##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
 For the quarterly period ended July 3, 2010
 Commission File No. 1-11333
 KAYDON CORPORATION
  Delaware
    
    13-3186040(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)Suite 300, 315 E. Eisenhower Parkway, Ann Arbor, Michigan
    
    48108(Address of principal executive offices)
    
    (Zip Code)
 (734) 747-7025
  þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



Page No.Part I  Financial Information:Item 1. Financial Statements.
    
    
    1Consolidated Condensed Balance Sheets  July 3, 2010 (Unaudited) and December 31, 2009
    
    
    1Consolidated
Condensed Statements of Income (Unaudited)  Quarters and Halves Ended July 3, 2010 and July 4, 2009
    
    
    2Consolidated
Condensed Statements of Cash Flows (Unaudited)  Halves Ended July 3, 2010 and July 4, 2009
    
    
    3Notes to Consolidated Condensed Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    18Item 4. Controls and Procedures.
    
    
    18Part II  Other Information:
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    18Item 6. Exhibits.
    
    
    19Signatures
    
    
    20EX-3.1EX-31.1EX-31.2EX-32




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS.
 KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Unaudited)July 3, 2010
    
    December 31, 2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    283,696,000
    
    
    $
    262,403,000Accounts receivable, net
    
    
    85,186,000
    
    
    
    77,977,000Inventories, net
    
    
    91,859,000
    
    
    
    88,796,000Other current assets
    
    
    12,661,000
    
    
    
    16,601,000Total current assets
    
    
    473,402,000
    
    
    
    445,777,000Property, plant and equipment, net
    
    
    171,948,000
    
    
    
    175,716,000Goodwill, net
    
    
    143,139,000
    
    
    
    143,891,000Other intangible assets, net
    
    
    19,751,000
    
    
    
    21,552,000Other assets
    
    
    1,122,000
    
    
    
    1,008,000Total assets
    
    $
    809,362,000
    
    
    $
    787,944,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    26,055,000
    
    
    $
    21,353,000Salaries and wages
    
    
    8,834,000
    
    
    
    5,087,000Taxes payable
    
    
    4,440,000
    
    
    
    2,473,000Other accrued expenses
    
    
    23,244,000
    
    
    
    19,171,000Total current liabilities
    
    
    62,573,000
    
    
    
    48,084,000Long-term postretirement and
postemployment benefit obligations
    
    
    26,156,000
    
    
    
    28,669,000Other long-term liabilities
    
    
    11,370,000
    
    
    
    11,226,000Total long-term liabilities
    
    
    37,526,000
    
    
    
    39,895,000Shareholders Equity:Common stock
    
    
    3,693,000
    
    
    
    3,693,000Other shareholders equity
    
    
    705,570,000
    
    
    
    696,272,000Total shareholders equity
    
    
    709,263,000
    
    
    
    699,965,000Total liabilities and shareholders equity
    
    $
    809,362,000
    
    
    $
    787,944,000
  1




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KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED STATEMENTS OF INCOME
 (UNAUDITED)
 Second Quarter Ended
    
    First Half EndedJuly 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Net sales
    
    $
    121,500,000
    
    
    $
    98,318,000
    
    
    $
    240,745,000
    
    
    $
    208,653,000Cost of sales
    
    
    75,563,000
    
    
    
    65,966,000
    
    
    
    153,039,000
    
    
    
    140,523,000Gross profit
    
    
    45,937,000
    
    
    
    32,352,000
    
    
    
    87,706,000
    
    
    
    68,130,000Selling, general and
administrative expenses
    
    
    19,679,000
    
    
    
    19,124,000
    
    
    
    41,766,000
    
    
    
    39,382,000Operating income
    
    
    26,258,000
    
    
    
    13,228,000
    
    
    
    45,940,000
    
    
    
    28,748,000Interest expense
    
    
    (62,000
    )
    
    
    (61,000
    )
    
    
    (124,000
    )
    
    
    (123,000
    )Interest income
    
    
    98,000
    
    
    
    109,000
    
    
    
    122,000
    
    
    
    239,000Income before income taxes
    
    
    26,294,000
    
    
    
    13,276,000
    
    
    
    45,938,000
    
    
    
    28,864,000Provision for income taxes
    
    
    8,478,000
    
    
    
    4,917,000
    
    
    
    14,295,000
    
    
    
    10,381,000Net income
    
    $
    17,816,000
    
    
    $
    8,359,000
    
    
    $
    31,643,000
    
    
    $
    18,483,000Earnings per share:Basic
    
    $
    0.53
    
    
    $
    0.25
    
    
    $
    0.94
    
    
    $
    0.55Diluted
    
    $
    0.53
    
    
    $
    0.25
    
    
    $
    0.94
    
    
    $
    0.55Dividends declared per share
    
    $
    0.18
    
    
    $
    0.17
    
    
    $
    0.36
    
    
    $
    0.34
  2




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KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 First Half EndedJuly 3, 2010
    
    July 4, 2009Cash flows from operating activities:Net income
    
    $
    31,643,000
    
    
    $
    18,483,000Adjustments to reconcile net income to net cash from
operating activities:Depreciation
    
    
    10,023,000
    
    
    
    9,575,000Amortization of intangible assets
    
    
    1,842,000
    
    
    
    2,140,000Amortization of stock awards
    
    
    2,144,000
    
    
    
    2,070,000Stock option compensation expense
    
    
    670,000
    
    
    
    692,000Excess tax benefits from stock-based compensation
    
    
    (124,000
    )
    
    
    43,000Deferred financing fees
    
    
    124,000
    
    
    
    124,000Non-cash postretirement benefits curtailment gain
    
    
    (3,066,000
    )
    
    
    (910,000
    )Contributions to qualified pension plans
    
    
    (657,000
    )
    
    
    (14,846,000
    )Net change in receivables, inventories and trade payables
    
    
    (6,714,000
    )
    
    
    (17,769,000
    )Net change in other assets and liabilities
    
    
    16,167,000
    
    
    
    3,178,000Net cash from operating activities
    
    
    52,052,000
    
    
    
    2,780,000Cash flows from investing activities:Capital expenditures
    
    
    (7,191,000
    )
    
    
    (7,699,000
    )Dispositions of property, plant and equipment
    
    
    40,000
    
    
    
    110,000Proceeds from sales of investments
    
    
    0
    
    
    
    1,893,000Net cash used in investing activities
    
    
    (7,151,000
    )
    
    
    (5,696,000
    )Cash flows from financing activities:Cash dividends paid
    
    
    (12,100,000
    )
    
    
    (11,457,000
    )Purchase of treasury stock
    
    
    (8,789,000
    )
    
    
    (8,871,000
    )Excess tax benefits from stock-based compensation
    
    
    124,000
    
    
    
    (43,000
    )Proceeds from exercise of stock options
    
    
    55,000
    
    
    
    0Net cash used in financing activities
    
    
    (20,710,000
    )
    
    
    (20,371,000
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (2,898,000
    )
    
    
    956,000Net increase (decrease) in cash and cash equivalents
    
    
    21,293,000
    
    
    
    (22,331,000
    )Cash and cash equivalents  Beginning of period
    
    
    262,403,000
    
    
    
    232,998,000Cash and cash equivalents  End of period
    
    $
    283,696,000
    
    
    $
    210,667,000Cash paid for income taxes
    
    $
    7,890,000
    
    
    $
    6,918,000Cash paid for interest
    
    
    0
    
    
    
    0
  3




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KAYDON CORPORATION
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 (1) Basis of Presentation:
  (2) Cash and Cash Equivalents:
  July 3, 2010
    
    December 31, 2009Cash and cash equivalents:Money market and other short-term funds
    
    $
    257,978,000
    
    
    $
    248,091,000Time deposits, other interest bearing accounts, and other cash
    
    
    25,718,000
    
    
    
    14,312,000$
    283,696,000
    
    
    $
    262,403,000
 (3) Inventories:
 July 3, 2010
    
    December 31, 2009Raw material
    
    $
    36,389,000
    
    
    $
    32,933,000Work in process
    
    
    26,859,000
    
    
    
    22,857,000Finished goods
    
    
    28,611,000
    
    
    
    33,006,000$
    91,859,000
    
    
    $
    88,796,000
 (4) Comprehensive Income:
  Second Quarter Ended
    
    First Half EndedJuly 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Net income
    
    $
    17,816,000
    
    
    $
    8,359,000
    
    
    $
    31,643,000
    
    
    $
    18,483,000Other comprehensive
income (loss)
    
    
    (1,711,000
    )
    
    
    6,198,000
    
    
    
    (4,540,000
    )
    
    
    3,388,000Comprehensive income
    
    $
    16,105,000
    
    
    $
    14,557,000
    
    
    $
    27,103,000
    
    
    $
    21,871,000
 4




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##### Table of Contents



(5) Earnings per Share:
  Second Quarter EndedJuly 3, 2010
    
    July 4, 2009Earnings per share  BasicNet income
    
    $
    17,816,000
    
    
    $
    8,359,000Less: Net earnings allocated to participating
securities  Basic
    
    
    (187,000
    )
    
    
    (89,000
    )Income available to common shareholders  Basic
    
    $
    17,629,000
    
    
    $
    8,270,000Weighted average common shares outstanding  Basic
    
    
    33,119,000
    
    
    
    33,225,000Earnings per share  Basic
    
    $
    0.53
    
    
    $
    0.25Earnings per share  DilutedNet income
    
    $
    17,816,000
    
    
    $
    8,359,000Less: Net earnings allocated to participating
securities  Diluted
    
    
    (187,000
    )
    
    
    (89,000
    )Income available to common shareholders  Diluted
    
    $
    17,629,000
    
    
    $
    8,270,000Weighted average common shares outstanding  DilutedWeighted average common shares outstanding  Basic
    
    
    33,119,000
    
    
    
    33,225,000Potential dilutive shares resulting from stock options
    
    
    28,000
    
    
    
    13,000Weighted average common shares outstanding  Diluted
    
    
    33,147,000
    
    
    
    33,238,000Earnings per share  Diluted
    
    $
    0.53
    
    
    $
    0.25
 First Half EndedJuly 3, 2010
    
    July 4, 2009Earnings per share  BasicNet income
    
    $
    31,643,000
    
    
    $
    18,483,000Less: Net earnings allocated to participating
securities  Basic
    
    
    (339,000
    )
    
    
    (211,000
    )Income available to common shareholders  Basic
    
    $
    31,304,000
    
    
    $
    18,272,000Weighted average common shares outstanding  Basic
    
    
    33,225,000
    
    
    
    33,274,000Earnings per share  Basic
    
    $
    0.94
    
    
    $
    0.55Earnings per share  DilutedNet income
    
    $
    31,643,000
    
    
    $
    18,483,000Less: Net earnings allocated to participating
securities  Diluted
    
    
    (339,000
    )
    
    
    (211,000
    )Income available to common shareholders  Diluted
    
    $
    31,304,000
    
    
    $
    18,272,000Weighted average common shares outstanding  DilutedWeighted average common shares outstanding  Basic
    
    
    33,225,000
    
    
    
    33,274,000Potential dilutive shares resulting from stock options
    
    
    28,000
    
    
    
    13,000Weighted average common shares outstanding  Diluted
    
    
    33,253,000
    
    
    
    33,287,000Earnings per share  Diluted
    
    $
    0.94
    
    
    $
    0.55
  5




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Second Quarter Ended
    
    First Half EndedJuly 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Shares excluded
    
    
    385,500
    
    
    
    406,500
    
    
    
    385,500
    
    
    
    406,500Average exercise price
    
    $
    43.87
    
    
    $
    43.29
    
    
    $
    43.87
    
    
    $
    43.29
 (6) Business Segment Information:
  Second Quarter Ended
    
    
    First Half EndedJuly 3, 2010
    
    
    July 4, 2009
    
    
    July 3, 2010
    
    
    July 4, 2009Net salesFriction Control Products
    
    $
    79,692,000
    
    
    $
    64,220,000
    
    
    $
    159,474,000
    
    
    $
    136,415,000Velocity Control Products
    
    
    15,114,000
    
    
    
    10,241,000
    
    
    
    29,347,000
    
    
    
    22,400,000Other Industrial Products
    
    
    26,694,000
    
    
    
    23,857,000
    
    
    
    51,924,000
    
    
    
    49,838,000Total consolidated net sales
    
    $
    121,500,000
    
    
    $
    98,318,000
    
    
    $
    240,745,000
    
    
    $
    208,653,000Second Quarter Ended
    
    First Half EndedJuly 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Operating incomeFriction Control Products
    
    $
    20,339,000
    
    
    $
    9,759,000
    
    
    $
    36,883,000
    
    
    $
    22,241,000Velocity Control Products
    
    
    3,952,000
    
    
    
    891,000
    
    
    
    7,327,000
    
    
    
    3,067,000Other Industrial Products
    
    
    2,813,000
    
    
    
    1,886,000
    
    
    
    4,119,000
    
    
    
    3,239,000Total segment operating income
    
    
    27,104,000
    
    
    
    12,536,000
    
    
    
    48,329,000
    
    
    
    28,547,000Items not allocated to segment
operating income
    
    
    (846,000
    )
    
    
    692,000
    
    
    
    (2,389,000
    )
    
    
    201,000Interest expense
    
    
    (62,000
    )
    
    
    (61,000
    )
    
    
    (124,000
    )
    
    
    (123,000
    )Interest income
    
    
    98,000
    
    
    
    109,000
    
    
    
    122,000
    
    
    
    239,000Income before income taxes
    
    $
    26,294,000
    
    
    $
    13,276,000
    
    
    $
    45,938,000
    
    
    $
    28,864,000
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(7) Long-term Debt:
  (8) Goodwill and Other Intangible Assets:
     Friction
    
    Velocity
    
    OtherControl
    
    Control
    
    IndustrialProducts
    
    Products
    
    Products
    
    TotalBalance as of January 1, 2010Goodwill
    
    $
    56,859,000
    
    
    $
    43,200,000
    
    
    $
    62,532,000
    
    
    $
    162,591,000Accumulated impairment losses
    
    
    0
    
    
    
    0
    
    
    
    (18,700,000
    )
    
    
    (18,700,000
    )$
    56,859,000
    
    
    $
    43,200,000
    
    
    $
    43,832,000
    
    
    $
    143,891,000Effect of foreign currency
exchange rate changes
    
    
    (752,000
    )
    
    
    0
    
    
    
    0
    
    
    
    (752,000
    )Balance as of July 3, 2010Goodwill
    
    $
    56,107,000
    
    
    $
    43,200,000
    
    
    $
    62,532,000
    
    
    $
    161,839,000Accumulated impairment losses
    
    
    0
    
    
    
    0
    
    
    
    (18,700,000
    )
    
    
    (18,700,000
    )$
    56,107,000
    
    
    $
    43,200,000
    
    
    $
    43,832,000
    
    
    $
    143,139,000
   July 3, 2010
    
    December 31, 2009Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmortized Intangible Assets
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationCustomer relationships and lists
    
    $
    28,194,000
    
    
    $
    16,205,000
    
    
    $
    28,194,000
    
    
    $
    14,672,000Patents and developed technology
    
    
    6,557,000
    
    
    
    3,740,000
    
    
    
    6,516,000
    
    
    
    3,503,000Backlog
    
    
    3,300,000
    
    
    
    3,259,000
    
    
    
    3,300,000
    
    
    
    3,219,000Distributor agreements
    
    
    374,000
    
    
    
    217,000
    
    
    
    374,000
    
    
    
    199,000Product names
    
    
    320,000
    
    
    
    177,000
    
    
    
    320,000
    
    
    
    163,000$
    38,745,000
    
    
    $
    23,598,000
    
    
    $
    38,704,000
    
    
    $
    21,756,000
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##### Table of Contents



July 3, 2010
    
    December 31, 2009Unamortized Intangible Assets
    
    Carrying Amount
    
    Carrying AmountTrademarks
    
    $
    4,604,000
    
    
    $
    4,604,000
 Aggregate Intangible Assets
Amortization ExpenseFor the first half ended July 3, 2010
    
    
    
    
    
    $
    1,842,000For the first half ended July 4, 2009
    
    
    
    
    
    $
    2,140,000
 Estimated Intangible Assets
Amortization ExpenseFor the year ending December 31, 2010
    
    
    
    
    
    $
    3,577,000For the year ending December 31, 2011
    
    
    
    
    
    $
    2,265,000For the year ending December 31, 2012
    
    
    
    
    
    $
    1,983,000For the year ending December 31, 2013
    
    
    
    
    
    $
    1,716,000For the year ending December 31, 2014
    
    
    
    
    
    $
    1,418,000
 (9) Employee Benefit Plans:
  Second Quarter Ended
    
    First Half EndedPension Benefits
    
    July 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Service cost
    
    $
    831,000
    
    
    $
    792,000
    
    
    $
    1,662,000
    
    
    $
    1,583,000Interest cost
    
    
    1,738,000
    
    
    
    1,712,000
    
    
    
    3,476,000
    
    
    
    3,424,000Expected return on plan assets
    
    
    (1,921,000
    )
    
    
    (1,497,000
    )
    
    
    (3,842,000
    )
    
    
    (2,908,000
    )Amortization of:Unrecognized net prior service
cost
    
    
    16,000
    
    
    
    3,000
    
    
    
    32,000
    
    
    
    6,000Unrecognized net loss
    
    
    870,000
    
    
    
    1,265,000
    
    
    
    1,740,000
    
    
    
    2,530,000Total
    
    $
    1,534,000
    
    
    $
    2,275,000
    
    
    $
    3,068,000
    
    
    $
    4,635,000
 Second Quarter Ended
    
    First Half EndedPostretirement Benefits
    
    July 3, 2010
    
    July 4, 2009
    
    July 3, 2010
    
    July 4, 2009Service cost
    
    $
    50,000
    
    
    $
    122,000
    
    
    $
    112,000
    
    
    $
    201,000Interest cost
    
    
    121,000
    
    
    
    204,000
    
    
    
    257,000
    
    
    
    376,000Amortization of:Unrecognized net prior
service cost
    
    
    (289,000
    )
    
    
    (266,000
    )
    
    
    (578,000
    )
    
    
    (567,000
    )Unrecognized net gain
    
    
    (111,000
    )
    
    
    (129,000
    )
    
    
    (186,000
    )
    
    
    (257,000
    )Curtailment gain
    
    
    (3,066,000
    )
    
    
    (910,000
    )
    
    
    (3,066,000
    )
    
    
    (910,000
    )Total
    
    $
    (3,295,000
    )
    
    $
    (979,000
    )
    
    $
    (3,461,000
    )
    
    $
    (1,157,000
    )
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##### Table of Contents



(10) Stock-Based Compensation:
  Wtd.-Avg.Restricted
    
    Grant DateStock
    
    Fair ValueOutstanding at January 1, 2010
    
    
    345,970
    
    
    $
    35.93Granted
    
    
    124,500
    
    
    $
    34.78Vested
    
    
    (131,486
    )
    
    $
    35.04Canceled
    
    
    (6,616
    )
    
    $
    35.44Outstanding at July 3, 2010
    
    
    332,368
    
    
    $
    35.87
   Wtd.-Avg.Options
    
    Ex. PriceOutstanding at January 1, 2010
    
    
    549,750
    
    
    $
    38.67Granted
    
    
    85,000
    
    
    $
    35.52Canceled
    
    
    (21,000
    )
    
    $
    25.58Exercised
    
    
    (2,250
    )
    
    $
    25.57Outstanding at July 3, 2010
    
    
    611,500
    
    
    $
    38.67Exercisable at July 3, 2010
    
    
    297,400
    
    
    $
    40.11Weighted-Avg. Fair Value of Options Granted
    
    $
    10.56Weighted-Avg. Remaining Contractual Life (years)Outstanding at July 3, 2010
    
    
    7.1Exercisable at July 3, 2010
    
    
    6.8
   (11) Other Matters:
  9




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##### Table of Contents



(12) Taxes:
  (13) Manufacturing Consolidation Program:
    (14) Fair Value Measurement:
  (15) Impact of Recently Issued Accounting Pronouncements:
  10




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Results of Operations
 Second Quarter Results
 For the Second Quarter EndedJuly 3,
    
    % of
    
    July 4,
    
    % ofDollars in millions, except per share amounts
    
    2010
    
    Sales
    
    2009
    
    SalesNet sales
    
    $
    121.5
    
    
    
    
    
    
    $
    98.3Cost of sales
    
    
    75.6
    
    
    
    
    
    
    
    66.0Gross profit
    
    
    45.9
    
    
    
    37.8
    %
    
    
    32.4
    
    
    
    32.9
    %Selling, general and administrative expenses
    
    
    19.7
    
    
    
    16.2
    %
    
    
    19.1
    
    
    
    19.5
    %Operating income
    
    
    26.3
    
    
    
    21.6
    %
    
    
    13.2
    
    
    
    13.5
    %Interest, net
    
    
    0.0
    
    
    
    
    
    
    
    0.0Income before income taxes
    
    
    26.3
    
    
    
    21.6
    %
    
    
    13.3
    
    
    
    13.5
    %Provision for income taxes
    
    
    8.5
    
    
    
    
    
    
    
    4.9Net income
    
    $
    17.8
    
    
    
    14.7
    %
    
    $
    8.4
    
    
    
    8.5
    %Earnings per share:Basic
    
    $
    0.53
    
    
    
    
    
    
    $
    0.25Diluted
    
    $
    0.53
    
    
    
    
    
    
    $
    0.25
     11




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##### Table of Contents



First Half Results
 For the First Half EndedJuly 3,
    
    % of
    
    July 4,
    
    % ofDollars in millions, except per share amounts
    
    2010
    
    Sales
    
    2009
    
    SalesNet sales
    
    $
    240.7
    
    
    
    
    
    
    $
    208.7Cost of sales
    
    
    153.0
    
    
    
    
    
    
    
    140.5Gross profit
    
    
    87.7
    
    
    
    36.4
    %
    
    
    68.1
    
    
    
    32.7
    %Selling, general and administrative expenses
    
    
    41.8
    
    
    
    17.3
    %
    
    
    39.4
    
    
    
    18.9
    %Operating income
    
    
    45.9
    
    
    
    19.1
    %
    
    
    28.7
    
    
    
    13.8
    %Interest, net
    
    
    0.0
    
    
    
    
    
    
    
    0.1Income before income taxes
    
    
    45.9
    
    
    
    19.1
    %
    
    
    28.9
    
    
    
    13.8
    %Provision for income taxes
    
    
    14.3
    
    
    
    
    
    
    
    10.4Net income
    
    $
    31.6
    
    
    
    13.1
    %
    
    $
    18.5
    
    
    
    8.9
    %Earnings per share:Basic
    
    $
    0.94
    
    
    
    
    
    
    $
    0.55Diluted
    
    $
    0.94
    
    
    
    
    
    
    $
    0.55
  12




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Results of Business Segments
  13




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Friction Control Products
 For the Second Quarter Ended
    
    For the First Half Ended%
    
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 3, 2010
    
    July 4, 2009
    
    Change
    
    July 3, 2010
    
    July 4, 2009
    
    ChangeSales
    
    $
    79.7
    
    
    $
    64.2
    
    
    
    24.1
    %
    
    $
    159.5
    
    
    $
    136.4
    
    
    
    16.9
    %Operating Income
    
    $
    20.3
    
    
    $
    9.8
    
    
    
    108.4
    %
    
    $
    36.9
    
    
    $
    22.2
    
    
    
    65.8
    %Operating Margin
    
    
    25.5
    %
    
    
    15.2
    %
    
    
    
    
    
    
    23.1
    %
    
    
    16.3
    %
 Second Quarter
    First Half
   14




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##### Table of Contents



Velocity Control Products
 For the Second Quarter Ended
    
    For the First Half Ended%
    
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 3, 2010
    
    July 4, 2009
    
    Change
    
    July 3, 2010
    
    July 4, 2009
    
    ChangeSales
    
    $
    15.1
    
    
    $
    10.2
    
    
    
    47.6
    %
    
    $
    29.3
    
    
    $
    22.4
    
    
    
    31.0
    %Operating Income
    
    $
    4.0
    
    
    $
    0.9
    
    
    
    343.7
    %
    
    $
    7.3
    
    
    $
    3.1
    
    
    
    138.9
    %Operating Margin
    
    
    26.1
    %
    
    
    8.7
    %
    
    
    
    
    
    
    25.0
    %
    
    
    13.7
    %
 Second Quarter
   First Half
   Other Industrial Products
 For the Second Quarter Ended
    
    For the First Half Ended%
    
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 3, 2010
    
    July 4, 2009
    
    Change
    
    July 3, 2010
    
    July 4, 2009
    
    ChangeSales
    
    $
    26.7
    
    
    $
    23.9
    
    
    
    11.9
    %
    
    $
    51.9
    
    
    $
    49.8
    
    
    
    4.2
    %Operating Income
    
    $
    2.8
    
    
    $
    1.9
    
    
    
    49.2
    %
    
    $
    4.1
    
    
    $
    3.2
    
    
    
    27.2
    %Operating Margin
    
    
    10.5
    %
    
    
    7.9
    %
    
    
    
    
    
    
    7.9
    %
    
    
    6.5
    %
 Second Quarter
   First Half
  15




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Liquidity and Capital Resources
       16




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##### Table of Contents



Outlook
     Critical Accounting Policies and Estimates
  Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  17




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  
 ITEM 4. CONTROLS AND PROCEDURES.
  
 PART II. OTHER INFORMATION
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  Total Number of
    
    Maximum NumberTotal Number
    
    Average Price
    
    Shares Purchased as
    
    of Shares that MayOf Shares
    
    Paid
    
    Part of Publicly
    
    Yet be PurchasedPeriod
    
    Purchased
    
    Per Share
    
    Announced Plan
    
    Under the Plan (1)April 4 to May 1
    
    
    33,817
    
    
    $
    37.66
    
    
    
    33,817
    
    
    
    2,787,929May 2 to June 3
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    2,787,929June 4 to July 3
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    2,787,929Total
    
    
    33,817
    
    
    $
    37.66
    
    
    
    33,817
    
    
    
    2,787,929
 
 (1)
    
    On May 6, 2005, the Companys Board of Directors authorized management to purchase up
to 5,000,000 shares of its common stock in the open market. 18




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##### Table of Contents



ITEM 6. EXHIBITS.
 Exhibit No.
    
    Description3.1
    
    Certificate of Elimination with respect to the Companys Series A Preferred Stock10.1*
    
    Kaydon Corporation Employee Stock Ownership and Thrift Plan effective June 1, 2010
(previously filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed June 7,
2010 and incorporated herein by reference).31.1
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
  19




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KAYDON CORPORATIONAugust 3, 2010
    /s/ Peter C. DeChantsPeter C. DeChantsSenior Vice President, Chief Financial OfficerAugust 3, 2010
    /s/ Donald I. BuzinkaiDonald I. BuzinkaiVice President, Chief Accounting Officer 20