##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 2, 2011                 Commission File No. 1-11333
 KAYDON CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    13-3186040
(I.R.S. Employer Identification No.)Suite 300, 315 E. Eisenhower Parkway, Ann Arbor, Michigan
(Address of principal executive offices)
    
    48108
(Zip Code)
 (734) 747-7025
  þ o
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



Page No.Part I  Financial Information:Item 1. Financial Statements.
    
    
    3Consolidated Condensed Balance Sheets (Unaudited) -
July 2, 2011 and December 31, 2010
    
    
    3Consolidated Condensed Statements of Income (Unaudited) -
Quarters and Halves Ended July 2, 2011 and July 3, 2010
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited) -
Halves Ended July 2, 2011 and July 3, 2010
    
    
    5Notes to Consolidated Condensed Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations.
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    20Item 4. Controls and Procedures.
    
    
    20Part II  Other Information:Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    21Item 6. Exhibits.
    
    
    21Signatures
    
    
    22EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.  KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (UNAUDITED)
 July 2, 2011
    
    
    December 31, 2010ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    223,267,000
    
    
    $
    286,648,000Accounts receivable, net
    
    
    87,256,000
    
    
    
    76,010,000Inventories, net
    
    
    103,554,000
    
    
    
    88,253,000Other current assets
    
    
    15,850,000
    
    
    
    16,384,000Total current assets
    
    
    429,927,000
    
    
    
    467,295,000Property, plant and equipment, net
    
    
    176,625,000
    
    
    
    169,597,000Goodwill, net
    
    
    160,152,000
    
    
    
    143,428,000Other intangible assets, net
    
    
    32,793,000
    
    
    
    18,047,000Other assets
    
    
    4,557,000
    
    
    
    2,965,000Total assets
    
    $
    804,054,000
    
    
    $
    801,332,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    20,984,000
    
    
    $
    16,944,000Salaries and wages
    
    
    8,544,000
    
    
    
    11,439,000Taxes payable
    
    
    7,025,000
    
    
    
    3,452,000Other accrued expenses
    
    
    20,619,000
    
    
    
    21,194,000Total current liabilities
    
    
    57,172,000
    
    
    
    53,029,000Long-term postretirement and
postemployment benefit obligations
    
    
    23,727,000
    
    
    
    23,567,000Other long-term liabilities
    
    
    19,797,000
    
    
    
    15,598,000Total long-term liabilities
    
    
    43,524,000
    
    
    
    39,165,000Shareholders Equity:Common stock
    
    
    3,693,000
    
    
    
    3,693,000Other shareholders equity
    
    
    699,665,000
    
    
    
    705,445,000Total shareholders equity
    
    
    703,358,000
    
    
    
    709,138,000Total liabilities and shareholders equity
    
    $
    804,054,000
    
    
    $
    801,332,000
  3




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KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED STATEMENTS OF INCOME
 (UNAUDITED)
 Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Net sales
    
    $
    122,029,000
    
    
    $
    121,500,000
    
    
    $
    230,370,000
    
    
    $
    240,745,000Cost of sales
    
    
    78,045,000
    
    
    
    75,563,000
    
    
    
    147,564,000
    
    
    
    153,039,000Gross profit
    
    
    43,984,000
    
    
    
    45,937,000
    
    
    
    82,806,000
    
    
    
    87,706,000Selling, general and
administrative expenses
    
    
    23,537,000
    
    
    
    19,679,000
    
    
    
    44,860,000
    
    
    
    41,766,000Operating income
    
    
    20,447,000
    
    
    
    26,258,000
    
    
    
    37,946,000
    
    
    
    45,940,000Interest expense
    
    
    (98,000
    )
    
    
    (62,000
    )
    
    
    (195,000
    )
    
    
    (124,000
    )Interest income
    
    
    110,000
    
    
    
    98,000
    
    
    
    289,000
    
    
    
    122,000Income before income taxes
    
    
    20,459,000
    
    
    
    26,294,000
    
    
    
    38,040,000
    
    
    
    45,938,000Provision for income taxes
    
    
    6,301,000
    
    
    
    8,478,000
    
    
    
    11,892,000
    
    
    
    14,295,000Net income
    
    $
    14,158,000
    
    
    $
    17,816,000
    
    
    $
    26,148,000
    
    
    $
    31,643,000Earnings per share:Basic
    
    $
    0.44
    
    
    $
    0.53
    
    
    $
    0.80
    
    
    $
    0.94Diluted
    
    $
    0.43
    
    
    $
    0.53
    
    
    $
    0.80
    
    
    $
    0.94Dividends declared per share
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.38
    
    
    $
    0.36
  4




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##### Table of Contents



KAYDON CORPORATION
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  (UNAUDITED)
 First Half EndedJuly 2, 2011
    
    
    July 3, 2010Cash flows from operating activities:Net income
    
    $
    26,148,000
    
    
    $
    31,643,000Adjustments to reconcile net income to net cash from
operating activities:Depreciation
    
    
    9,967,000
    
    
    
    10,023,000Amortization of intangible assets
    
    
    1,458,000
    
    
    
    1,842,000Amortization of stock awards
    
    
    2,023,000
    
    
    
    2,144,000Stock option compensation expense
    
    
    678,000
    
    
    
    670,000Excess tax benefits from stock-based compensation
    
    
    (58,000
    )
    
    
    (124,000
    )Deferred financing fees
    
    
    194,000
    
    
    
    124,000Non-cash postretirement benefits curtailment gain
    
    
    (142,000
    )
    
    
    (3,066,000
    )Contributions to qualified pension plans
    
    
    (1,112,000
    )
    
    
    (657,000
    )Net change in receivables, inventories and trade payables
    
    
    (16,642,000
    )
    
    
    (6,714,000
    )Net change in other assets and liabilities
    
    
    (1,701,000
    )
    
    
    16,167,000Net cash from operating activities
    
    
    20,813,000
    
    
    
    52,052,000Cash flows from investing activities:Capital expenditures
    
    
    (7,731,000
    )
    
    
    (7,191,000
    )Dispositions of property, plant and equipment
    
    
    77,000
    
    
    
    40,000Acquisition of business, net of cash received
    
    
    (39,047,000
    )
    
    
    0Net cash used in investing activities
    
    
    (46,701,000
    )
    
    
    (7,151,000
    )Cash flows from financing activities:Cash dividends paid
    
    
    (12,509,000
    )
    
    
    (12,100,000
    )Purchase of treasury stock
    
    
    (28,150,000
    )
    
    
    (8,789,000
    )Excess tax benefits from stock-based compensation
    
    
    58,000
    
    
    
    124,000Proceeds from exercise of stock options
    
    
    39,000
    
    
    
    55,000Net cash used in financing activities
    
    
    (40,562,000
    )
    
    
    (20,710,000
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    3,069,000
    
    
    
    (2,898,000
    )Net increase (decrease) in cash and cash equivalents
    
    
    (63,381,000
    )
    
    
    21,293,000Cash and cash equivalents  Beginning of period
    
    
    286,648,000
    
    
    
    262,403,000Cash and cash equivalents  End of period
    
    $
    223,267,000
    
    
    $
    283,696,000Cash paid for income taxes
    
    $
    7,238,000
    
    
    $
    7,890,000Cash paid for interest
    
    
    0
    
    
    
    0
  5




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KAYDON CORPORATION
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 (1) Basis of Presentation:
  (2) Cash and Cash Equivalents:
  July 2, 2011
    
    
    December 31, 2010Cash and cash equivalents:Money market and other short-term funds
    
    $
    210,473,000
    
    
    $
    275,547,000Time deposits, other interest bearing accounts, and other cash
    
    
    12,794,000
    
    
    
    11,101,000$
    223,267,000
    
    
    $
    286,648,000
 (3) Inventories:
 July 2, 2011
    
    
    December 31, 2010Raw material
    
    $
    39,057,000
    
    
    $
    33,429,000Work in process
    
    
    31,709,000
    
    
    
    23,797,000Finished goods
    
    
    32,788,000
    
    
    
    31,027,000$
    103,554,000
    
    
    $
    88,253,000
 (4) Comprehensive Income:
  Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Net income
    
    $
    14,158,000
    
    
    $
    17,816,000
    
    
    $
    26,148,000
    
    
    $
    31,643,000Other comprehensive
income (loss)
    
    
    1,941,000
    
    
    
    (1,711,000
    )
    
    
    5,749,000
    
    
    
    (4,540,000
    )Comprehensive income
    
    $
    16,099,000
    
    
    $
    16,105,000
    
    
    $
    31,897,000
    
    
    $
    27,103,000
 6




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##### Table of Contents



(5) Earnings per Share:
  Second Quarter EndedJuly 2, 2011
    
    
    July 3, 2010Earnings per share  BasicNet income
    
    $
    14,158,000
    
    
    $
    17,816,000Less: Net earnings allocated to participating
securities  Basic
    
    
    (141,000
    )
    
    
    (187,000
    )Income available to common shareholders  Basic
    
    $
    14,017,000
    
    
    $
    17,629,000Weighted average common shares outstanding  Basic
    
    
    32,205,000
    
    
    
    33,119,000Earnings per share  Basic
    
    $
    0.44
    
    
    $
    0.53Earnings per share  DilutedNet income
    
    $
    14,158,000
    
    
    $
    17,816,000Less: Net earnings allocated to participating
securities  Diluted
    
    
    (141,000
    )
    
    
    (187,000
    )Income available to common shareholders  Diluted
    
    $
    14,017,000
    
    
    $
    17,629,000Weighted average common shares outstanding  DilutedWeighted average common shares outstanding  Basic
    
    
    32,205,000
    
    
    
    33,119,000Potential dilutive shares resulting from stock options
    
    
    28,000
    
    
    
    28,000Weighted average common shares outstanding  Diluted
    
    
    32,233,000
    
    
    
    33,147,000Earnings per share  Diluted
    
    $
    0.43
    
    
    $
    0.53
 First Half EndedJuly 2, 2011
    
    
    July 3, 2010Earnings per share  BasicNet income
    
    $
    26,148,000
    
    
    $
    31,643,000Less: Net earnings allocated to participating
securities  Basic
    
    
    (270,000
    )
    
    
    (339,000
    )Income available to common shareholders  Basic
    
    $
    25,878,000
    
    
    $
    31,304,000Weighted average common shares outstanding  Basic
    
    
    32,406,000
    
    
    
    33,225,000Earnings per share  Basic
    
    $
    0.80
    
    
    $
    0.94Earnings per share  DilutedNet income
    
    $
    26,148,000
    
    
    $
    31,643,000Less: Net earnings allocated to participating
securities  Diluted
    
    
    (270,000
    )
    
    
    (339,000
    )Income available to common shareholders  Diluted
    
    $
    25,878,000
    
    
    $
    31,304,000Weighted average common shares outstanding  DilutedWeighted average common shares outstanding  Basic
    
    
    32,406,000
    
    
    
    33,225,000Potential dilutive shares resulting from stock options
    
    
    28,000
    
    
    
    28,000Weighted average common shares outstanding  Diluted
    
    
    32,434,000
    
    
    
    33,253,000Earnings per share  Diluted
    
    $
    0.80
    
    
    $
    0.94
 7




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Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Shares excluded
    
    
    420,500
    
    
    
    385,500
    
    
    
    403,000
    
    
    
    385,500
 (6) Business Segment Information:
  Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Net salesFriction Control Products
    
    $
    65,797,000
    
    
    $
    79,692,000
    
    
    $
    126,692,000
    
    
    $
    159,474,000Velocity Control Products
    
    
    25,331,000
    
    
    
    15,114,000
    
    
    
    44,957,000
    
    
    
    29,347,000Other Industrial Products
    
    
    30,901,000
    
    
    
    26,694,000
    
    
    
    58,721,000
    
    
    
    51,924,000Total consolidated net sales
    
    $
    122,029,000
    
    
    $
    121,500,000
    
    
    $
    230,370,000
    
    
    $
    240,745,000
 Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Operating incomeFriction Control Products
    
    $
    11,526,000
    
    
    $
    20,339,000
    
    
    $
    21,400,000
    
    
    $
    36,883,000Velocity Control Products
    
    
    5,884,000
    
    
    
    3,952,000
    
    
    
    11,710,000
    
    
    
    7,327,000Other Industrial Products
    
    
    4,395,000
    
    
    
    2,813,000
    
    
    
    6,932,000
    
    
    
    4,119,000Total segment operating income
    
    
    21,805,000
    
    
    
    27,104,000
    
    
    
    40,042,000
    
    
    
    48,329,000Items not allocated to segment
operating income
    
    
    (1,358,000
    )
    
    
    (846,000
    )
    
    
    (2,096,000
    )
    
    
    (2,389,000
    )Interest expense
    
    
    (98,000
    )
    
    
    (62,000
    )
    
    
    (195,000
    )
    
    
    (124,000
    )Interest income
    
    
    110,000
    
    
    
    98,000
    
    
    
    289,000
    
    
    
    122,000Income before income taxes
    
    $
    20,459,000
    
    
    $
    26,294,000
    
    
    $
    38,040,000
    
    
    $
    45,938,000
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##### Table of Contents



(7) Long-term Debt:
   (8) Goodwill and Other Intangible Assets:
     Friction Control
    
    
    Velocity Control
    
    
    Other IndustrialProducts
    
    
    Products
    
    
    Products
    
    
    TotalBalance at January 1, 2011Goodwill
    
    $
    56,396,000
    
    
    $
    43,200,000
    
    
    $
    62,532,000
    
    
    $
    162,128,000Accumulated impairment losses
    
    
    0
    
    
    
    0
    
    
    
    (18,700,000
    )
    
    
    (18,700,000
    )$
    56,396,000
    
    
    $
    43,200,000
    
    
    $
    43,832,000
    
    
    $
    143,428,000Effect of foreign currency
exchange rate changes
    
    
    582,000
    
    
    
    227,000
    
    
    
    0
    
    
    
    809,000Goodwill acquired
    
    
    0
    
    
    
    15,915,000
    
    
    
    0
    
    
    
    15,915,000Balance at July 2, 2011Goodwill
    
    $
    56,978,000
    
    
    $
    59,342,000
    
    
    $
    62,532,000
    
    
    $
    178,852,000Accumulated impairment losses
    
    
    0
    
    
    
    0
    
    
    
    (18,700,000
    )
    
    
    (18,700,000
    )$
    56,978,000
    
    
    $
    59,342,000
    
    
    $
    43,832,000
    
    
    $
    160,152,000
  9




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##### Table of Contents



July 2, 2011
    
    
    December 31, 2010Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmortized Intangible Assets
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    AmortizationCustomer relationships and lists
    
    $
    43,421,000
    
    
    $
    18,824,000
    
    
    $
    28,194,000
    
    
    $
    17,638,000Patents and developed technology
    
    
    6,856,000
    
    
    
    4,212,000
    
    
    
    6,596,000
    
    
    
    3,974,000Distributor agreements
    
    
    374,000
    
    
    
    257,000
    
    
    
    374,000
    
    
    
    237,000Product names
    
    
    320,000
    
    
    
    206,000
    
    
    
    320,000
    
    
    
    192,000$
    50,971,000
    
    
    $
    23,499,000
    
    
    $
    35,484,000
    
    
    $
    22,041,000
  July 2, 2011
    
    
    December 31, 2010Unamortized Intangible Assets
    
    Carrying Value
    
    
    Carrying ValueTrademarks
    
    $
    5,321,000
    
    
    $
    4,604,000
 Aggregate Intangible Assets Amortization ExpenseFor the first half ended July 2, 2011
    
    $
    1,458,000For the first half ended July 3, 2010
    
    $
    1,842,000
 Estimated Intangible Assets Amortization ExpenseFor the year ending December 31, 2011
    
    $
    3,094,000For the year ending December 31, 2012
    
    $
    3,033,000For the year ending December 31, 2013
    
    $
    2,712,000For the year ending December 31, 2014
    
    $
    2,412,000For the year ending December 31, 2015
    
    $
    2,076,000
 (9) Employee Benefit Plans:
  Pension Benefits
    
    Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Service cost
    
    $
    776,000
    
    
    $
    831,000
    
    
    $
    1,553,000
    
    
    $
    1,662,000Interest cost
    
    
    1,715,000
    
    
    
    1,738,000
    
    
    
    3,429,000
    
    
    
    3,476,000Expected return on plan assets
    
    
    (2,120,000
    )
    
    
    (1,921,000
    )
    
    
    (4,240,000
    )
    
    
    (3,842,000
    )Amortization of:Unrecognized net prior
service cost
    
    
    16,000
    
    
    
    16,000
    
    
    
    32,000
    
    
    
    32,000Unrecognized net actuarial loss
    
    
    810,000
    
    
    
    870,000
    
    
    
    1,620,000
    
    
    
    1,740,000Total
    
    $
    1,197,000
    
    
    $
    1,534,000
    
    
    $
    2,394,000
    
    
    $
    3,068,000
 10




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##### Table of Contents



Postretirement Benefits
    
    Second Quarter Ended
    
    
    First Half EndedJuly 2, 2011
    
    
    July 3, 2010
    
    
    July 2, 2011
    
    
    July 3, 2010Service cost
    
    $
    23,000
    
    
    $
    50,000
    
    
    $
    46,000
    
    
    $
    112,000Interest cost
    
    
    73,000
    
    
    
    121,000
    
    
    
    147,000
    
    
    
    257,000Amortization of:Unrecognized net prior
service credit
    
    
    (325,000
    )
    
    
    (289,000
    )
    
    
    (650,000
    )
    
    
    (578,000
    )Unrecognized net
actuarial gain
    
    
    (112,000
    )
    
    
    (111,000
    )
    
    
    (225,000
    )
    
    
    (186,000
    )Curtailment gain
    
    
    (142,000
    )
    
    
    (3,066,000
    )
    
    
    (142,000
    )
    
    
    (3,066,000
    )Total
    
    $
    (483,000
    )
    
    $
    (3,295,000
    )
    
    $
    (824,000
    )
    
    $
    (3,461,000
    )
  (10) Stock-Based Compensation:
  Wtd. Avg.Restricted
    
    
    Grant DateStock
    
    
    Fair ValueOutstanding at January 1, 2011
    
    
    330,630
    
    
    $
    35.85Granted
    
    
    98,250
    
    
    
    38.53Vested
    
    
    (113,652
    )
    
    
    37.29Canceled
    
    
    (2,350
    )
    
    
    32.48Outstanding at July 2, 2011
    
    
    312,878
    
    
    $
    36.20
   Wtd. Avg.Options
    
    
    Ex. PriceOutstanding at January 1, 2011
    
    
    603,000
    
    
    $
    38.83Granted
    
    
    17,500
    
    
    
    37.75Canceled
    
    
    0
    
    
    
    0Exercised
    
    
    (1,500
    )
    
    
    26.01Outstanding at July 2, 2011
    
    
    619,000
    
    
    $
    38.83Exercisable at July 2, 2011
    
    
    413,700
    
    
    $
    39.92
  11




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##### Table of Contents



(11) Other Matters:
  (12) Taxes:
  (13) Acquisition:
  (14) Manufacturing Consolidation Program:
   (15) Fair Value Measurement:
  (16) Impact of Recently Issued Accounting Pronouncements:
  12




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Results of Operations
 Second Quarter Results
 Second Quarter EndedJuly 2,
    
    
    % of
    
    
    July 3,
    
    
    % ofDollars in millions, except per share amounts
    
    2011
    
    
    Sales
    
    
    2010
    
    
    SalesNet sales
    
    $
    122.0
    
    
    
    
    
    
    $
    121.5Cost of sales
    
    
    78.0
    
    
    
    
    
    
    
    75.6Gross profit
    
    
    44.0
    
    
    
    36.0
    %
    
    
    45.9
    
    
    
    37.8
    %Selling, general and administrative expenses
    
    
    23.5
    
    
    
    19.3
    %
    
    
    19.7
    
    
    
    16.2
    %Operating income
    
    
    20.4
    
    
    
    16.8
    %
    
    
    26.3
    
    
    
    21.6
    %Interest, net
    
    
    0.0
    
    
    
    
    
    
    
    0.0Income before income taxes
    
    
    20.5
    
    
    
    16.8
    %
    
    
    26.3
    
    
    
    21.6
    %Provision for income taxes
    
    
    6.3
    
    
    
    
    
    
    
    8.5Net income
    
    $
    14.2
    
    
    
    11.6
    %
    
    $
    17.8
    
    
    
    14.7
    %Earnings per share:Basic
    
    $
    0.44
    
    
    
    
    
    
    $
    0.53Diluted
    
    $
    0.43
    
    
    
    
    
    
    $
    0.53
   13




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##### Table of Contents



First Half Results
 First Half EndedJuly 2,
    
    
    % of
    
    
    July 3,
    
    
    % ofDollars in millions, except per share amounts
    
    2011
    
    
    Sales
    
    
    2010
    
    
    SalesNet sales
    
    $
    230.4
    
    
    
    
    
    
    $
    240.7Cost of sales
    
    
    147.6
    
    
    
    
    
    
    
    153.0Gross profit
    
    
    82.8
    
    
    
    35.9
    %
    
    
    87.7
    
    
    
    36.4
    %Selling, general and administrative expenses
    
    
    44.9
    
    
    
    19.5
    %
    
    
    41.8
    
    
    
    17.3
    %Operating income
    
    
    37.9
    
    
    
    16.5
    %
    
    
    45.9
    
    
    
    19.1
    %Interest, net
    
    
    0.1
    
    
    
    
    
    
    
    0.0Income before income taxes
    
    
    38.0
    
    
    
    16.5
    %
    
    
    45.9
    
    
    
    19.1
    %Provision for income taxes
    
    
    11.9
    
    
    
    
    
    
    
    14.3Net income
    
    $
    26.1
    
    
    
    11.4
    %
    
    $
    31.6
    
    
    
    13.1
    %Earnings per share:Basic
    
    $
    0.80
    
    
    
    
    
    
    $
    0.94Diluted
    
    $
    0.80
    
    
    
    
    
    
    $
    0.94
  14




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##### Table of Contents



Results of Business Segments
  Friction Control Products
 Second Quarter Ended
    
    
    First Half Ended%
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    Change
    
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    ChangeSales
    
    $
    65.8
    
    
    $
    79.7
    
    
    
    (17.4
    )%
    
    $
    126.7
    
    
    $
    159.5
    
    
    
    (20.6
    )%Operating Income
    
    $
    11.5
    
    
    $
    20.3
    
    
    
    (43.3
    )%
    
    $
    21.4
    
    
    $
    36.9
    
    
    
    (42.0
    )%Operating Margin
    
    
    17.5
    %
    
    
    25.5
    %
    
    
    
    
    
    
    16.9
    %
    
    
    23.1
    %
 15




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##### Table of Contents



Second Quarter
   First Half
   Velocity Control Products
 Second Quarter Ended
    
    
    First Half Ended%
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    Change
    
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    ChangeSales
    
    $
    25.3
    
    
    $
    15.1
    
    
    
    67.6
    %
    
    $
    45.0
    
    
    $
    29.3
    
    
    
    53.2
    %Operating Income
    
    $
    5.9
    
    
    $
    4.0
    
    
    
    48.9
    %
    
    $
    11.7
    
    
    $
    7.3
    
    
    
    59.8
    %Operating Margin
    
    
    23.2
    %
    
    
    26.1
    %
    
    
    
    
    
    
    26.1
    %
    
    
    25.0
    %
 Second Quarter
   First Half
   16




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##### Table of Contents



Other Industrial Products
 Second Quarter Ended
    
    
    First Half Ended%
    
    
    
    
    
    
    
    
    %Dollars in millions
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    Change
    
    
    July 2, 2011
    
    
    July 3, 2010
    
    
    ChangeSales
    
    $
    30.9
    
    
    $
    26.7
    
    
    
    15.8
    %
    
    $
    58.7
    
    
    $
    51.9
    
    
    
    13.1
    %Operating Income
    
    $
    4.4
    
    
    $
    2.8
    
    
    
    56.2
    %
    
    $
    6.9
    
    
    $
    4.1
    
    
    
    68.3
    %Operating Margin
    
    
    14.2
    %
    
    
    10.5
    %
    
    
    
    
    
    
    11.8
    %
    
    
    7.9
    %
 Second Quarter
   First Half
   Liquidity and Capital Resources
 
   17




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Outlook
     Critical Accounting Policies and Estimates
  18




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Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   19




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  
 ITEM 4. CONTROLS AND PROCEDURES.
  20




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  Total Number of
    
    
    Maximum NumberTotal Number
    
    
    Average Price
    
    
    Shares Purchased as
    
    
    of Shares that MayOf Shares
    
    
    Paid
    
    
    Part of Publicly
    
    
    Yet be PurchasedPeriod
    
    Purchased
    
    
    Per Share
    
    
    Announced Plan
    
    
    Under the Plan (1)April 3 to April 30
    
    
    95,000
    
    
    $
    38.48
    
    
    
    95,000
    
    
    
    1,835,338May 1 to May 28
    
    
    130,000
    
    
    $
    37.45
    
    
    
    130,000
    
    
    
    1,705,338May 29 to July 2
    
    
    160,000
    
    
    $
    35.30
    
    
    
    160,000
    
    
    
    1,545,338Total
    
    
    385,000
    
    
    $
    36.81
    
    
    
    385,000
    
    
    
    1,545,338
 
 (1)
    
    On May 6, 2005, the Companys Board of Directors authorized management to purchase up
to 5,000,000 shares of its common stock in the open market. 
 ITEM 6. EXHIBITS.
 Exhibit No.
    
    Description31.1
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 21




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KAYDON CORPORATIONJuly 29, 2011

/s/
Peter C. DeChantsPeter C. DeChantsSenior Vice President, Chief Financial OfficerJuly 29, 2011

/s/
Laura M. KowalchikLaura M. KowalchikVice President, Chief Accounting Officer 22