##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934

|                                |  |                            
|------------------------------- |  | ---------------------------
|For Quarter Ended June 30, 2001 |  | 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.)
|                                                                                                  
|                                                                                                  
|                                                                                                  
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|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   NO

Common Stock Outstanding at August 1, 2001  29,939,594 shares, $.10 par value.





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TABLE OF CONTENTS



|                                |                                                                                                           |  |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION:
|                                | ITEM 1. FINANCIAL STATEMENTS                                                                             
|                                | CONSOLIDATED CONDENSED BALANCE SHEETS  JUNE 30, 2001 AND DECEMBER 31, 2000                              
|                                | CONSOLIDATED CONDENSED STATEMENTS OF INCOME  QUARTER AND FIRST HALF ENDED JUNE 30, 2001 AND JULY 1, 2000
|                                | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  FIRST HALF ENDED JUNE 30, 2001 AND JULY 1, 2000        
|                                | 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                                                                                       
|                                | SIGNATURES                                                                                               



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##### Table of Contents



KAYDON CORPORATION FORM 10-Q

FOR THE QUARTER ENDED June 30, 2001

INDEX

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|                                |                                                                                                           |  |          |         | 
|------------------------------- | --------------------------------------------------------------------------------------------------------- |  | -------- | ------- | 
|                                |                                                                                                           |  | Page No. |        
|                                |                                                                                                           |  |          |        
|Part I  Financial Information:
|                               
|                                | Item 1. Financial Statements                                                                             
|                               
|                                | Consolidated Condensed Balance Sheets 
June 30, 2001 and December 31, 2000                               |  |          | 1       | 
|                               
|                                | Consolidated Condensed Statements of Income 
Quarter and First Half Ended June 30, 2001 and July 1, 2000 |  |          | 2       | 
|                               
|                                | Consolidated Condensed Statements of Cash Flows 
First Half Ended June 30, 2001 and July 1, 2000         |  |          | 3       | 
|                               
|                                | Notes to Consolidated Condensed Financial Statements                                                      |  |          | 4 - 10  | 
|                               
|                                | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations             |  |          | 11 - 14 | 
|                               
|                                | Item 3. Quantitative and Qualitative Disclosures About
Market Risk                                        |  |          | 14      | 
|                               
|Part II  Other Information:   
|                               
|                                | Item 1.  Legal Proceedings                                                                               |  |          | 15      | 
|                               
|                                | Item 6.  Exhibits and Reports on Form 8-K                                                                |  |          | 15      | 
|                               
|                                | Signatures                                                                                                |  |          | 16      | 





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##### Table of Contents









ITEM 1. FINANCIAL STATEMENTS
KAYDON CORPORATION




CONSOLIDATED CONDENSED BALANCE SHEETS

---

|                                                                   |  |   |              |   |               |   |              |                   |  |  | 
|------------------------------------------------------------------ |  | - | ------------ | - | ------------- | - | ------------ | ----------------- |  |  | 
|                                                                   |  |   |              |   | June 30, 2001 |   |              | December 31, 2000 | 
|                                                                   |  |   |              |   |               |   |              |                   | 
|                                                                   |  |   |              |   | (Unaudited)   |  
|Assets:                                                           
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cash and cash equivalents                                          |  | $ | 118,627,000  |   |               | $ | 114,965,000  |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accounts receivable, net                                           |  |   | 53,934,000   |   |               |   | 56,986,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Inventories, net                                                   |  |   | 68,903,000   |   |               |   | 60,110,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other current assets                                               |  |   | 10,485,000   |   |               |   | 9,124,000    |                  
|                                                                   |  |   |              |   |               |  
|Total current assets                                               |  |   | 251,949,000  |   |               |   | 241,185,000  |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Plant and equipment, net                                           |  |   | 111,265,000  |   |               |   | 105,304,000  |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Cost in excess of net tangible assets of purchased businesses, net |  |   | 142,430,000  |   |               |   | 103,248,000  |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other assets                                                       |  |   | 36,814,000   |   |               |   | 25,815,000   |                  
|                                                                   |  |   |              |   |               |  
|Total assets                                                       |  | $ | 542,458,000  |   |               | $ | 475,552,000  |                  
|                                                                   |  |   |              |   |               |  
|Liabilities and Shareholders Equity:                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accounts payable                                                   |  | $ | 12,179,000   |   |               | $ | 12,257,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accrued expenses                                                   |  |   | 35,278,000   |   |               |   | 47,742,000   |                  
|                                                                   |  |   |              |   |               |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Total current liabilities                                          |  |   | 47,457,000   |   |               |   | 59,999,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Long-term debt                                                     |  |   | 118,231,000  |   |               |   | 47,518,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Long-term liabilities                                              |  |   | 45,969,000   |   |               |   | 45,600,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Shareholders equity:                                             
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Common stock                                                       |  |   | 3,685,000    |   |               |   | 3,680,000    |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Paid-in capital                                                    |  |   | 44,259,000   |   |               |   | 42,971,000   |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Retained earnings                                                  |  |   | 436,244,000  |   |               |   | 426,657,000  |                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Less  treasury stock, at cost                                     |  |   | (133,885,000 | ) |               |   | (134,618,000 | )                
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Less   restricted stock awards                                    |  |   | (11,458,000  | ) |               |   | (10,357,000  | )                
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Accumulated other comprehensive loss                               |  |   | (8,044,000   | ) |               |   | (5,898,000   | )                
|                                                                   |  |   |              |   |               |  
|                                                                   |  |   | 330,801,000  |   |               |   | 322,435,000  |                  
|                                                                   |  |   |              |   |               |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Total liabilities and shareholders equity                         |  | $ | 542,458,000  |   |               | $ | 475,552,000  |                  
|                                                                   |  |   |              |   |               |  

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

---

|                                             |         |   |               |            |  |                  |            |            |               |   |             |              |  |   |             |            | 
|-------------------------------------------- | ------- | - | ------------- | ---------- |  | ---------------- | ---------- | ---------- | ------------- | - | ----------- | ------------ |  | - | ----------- | ---------- | 
|                                             |         |   | Quarter Ended |            |  | First Half Ended |           
|                                             |         |   |               |            |  |                  |           
|                                             |         |   | June 30, 2001 |            |  | July 1, 2000     |            |            | June 30, 2001 |   |             | July 1, 2000 | 
|                                             |         |   |               |            |  |                  |            |            |               |   |             |              | 
|Net sales                                    |         | $ | 89,600,000    |            |  | $                | 86,068,000 |            |               | $ | 180,954,000 |              |  | $ | 170,988,000 |           
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |         |   | 63,830,000    |            |  |                  | 53,895,000 |            |               |   | 125,592,000 |              |  |   | 106,703,000 |           
|                                             |         |   |               |            |  |                  |            |            |               |   |             |             
|Gross profit                                 |         |   | 25,770,000    |            |  |                  | 32,173,000 |            |               |   | 55,362,000  |              |  |   | 64,285,000  |           
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |         |   | 15,157,000    |            |  |                  | 12,014,000 |            |               |   | 28,814,000  |              |  |   | 24,567,000  |           
|                                            
|                                            
|                                            
|                                            
|Unusual litigation-related charge            |         |   |              |            |  |                  | 12,637,000 |            |               |   |            |              |  |   | 12,637,000  |           
|                                             |         |   |               |            |  |                  |            |            |               |   |             |             
|Operating income                             |         |   | 10,613,000    |            |  |                  | 7,522,000  |            |               |   | 26,548,000  |              |  |   | 27,081,000  |           
|                                            
|                                            
|                                            
|                                            
|Interest income (expense), net               |         |   | (307,000      | )          |  |                  | 1,375,000  |            |               |   | 257,000     |              |  |   | 2,922,000   |           
|                                             |         |   |               |            |  |                  |            |            |               |   |             |             
|Income before income taxes                   |         |   | 10,306,000    |            |  |                  | 8,897,000  |            |               |   | 26,805,000  |              |  |   | 30,003,000  |           
|                                            
|                                            
|                                            
|                                            
|Provision for income taxes                   |         |   | 3,814,000     |            |  |                  | 3,292,000  |            |               |   | 9,918,000   |              |  |   | 11,102,000  |           
|                                             |         |   |               |            |  |                  |            |            |               |   |             |             
|Net income                                   |         | $ | 6,492,000     |            |  | $                | 5,605,000  |            |               | $ | 16,887,000  |              |  | $ | 18,901,000  |           
|                                             |         |   |               |            |  |                  |            |            |               |   |             |             
|Weighted Average Common Shares:             
|                                            
|                                            
|                                            
|                                            
|                                             | Basic   |   |               | 29,973,000 |  |                  |            | 30,111,000 |               |   |             | 29,951,000   |  |   |             | 30,286,000 | 
|                                            
|                                            
|                                            
|                                            
|                                             | Diluted |   |               | 30,030,000 |  |                  |            | 30,157,000 |               |   |             | 29,994,000   |  |   |             | 30,339,000 | 
|                                            
|                                            
|                                            
|                                            
|Earnings Per Share:                         
|                                            
|                                            
|                                            
|                                            
|                                             | Basic   |   | $             | .22        |  |                  | $          | .19        |               |   | $           | .56          |  |   | $           | .62        | 
|                                            
|                                            
|                                            
|                                            
|                                             | Diluted |   | $             | .22        |  |                  | $          | .19        |               |   | $           | .56          |  |   | $           | .62        | 

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

---

|                                                             |                                                 |                                        |             |             |                  |            |            |              |             |         |  
|------------------------------------------------------------ | ----------------------------------------------- | -------------------------------------- | ----------- | ----------- | ---------------- | ---------- | ---------- | ------------ | ----------- | ------- | -
|                                                             |                                                 |                                        |             |             | First Half Ended |           
|                                                             |                                                 |                                        |             |             |                  |           
|                                                             |                                                 |                                        |             |             | June 30, 2001    |            |            | July 1, 2000 |            
|                                                             |                                                 |                                        |             |             |                  |            |            |              |            
|Cash flows from operating activities                         |                                                 | $                                      | 18,241,000  |             |                  | $          | 36,510,000 |             
|                                                             |                                                 |                                        |             |             |                  |            |            |              |            
|                                                            
|                                                            
|                                                            
|                                                            
|Cash flows from (used in) investing activities:             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Capital expenditures, net                       |                                        |             | (7,409,000  | )                |            |            | (6,343,000   | )          
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Acquisition of business                         |                                        |             | (70,584,000 | )                |            |            | (1,248,000   | )          
|                                                             |                                                 |                                        |             |             |                  |           
|Cash used in investing activities                            |                                                 |                                        | (77,993,000 | )           |                  |            | (7,591,000 | )           
|                                                             |                                                 |                                        |             |             |                  |           
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Cash flows from (used in) financing activities:
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 | Proceeds from issuance of common stock |             |             | 1,096,000        |            |            |              | 597,000     |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 | Dividends paid                         |             |             | (7,287,000       | )          |            |              | (6,788,000  | )      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 | Long-Term Debt:                       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 |                                        | Issuance    |             |                  | 70,750,000 |            |              |             |        |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 |                                        | Retirement  |             |                  | (33,000    | )          |              |             | (46,000 | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                 | Purchase of treasury stock             |             |             | (546,000         | )          |            |              | (14,414,000 | )      
|                                                             |                                                 |                                        |             |             |                  |           
|                                                             | Cash from (used) in financing activities        |                                        |             | 63,980,000  |                  |            |            | (20,651,000  | )          
|                                                             |                                                 |                                        |             |             |                  |           
|Effect of exchange rate changes on cash and cash equivalents |                                                 |                                        | (566,000    | )           |                  |            | (328,000   | )           
|                                                             |                                                 |                                        |             |             |                  |           
|Net increase in cash and cash equivalents                    |                                                 |                                        | 3,662,000   |             |                  |            | 7,940,000  |             
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents  Beginning of period              |                                                 |                                        | 114,965,000 |             |                  |            | 89,749,000 |             
|                                                             |                                                 |                                        |             |             |                  |           
|Cash and cash equivalents  End of period                    |                                                 | $                                      | 118,627,000 |             |                  | $          | 97,689,000 |             
|                                                             |                                                 |                                        |             |             |                  |           
|Cash expended for income taxes                               |                                                 | $                                      | 13,865,000  |             |                  | $          | 13,424,000 |             
|                                                             |                                                 |                                        |             |             |                  |           
|Cash expended for interest                                   |                                                 | $                                      | 1,975,000   |             |                  | $          | 13,000     |             
|                                                             |                                                 |                                        |             |             |                  |           

See accompanying notes to consolidated condensed financial statements.

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KAYDON CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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|(1) |  | The accompanying unaudited consolidated condensed financial statements of
Kaydon Corporation and subsidiaries (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,
2000.                                                                                                                                                                                                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Statements of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142 Goodwill and Other Intangible Assets,
was recently approved by the Financial Accounting Standards Board. These
pronouncements amend the accounting for business combinations, goodwill,
and intangible assets. SFAS No. 141 eliminates the pooling-of-interests
method of accounting for business combinations and further clarifies the
criteria to recognize intangible assets separately from goodwill. The
requirements of SFAS No. 141 are effective for any business combination
that is completed after June 30, 2001. 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, companies are required to adopt the pronouncement in their fiscal
year beginning after December 15, 2001.
|   
|    |  | Total goodwill included in the Companys Financial Statements was $142.4
million at June 30, 2001 and 103.2 million at December 31, 2000.
Goodwill amortization expense was $1.2 million during the second quarter
of 2001 and $0.7 million during the second quarter of 2000. Goodwill
amortization expense was $2.3 million during the first half of 2001 and
$1.3 million during the first half of 2000. The Company is currently
assessing the effect of the new standards related to the impairment
testing of goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|(2) |  | Inventories are summarized as follows:
|--- |  | --------------------------------------

|                |  |               |            |  |                   |   |            | 
|--------------- |  | ------------- | ---------- |  | ----------------- | - | ---------- | 
|                |  | June 30, 2001 |            |  | December 31, 2000 |  
|                |  |               |            |  |                   |  
|Raw Material    |  | $             | 24,738,000 |  |                   | $ | 23,076,000 | 
|               
|               
|               
|               
|Work in Process |  |               | 14,215,000 |  |                   |   | 15,286,000 | 
|               
|               
|               
|               
|Finished Goods  |  |               | 29,950,000 |  |                   |   | 21,748,000 | 
|                |  |               |            |  |                   |  
|                |  | $             | 68,903,000 |  |                   | $ | 60,110,000 | 
|                |  |               |            |  |                   |  



|    |  | Inventory balances as of June 30, 2001 include $3.2 million of Raw
Material, $0.2 million of Work in Process, and $4.2 million of Finished
Goods related to Ace Controls, Inc. acquired on March 1, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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. Components of other
comprehensive income, net of tax, was approximately $0.1 million and
($1.7) million, resulting in comprehensive income of $6.6 million and $3.9
million for the quarters ended June 30, 2001 and July 1, 2000. On a first
half basis, components of other comprehensive income, net of tax, was approximately
($2.1) million and ($2.2) million, resulting in year to date comprehensive
income of $14.7 million and $16.7 million for the first halves ended June
30, 2001 and July 1, 2000.
|   
|(4) |  | The following table reconciles the numerators and denominators used in
the calculation of basic and diluted earnings per share for the periods
presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|            |                                                                      |                                                                                       |   |                  |            |  |              |            |            | 
|----------- | -------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | - | ---------------- | ---------- |  | ------------ | ---------- | ---------- | 
|            |                                                                      |                                                                                       |   | Quarter Ended    |           
|            |                                                                      |                                                                                       |   |                  |           
|            |                                                                      |                                                                                       |   | June 30, 2001    |            |  | July 1, 2000 |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|Numerators:
|           
|           
|           
|           
|            | Numerators
for both basic and diluted earnings per share, net income |                                                                                       | $ | 6,492,000        |            |  | $            | 5,605,000  |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Denominators:                                                       
|           
|           
|           
|           
|            |                                                                      | Denominators
for basic earnings per share, weighted average common shares outstanding |   |                  | 29,973,000 |  |              |            | 30,111,000 | 
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|            |                                                                      | Potential
dilutive shares resulting from stock options and restricted stock awards    |   |                  | 57,000     |  |              |            | 46,000     | 
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Denominators for dilutive earnings per share                         |                                                                                       |   | 30,030,000       |            |  |              | 30,157,000 |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Earnings per share:                                                 
|           
|           
|           
|           
|            | Basic                                                                |                                                                                       | $ | .22              |            |  | $            | .19        |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Diluted                                                              |                                                                                       | $ | .22              |            |  | $            | .19        |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|           
|            |                                                                      |                                                                                       |   | First Half Ended |           
|            |                                                                      |                                                                                       |   |                  |           
|            |                                                                      |                                                                                       |   | June 30, 2001    |            |  | July 1, 2000 |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|           
|           
|           
|           
|Numerators:
|           
|           
|           
|           
|            | Numerators
for both basic and diluted earnings per share, net income |                                                                                       | $ | 16,887,000       |            |  | $            | 18,901,000 |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Denominators:                                                       
|           
|           
|           
|           
|            |                                                                      | Denominators
for basic earnings per share, weighted average common shares outstanding |   |                  | 29,951,000 |  |              |            | 30,286,000 | 
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|            |                                                                      | Potential
dilutive shares resulting from stock options and restricted stock awards    |   |                  | 43,000     |  |              |            | 53,000     | 
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Denominators for dilutive
earnings per share                         |                                                                                       |   | 29,994,000       |            |  |              | 30,339,000 |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Earnings per share:                                                 
|           
|           
|           
|           
|            | Basic                                                                |                                                                                       | $ | .56              |            |  | $            | .62        |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           
|            | Diluted                                                              |                                                                                       | $ | .56              |            |  | $            | .62        |           
|            |                                                                      |                                                                                       |   |                  |            |  |              |           



6



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##### Table of Contents





|    |  | Options to purchase 115,300 shares of common stock at prices ranging from
$26.01 to $33.3125 per share were outstanding during the second 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. Options to purchase
414,225 shares of common stock at prices ranging from $24.8125 to
$33.3125 per share were outstanding during the second quarter of 2000,
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.                                                                                                                                                                                                                                                                                                                                                           
|   
|(5) |  | The Company operates through individual operating units which serve four
key market sectors. The market sectors served by the Company have several
related economic characteristics and attributes, including similar
products, distribution patterns and classes of customers. As a result,
the Company aggregates its operating units into a single segment of
Custom-Engineered Products.                                                                                                                                                                                                                                                                                                                       
|   
|    |  | The corporate component of income before taxes includes net interest,
goodwill amortization, depreciation and unallocated corporate
administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

7



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##### Table of Contents



Segment financial data (in thousands):

|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |         |              |  |   |         |   | 
|---------------------------------------- |  | - | ---------------- | - |  | ------------ | ---- | - | ------ | ------------ | ------- | -------- | ---------- | ------- | --------- | - |  | ------ | ------- | ------------ |  | - | ------- | - | 
|                                         |  |   | Quarter Ended   
|                                         |  |   |                 
|                                         |  |   | June 30, 2001    |   |  | July 1, 2000
|                                         |  |   |                  |   |  |              |     
|                                         |  |   | Custom-          |   |  |              |      |   |        |              |         |          |            | Custom- |          
|                                         |  |   | Engineered       |   |  |              |      |   |        | Consolidated |         |          | Engineered |         |           |   |  |        |         | Consolidated | 
|                                         |  |   | Products         |   |  | Corporate    |      |   | Totals |              |         | Products |            |         | Corporate |   |  | Totals |        
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |        
|Sales                                    |  | $ | 92,774           |   |  |              |      |   |        | $            | 92,774  |          |            | $       | 86,424    |   |  |        |         |              |  | $ | 86,424  |  
|                                        
|                                        
|                                        
|                                        
|Elimination
of intercompany sales        |  |   | (3,174           | ) |  |              |      |   |        |              | (3,174  | )        |            |         | (356      | ) |  |        |         |              |  |   | (356    | )
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |         |             
|Total net sales                          |  | $ | 89,600           |   |  |              |      |   |        | $            | 89,600  |          |            | $       | 86,068    |   |  |        |         |              |  | $ | 86,068  |  
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |         |             
|Segment
earnings before interest and tax |  | $ | 10,854           |   |  |              |      |   |        | $            | 10,854  |          |            | $       | 20,192    |   |  |        |         |              |  | $ | 20,192  |  
|                                        
|                                        
|                                        
|                                        
|Unallocated amounts                      |  |   | 0                |   |  | $            | (548 | ) |        |              | (548    | )        |            |         | 0         |   |  | $      | (11,295 | )            |  |   | (11,295 | )
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |       
|Income before income taxes               |  | $ | 10,854           |   |  | $            | (548 | ) |        | $            | 10,306  |          |            | $       | 20,192    |   |  | $      | (11,295 | )            |  | $ | 8,897   |  
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |       
|                                        
|                                         |  |   | First Half Ended
|                                         |  |   |                 
|                                         |  |   | June 30, 2001    |   |  | July 1, 2000 |     
|                                         |  |   |                  |   |  |              |     
|                                         |  |   | Custom-          |   |  |              |      |   |        |              |         |          |            | Custom- |          
|                                         |  |   | Engineered       |   |  |              |      |   |        | Consolidated |         |          | Engineered |         |           |   |  |        |         | Consolidated | 
|                                         |  |   | Products         |   |  | Corporate    |      |   | Totals |              |         | Products |            |         | Corporate |   |  | Totals |        
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |        
|Sales                                    |  | $ | 185,572          |   |  |              |      |   |        | $            | 185,572 |          |            | $       | 171,849   |   |  |        |         |              |  | $ | 171,849 |  
|                                        
|                                        
|                                        
|                                        
|Elimination
of intercompany sales        |  |   | (4,618           | ) |  |              |      |   |        |              | (4,618  | )        |            |         | (861      | ) |  |        |         |              |  |   | (861    | )
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |         |             
|Total net sales                          |  | $ | 180,954          |   |  |              |      |   |        | $            | 180,954 |          |            | $       | 170,988   |   |  |        |         |              |  | $ | 170,988 |  
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |        |         |             
|Segment
earnings before interest and tax |  | $ | 26,980           |   |  |              |      |   |        | $            | 26,980  |          |            | $       | 40,441    |   |  |        |         |              |  | $ | 40,441  |  
|                                        
|                                        
|                                        
|                                        
|Unallocated amounts                      |  |   | 0                |   |  | $            | (175 | ) |        |              | (175    | )        |            |         | 0         |   |  | $      | (10,438 | )            |  |   | (10,438 | )
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |       
|Income before income taxes               |  | $ | 26,980           |   |  | $            | (175 | ) |        | $            | 26,805  |          |            | $       | 40,441    |   |  | $      | (10,438 | )            |  | $ | 30,003  |  
|                                         |  |   |                  |   |  |              |      |   |        |              |         |          |            |         |           |   |  |       



|    |  | There has been no change in the basis or measurement of segmentation
since the last annual report. Companies newly acquired during 2001 are
reported as part of the Custom-Engineered Products segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(6) |  | At June 30, 2001, borrowings under the Companys revolving credit
facility totaled $118.2 million. The credit facility permits the
Company to borrow under several different interest rate options. The
interest rate on borrowings equaled a weighted average 5.08 percent
during the second quarter of 2001. The credit facility contains
certain restrictive covenants. The Company is in compliance with all
restrictive covenants contained in the credit facility at June 30,
2001. After consideration of outstanding standby letters of credit,
the Company has available credit under its revolving credit facility of
$179.7 million at June 30, 2001.
|   
|(7) |  | On March 1, 2001, the Company purchased for $70.8 million, all of
the outstanding stock of ACE Controls, Inc. and its affiliated company
ACE Controls International, Inc. (collectively known as ACE)
headquartered in Farmington Hills, Michigan, with additional facilities
in Germany, the United Kingdom and Japan. ACE manufactures a wide
range of linear deceleration products serving various                                                                                                                                                                                                                                                           

8



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##### Table of Contents





|    |  | 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. Goodwill and intangible assets acquired of $53.6
million is being amortized on a straight-line basis over periods
ranging from 10 to 40 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On a pro forma, unaudited basis, as if the ACE acquisition had occurred
as of January 1, 2000, net sales, net income, basic earnings per share
and diluted earnings per share for the second quarter of 2000 would have
been $97.2 million, $6.0 million, $.20 and $.20. Net sales, net income,
basic earnings per share and diluted earnings per share for the first
half of 2001 would have been $187.2 million, $17.0 million, $.57 and
$.57, and net sales, net income, basic earnings per share and diluted
earnings per share for the first half of 2000 would have been $193.1
million, $19.8 million, $.65 and $.65.                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(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 current
status of the Transactions Lawsuit is that fact depositions have been
substantially completed, and written fact discovery currently is scheduled
to conclude by the end of August 2001, with expert discovery to follow. 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. The total accrual in the consolidated financial
statements related to the Transactions Lawsuit is $4.9 million at June
30, 2001. Such amount represents the Companys most current and best
estimate to litigate this legal matter.
|   
|    |  | 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, and in
July 1998, Sikorsky commenced a lawsuit against the Company claiming damages which they were alleged to have incurred
following the accident (collectively, the Sikorsky Matter).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | During the second quarter of 2000, a $12.6 million provision was recorded
in order to support the Companys most current and best estimates to
litigate the Transactions Lawsuit and the Sikorsky Matter discussed
above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

9



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##### Table of Contents





| |  | Regarding the Sikorsky Matter, during the third quarter of 2000, Kaydon
reached a settlement with Sikorsky Aircraft Corporation, and on April 10,
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. As part
of the settlement with the U.S. government, the Company entered a plea to
two counts of improper certification of the raceway surface finish of
three bearings shipped in 1995 and 1996. The bearings that were the
subject of the plea have not been involved in any accident. 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 the previously recorded
provisions without any impact on year 2001 earnings.                                                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As previously reported, in October 1995, Cooper Split Roller Bearing Corporation (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. The lawsuit related to the failure of a Cooper split
roller bearing at a customers facility in July 1994.
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 action. The Company believes
that the loss sustained in the settlement of the lawsuit is covered under
Kaydons commercial general liability policy, and that the ultimate
resolution of any 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

10



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##### Table of Contents






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

---

Results of Operations

During the second quarter of 2001, Kaydon Corporation and subsidiaries (the
Company) achieved sales of $89.6 million, up 4.1 percent from $86.1 million
in the second quarter of 2000. Results for the quarter reflect sales of $15.7
million from businesses recently acquired. Excluding the positive impact of
these acquisitions, sales during the second quarter of 2001 for the remaining
Kaydon divisions were down $12.2 million or 14.2 percent from the second
quarter of 2000 reflecting the continuing broad based slowdown in industrial
manufacturing activity, particularly in North America. Specifically, the
Company experienced reduced demand for specialty bearings products,
particularly from the semiconductor manufacturing equipment market and
off-highway equipment markets, and for the Companys fluid power products,
which are sold primarily to the construction equipment and other heavy
equipment markets. Kaydons high value-added products and resultant strong
contribution margins make the Companys profit performance very volume
sensitive. The reduction in sales by many of our business units contributed
significantly to declines in gross profit and operating income.

Gross profit during the second quarter of 2001 was $25.8 million or 28.8
percent of sales, compared with $32.2 million or 37.4 percent of sales in the
second quarter of 2000. The gross profit percentage achieved in the second
quarter of 2001 was negatively impacted by reduced sales, unfavorable product
mix and reduced absorption.

Operating expenses during the second quarter of 2001 were $15.2 million or 16.9
percent of sales. Operating expenses during the second quarter of 2000,
including a $12.6 million unusual litigation-related charge, were $24.7 million
or 28.6 percent of sales. Excluding the $12.6 million unusual
litigation-related charge recorded in the second quarter of 2000 and adjusting
second quarter 2001 operating expenses for recent acquisitions, operating
expenses in the second quarter of 2001 were down approximately $0.9 million
compared with the second quarter 2000.

Operating income during the second quarter of 2001 was $10.6 million or 11.8
percent of sales. Operating income during the second quarter of 2000,
including the unusual litigation-related charge of $12.6 million, was $7.5
million or 8.7 percent of sales.

Net interest expense of $0.3 million during the second quarter of 2001 compares
to net interest income of $1.4 million during the second quarter of 2000. The
fluctuation in net interest from last years comparable period is due to higher
interest expense on bank borrowings related to recent acquisitions.

11



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##### Table of Contents



The effective tax rate during the 2001 and 2000 second quarter was 37.0
percent.

Second quarter 2001 net income was $6.5 million or 7.2 percent of sales.
Earnings per share on a diluted basis equaled $.22. Second quarter 2000 net
income, including the after tax effect of the unusual litigation-related charge
of $8.0 million, was $5.6 million or 6.5 percent of sales. Earnings per share
on a diluted basis, including the after tax effect of the litigation charge of
$.26, equaled $.19.

On April 10, 2001, the Company reached a settlement of claims with the U.S.
government regarding their investigation of inspection and product
certification procedures at the Companys Muskegon, Michigan facility. As part
of the settlement, the Company entered a plea to two counts of improper
certification of the raceway surface finish of three bearings shipped in 1995
and 1996. The bearings that were the subject of the plea have not been
involved in any accident. 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 the previously
recorded provisions without any impact on year 2001 earnings.

Sales for the first half of 2001 were $181.0 million, an increase of 5.8
percent over last years first half sales of $171.0 million. Results for the
first half reflect sales of $26.9 million from businesses recently acquired.
Excluding the positive impact of these acquisitions, sales during the first
half of 2001 for the remaining Kaydon divisions were down $16.9 million or 9.9
percent from the first half of 2000 reflecting the broad based slowdown in
industrial manufacturing activity. As a result of the lower sales volume and
mix of products sold, higher energy costs, and lower absorption, gross profit
for the first half of 2001 decreased to $55.4 million or 30.6 percent of sales
as compared to $64.3 million or 37.6 percent of sales during the first half of
2000. Operating income during the first half of 2001 was $26.5 million or 14.7
percent of sales. Operating income for the first half of 2000, including the
unusual litigation-related charge in the second quarter, was $27.1 million or
15.8 percent of sales.

Net income for the first half of 2001 was $16.9 million or 9.3 percent of
sales, while earnings per share on a diluted basis equaled $.56. Net income
for the first half of 2000, including the unusual litigation-related charge,
was $18.9 million or 11.1 percent of sales, while earnings per share on a
diluted basis equaled $.62.

Liquidity and Capital Resources

Working capital was $204.5 million at June 30, 2001 reflecting a current ratio
of 5.3 to 1 compared to $181.2 million and a current ratio of 4.0 to 1 at
year-end 2000. Cash flow from operations, including the previously disclosed
$7.5 million settlement payment to the U.S. government was $18.2 million during
the first half of 2001, compared to $36.5 million for the same period in 2000.

12



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##### Table of Contents



Depreciation and amortization for the first half of 2001 totaled $10.7 million
compared to $9.0 million in the first half of 2000. Increases are primarily
due to recent acquisitions completed in late 2000 and during the first quarter
of 2001.

Cash and cash equivalents equaled $118.7 million at June 30, 2001, up $3.7
million over the balance at year-end 2000 of $115.0 million. This increase
reflects strong operating cash flow offset by capital expenditures of $7.4
million, dividend payments of $7.3 million, and the previously mentioned $7.5
million payment to the U.S. government.

Management expects that the Companys planned capital requirements for the
remainder of 2001, which consists of capital expenditures, dividend payments
and its stock repurchase program will be financed by operating cash flow and
existing cash balances.

Outlook

The Companys backlog at June 30, 2001 was $111.2 million compared to $117.9
million at the end of 2000. 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, will continue to be negatively affected by the broad-based slowdown
of economic activity in the United States. Management expects orders will be
relatively flat for the third quarter of 2001, with an increase not expected
until late in 2001 or early 2002. Expected operating cash flows coupled with
the Companys current cash reserves and the Companys $300.0 million 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.

Statements of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142 Goodwill and Other Intangible Assets, was
recently approved by the Financial Accounting Standards Board. These
pronouncements amend the accounting for business combinations, goodwill, and
intangible assets. SFAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations and further clarifies the criteria to
recognize intangible assets separately from goodwill. The requirements of SFAS
No. 141 are effective for any business combination that is completed after June
30, 2001. 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.

13



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##### Table of Contents



With respect to goodwill and intangible assets acquired
prior to July 1, 2001, companies are required to adopt the pronouncement in
their fiscal year beginning after December 15, 2001.

Total goodwill included in the Companys Financial Statements was $142.4
million at June 30, 2001 and 103.2 million at December 31, 2000. Goodwill
amortization expense was $1.2 million during the second quarter of 2001 and
$0.7 million during the second quarter of 2000. Goodwill amortization expense
was $2.3 million during the first half of 2001 and $1.3 million during the
first half of 2000. The Company is currently assessing the effect of the new
standards related to the impairment testing of goodwill.

Certain information in this Form 10-Q is forward-looking, such as the Companys
expectations regarding future financial performance, litigation expenses and
business development activity. The Company may not update these expectations to
reflect subsequent events. Such forward-looking information involves risks and
uncertainties that could significantly affect expected results. These risks
and uncertainties include, but are not limited to, uncertainties as to economic
conditions, market acceptance of new or enhanced versions of the Companys
products, the pricing of raw materials, changes in the competitive environments
in which the Companys businesses operate and the outcome of pending and future
litigation and governmental proceedings. 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 Company believes that the potential effect of these risks
in the near term should not materially affect the Companys financial position.

14



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##### Table of Contents






PART II.     OTHER INFORMATION




|        |  |                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------
|Item 1. |  | Legal Proceedings     See the discussion in the Notes to
Consolidated Condensed Financial Statements.




|        |  |                                 
|------- |  | --------------------------------
|Item 6. |  | Exhibits and Reports on Form 8-K

|                       |  |            
|---------------------- |  | -----------
|A. Exhibit No.         |  | Description
|                      
|                      
|                      
|                      
|None.                 
|                      
|                      
|                      
|                      
|B. Reports on Form 8-K



| |  | On April 10, 2001, the Company filed a Form 8-K under Item 5 reporting the
settlement of claims by the U.S. government in connection with product inspection
procedures at a Company manufacturing facility. The Form 8-K also reported
that first quarter 2001 earnings would be 12-15 percent below the consensus
estimate due to a broad-based slowdown in industrial manufacturing activity.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15



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##### Table of Contents






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                     
|               
|               
|August 10, 2001 |  | /s/ Brian P. Campbell                  
|                |  |                                        
|                |  | Brian P. Campbell                      
|               
|               
|               
|               
|                |  | Chairman, President, Chief Executive   
|               
|               
|               
|               
|                |  | Officer and Chief Financial Officer    
|               
|               
|               
|               
|                |  | (Principal Executive Officer and       
|               
|               
|               
|               
|                |  | Principal Financial Officer)           
|               
|               
|August 10, 2001 |  | /s/ Kenneth W. Crawford                
|                |  |                                        
|                |  | Kenneth W. Crawford                    
|               
|               
|               
|               
|                |  | Vice President and Corporate Controller
|               
|               
|               
|               
|                |  | (Principal Accounting Officer)         

16