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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 Quarter Ended March 30, 2002 |  | Commission File No. 0-12640

KAYDON CORPORATION
(Exact name of registrant as specified in its charter)

|                                                                                                   |  |                                                
|-------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)                            |  | 13-3186040
(I.R.S. Employer Identification No.)
|                                                                                                  
|315 E. Eisenhower Parkway, Suite 300, Ann Arbor, Michigan
(Address of principal executive offices) |  | 48108
(Zip Code)                               

Registrants telephone number, including area code (734) 747-7025

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES
X IN BALLOT BOX  NO
OPEN BALLOT BOX

Common Stock Outstanding at April 26, 2002  30,032,409 shares, $.10 par value.





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TABLE OF CONTENTS



|                                         |                                                                                                    |  |  |  |  |  |  | 
|---------------------------------------- | -------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION:         
|                                         | ITEM 1. FINANCIAL STATEMENTS                                                                      
|                                         | CONSOLIDATED CONDENSED BALANCE SHEETS  MARCH 30, 2002 AND DECEMBER 31,2001                       
|                                         | CONSOLIDATED CONDENSED STATEMENTS OF INCOME  QUARTERS ENDED MARCH 30, 2002 AND MARCH 31, 2001    
|                                         | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  QUARTERS ENDED MARCH 30, 2002 AND MARCH 31, 2001
|                                         | NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS                                              
|                                         | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     
|                                         | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                
|PART II. OTHER INFORMATION              
|                                         | ITEM 1. LEGAL PROCEEDINGS                                                                         
|                                         | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                          
|                                         | SIGNATURES                                                                                        
|Stock Option Plan                       
|Non-Employee Directors Stock Option Plan
|Employee Stock Ownership and Thrift Plan
|Employee Retirement Benefit Plan        



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KAYDON CORPORATION FORM 10-Q

FOR THE QUARTER ENDED MARCH 30, 2002

INDEX

|                                 |                                                                                                    |  |          |        | 
|-------------------------------- | -------------------------------------------------------------------------------------------------- |  | -------- | ------ | 
|                                 |                                                                                                    |  | Page No. |       
|                                 |                                                                                                    |  |          |       
|Part I   Financial Information: |                                                                                                    |  |          |       
|                                 | Item 1. Financial Statements                                                                       |  |          |        | 
|                                 | Consolidated Condensed Balance Sheets -
March 30, 2002 and December 31, 2001                       |  |          | 1      | 
|                                 | Consolidated Condensed Statements of Income -
Quarters Ended March 30, 2002
and March 31, 2001     |  |          | 2      | 
|                                 | Consolidated Condensed Statements of Cash Flows -
Quarters Ended March 30, 2002 and
March 31, 2001 |  |          | 3      | 
|                                 | Notes to Consolidated Condensed Financial Statements                                               |  |          | 4 - 13 | 
|                                 | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations      |  |          | 14 -18 | 
|                                 | Item 3. Quantitative and Qualitative Disclosures About
Market Risk                                 |  |          | 18     | 
|Part II  Other Information:     |                                                                                                    |  |          |       
|                                 | Item 1.  Legal Proceedings                                                                        |  |          | 19     | 
|                                 | Item 6.  Exhibits and Reports on Form 8-K                                                         |  |          | 19     | 
|                                 | Signatures                                                                                         |  |          | 20     | 





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ITEM 1. FINANCIAL STATEMENTS
KAYDON CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS

|                                                                                |                                            |   |                |             |  |                   |              |             | 
|------------------------------------------------------------------------------- | ------------------------------------------ | - | -------------- | ----------- |  | ----------------- | ------------ | ----------- | 
|                                                                                |                                            |   | March 30, 2002 |             |  | December 31, 2001 |             
|                                                                                |                                            |   |                |             |  |                   |             
|                                                                                |                                            |   | (Unaudited)    |             |  |                   |              |            
|Assets:                                                                         |                                            |   |                |             |  |                   |              |            
|Cash and cash equivalents                                                       |                                            | $ | 126,743,000    |             |  | $                 | 152,570,000  |            
|Accounts receivable, net                                                        |                                            |   | 40,631,000     |             |  |                   | 38,432,000   |            
|Inventories, net                                                                |                                            |   | 54,337,000     |             |  |                   | 55,066,000   |            
|Other current assets                                                            |                                            |   | 15,799,000     |             |  |                   | 15,706,000   |            
|                                                                                |                                            |   |                |             |  |                  
|Total current assets                                                            |                                            |   | 237,510,000    |             |  |                   | 261,774,000  |            
|                                                                                |                                            |   |                |             |  |                  
|Property, plant and equipment, net                                              |                                            |   | 82,882,000     |             |  |                   | 84,273,000   |            
|Cost in excess of net tangible assets
of purchased businesses, net (Goodwill) |                                            |   | 121,683,000    |             |  |                   | 121,708,000  |            
|Other assets                                                                    |                                            |   | 29,896,000     |             |  |                   | 30,043,000   |            
|                                                                                |                                            |   |                |             |  |                  
|Total assets                                                                    |                                            | $ | 471,971,000    |             |  | $                 | 497,798,000  |            
|                                                                                |                                            |   |                |             |  |                  
|Liabilities and Shareholders Equity:                                           |                                            |   |                |             |  |                   |              |            
|Accounts payable                                                                |                                            | $ | 9,812,000      |             |  | $                 | 10,117,000   |            
|Accrued expenses                                                                |                                            |   | 35,360,000     |             |  |                   | 21,528,000   |            
|                                                                                |                                            |   |                |             |  |                  
|Total current liabilities                                                       |                                            |   | 45,172,000     |             |  |                   | 31,645,000   |            
|                                                                                |                                            |   |                |             |  |                  
|Long-term debt                                                                  |                                            |   | 72,177,000     |             |  |                   | 112,194,000  |            
|Long-term liabilities                                                           |                                            |   | 49,100,000     |             |  |                   | 50,155,000   |            
|                                                                                |                                            |   |                |             |  |                  
|Total long-term liabilities                                                     |                                            |   | 121,277,000    |             |  |                   | 162,349,000  |            
|                                                                                |                                            |   |                |             |  |                  
|Shareholders equity:                                                           |                                            |   |                |             |  |                   |              |            
|Common stock                                                                    |                                            |   | 3,691,000      |             |  |                   | 3,691,000    |            
|Paid-in capital                                                                 |                                            |   | 45,824,000     |             |  |                   | 45,017,000   |            
|Retained earnings                                                               |                                            |   | 410,355,000    |             |  |                   | 408,058,000  |            
|Less  treasury stock, at cost                                                  |                                            |   | (135,137,000   | )           |  |                   | (135,782,000 | )          
|Less- restricted stock awards                                                   |                                            |   | (10,827,000    | )           |  |                   | (9,619,000   | )          
|Accumulated other comprehensive loss                                            |                                            |   | (8,384,000     | )           |  |                   | (7,561,000   | )          
|                                                                                |                                            |   |                |             |  |                  
|                                                                                |                                            |   | 305,522,000    |             |  |                   | 303,804,000  |            
|                                                                                |                                            |   |                |             |  |                  
|                                                                                | Total liabilities and
Shareholders equity |   | $              | 471,971,000 |  |                   | $            | 497,798,000 | 
|                                                                                |                                            |   |                |             |  |                  

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

|                                                      |         |   |                |            |  |                |            |            |  
|----------------------------------------------------- | ------- | - | -------------- | ---------- |  | -------------- | ---------- | ---------- | -
|                                                      |         |   | Quarter Ended  |           
|                                                      |         |   |                |           
|                                                      |         |   | March 30, 2002 |            |  | March 31, 2001 |           
|                                                      |         |   |                |            |  |                |           
|Net sales                                             |         | $ | 66,145,000     |            |  | $              | 76,596,000 |           
|Cost of sales                                         |         |   | 43,910,000     |            |  |                | 48,737,000 |           
|                                                      |         |   |                |            |  |               
|Gross profit                                          |         |   | 22,235,000     |            |  |                | 27,859,000 |           
|Selling, general, and administrative
expenses         |         |   | 12,980,000     |            |  |                | 11,437,000 |           
|                                                      |         |   |                |            |  |               
|Operating income from continuing
operations           |         |   | 9,255,000      |            |  |                | 16,422,000 |           
|Interest income, net, from
continuing operations      |         |   | 45,000         |            |  |                | 572,000    |           
|                                                      |         |   |                |            |  |               
|Income from continuing operations
before income taxes |         |   | 9,300,000      |            |  |                | 16,994,000 |           
|Provision for income taxes                            |         |   | 3,348,000      |            |  |                | 6,287,000  |           
|                                                      |         |   |                |            |  |               
|Net income from continuing operations                 |         | $ | 5,952,000      |            |  | $              | 10,707,000 |           
|                                                      |         |   |                |            |  |               
|Discontinued Operations                               |         |   |                |            |  |                |            |           
|(Loss) from operations of discontinued
segment        |         |   |               |            |  |                | (495,000   | )         
|(Credit) for income taxes                             |         |   |               |            |  |                | (183,000   | )         
|                                                      |         |   |                |            |  |               
|Net (loss) from discontinued operations               |         |   |               |            |  |                | (312,000   | )         
|                                                      |         |   |                |            |  |               
|Net Income                                            |         | $ | 5,952,000      |            |  | $              | 10,395,000 |           
|                                                      |         |   |                |            |  |               
|Weighted Average Common Shares:                       |         |   |                |            |  |                |            |           
|                                                      | Basic   |   |                | 29,977,000 |  |                |            | 29,929,000 |  
|                                                      | Diluted |   |                | 29,986,000 |  |                |            | 29,958,000 |  
|Earnings Per Share- Continuing Operations             |         |   |                |            |  |                |            |           
|                                                      | Basic   |   | $              | .20        |  |                | $          | .36        |  
|                                                      | Diluted |   | $              | .20        |  |                | $          | .36        |  
|(Loss) Per Share- Discontinued Operations             |         |   |                |            |  |                |            |           
|                                                      | Basic   |   |                |           |  |                | $          | (0.01      | )
|                                                      | Diluted |   |                |           |  |                | $          | (0.01      | )
|Earnings Per Share                                    |         |   |                |            |  |                |            |           
|                                                      | Basic   |   | $              | .20        |  |                | $          | .35        |  
|                                                      | Diluted |   | $              | .20        |  |                | $          | .35        |  

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                             |                                        |            |             |                |             |   |                |             |            |  
|------------------------------------------------------------ | -------------------------------------- | ---------- | ----------- | -------------- | ----------- | - | -------------- | ----------- | ---------- | -
|                                                             |                                        |            |             | Quarter Ended  |            
|                                                             |                                        |            |             |                |            
|                                                             |                                        |            |             | March 30, 2002 |             |   | March 31, 2001 |            
|                                                             |                                        |            |             |                |             |   |                |            
|Cash flows from operating activities                         |                                        | $          | 19,788,000  |                |             | $ | 17,497,000     |            
|                                                             |                                        |            |             |                |             |  
|Cash flows used in investing activities:                     |                                        |            |             |                |             |   |                |            
|                                                             | Capital expenditures, net              |            |             | (1,691,000     | )           |   |                | (3,621,000  | )         
|                                                             | Acquisition of business, net           |            |             |               |             |   |                | (70,497,000 | )         
|                                                             |                                        |            |             |                |             |  
|Cash used in investing activities                            |                                        |            | (1,691,000  | )              |             |   | (74,118,000    | )          
|                                                             |                                        |            |             |                |             |  
|Cash flows from (used in) financing activities:              |                                        |            |             |                |             |   |                |            
|                                                             | Dividends paid                         |            |             | (3,645,000     | )           |   |                | (3,643,000  | )         
|                                                             | Long-term debt:                        |            |             |                |             |   |                |             |           
|                                                             |                                        | Issuance   |             |                |            |   |                |             | 70,750,000 |  
|                                                             |                                        | Retirement |             |                | (40,017,000 | ) |                |             | (18,000    | )
|                                                             | Proceeds from issuance of common stock |            |             |               |             |   |                | 713,000     |           
|                                                             | Purchase of treasury stock             |            |             |               |             |   |                | (173,000    | )         
|                                                             |                                        |            |             |                |             |  
|Cash from (used in) financing activities                     |                                        |            | (43,662,000 | )              |             |   | 67,629,000     |            
|                                                             |                                        |            |             |                |             |  
|Cash (used in) discontinued operations                       |                                        |            |            |                |             |   | (2,622,000     | )          
|Effect of exchange rate changes on cash
and cash equivalents |                                        |            | (262,000    | )              |             |   | (385,000       | )          
|                                                             |                                        |            |             |                |             |  
|Net increase (decrease) in cash and cash equivalents         |                                        |            | (25,827,000 | )              |             |   | 8,001,000      |            
|Cash and cash equivalents  Beginning of period              |                                        |            | 152,570,000 |                |             |   | 114,965,000    |            
|                                                             |                                        |            |             |                |             |  
|Cash and cash equivalents  End of period                    |                                        | $          | 126,743,000 |                |             | $ | 122,966,000    |            
|                                                             |                                        |            |             |                |             |  
|Cash expended for income taxes                               |                                        | $          | 979,000     |                |             | $ | 5,141,000      |            
|                                                             |                                        |            |             |                |             |  
|Cash expended for interest                                   |                                        | $          | 619,000     |                |             | $ | 600,000        |            
|                                                             |                                        |            |             |                |             |  

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



|(1) |  | The accompanying unaudited consolidated condensed financial statements of
Kaydon Corporation and subsidiaries (Kaydon or the Company) have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included, and such adjustments are of a normal recurring nature.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. For further information, refer
to the consolidated financial statements and footnotes thereto included in
the Companys annual report on Form 10-K for the year ended December 31,
2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible
Assets. This pronouncement amends the accounting for goodwill and
intangible assets. SFAS No. 142 no longer permits amortization of goodwill
and indefinite-lived intangible assets. Separable intangible assets that
are not deemed to have an indefinite life will continue to be amortized
over their useful lives. In addition, SFAS No. 142 establishes a new method
of testing goodwill for impairment by using a fair-value approach. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and
intangible assets acquired prior to July 1, 2001, Kaydon, as required,
adopted the pronouncement in the fiscal year beginning January 1, 2002. As
a result of the adoption of the pronouncement, Kaydon is no longer
amortizing goodwill and indefinite-lived intangible assets during 2002.
Goodwill amortization from continuing operations was $.8 million during the
first quarter of 2001. In accordance with the new pronouncement, during the
first quarter of 2002 the Company completed a reassessment of the useful
lives of its intangible assets other than goodwill, and adjustments were
made accordingly. Intangible assets deemed to have indefinite useful lives
were tested for impairment as of January 1, 2002, with no impairment loss
being realized. The Company is currently assessing the effect of this new
pronouncement related to the impairment testing of goodwill, but at this
time can not estimate the impact, if any, on the consolidated financial
statements.
|   
|    |  | Also, the Financial Accounting Standards Board has issued SFAS No. 143,
Accounting for Asset Retirement Obligations. The pronouncement requires
entities to record the fair value of a liability for an asset retirement
obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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|    |  | in the period in which it is incurred. Companies are required to
adopt the pronouncement in their fiscal year beginning after June 15, 2002.
The Company is currently assessing the effect of the new pronouncement,
but at this time can not estimate the impact, if any, on the consolidated
financial statements.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Inventories are summarized as follows:                                                                                                                                                                                                                                                                              

|                |  |                |            |  |                   |   |            | 
|--------------- |  | -------------- | ---------- |  | ----------------- | - | ---------- | 
|                |  | March 30, 2002 |            |  | December 31, 2001 |  
|                |  |                |            |  |                   |  
|Raw Material    |  | $              | 17,954,000 |  |                   | $ | 17,482,000 | 
|Work in Process |  |                | 13,362,000 |  |                   |   | 11,227,000 | 
|Finished Goods  |  |                | 23,021,000 |  |                   |   | 26,357,000 | 
|                |  |                |            |  |                   |  
|                |  | $              | 54,337,000 |  |                   | $ | 55,066,000 | 
|                |  |                |            |  |                   |  



|(3) |  | Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events, and from
circumstances involving nonowner sources. For the Company, comprehensive
income consists of net income, minimum pension liability adjustments and
foreign currency translation adjustments. Other comprehensive loss, net of
tax, was approximately $(.8) million and $(2.3) million, resulting in
comprehensive income of $5.1 million and $8.1 million for the quarters
ended March 30, 2002 and March 31, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(4) |  | The following table reconciles the numerators and denominators used in
the calculation of basic and diluted earnings per share from continuing
operations for the periods presented.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                        |                                                                                                                  |   |                |            |  |                |            |            | 
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | - | -------------- | ---------- |  | -------------- | ---------- | ---------- | 
|                                                                        |                                                                                                                  |   | Quarter Ended  |           
|                                                                        |                                                                                                                  |   |                |           
|                                                                        |                                                                                                                  |   | March 30, 2002 |            |  | March 31, 2001 |           
|                                                                        |                                                                                                                  |   |                |            |  |                |           
|Numerators:                                                             |                                                                                                                  |   |                |            |  |                |            |           
|                                                                        | Numerators for both
basic and diluted earnings
per share, net income from
continuing operations                  |   | $              | 5,952,000  |  |                | $          | 10,707,000 | 
|                                                                        |                                                                                                                  |   |                |            |  |                |           
|Denominators:                                                           |                                                                                                                  |   |                |            |  |                |            |           
|                                                                        | Denominators for basic earnings
per share from continuing operations,
weighted average common
shares outstanding |   |                | 29,977,000 |  |                |            | 29,929,000 | 
|                                                                        | Potential dilutive shares resulting
from stock options and
restricted stock awards                               |   |                | 9,000      |  |                |            | 29,000     | 
|                                                                        |                                                                                                                  |   |                |            |  |                |           
|Denominators for dilutive
earnings per share from continuing
operations |                                                                                                                  |   | 29,986,000     |            |  |                | 29,958,000 |           
|                                                                        |                                                                                                                  |   |                |            |  |                |           
|Earnings per share from continuing operations:                          |                                                                                                                  |   |                |            |  |                |            |           
|Basic                                                                   |                                                                                                                  | $ | .20            |            |  | $              | .36        |           
|                                                                        |                                                                                                                  |   |                |            |  |                |           
|Diluted                                                                 |                                                                                                                  | $ | .20            |            |  | $              | .36        |           
|                                                                        |                                                                                                                  |   |                |            |  |                |           



| |  | Options to purchase 110,850 shares of common stock at prices ranging from
$26.01 to $33.31 per share were outstanding during the first quarter of
2002, but were not included in the computation of diluted earnings per
share because the options exercise price was greater than the average
market price of the common shares during that period. Options to purchase
111,400 shares of common stock at prices ranging from $31.44 to $33.31 per
share were outstanding during the first quarter of 2001, but were not
included in the computation of diluted earnings per share because the
options exercise price was greater than the average market price of the
common shares during that period.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In accordance with the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, potential
dilutive shares resulting from stock option plans used in the calculation
of dilutive earnings per share are based on an average of the potential
dilutive shares resulting from stock option plans for the periods
presented.                                                                                                                                                                                                                                                                                                                                                   

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|(5) |  | The Company operates through individual operating units for which
separate financial information is available, and for which operating
results are evaluated regularly by the Companys chief operating decision
maker in determining resource allocation and assessing performance
(operating segments). The Companys operating segments manufacture
complex and standard metal products that are sold primarily to equipment
manufacturers and other assemblers or integrators. Certain of the
operating segments have similar long-term average gross margins and all of
them exhibit other common attributes, including the nature of the products
and production processes, distribution patterns and classes of customers.
As a result, based upon current and expected future long-term financial
performance, the Company aggregates its operating segments into four
reportable segments. Prior to the fourth quarter of 2001 the Company
aggregated its operating segments into a single reportable segment
referred to as Custom-Engineered Products. Due to changes in economic
conditions affecting certain operating segments, during the fourth quarter
of 2001 the Company changed the way it aggregates operating segments for
purposes of reporting segment information. Prior year amounts have been
reclassified to reflect the current year presentation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has four reportable segments engaged in the manufacture and
sale of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | Specialty Metal Formed Products complex metal products used in
specialized industrial and aerospace equipment applications. Products
include anti-friction bearings, split roller bearings, specialty balls,
industrial shock absorbers and metal retaining devices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Ring, Seal and Filtration Products complex and standard ring, seal and
filtration products used in demanding industrial, aerospace, medical,
electronic and marine equipment applications. Products include engine
rings, sealing rings, shaft seals, slip-rings, slip-ring assemblies, fiber
optic rotary joints, filter elements and filtration systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | Fluid Power Products standard and custom-made hydraulic cylinders used in
heavy industrial equipment applications. The Fluid Power Products business
was sold on December 31, 2001. Its results have been presented separately
in the consolidated financial statements in accordance with the
requirements of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | Other Metal Products- metal alloys, machine tool components, presses, dies
and benders used in a variety of industrial applications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |  | The accounting policies of the operating segments are the same as those of
the Company. Segment performance is evaluated based on segment operating
income (which includes an estimated provision for state income taxes) and
segment assets.                                                                                                                                                              
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Items not allocated to segment operating income include depreciation of
corporate fixed assets, certain amortization and corporate administrative
expenses, and other amounts. Corporate assets consist of cash and cash
equivalents, fixed assets and certain prepaid expenses. The selling price
for transfers between operating segments and geographic areas is generally
based on cost plus a mark-up.

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|                                     |                    |                         |            |               |                |   |             |            |            | 
|------------------------------------ | ------------------ | ----------------------- | ---------- | ------------- | -------------- | - | ----------- | ---------- | ---------- | 
|                                     |                    |                         |            | Quarter Ended |               
|                                     |                    |                         |            |               |               
|Net sales                            |                    | March
30, 2002          |            |               | March 31, 2001 |  
|                                     |                    |                         |            |               |                |  
|Specialty Metal Formed Products      |                    |                         |            |               |                |   |             |           
|                                     | External customers |                         | $          | 38,697,000    |                |   | $           | 46,178,000 |           
|                                     | Intersegment       |                         |            | 70,000        |                |   |             | 124,000    |           
|                                     |                    |                         |            |               |                |  
|                                     |                    |                         | 38,767,000 |               |                |   | 46,302,000  |           
|Ring, Seal and Filtration Products   |                    |                         |            |               |                |   |             |           
|                                     | External customers |                         |            | 22,451,000    |                |   |             | 22,924,000 |           
|                                     | Intersegment       |                         |            | (70,000       | )              |   |             | (124,000   | )         
|                                     |                    |                         |            |               |                |  
|                                     |                    |                         | 22,381,000 |               |                |   | 22,800,000  |           
|Fluid Power Products                 |                    |                         |           |               |                |   | 14,758,000  |           
|Other Metal Products                 |                    |                         | 4,997,000  |               |                |   | 7,494,000   |           
|                                     |                    |                         |            |               |                |   |            
|                                     |                    | Total segment net sales |            |               | 66,145,000     |   |             |            | 91,354,000 | 
|Net sales of discontinued
operations |                    |                         |           |               |                |   | (14,758,000 | )         
|                                     |                    |                         |            |               |                |  
|Total consolidated net sales         |                    | $                       | 66,145,000 |               |                | $ | 76,596,000  |           
|                                     |                    |                         |            |               |                |  

|                                                                |                                |                |               |           |                |   |            |            | 
|--------------------------------------------------------------- | ------------------------------ | -------------- | ------------- | --------- | -------------- | - | ---------- | ---------- | 
|                                                                |                                |                | Quarter Ended |          
|                                                                |                                |                |               |          
|Operating income (loss)                                         |                                | March
30, 2002 |               |           | March
31, 2001 |  
|                                                                |                                |                |               |           |                |  
|Specialty Metal Formed Products                                 |                                | $              | 5,463,000     |           |                | $ | 13,237,000 |           
|Ring, Seal and Filtration Products                              |                                |                | 3,330,000     |           |                |   | 3,433,000  |           
|Fluid Power Products                                            |                                |                |              |           |                |   | (495,000   | )         
|Other Metal Products                                            |                                |                | 359,000       |           |                |   | 756,000    |           
|                                                                |                                |                |               |           |                |  
|                                                                | Total segment operating income |                |               | 9,152,000 |                |   |            | 16,931,000 | 
|State income tax provision included
in segment operating income |                                |                | 349,000       |           |                |   | 355,000    |           
|Items not allocated to segment
operating income                 |                                |                | (246,000      | )         |                |   | (1,359,000 | )         
|Interest expense                                                |                                |                | (599,000      | )         |                |   | (1,047,000 | )         
|Interest income                                                 |                                |                | 644,000       |           |                |   | 1,619,000  |           
|Operating loss of discontinued
operations                       |                                |                |              |           |                |   | 495,000    |           
|                                                                |                                |                |               |           |                |  
|Income from continuing operations
before income taxes           |                                | $              | 9,300,000     |           |                | $ | 16,994,000 |           
|                                                                |                                |                |               |           |                |  

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|                                                                          |  |                |               |  |                |   |            |   | 
|------------------------------------------------------------------------- |  | -------------- | ------------- |  | -------------- | - | ---------- | - | 
|                                                                          |  |                | Quarter Ended | 
|                                                                          |  |                |               | 
|Depreciation and amortization                                             |  | March
30, 2002 |               |  | March
31, 2001 |  
|                                                                          |  |                |               |  |                |  
|Specialty Metal Formed Products                                           |  | $              | 2,314,000     |  |                | $ | 2,268,000  |  
|Ring, Seal and Filtration Products                                        |  |                | 686,000       |  |                |   | 842,000    |  
|Fluid Power Products                                                      |  |                |              |  |                |   | 1,468,000  |  
|Other Metal Products                                                      |  |                | 138,000       |  |                |   | 391,000    |  
|Corporate                                                                 |  |                | 238,000       |  |                |   | 130,000    |  
|                                                                          |  |                |               |  |                |  
|                                                                          |  |                | 3,376,000     |  |                |   | 5,099,000  |  
|Depreciation and amortization of
discontinued operations                  |  |                |              |  |                |   | (1,468,000 | )
|                                                                          |  |                |               |  |                |  
|Total consolidated depreciation and
amortization of continuing
operations |  | $              | 3,376,000     |  |                | $ | 3,631,000  |  
|                                                                          |  |                |               |  |                |  

|                                                                                             |  |                |               |  |                |   |           |   | 
|-------------------------------------------------------------------------------------------- |  | -------------- | ------------- |  | -------------- | - | --------- | - | 
|                                                                                             |  |                | Quarter Ended | 
|                                                                                             |  |                |               | 
|Additions to property, plant and
equipment, net                                              |  | March
30, 2002 |               |  | March
31, 2001 |  
|                                                                                             |  |                |               |  |                |   |          
|Specialty Metal Formed Products                                                              |  | $              | 595,000       |  |                | $ | 1,940,000 |  
|Ring, Seal and Filtration Products                                                           |  |                | 855,000       |  |                |   | 529,000   |  
|Fluid Power Products                                                                         |  |                |              |  |                |   | 832,000   |  
|Other Metal Products                                                                         |  |                | 61,000        |  |                |   | 18,000    |  
|Corporate                                                                                    |  |                | 180,000       |  |                |   | 1,134,000 |  
|                                                                                             |  |                |               |  |                |  
|                                                                                             |  |                | 1,691,000     |  |                |   | 4,453,000 |  
|Additions to property, plant and
equipment, net, of discontinued
operations                  |  |                |              |  |                |   | (832,000  | )
|                                                                                             |  |                |               |  |                |  
|Total consolidated additions to property, plant and equipment,
net, of continuing operations |  | $              | 1,691,000     |  |                | $ | 3,621,000 |  
|                                                                                             |  |                |               |  |                |  

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|                                   |  |                |               |  |                |   |             |  | 
|---------------------------------- |  | -------------- | ------------- |  | -------------- | - | ----------- |  | 
|                                   |  |                | Quarter Ended | 
|                                   |  |                |               | 
|Total assets                       |  | March
30, 2002 |               |  | March
31, 2001 |  
|                                   |  |                |               |  |                |  
|Specialty Metal Formed Products    |  | $              | 210,418,000   |  |                | $ | 229,152,000 | 
|Ring, Seal and Filtration Products |  |                | 70,707,000    |  |                |   | 69,812,000  | 
|Fluid Power Products               |  |                |              |  |                |   | 68,733,000  | 
|Other Metal Products               |  |                | 44,655,000    |  |                |   | 51,048,000  | 
|Corporate                          |  |                | 146,191,000   |  |                |   | 140,447,000 | 
|                                   |  |                |               |  |                |  
|Total consolidated assets          |  | $              | 471,971,000   |  |                | $ | 559,192,000 | 
|                                   |  |                |               |  |                |  



|(6) |  | At March 30, 2002, borrowings under the Companys revolving credit
facility totaled $72.2 million. The revolving credit facility permits the
Company to borrow under several different interest rate options. The
interest rate on borrowings equaled a weighted average 2.4 percent during
the first quarter of 2002 based on the London Interbank Offered Rate
(LIBOR). The revolving credit facility contains certain restrictive
covenants. The Company is in compliance with all restrictive covenants
contained in the revolving credit facility at March 30, 2002. After
consideration of the facilitys covenants, and of outstanding standby
letters of credit, the Company has available credit under its revolving
credit facility of $78.6 million at March 30, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(7) |  | On March 1, 2001, the Company purchased for $70.6 million, all of the
outstanding stock of ACE Controls, Inc. and its affiliated company ACE
Controls International, Inc. (collectively, ACE) headquartered in
Farmington Hills, Michigan, with additional facilities in Germany, the
United Kingdom and Japan. ACE manufacturers a wide range of linear
deceleration products serving various industrial markets. The Company
utilized its revolving credit facility to finance the acquisition. The
acquisition has been accounted for using the purchase method of accounting
and accordingly the results of operations have been included in the
financial statements since the effective acquisition date.                                                                
|   
|    |  | On a pro forma, unaudited basis, as if the ACE acquisition had occurred as
of January 1, 2001, net sales, net income, basic earnings per share and
diluted earnings per share for the first quarter of 2001 would have been
$82.8 million, $10.8 million, $.36 and $.36.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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|(8) |  | As previously reported, the Company, along with certain other companies,
is a defendant in a lawsuit filed in 1995 and pending in the United States
District Court for the Southern District of New York captioned Richard A.
Lippe, et al. v. Bairnco Corporation, et al.(the Transactions
Lawsuit). The Transactions Lawsuit seeks damages alleged by plaintiffs to
be an amount of $700 million, plus interest and punitive damages against
the defendants collectively. The current status of the Transactions
Lawsuit is that fact depositions and discovery were completed during April
2002. Furthermore, at a meeting held on March 19, 2002, the Court set
January 13, 2003 as the trial date for the entire action. Management
continues to believe that it has meritorious defenses to the claims
pending against it in this litigation. Accordingly, no provision has been
reflected in the consolidated financial statements for any alleged
damages. An accrual is recorded in the consolidated financial statements
equal to the Companys most current and best estimate to litigate this
matter. While management currently believes the amount of the ultimate
liability, if any, with respect to these actions will not materially
affect the financial condition, results of operations, or liquidity of the
Company, management realizes that the ultimate outcome of this litigation
is uncertain. Were an unfavorable outcome to occur, the impact could be
material to the Company.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | As previously reported, in June 1996, the U.S. government commenced a grand
jury investigation relating to a May 9, 1996 accident involving a Sikorsky
Aircraft Corporation CH-53E helicopter. In April 2001, the Company reached
a settlement with the U.S. government regarding their investigation of
inspection and product certification procedures at the Companys Muskegon,
Michigan facility. The settlement included the payment of $7.5 million to
the U.S. government, including a $1.0 million fine. The payment to the U.S.
government was completed during April 2001 and was offset by previously
recorded provisions without any impact on year 2001 earnings. In addition
to the U.S. government settlement, Kaydon entered into a three-year
agreement with the U.S. Department of Navy, on behalf of the U.S.
Department of Defense, which confirms that Kaydon is presently eligible to
contract with the U.S. government, insures that Kaydon has, and will
continue to have, a program of acceptable contracting policies and
procedures, and establishes and implements a program of compliance reviews,
audits and reports.                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | As previously reported, in October 1995, Cooper Split Roller Bearing
(Cooper), a subsidiary of the Company, was named as a defendant in a
lawsuit commenced in the U.S. District Court for the Western District of
Pennsylvania. In July 2001, Kaydon, Kaydons insurance provider and the
plaintiff agreed to a settlement of the lawsuit, with the settlement
payment to the plaintiff being shared between Kaydon and Kaydons insurance
provider. Kaydons portion of the settlement payment was offset by amounts
previously recorded to litigate this legal matter. The Company believes
that                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |  | the loss sustained in the settlement of the lawsuit is covered under
Kaydons commercial general liability policy, and that the ultimate
resolution of the litigation related to this matter between Kaydon and
Kaydons insurance provider will not have a material effect on the
Companys consolidated financial statements.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Various other claims, lawsuits and environmental matters arising in the
normal course of business are pending against the Company. An accrual is
recorded in the consolidated financial statements equal to the Companys
most current and best estimates to litigate these legal actions.                                     

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

During the first quarter of 2002, Kaydon Corporation and subsidiaries (the
Company) achieved sales from continuing operations of $66.1 million, down
13.6 percent from $76.6 million in the first quarter of 2001. These sales
figures continue to reflect the slowdown in industrial manufacturing activity
in this country and abroad. Specifically, reduced demand for custom engineered
bearings and specialty ball products from the specialty electronic
manufacturing equipment market, construction and mining equipment markets,
other heavy industrial equipment markets, and the specialty ball markets was
evident as compared to the first quarter of 2001. Sales of these products both
to original equipment manufacturers and distribution networks declined
compared to the first quarter of 2001.

Gross profit during the first quarter of 2002 of $22.2 million was 33.6 percent
of sales, compared with $27.9 million or 36.4 percent of sales in the first
quarter of 2001. The gross profit percentage achieved in the first quarter of
2002 was negatively impacted by reduced volumes and unfavorable sales mix. The
gross profit percentage achieved during the first quarter was slightly better
than the gross profit percentage of 33.4 percent achieved in the fourth quarter
of 2001.

Selling, general and administrative expenses during the first quarter of 2002,
were $13.0 million or 19.6 percent of sales as compared to $11.4 million or
14.9 percent of sales during the first quarter of 2001. Reductions in goodwill
amortization during the quarter of $.8 million due to the adoption of
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets partially offset increases in selling, general and
administrative expenses related to the ACE Controls, Inc. acquisition.
Excluding the impact of the accounting change related to goodwill amortization,
and the additional selling, general and administrative expenses due to the ACE
Controls, Inc. acquisition, selling, general and administrative expenses were
flat with the first quarter of 2001.

Operating income from continuing operations during the first quarter of 2002
was $9.3 million or 14.0 percent of sales as compared to $16.4 million or 21.4
percent of sales in the first quarter of 2001.

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The effective income tax rate in the first quarter of 2002 was 36.0 percent as
compared to a 37.0 percent tax rate realized during 2001. This slight
reduction relates primarily to the adoption of SFAS 142 as goodwill is no
longer amortized for book purposes. The decrease in the effective tax rate was minimized as the majority of goodwill
amortization expense is deductible for tax purposes. The Company expects the
effective tax rate for the 2002 year to remain approximately 36 percent.

First quarter 2002 net income from continuing operations was $6.0 million, or
9.0 percent of sales. Earnings per share from continuing operations on a
diluted basis equaled $.20. First quarter 2001 net income from continuing
operations and diluted earnings per share from continuing operations were $10.7
million and $.36. Excluding goodwill amortization, first quarter 2001 net
income from continuing operations and diluted earnings per share from
continuing operations would have been $11.2 million and $.37.

As previously reported, the Company, along with certain other companies, is a
defendant in a lawsuit filed in 1995 and pending in the United States District
Court for the Southern District of New York captioned Richard A. Lippe, et al.
v. Bairnco Corporation, et al.(the Transactions Lawsuit). The Transactions
Lawsuit seeks damages alleged by plaintiffs to be an amount of $700 million,
plus interest and punitive damages against the defendants collectively. The
current status of the Transactions Lawsuit is that fact depositions and
discovery were completed during April 2002. Furthermore, at a meeting held on
March 19, 2002, the Court set January 13, 2003 as the trial date for the entire
action. Management continues to believe that it has meritorious defenses to the
claims pending against it in this litigation. Accordingly, no provision has
been reflected in the consolidated financial statements for any alleged
damages. An accrual is recorded in the consolidated financial statements equal
to the Companys most current and best estimate to litigate this matter. While
management currently believes the amount of the ultimate liability, if any,
with respect to these actions will not materially affect the financial
condition, results of operations, or liquidity of the Company, management
realizes that the ultimate outcome of this litigation is uncertain. Were an
unfavorable outcome to occur, the impact could be material to the Company.

Liquidity and Capital Resources

Working capital was $192.3 million at March 30, 2002 reflecting a current ratio
of 5.3 to 1 compared to $230.1 million and a current ratio of 8.3 to 1 at
year-end 2001. The reduction in working capital is primarily due to a $40.0
million debt reduction payment that lowered the Companys cash and cash
equivalents balance during the quarter. Cash flow from continuing operations
during the first quarter of 2002, including a tax refund of $10.1 million
relating to the Fluid Power Products Group disposition completed at year-end
2001, was $19.8 million compared to cash flow from continuing operations of
$17.5 million achieved during the first quarter last year. Cash flow from
operations was negatively impacted during the

15



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first quarter of 2002 compared to the comparable period last year by lower net income.

Depreciation and amortization for the first quarter of 2002 totaled $3.4
million compared to $3.6 million in the first quarter of 2001. The decrease
was due to reduced levels of goodwill amortization during the quarter of $.8
million, offset by increases in depreciation and other intangible amortization
primarily due to the ACE Controls, Inc. acquisition completed in March 2001.

Cash and cash equivalents equaled $126.7 million at the end of the first
quarter 2002 as compared to the year-end 2001 balance of $152.6 million.
Operating cash flow during the quarter, including the tax receipt of $10.1
million, was offset by debt reduction payments of $40.0 million, dividend
payments of $3.6 million, and capital expenditures of $1.7 million. The debt
reduction payment in the first quarter of 2002 was in response to an increasing
negative spread between the interest rate on debt and the interest rate on
invested cash.

Management expects that the Companys planned capital requirements for the
remainder of 2002, which consists of capital expenditures, dividend payments
and its stock repurchase program, will be financed by operations and existing
cash balances.

Outlook

The Companys backlog at March 30, 2002 was $96.5 million compared to $91.6
million at the end of 2001. Based upon current business indications, including
quoting activity and future business forecasts for Kaydon customers
end-markets, management believes that the Company, along with most industrial
companies, has seen or is near the bottom of the recent economic downturn that
has been evident in the United States and abroad. Management expects orders to
rise marginally in the second quarter of 2002, with a more significant increase
not expected until later in the summer. Expected operating cash flows coupled
with the Companys current cash reserves and available credit under the
Companys $300.0 million revolving credit facility will provide substantial
resources to fund the Companys ongoing business development efforts which
include internal and external growth initiatives as well as selected stock
repurchases.

New Accounting Standards

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets.
This pronouncement amends the accounting for goodwill and intangible assets.
SFAS No. 142 no longer permits amortization of goodwill and indefinite-lived
intangible assets. Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. In
addition, SFAS No. 142 establishes a new method of testing goodwill for
impairment by using a fair-value approach. The amortization provisions of SFAS
No. 142 apply to goodwill

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and intangible assets acquired after June 30, 2001.
With respect to goodwill and intangible assets acquired prior to July 1, 2001,
Kaydon, as required, adopted the pronouncement in the fiscal year beginning
January 1, 2002. As a result of the adoption of the pronouncement, Kaydon is
no longer amortizing goodwill and indefinite-lived intangible assets during
2002. Goodwill amortization from continuing operations was $.8 million during
the first quarter of 2001. In accordance with the new pronouncement, during the
first quarter of 2002 the Company completed a reassessment of the useful lives
of its intangible assets other than goodwill, and adjustments were made
accordingly. Intangible assets deemed to have indefinite useful lives were
tested for impairment as of January 1, 2002, with no impairment loss being
realized. The Company is currently assessing the
effect of this new pronouncement related to the impairment testing of goodwill,
but at this time can not estimate the impact, if any, on the consolidated
financial statements.

Also, the Financial Accounting Standards Board has issued SFAS No. 143,
Accounting for Asset Retirement Obligations. The pronouncement requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. Companies are required to
adopt the pronouncement in their fiscal year beginning after June 15, 2002.
The Company is currently assessing the effect of the new pronouncement, but at
this time can not estimate the impact, if any, on the consolidated financial
statements.

Forward-Looking Statements

This form 10-Q contains forward-looking statements within the meaning of the
federal securities laws. While the Company believes any forward-looking
statements made are reasonable, actual results could differ materially since
the statements are based on our current expectations, estimates, forecasts and
projections about the markets in which the Company operates, managements
beliefs, and assumptions made by management. Words such as expects,
anticipates, intends, plans, believes, seeks, estimates, should,
going forward, and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions (Business Risks), which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in such forward-looking statements.

Business Risks include increasing price and product competition by foreign and
domestic competitors, including new entrants; the Companys ability to continue
to introduce competitive new products on a timely, cost-effective basis; the
mix of products; the achievement of lower costs and expenses; the reliance on
large customers; the cyclical nature of the markets served by the Company; the
outcome of pending and future litigation and governmental proceedings; and
continued availability of financing and financial resources in the amounts, at
the times and on the terms required to support the Companys future business
and growth strategies. These are representative of the Business Risks that
could affect the

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outcome of the forward-looking statements. In addition, such
forward-looking statements could be affected by general industry and market
conditions, including interest rate fluctuations and other Business Risks. The
Company does not undertake, and expressly disclaims any obligation, to update
or alter its forward-looking statements whether as a result of new information,
future events or otherwise, except as required by applicable law. Readers are
cautioned to consider these factors when relying on such forward-looking
information.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks which exist as part of its
ongoing business operations including interest rates and foreign currency
exchange rates. The exposure to market risk for changes in interest rates
relates primarily to the Companys long-term debt borrowings under the
revolving credit facility and investments in cash and cash equivalents. The
interest rate on the long-term debt borrowings under the
credit facility is variable and is based on the London Interbank Offered Rate
(LIBOR). A 24 basis point increase in interest rates (10 percent of the
Companys weighted average long-term debt interest rate for the first quarter
of 2002) would have an immaterial effect on the Companys pre-tax earnings.
All highly liquid investments, including highly liquid debt instruments
purchased with an original maturity of three months or less, are considered
cash equivalents. The Company places its investments in cash equivalents with
high credit quality issuers and limits the amount of exposure to any one
issuer. An 18 basis point decrease in interest rates (10 percent of the
Companys weighted average investment interest rate for the first quarter of
2002) would have an immaterial impact on the Companys pre-tax earnings. The
Company does not enter into derivative financial or derivative commodity
instruments for trading or speculative purposes. The Company conducts business
in various foreign currencies, primarily in Europe, Canada, and Japan.
Therefore, changes in the value of currencies of these countries affect the
Companys financial position and cash flows when translated into U.S. dollars.
As of March 30, 2002, the Company had not established a foreign-currency
hedging program. The Company has mitigated and will continue to mitigate a
portion of its currency exposure through operation of decentralized foreign
operating companies in which all costs are local currency based. A 10 percent
change in the value of all foreign currencies would have an immaterial effect
on the Companys financial position and cash flows.

18



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PART II.OTHER INFORMATION







|        |  |                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1. |  | Legal Proceedings. See the discussion in Note 8 to Consolidated Condensed
Financial Statements, which discussion is incorporated herein by reference.
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                                     



|A. |  | Exhibit No. | Description
|-- |  | ----------- | -----------

|     |  |                                                                              
|---- |  | -----------------------------------------------------------------------------
|10.1 |  | Kaydon Corporation 1993 Stock Option Plan (as amended)                       
|10.2 |  | Kaydon Corporation 1993 Non-Employee Directors Stock
Option Plan (as amended)
|10.3 |  | Kaydon Corporation Employee Stock Ownership and
Thrift Plan (as amended)     
|10.4 |  | Electro-Tec Corporation Employee Retirement
Benefit Plan (as amended)        



|B. |  | Reports on Form 8-K                                                                                                                                                                                                      
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On January 4, 2002, the Company filed a Form 8-K under Item 5
reporting the sale of substantially all of the assets and
liabilities of its Fluid Power Products Group in a transaction
effective as of December 31, 2001.

19



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|            |  |                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  | KAYDON CORPORATION                                                                                                                                                           
|           
|May 3, 2002 |  | /s/ Brian P. CampbellBrian P. Campbell
Chairman, President, Chief Executive
Officer and Chief Financial Officer
(Principal Executive Officer and
Principal Financial Officer)
|           
|           
|May 3, 2002 |  | /s/ Kenneth W. CrawfordKenneth W. Crawford
Vice President and Corporate Controller
(Principal Accounting Officer)                                                            

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Exhibit Index

|            |  |                                                                                |  |  |  | 
|----------- |  | ------------------------------------------------------------------------------ |  |  |  | 
|Exhibit No. |  | Description                                                                    |  |  |  | 
|            |  |                                                                                |  |  |  | 
|10.1        |  | Kaydon Corporation 1993 Stock Option Plan (as amended).                       
|10.2        |  | Kaydon Corporation 1993 Non-Employee Directors Stock
Option Plan (as amended).
|10.3        |  | Kaydon Corporation Employee Stock Ownership and
Thrift Plan (as amended).     
|10.4        |  | Electro-Tec Corporation Employee Retirement
Benefit Plan (as amended).