<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:
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
KAYDON CORPORATION
315 E. EISENHOWER PARKWAY
SUITE 300
ANN ARBOR, MI 48108
<PAGE> 2
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
The following documents are attached hereto as exhibits:
Page
Report of Independent Public Accountants A
Statement of Net Assets Available for 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 instructions to this Form 11-K, "plans subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") may file plan
financial statements and schedules prepared in accordance with the financial
reporting requirements of ERISA". As the Plan is subject to the filing
requirements of ERISA, the aforementioned financial statements and schedules of
the Plan have been prepared in accordance with such requirements.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the Administrative Committee of this plan have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
Electro-Tec Corporation Employee
Retirement Benefit Plan
Date: June 28, 1999
By: The Plan Administrative Committee
---------------------------------
By: John F. Brocci
---------------------------------
John F. Brocci
Chairman
Plan Administrative Committee
<PAGE> 4
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT 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
Electro-Tec Corporation Employee Retirement Benefit Plan:
We have audited the accompanying statements of net assets available for benefits
of the ELECTRO-TEC CORPORATION EMPLOYEE RETIREMENT BENEFIT 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
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT 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
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT 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 Templeton
Securities Fixed Income Return Growth Opportunities Value Foreign
Fund Fund Account Account Account Account Account
------------- ------------ --------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $1,756,228 $457,651 $532,329 $1,065,208 $369,926 $82,126 $44,288
Kaydon Corporation
common stock - - - - - - -
---------- -------- -------- ---------- -------- ------- -------
Total investments 1,756,228 457,651 532,329 1,065,208 369,926 82,126 44,288
---------- -------- -------- ---------- -------- ------- -------
Dividend receivable - - - - - - -
---------- -------- -------- ---------- -------- ------- -------
NET ASSETS AVAILABLE
FOR BENEFITS $1,756,228 $457,651 $532,329 $1,065,208 $369,926 $82,126 $44,288
========== ======== ======== ========== ======== ======= =======
<CAPTION>
CIGNA
Charter
Large
Lazard Janus Company
Small Cap Worldwide Stock-Growth Stock
Account Account Fund Fund Total
--------- --------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $20,182 $76,423 $2,341,889 $ - $6,746,250
Kaydon Corporation
common stock - - - 1,183,873 1,183,873
------- ------- ---------- ---------- ----------
Total investments 20,182 76,423 2,341,889 1,183,873 7,930,123
------- ------- ---------- ---------- ----------
Dividend receivable - - - 2,948 2,948
------- ------- ---------- ---------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $20,182 $76,423 $2,341,889 $1,186,821 $7,933,071
======= ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-1-
<PAGE> 8
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter Warburg Pincus
Guaranteed Actively Fidelity Fidelity Advisor
Short-Term Managed INVESCO Growth and Advisor Emerging
Securities Fixed Income Total Return Income Equity Growth Growth
Fund Fund Account Account Account Account
------------ ------------ ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $1,870,136 $447,539 $516,760 $1,588,302 $180,835 $1,125,122
Kaydon Corporation
common stock - - - - - -
---------- -------- -------- ---------- -------- ----------
Total investments 1,870,136 447,539 516,760 1,588,302 180,835 1,125,122
---------- -------- -------- ---------- -------- ----------
Dividend receivable - - - - - -
---------- -------- -------- ---------- -------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $1,870,136 $447,539 $516,760 $1,588,302 $180,835 $1,125,122
========== ======== ======== ========== ======== ==========
<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 $32,323 $311,473 $59,787 $20,590 $ - $6,152,867
Kaydon Corporation
common stock - - - - 1,026,816 1,026,816
------- -------- ------- ------- ---------- ----------
Total investments 32,323 311,473 59,787 20,590 1,026,816 7,179,683
------- -------- ------- ------- ---------- ----------
Dividend receivable - - - - 2,824 2,824
------- -------- ------- ------- ---------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $32,323 $311,473 $59,787 $20,590 $1,029,640 $7,182,507
======= ======== ======= ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-2-
<PAGE> 9
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
<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>
Contributions:
Employer $ 42,326 $ 14,738 $ 18,497 $ 35,200 $ 13,819 $ 45,034
Participants 57,958 19,140 26,377 56,537 23,796 65,304
---------- -------- -------- ---------- -------- ----------
100,284 33,878 44,874 91,737 37,615 110,338
---------- -------- -------- ---------- -------- ----------
Investment earnings:
Interest and dividends - - - - - -
Net appreciation (depreciation) in
current value of investments 62,275 27,380 61,638 70,496 14,308 57,135
---------- -------- -------- ---------- -------- ----------
62,275 27,380 61,638 70,496 14,308 57,135
---------- -------- -------- ---------- -------- ----------
162,559 61,258 106,512 162,233 51,923 167,473
Benefit payments (246,745) (119,196) (179,109) (207,082) (8,076) (167,317)
Administrative expenses (70) (225) (35) - - (160)
Fund transfers (29,652) 68,275 88,201 (1,543,453) (224,682) (59,910)
---------- -------- -------- ---------- -------- ----------
Change in net assets
available for benefits (113,908) 10,112 15,569 (1,588,302) (180,835) (59,914)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 1,870,136 447,539 516,760 1,588,302 180,835 1,125,122
---------- -------- -------- ---------- -------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,756,228 $457,651 $532,329 $ - $ - $1,065,208
========== ======== ======== ========== ======== ==========
<CAPTION>
Fidelity
CIGNA Advisor
International Growth Fidelity AIM Templeton Lazard
Equity Opportunities Magellan Value Foreign Small Cap
Account Account Account Account Account Account
--------------- ------------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ - $ 12,043 $ - $10,638 $ 9,030 $ 4,797
Participants - 19,622 - 15,563 13,263 6,952
------- -------- ------- ------- ------- -------
- 31,665 - 26,201 22,293 11,749
------- -------- ------- ------- ------- -------
Investment earnings:
Interest and dividends - - - - - -
Net appreciation (depreciation) in
current value of investments 556 70,706 166 15,055 (2,307) (1,358)
------- -------- ------- ------- ------- -------
556 70,706 166 15,055 (2,307) (1,358)
------- -------- ------- ------- ------- -------
556 102,371 166 41,256 19,986 10,391
Benefit payments (634) (10,351) - (2,970) (4,516) (164)
Administrative expenses - (70) - (70) (35) -
Fund transfers (32,245) (33,497) (59,953) 23,320 28,853 9,955
------- -------- ------- ------- ------- -------
Change in net assets
available for benefits (32,323) 58,453 (59,787) 61,536 44,288 20,182
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 32,323 311,473 59,787 20,590 - -
------- -------- ------- ------- ------- -------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ - $369,926 $ - $82,126 $44,288 $20,182
======= ======== ======= ======= ======= =======
<CAPTION>
CIGNA
Charter
Janus Large Company
Worldwide Stock-Growth Stock
Account Fund Fund Total
--------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Contributions:
Employer $ 442 $ 15,936 $ 35,823 $ 258,323
Participants 653 26,408 53,916 385,489
------- ---------- ---------- ----------
1,095 42,344 89,739 643,812
------- ---------- ---------- ----------
Investment earnings:
Interest and dividends - - 11,641 11,641
Net appreciation (depreciation) in
current value of investments 18,569 518,766 235,707 1,149,092
------- ---------- ---------- ----------
18,569 518,766 247,348 1,160,733
------- ---------- ---------- ----------
19,664 561,110 337,087 1,804,545
Benefit payments - (25,037) (81,804) (1,053,001)
Administrative expenses - (315) - (980)
Fund transfers 56,759 1,806,131 (98,102) -
------- ---------- ---------- ----------
Change in net assets
available for benefits 76,423 2,341,889 157,181 750,564
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year - - 1,029,640 7,182,507
------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $76,423 $2,341,889 $1,186,821 $7,933,071
======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE> 10
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CIGNA CIGNA
Charter Charter Twentieth
Guaranteed Actively Fidelity Fidelity Century
Short-Term Managed INVESCO Growth and Advisor Heritage
Securities Fixed Income Total Return Income Equity Growth Investors
Fund Fund Account Account Account Account
---------- ------------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 54,630 $ 14,373 $ 12,980 $ 45,524 $ 8,399 $ 368
Participants 73,677 19,721 18,640 69,494 12,661 479
---------- -------- -------- ---------- -------- ------
128,307 34,094 31,620 115,018 21,060 847
---------- -------- -------- ---------- -------- ------
Investment earnings:
Interest and dividends - - - - - -
Net appreciation (depreciation) in
current value of investments 76,730 33,452 91,115 352,027 26,478 (213)
---------- -------- -------- ---------- -------- ------
76,730 33,452 91,115 352,027 26,478 (213)
---------- -------- -------- ---------- -------- ------
205,037 67,546 122,735 467,045 47,538 634
Benefit payments (310,070) (14,758) (42,112) (59,243) (1,983) -
Administrative expenses (315) (211) - (14) (35) -
Fund transfers (79,379) (44,630) 64,811 14,377 42,114 (7,837)
Transfers to other plan - - (5,195) (5,435) (2,695) -
---------- -------- -------- ---------- -------- ------
Change in net assets
available for benefits (184,727) 7,947 140,239 416,730 84,939 (7,203)
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 2,054,863 439,592 376,521 1,171,572 95,896 7,203
---------- -------- -------- ---------- -------- ------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,870,136 $447,539 $516,760 $1,588,302 $180,835 $ -
========== ======== ======== ========== ======== ======
<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 $ 39,992 $ 3,330 $ 8,709 $ 4,963 $ 1,955
Participants 56,797 4,461 14,950 8,519 2,462
---------- ------- -------- ------- -------
96,789 7,791 23,659 13,482 4,417
---------- ------- -------- ------- -------
Investment earnings:
Interest and dividends - - - - -
Net appreciation (depreciation) in
current value of investments 190,756 (972) 57,086 9,984 2,129
---------- ------- -------- ------- -------
190,756 (972) 57,086 9,984 2,129
---------- ------- -------- ------- -------
287,545 6,819 80,745 23,466 6,546
Benefit payments (66,362) (9,254) (649) (476) (284)
Administrative expenses (258) (140) (34) (8) (36)
Fund transfers (217,178) 10,433 137,969 29,386 14,364
Transfers to other plan (4,719) - (2,695) - -
---------- ------- -------- ------- -------
Change in net assets
available for benefits (972) 7,858 215,336 52,368 20,590
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 1,126,094 24,465 96,137 7,419 -
---------- ------- -------- ------- -------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,125,122 $32,323 $311,473 $59,787 $20,590
========== ======= ======== ======= =======
<CAPTION>
Stock
Fund Total
---------- -------
<S> <C> <C>
Contributions:
Employer $ 28,487 $ 223,710
Participants 42,434 324,295
---------- ----------
70,921 548,005
---------- ----------
Investment earnings:
Interest and dividends 9,048 9,048
Net appreciation (depreciation) in
current value of investments 271,014 1,109,586
---------- ----------
280,062 1,118,634
---------- ----------
350,983 1,666,639
Benefit payments (20,528) (525,719)
Administrative expenses (1) (1,052)
Fund transfers 35,570 -
Transfers to other plan (19,638) (40,377)
---------- ----------
Change in net assets
available for benefits 346,386 1,099,491
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 683,254 6,083,016
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,029,640 $7,182,507
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE> 11
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accompanying financial statements of the Electro-Tec Corporation
Employee Retirement Benefit Plan (the "Plan") have been prepared
on the accrual basis of accounting. The Plan is subject to the
applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended. Investments are stated at current value,
which is based on the quoted market price.
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
Electro-Tec Corporation (the "Company" or "Employer"), a wholly-owned
subsidiary of Kaydon Corporation ("Kaydon"), sponsors 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.
-5-
<PAGE> 12
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Eligibility requirements - All employees of the Company 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, 1998) 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 elect to make, through payroll
deductions, both tax-deferred contributions, which may not exceed
15% of compensation, and after-tax voluntary contributions. The
maximum contributions for the year, which includes pre-tax,
after-tax voluntary and employer matching and discretionary
contributions is 25% of compensation less tax-deferred
contributions. Under the terms of the Plan, the Company
contributes to the Plan an amount equal to the payroll deduction
contribution by each participant up to 3% of the participant's
compensation, as defined by the Plan, and 75% of each
participant's contribution in excess of 3% of compensation, not to
exceed an additional 4% of each participant's compensation, as
defined. In addition, the Company may, with the approval of the
Board of Directors of Kaydon, make discretionary contributions to
the Plan. 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 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.
-6-
<PAGE> 13
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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.
-7-
<PAGE> 14
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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.
-8-
<PAGE> 15
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
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. As described in the Plan, in certain
hardship situations, participants may withdraw a portion of their
account balances while actively employed.
Administrative expenses - Although not required to do so, the
Employer paid certain administrative expenses of the Plan during
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 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.
-9-
<PAGE> 16
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) TAX STATUS
The Internal Revenue Service issued a determination dated October 12,
1995, stating that the Plan was in accordance with applicable plan
design requirements as of that date. The Plan has been amended
since receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the Plan
and underlying trust are currently designed and being operated in
compliance with the applicable requirements of the Internal
Revenue Code. Therefore, they believe that the Plan was qualified
and the related trust was tax-exempt as of the financial statement
date.
(6) INVESTMENTS
The fair market value of investments that represent 5% or more of the
Plan's total net assets is as follows as of December 31,:
<TABLE>
<CAPTION>
1998 1997
---------- -------
<S> <C> <C>
CIGNA Charter Guaranteed Short-Term Securities Fund $1,756,228 $1,870,136
CIGNA Charter Actively Managed Fixed Income Fund 457,651 447,539
INVESCO Total Return Account 532,329 516,760
Fidelity Growth and Income Account - 1,588,302
Warburg Pincus Advisor Emerging Growth Account 1,065,208 1,125,122
CIGNA Charter Large Company Stock-Growth Fund 2,341,889 -
Stock Fund 1,183,873 1,026,816
</TABLE>
-10-
<PAGE> 17
SCHEDULE I
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
EIN: 59-1226757
PLAN NUMBER: 001
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Current
Identity of Issuer Description of Investment Cost Value
------------------ ------------------------- ---- -----
<S> <C> <C> <C>
Mutual Funds:
*Connecticut General Life CIGNA Charter Guaranteed Short-
Insurance Company Term Securities Fund,
39,205 units $1,756,228 $1,756,228
*Connecticut General Life CIGNA Charter Actively Managed
Insurance Company Fixed Income Fund, 3,583 units 404,760 457,651
*Connecticut General Life INVESCO Total Return Account,
Insurance Company 14,276 units 398,403 532,329
*Connecticut General Life Warburg Pincus Advisor Emerging
Insurance Company Growth Account, 23,256 units 839,523 1,065,208
*Connecticut General Life Fidelity Advisor Growth
Insurance Company Opportunities Account,
5,072 units 244,674 369,926
*Connecticut General Life AIM Value Account,
Insurance Company 1,671 units 65,398 82,126
*Connecticut General Life Templeton Foreign Account,
Insurance Company 4,143 units 46,321 44,288
*Connecticut General Life Lazard Small Cap Account,
Insurance Company 1,001 units 21,495 20,182
*Connecticut General Life Janus Worldwide Account,
Insurance Company 1,443 units 57,853 76,423
*Connecticut General Life CIGNA Charter Large Company
Insurance Company Stock-Growth Fund,
172,620 units 1,832,329 2,341,889
---------- ----------
5,666,984 6,746,250
Common Stock:
*Kaydon Corporation Stock Fund, 29,551 shares 578,217 1,183,873
---------- ----------
$6,245,201 $7,930,123
========== ==========
</TABLE>
* Represents a party-in-interest
-11-
<PAGE> 18
SCHEDULE II
ELECTRO-TEC CORPORATION
EMPLOYEE RETIREMENT BENEFIT PLAN
EIN: 59-1226757
PLAN NUMBER: 001
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 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 56 $ 145,214 18 $ 321,397 $ 321,397 $ -
Fidelity Growth and Income Account 45 130,487 22 1,789,285 1,245,230 544,055
Fidelity Advisor Equity Growth
Account 44 146,971 12 342,114 297,198 44,916
CIGNA Charter Large Company Stock-
Growth Fund 15 1,989,587 10 166,464 157,257 9,207
*Kaydon Corporation:
Stock Fund 63 155,947 23 234,597 126,690 107,907
</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.
-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 Form S-8 Registration Statement Number 33-48762.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
June 28, 1999.
-13-
