<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:
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
315 E. EISENHOWER PARKWAY
SUITE 300
ANN ARBOR, MI 48108
<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:
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 5-9
Schedule I - Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1998 10
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1998 11
Consent of Independent Public Accountants Exhibit 23
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 28, 1999
By: The Plan Administrative Committee
---------------------------------
By: 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, 1998 AND 1997
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 (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
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS 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 5-9
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1998 10
Schedule II - Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1998 11
<PAGE> 7
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS 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 AIM
Securities Fixed Income Return Growth Opportunities Value
Fund Fund Account Account Account Account
---------- ------------ ---------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ - $ - $ - $ - $ - $- -
---------- ------------ ---------- ------------- ------------ --------
Investments:
Mutual funds 1,771,611 1,589,178 1,248,926 588,513 569,321 732,051
Kaydon Corporation
common stock - - - - - -
---------- ------------ ---------- ------------- ------------ --------
Total investments 1,771,611 1,589,178 1,248,926 588,513 569,321 732,051
---------- ------------ ---------- ------------- ------------ --------
Dividend receivable - - - - - -
---------- ------------ ---------- ------------- ------------ --------
NET ASSETS AVAILABLE
FOR BENEFITS $1,771,611 $ 1,589,178 $1,248,926 $ 588,513 $ 569,321 $732,051
========== ============ ========== ============= ============ ========
<CAPTION>
CIGNA
Charter
Templeton Lazard Janus Large Company
Foreign Small Cap Worldwide Stock-Growth Stock
Account Account Account Fund Fund Total
--------- --------- --------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ - $ - $ - $ - $ 103,964 $ 103,964
--------- --------- ---------- ------------- ------------ -----------
Investments:
Mutual funds 322,182 20,538 15,268 2,721,940 - 9,579,528
Kaydon Corporation
common stock - - - - 2,362,430 2,362,430
--------- --------- ---------- ------------- ------------ -----------
Total investments 322,182 20,538 15,268 2,721,940 2,362,430 11,941,958
--------- --------- ---------- ------------- ------------ -----------
Dividend receivable - - - - 5,635 5,635
--------- --------- ---------- ------------- ------------ -----------
NET ASSETS AVAILABLE
FOR BENEFITS $ 322,182 $ 20,538 $ 15,268 $ 2,721,940 $ 2,472,029 $12,051,557
========= ========= ========== ============= ============ ===========
</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, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter Fidelity Fidelity Warburg Pincus
Guaranteed Actively INVESCO Growth Advisor Advisor
Short-Term Managed Total and Equity Emerging
Securities Fixed Income Return Income Growth Growth
Fund Fund Account Account Account Account
---------- ------------ --------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ - $ 52 $ 177 $ 226 $ 91 $ 216
---------- ------------ --------- -------- -------- --------------
Investments:
Mutual funds 1,745,240 1,472,887 957,504 839,849 577,806 441,220
Kaydon Corporation
common stock - - - - - -
---------- ------------ --------- -------- -------- --------------
Total investments 1,745,240 1,472,887 957,504 839,849 577,806 441,220
---------- ------------ --------- -------- -------- --------------
Dividend receivable - - - - - -
---------- ------------ --------- -------- -------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,745,240 $ 1,472,939 $ 957,681 $840,075 $577,897 $ 441,436
========== ============ ========= ======== ======== ==============
<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 $ 173 $ 139 $ - $ 177 $ 474 $ 1,725
Cash ------------- ------------ --------- -------- ---------- ------------
Investments: 259,698 374,206 314,762 468,332 - 7,451,504
Mutual funds
Kaydon Corporation - - - - 1,241,655 1,241,655
common stock ------------- ------------ --------- -------- ---------- ------------
259,698 374,206 314,762 468,332 1,241,655 8,693,159
Total investments ------------- ------------ --------- -------- ---------- ------------
- - - - 3,274 3,274
Dividend receivable ------------- ------------ --------- -------- ---------- ------------
NET ASSETS AVAILABLE $ 259,871 $ 374,345 $ 314,762 $468,509 $1,245,403 $ 8,698,158
FOR BENEFITS ============= ============ ========= ======== ========== ============
</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, 1998
<TABLE>
<CAPTION>
CIGNA CIGNA
CHARTER CHARTER FIDELITY FIDELITY
GUARANTEED ACTIVELY INVESCO GROWTH ADVISOR
SHORT-TERM MANAGED TOTAL AND EQUITY
SECURITIES FIXED INCOME RETURN INCOME GROWTH
FUND FUND ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 136,958 $ 114,139 $ 109,730 $ 24,043 $ 29,313
Participants 124,090 93,085 148,751 110,987 133,640
------------ ------------ ------------ ------------ ------------
261,048 207,224 258,481 135,030 162,953
------------ ------------ ------------ ------------ ------------
INVESTMENT EARNINGS:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments 57,120 93,312 124,296 29,648 62,887
------------ ------------ ------------ ------------ ------------
57,120 93,312 124,296 29,648 62,887
------------ ------------ ------------ ------------ ------------
318,168 300,536 382,777 164,678 225,840
BENEFIT PAYMENTS (111,771) (66,138) (58,554) (19,823) (53,574)
ADMINISTRATIVE EXPENSES (175) (699) (24) - (74)
FUND TRANSFERS (179,851) (117,460) (32,954) (984,930) (750,089)
------------ ------------ ------------ ------------ ------------
Change in net assets available
for benefits 26,371 116,239 291,245 (840,075) (577,897)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 1,745,240 1,472,939 957,681 840,075 577,897
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 1,771,611 $ 1,589,178 $ 1,248,926 $ - $ -
============ ============ ============ ============ ============
<CAPTION>
WARBURG PINCUS FIDELITY
ADVISOR CIGNA ADVISOR
EMERGING INTERNATIONAL GROWTH FIDELITY AIM
GROWTH EQUITY OPPORTUNITIES MAGELLAN VALUE
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 80,127 $ - $ 63,381 $ - $ 64,250
Participants 127,160 (173) 82,000 - 89,540
------------ ------------ ------------ ------------ ------------
207,287 (173) 145,381 - 153,790
------------ ------------ ------------ ------------ ------------
INVESTMENT EARNINGS:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments 20,681 (625) 91,952 875 157,803
------------ ------------ ------------ ------------ ------------
20,681 (625) 91,952 875 157,803
------------ ------------ ------------ ------------ ------------
227,968 (798) 237,333 875 311,593
BENEFIT PAYMENTS (26,059) - (12,473) - (50,027)
ADMINISTRATIVE EXPENSES (152) - (24) - (237)
FUND TRANSFERS (54,680) (259,073) (29,860) (315,637) 2,213
------------ ------------ ------------ ------------ ------------
Change in net assets available
for benefits 147,077 (259,871) 194,976 (314,762) 263,542
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 441,436 259,871 374,345 314,762 468,509
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 588,513 $ - $ 569,321 $ - $ 732,051
============ ============ ============ ============ ============
<CAPTION>
CIGNA
CHARTER
TEMPLETON LAZARD JANUS LARGE COMPANY
FOREIGN SMALL CAP WORLDWIDE STOCK-GROWTH STOCK
ACCOUNT ACCOUNT ACCOUNT FUND FUND
------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 61,580 $ 8,450 $ 2,206 $ 199,177 $ 231,363
Participants 83,423 6,998 950 67,147 127,646
------------ ------------ ------------ ------------ ------------
145,003 15,448 3,156 266,324 359,009
------------ ------------ ------------ ------------ ------------
INVESTMENT EARNINGS:
Interest and dividends
Net appreciation (depreciation) - - - - 19,129
in current value of investments
(18,060) (6,329) 1,586 572,804 306,371
------------ ------------ ------------ ------------ ------------
(18,060) (6,329) 1,586 572,804 325,500
------------ ------------ ------------ ------------ ------------
126,943 9,119 4,742 839,128 684,509
(26,761) (102) - (33,157) (19,192)
BENEFIT PAYMENTS
(128) (60) - (770) (38)
ADMINISTRATIVE EXPENSES
222,128 11,581 10,526 1,916,739 561,347
FUND TRANSFERS ------------ ------------ ------------ ------------ ------------
Change in net assets available 322,182 20,538 15,268 2,721,940 1,226,626
for benefits
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - - - - 1,245,403
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 322,182 $ 20,538 $ 15,268 $ 2,721,940 $ 2,472,029
============ ============ ============ ============ ============
TOTAL
------------
<S> <C>
CONTRIBUTIONS:
Employer $ 1,124,717
Participants 1,195,244
------------
2,319,961
------------
INVESTMENT EARNINGS:
Interest and dividends
Net appreciation (depreciation) 19,129
in current value of investments
1,494,321
------------
1,513,450
------------
3,833,411
(477,631)
BENEFIT PAYMENTS
(2,381)
ADMINISTRATIVE EXPENSES
-
FUND TRANSFERS ------------
Change in net assets available 3,353,399
for benefits
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 8,698,158
------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 12,051,557
============
</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, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
CHARTER CHARTER FIDELITY FIDELITY
GUARANTEED ACTIVELY INVESCO GROWTH ADVISOR
SHORT-TERM MANAGED TOTAL AND EQUITY
SECURITIES FIXED INCOME RETURN INCOME GROWTH
FUND FUND ACCOUNT ACCOUNT ACCOUNT
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 71,829 $ 177,939 $ 75,395 $ 70,200 $ 57,599
Participants 422,665 207,561 333,550 372,315 202,703
---------- ---------- -------- -------- --------
494,494 385,500 408,945 442,515 260,302
---------- ---------- -------- -------- --------
INVESTMENT EARNINGS:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments 73,943 96,367 137,710 100,712 65,683
---------- ---------- -------- -------- --------
73,943 96,367 137,710 100,712 65,683
---------- ---------- -------- -------- --------
568,437 481,867 546,655 543,227 325,985
BENEFIT PAYMENTS (112,265) (50,928) (28,640) (22,303) (20,649)
ADMINISTRATIVE EXPENSES - (870) (113) - (227)
FUND TRANSFERS (629,788) (291,992) (69,884) 66,301 (614)
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
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 1,918,856 1,334,862 504,468 247,415 270,707
---------- ---------- -------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,745,240 $1,472,939 $957,681 $840,075 $577,897
========== ========== ======== ======== ========
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:
Employer $ 2,225 $ 57,133 $ 11,629 $ 39,997 $ 14,374
Participants 10,453 196,475 169,837 188,460 102,467
---------- ---------- -------- -------- --------
12,678 253,608 181,466 228,457 116,841
---------- ---------- -------- -------- --------
INVESTMENT EARNINGS:
Interest and dividends - - - - -
Net appreciation (depreciation)
in current value of investments (2,550) 46,868 (22,872) 46,688 38,490
---------- ---------- -------- -------- --------
(2,550) 46,868 (22,872) 46,688 38,490
---------- ---------- -------- -------- --------
10,128 300,476 158,594 275,145 155,331
BENEFIT PAYMENTS (10,364) (51,124) (19,791) (44,779) (27,033)
ADMINISTRATIVE EXPENSES - - (540) (71) -
FUND TRANSFERS (164,779) (6,354) (48,350) 45,278 48,634
TRANSFERS FROM OTHER PLAN - 4,719 - 2,695 -
---------- ---------- -------- -------- --------
Change in net assets available
for benefits (165,015) 247,717 89,913 278,268 176,932
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 165,015 193,719 169,958 96,077 137,830
---------- ---------- -------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ - $ 441,436 $259,871 $374,345 $314,762
========== ========== ======== ======== ========
<CAPTION>
AIM
VALUE STOCK
ACCOUNT FUND TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
CONTRIBUTIONS:
Employer $ 39,694 $ 47,170 $ 665,184
Participants 190,621 89,116 2,486,223
---------- ----------- ----------
230,315 136,286 3,151,407
---------- ----------- ----------
INVESTMENT EARNINGS:
Interest and dividends - 7,480 7,480
Net appreciation (depreciation)
in current value of investments 39,865 229,361 850,265
---------- ----------- ----------
39,865 236,841 857,745
---------- ----------- ----------
270,180 373,127 4,009,152
BENEFIT PAYMENTS (1,152) (2,876) (391,904)
ADMINISTRATIVE EXPENSES - - (1,821)
FUND TRANSFERS 199,481 852,067 -
TRANSFERS FROM OTHER PLAN - 19,638 40,377
---------- ----------- ----------
Change in net assets available
for benefits 468,509 1,241,956 3,655,804
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - 3,447 5,042,354
---------- ----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 468,509 $ 1,245,403 $8,698,158
========== =========== ==========
</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 (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.
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 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
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 Corporation ("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.
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.
-5-
<PAGE> 12
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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. The maximum matching contribution is equal to
25% of the maximum salary deferral contribution allowed
participants for the year ($1,600 prior to January 1, 1998). In
addition, the Company may, with the approval of the Board of
Directors of Kaydon, make discretionary contributions to the Plan.
Discretionary contributions were $767,000 and $496,000 in 1998 and
1997, respectively.
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.
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.
-6-
<PAGE> 13
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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.
-7-
<PAGE> 14
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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 - 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
1998 and 1997. 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.
-8-
<PAGE> 15
FLUID POWER COMPANIES'
PENSION AND RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
(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>
1998 1997
---------- ---------
<S> <C> <C>
CIGNA Charter Guaranteed Short-Term Securities Fund $1,771,611 $1,745,240
CIGNA Charter Actively Managed Fixed Income Fund 1,589,178 1,472,887
INVESCO Total Return Account 1,248,926 957,504
Fidelity Growth and Income Account - 839,849
Fidelity Advisor Equity Growth Account - 577,806
Warburg Pincus Advisor Emerging Growth Account - 441,220
AIM Value Account 732,051 468,332
CIGNA Charter Large Company Stock-Growth Fund 2,721,940 -
Stock Fund 2,362,430 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, 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, 39,549 units $1,771,611 $ 1,771,611
*Connecticut General Life CIGNA Charter Actively Managed
Insurance Company Fixed Income Fund,
12,442 units 1,325,914 1,589,178
*Connecticut General Life INVESCO Total Return Account,
Insurance Company 33,494 units 932,412 1,248,926
*Connecticut General Life Warburg Pincus Advisor Emerging
Insurance Company Growth Account, 12,849 units 473,175 588,513
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Account,
7,806 units 397,573 569,321
*Connecticut General Life AIM Value Account
Insurance Company 14,894 units 504,824 732,051
*Connecticut General Life Templeton Foreign Account,
Insurance Company 30,142 units 294,368 322,182
*Connecticut General Life Lazard Small Cap Account,
Insurance Company 1,019 units 15,322 20,538
*Connecticut General Life Janus Worldwide Account,
Insurance Company 288 units 11,663 15,268
*Connecticut General Life CIGNA Charter Large Company
Insurance Company Stock-Growth Fund,
200,634 units 1,968,959 2,721,940
---------- -----------
7,695,821 9,579,528
Common Stock:
*Kaydon Corporation Stock Fund, 58,969 shares 1,740,624 2,362,430
---------- -----------
$9,436,445 $11,941,958
========== ===========
</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, 1998
<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 Charter Guaranteed Short-Term Securities Fund 90 $ 386,226 49 $ 416,975 $ 416,975 $ -
CIGNA Charter Actively Managed Fixed Income Fund 85 266,805 60 243,826 223,762 20,064
INVESCO Total Return Account 84 324,216 52 157,090 128,510 28,580
Fidelity Growth and Income Account 65 199,112 37 1,068,609 931,289 137,320
Fidelity Advisor Equity Growth Account 58 492,802 45 1,133,495 1,004,459 129,036
Templeton Foreign Account 84 417,941 44 77,699 78,180 (481)
CIGNA Charter Large Company Stock-Growth Fund 25 2,221,818 17 72,682 69,711 2,971
*Kaydon Corporation:
Stock Fund 108 919,627 24 105,223 92,728 12,495
</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> 18
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 Form S-8 Registration Statements Number 333-15903.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
June 28, 1999.
