-5-
<PAGE> 12
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 1998 or 1997.
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.
-6-
<PAGE> 13
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 Charter Guaranteed Short-Term Securities 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 Charter 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 Account 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 Account invests in equity
securities of domestic and foreign companies including
preferred stocks and investment-grade debt instruments, and
all types of foreign securities. This fund was replaced by
the CIGNA Charter Large Company Stock-Growth Fund effective
October 1, 1998.
The Fidelity Advisor Equity Growth Account 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. This fund replaced the
Fidelity Magellan Account effective January 1, 1998 and was
replaced by the CIGNA Charter Large Company Stock-Growth
Fund effective October 1, 1998.
The Twentieth Century Heritage Investors Account 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 Account 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.
-7-
<PAGE> 14
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
The CIGNA International Equity Account 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. This fund was replaced by the Templeton Foreign
Account effective January 1, 1998.
The Fidelity Advisor Growth Opportunities Account 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 Account invests primarily in common
stocks and securities convertible into common stock. The
Fund may invest in securities of domestic, foreign and
multinational issuers. This fund was replaced by the
Fidelity Advisor Equity Growth Account effective January 1,
1998.
The AIM Value Account invests primarily in common stocks,
convertible bonds and convertible preferred stocks of
undervalued companies. This fund replaced the Twentieth
Century Heritage Investors Account, effective April 1, 1997.
The Templeton Foreign Account invests primarily in common and
preferred stock of non-U.S. companies, including American,
European and Global Depository Receipts. The Fund may invest
in debt securities of companies and governments located
anywhere in the world, emerging markets, U.S. Government
securities, bank time deposits in the currency of any major
nation, commercial paper and repurchase agreements. This
fund replaced the CIGNA International Equity Account
effective January 1, 1998.
The Lazard Small Cap Account invests in small-cap equity
securities including common stock, preferred stock,
securities convertible into or exchangeable for common
stock, and rights and warrants. The Fund may invest in
equity securities of large-cap U.S. companies and short-term
money market instruments. This fund became an investment
option effective January 1, 1998.
The Janus Worldwide Account invests primarily in common stock
of foreign and domestic issuers. The Fund may invest in
preferred stock, warrants, convertible securities and debt
securities, high-grade commercial paper, certificates of
deposit, money market funds, repurchase agreements and other
short-term debt obligations. This fund became an investment
option effective October 1, 1998.
-8-
<PAGE> 15
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
The CIGNA Charter Large Company Stock-Growth Fund invests
primarily in domestic stocks of large companies. The Fund may
also invest in American Depository Receipts. This fund replaced
the Fidelity Growth and Income Account and the Fidelity Advisor
Equity Growth Account effective October 1, 1998.
The Stock Fund invests solely in Kaydon Corporation Common Stock.
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
1998 and 1997. 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.
(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.
-9-
<PAGE> 16
KAYDON CORPORATION
EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(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>
1998 1997
----------- -----------
<S> <C> <C>
CIGNA Charter Guaranteed Short-Term
Securities Fund $ - $ 2,709,778
Fidelity Growth and Income Account - 4,821,841
Warburg Pincus Advisor Emerging
Growth Account 3,649,408 4,025,868
CIGNA Charter Large Company
Stock-Growth Fund 7,720,577 -
Stock Fund 25,888,274 22,778,238
</TABLE>
-10-
<PAGE> 17
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, 1998
<TABLE>
<CAPTION>
Current
Identity of Issuer Description of Investment Cost Value
------------------ ------------------------- ----------- -----------
<S> <C> <C> <C>
Mutual Funds:
*Connecticut General Life CIGNA Charter Guaranteed
Insurance Company Short-Term Securities
Fund, 47,212 units $ 2,114,877 $ 2,114,877
*Connecticut General Life CIGNA Charter Actively
Insurance Company Managed Fixed Income
Fund, 16,666 units 1,949,920 2,128,610
*Connecticut General Life INVESCO Total Return
Insurance Company Account, 49,796 units 1,427,055 1,856,778
*Connecticut General Life Warburg Pincus Advisor
Insurance Company Emerging Growth Account,
79,676 units 2,930,382 3,649,408
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Account,
12,245 units 694,591 893,094
*Connecticut General Life AIM Value Account,
Insurance Company 13,668 units 527,926 671,767
*Connecticut General Life Templeton Foreign Account,
Insurance Company 22,938 units 255,659 245,175
*Connecticut General Life Lazard Small Cap Account,
Insurance Company 3,210 units 71,046 64,711
*Connecticut General Life Janus Worldwide Account,
Insurance Company 187 units 8,861 9,898
*Connecticut General Life CIGNA Charter Large Company
Insurance Company Stock-Growth Fund,
569,083 units 5,853,892 7,720,577
----------- -----------
Common Stock: 15,834,209 19,354,895
*Kaydon Corporation Stock Fund, 646,197 shares 12,020,178 25,888,274
----------- -----------
$27,854,387 $45,243,169
=========== ===========
</TABLE>
* Represents a party-in-interest
-11-
<PAGE> 18
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, 1998
<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 Charter Guaranteed Short-
Term Securities Fund 86 $1,171,961 65 $1,844,325 $1,844,325 $ -
CIGNA Charter Actively Managed
Fixed Income Fund 86 1,240,043 68 827,263 760,641 66,622
Fidelity Growth and Income Account 72 1,048,982 63 5,985,750 4,460,248 1,525,502
CIGNA Charter Large Company
Stock-Growth Fund 24 6,006,169 21 171,667 150,589 21,078
*Kaydon Corporation:
Stock Fund 115 2,748,382 103 5,064,037 2,387,426 2,676,611
</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.
-12-
<PAGE> 19
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
23 Consent of Independent Public Accountants
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaydon Corporation:
As independent public accountants, we hereby consent to the incorporation
of our report dated June 11, 1999, included in this Form 11-K, into the
Company's previously filed S-8 Registration Statement Number 2-89399.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
June 28, 1999.
