SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 - For the fiscal year ended December 31, 1999
Commission file number 1-13905
COMPX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0981653
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16825 Northchase Drive, Suite 1200, Houston, TX 77060
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 423-3377
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Class A common stock New York Stock Exchange
($.01 par value per share)
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
As of February 29, 2000, 6,148,580 shares of Class A common stock were
outstanding. The aggregate market value of the 5.8 million shares of voting
stock held by nonaffiliates of Valhi, Inc. as of such date approximated $108
million.
Documents incorporated by reference
The information required by Part III is incorporated by reference from the
Registrant's definitive proxy statement to be filed with the Commission pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
<PAGE>
PART I
ITEM 1. BUSINESS
General
CompX International Inc. (NYSE: CIX) is a leading manufacturer of
ergonomic computer support systems, precision ball bearing slides and security
products for use in office furniture, computer-related applications and a
variety of other products. The Company's products are principally designed for
use in medium to high-end applications, where product design, quality and
durability are critical to the Company's customers. The Company believes that it
is among the world's largest producers of ergonomic computer support systems for
office furniture manufacturers, precision ball bearing slides and security
products consisting of cabinet locks and other locking mechanisms. In 1999,
CompX generated net sales of $225.9 million, a 49% increase from 1998 (an
increase of 5% excluding sales attributable to acquisitions). In 1999, ergonomic
computer support systems, precision ball bearing slides and security products
accounted for approximately 19%, 48% and 33% of net sales, respectively.
Valhi, Inc. and Valhi's wholly-owned subsidiary Valcor, Inc. own 64% of
the Company's outstanding common stock. Contran Corporation holds, directly or
through subsidiaries, approximately 93% of Valhi's outstanding common stock.
Substantially all of Contran's outstanding voting stock is held either by trusts
established for the benefit of certain children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is the sole trustee, or by Mr. Simmons directly.
Mr. Simmons is Chairman of the Board and Chief Executive Officer of each of
Contran, Valhi and Valcor and may be deemed to control each of such companies
and CompX.
The Company was incorporated in Delaware in 1993 under the name
National Cabinet Lock, Inc. At that time, Valhi contributed the assets of its
Cabinet Lock Division and the stock of Waterloo Furniture Components Limited. In
1996, the Company changed its name to CompX International Inc. In 1998, the
Company issued approximately 6 million shares of its common stock in an initial
public offering and CompX acquired two additional lock producers. In 1999, CompX
acquired two additional slide producers and in January 2000 acquired another
lock producer. See Note 2 to the Consolidated Financial Statements.
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that the statements in this
Annual Report on Form 10-K relating to matters that are not historical facts,
including, but not limited to, statements found in this Item 1 - "Business,"
Item 3 - "Legal Proceedings," Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 7A - "Quantative and
Qualitative Disclosures About Market Risk," are forward-looking statements that
represent management's belief and assumptions based on currently available
information. Forward-looking statements can be identified by the use of words
such as "believes," "intends," "may," "should," "anticipates," "expected" or
comparable terminology, or by discussions of strategies or trends. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it cannot give any assurances that these expectations
will prove to be correct. Such statements by their nature involve substantial
risks and uncertainties that could significantly impact expected results, and
actual future results could differ materially from those described in such
forward-looking statements. Among the factors that could cause actual future
results to differ materially are the risks and uncertainties discussed in this
Annual Report and those described from time to time in the Company's other
filings with the Securities and Exchange Commission. While it is not possible to
identify all factors, the Company continues to face many risks and uncertainties
including, but not limited to, future supply and demand for the Company's
products, cost of raw materials, general global economic and political
conditions, demand for office furniture, service industry employment levels, the
possibility of labor disruptions, competitive products and prices, substitute
products, customer and competitor strategies, the introduction of tariff or
non-tariff trade barriers, the impact of pricing and production decisions,
potential difficulties in integrating completed acquisitions, environmental
matters (such as those requiring emission and discharge standards for existing
and new facilities), government regulations and possible changes therein,
possible future litigation and other risks and uncertainties. Should one or more
of these risks materialize (or the consequences of such a development worsen),
or should the underlying assumptions prove incorrect, actual results could
differ materially from those forecasted or expected. The Company disclaims any
intention or obligation to update or revise any forward-looking statement
whether as a result of new information, future events or otherwise.
Industry Overview
During the mid 1990's, prior to 1998, approximately 75% of the
Company's products were sold to the office furniture manufacturing industry. As
a result of strategic acquisitions in the lock industry in 1998 and in the
precision ball bearing slide industry in 1999, the Company has expanded its
product offering and reduced its percentage of sales to the office furniture
market. Currently, approximately 62% of the Company's products are sold to the
office furniture manufacturing industry while the remainder are sold for use in
other products, such as vending equipment, electromechanical enclosures,
transportation, computers and related equipment, and other non-office furniture
and equipment. CompX's management believes that its emphasis on new product
development, sales of its ergonomic computer support systems as well as slide
and security products used in computer applications result in the Company
experiencing higher rates of growth than the office furniture industry as a
whole.
The Company believes that fundamental shifts in technology, health
considerations and work processes in the office workplace provide new growth
opportunities. Increased use of technology has caused businesses to redesign
their workspaces with greater emphasis on the space efficient integration of
computers and other office technologies into the office workplace as well as
protecting computer equipment from damage and theft. Additionally, increased
regulatory sensitivity to ergonomic concerns and heightened focus on the risks
of repetitive stress injury have also influenced redesign of the office
workplace. In 1996, California became the first state to adopt legislation
relating to ergonomics in the workplace. In Europe, organizations like the
International Organization for Standardization and the European Committee for
Standardization have proposed draft guidelines that specify ranges of adjustment
in height and angle of workstation tabletops and computer keyboard support
mechanisms aimed at reducing the likelihood of injury from repetitive stress
tasks. In the United States, the Occupational Safety & Health Administration has
recently issued a draft standard that addresses guidelines for ergonomic
standards in the workplace. This standard is a program-oriented standard that
will place responsibility on the employer to mitigate the risk of
musculoskeletal injury in workplaces prone to cause repetitive stress injuries.
It is currently believed that this proposal may be adopted as an OSHA standard
during the year 2000.
<PAGE>
The influence of existing and proposed legislation concerning workplace
ergonomics continues to affect the demand for ergonomically designed office
furniture products, which allow workers to adjust and re-arrange the orientation
of office equipment and supplies for greater comfort, safety and productivity.
Businesses increasingly are seeking changes in work processes to achieve more
efficient workspace utilization, resulting in the creation of new office
furniture designs that embrace office sharing concepts such as office "hoteling"
and open office designs. The Company's products target manufacturers of new
furniture designed to address these industry dynamics as well as customers that
specialize in retrofitting existing office furniture.
Products
CompX manufactures and sells components in three major product lines:
ergonomic computer support systems, precision ball bearing slides and security
products. The Company's ergonomic computer support systems and precision ball
bearing slides are sold under the Waterloo Furniture Components, Thomas Regout
and Dynaslide brand names and the Company's security products are sold under the
National Cabinet Lock, Fort Lock, Timberline Lock and Chicago Lock brand names.
The Company believes that its brand names are well recognized in the industry.
Ergonomic computer support systems. CompX is a leading manufacturer and
innovator in ergonomic computer support systems for office furniture. Unlike
products targeting the residential market, which is more price sensitive with
less emphasis on the overall value of products and service, the CompX line
consists of more highly engineered products designed to provide ergonomic
benefits for business and other sophisticated users.
The Company's ergonomic computer support systems include adjustable
computer keyboard support arms. These devices are designed to attach to office
desks in workplace and in home office environments where there exists a need to
permit computer users to adjust their computer keyboard to various heights and
positions to alleviate possible strains and stress which may result from
repetitive activities, such as typing or data entry on computer keyboards. These
products also maximize usable workspace and permit the storage of the keyboard
underneath the desk. CompX introduced its first ergonomic keyboard arm in 1983
and the Leverlock adjustment mechanism in 1989, which is designed to make the
adjustment of the keyboard arm easier for all (including physically challenged)
users. In 1999, the Company introduced the Lift-n-Lock mechanism that allows
adjustment of the keyboard arm without the use of levers or knobs.
In 1999, the Company began a program to utilize its engineering and
design capabilities to develop proprietary ergonomic product designs for its key
customers. Under this program, the Company will design and manufacture products
on a proprietary basis for key customers. The Company believes this program will
allow it to provide its customers one-stop shopping for product designs and
manufacturing capabilities. In 1999, the Company completed a proprietary
keyboard arm design for one of its key office furniture customers. The product
design combines both the ergonomic functionality and the aesthetics to
complement the customer's line of office furniture products. Sales of this
product began in mid-1999. In late 1999, a second proprietary adjustable
keyboard arm design was begun for another office furniture customer.
The Company is currently developing a height adjustable work surface
utilizing its patented twin-lift mechanism. This product provides the user
significantly more work surface than the traditional keyboard arm. The enhanced
work surface can be used to support a mouse tray and other ergonomic related
products at a height adjustable level.
<PAGE>
Adjustable computer table mechanisms address the need for flexibility
and adjustability in work surfaces. The Company's adjustable table mechanisms
provide adjustable workspace heights that permit users to stand or sit and that
can be easily adjusted for different user needs. The Company is also developing
a height adjustable work table whereby the Company's patented counterbalancing
feature will allow the user to easily adjust the height of the entire work
surface without the use of levers or cranks.
The prevalence of computers in the workplace has also created a need
for safe and convenient storage solutions for the central processor unit ("CPU")
case. In 1997, the Company introduced a CPU storage device that can be mounted
under a work surface or on the side of desk panels to store the CPU case off the
floor to minimize the adverse effects of dust and moisture or damage from
accidental impact. The unit operates on a slide mechanism that also pivots to
provide ease of access to peripheral connections while allowing convenient,
unobtrusive storage.
CompX also offers a number of complementary accessories to its main
products. These include ergonomic wrist rest aids, mouse pad supports and
computer monitor support arms, such as the Monitor Master for the adjustment of
heavy monitors to reduce eye strain.
Precision ball bearing slides. CompX manufactures a complete line of
precision ball bearing slides for use in office furniture, computer related
equipment and other applications. Precision ball bearing slides are manufactured
to stringent industry standards and are designed in conjunction with office
furniture original equipment manufacturers ("OEMs") to meet the needs of end
users with respect to weight support capabilities and ease of movement.
In addition to its basic product line, sales based on patented
innovations account for an increasing proportion of the Company's sales growth.
In 1994, CompX introduced the Butterfly Take Apart System, which is designed to
easily disengage drawers from filing cabinets. The following year, the Company
began selling its Integrated Slide Lock ("ISL"), with which a file cabinet
manufacturer can reduce the possibility of multiple drawers being opened by the
user at the same time, significantly reducing the risk of injury from a falling
cabinet while lowering the total cost of manufacturing the complete file
cabinet. The Company's patented concept affords OEM's cost savings advantages in
production, since the ISL is designed as an integral part of the drawer slide,
compared to custom fabricated add-on solutions previously utilized by most
manufacturers.
In recent years, applications other than office furniture have
represented a rapidly growing source of demand for the Company's precision ball
bearing slides. Opportunities in heavy-duty applications such as tool storage
cabinets and electromechanical applications have created new market
opportunities. As a result of the design efforts focused on these markets, CompX
created the Ball Lock to prevent heavily filled drawers, such as auto mechanic
tool boxes, from opening while cabinets are moved during routine use in the
field. The Company's products are used extensively in professional toolboxes
and, increasingly, in electromechanical imaging equipment to facilitate the
movement of machine components in the document reproduction process.
The Company acquired Thomas Regout in January 1999, and in November
1999 acquired the business that produces the Dynaslide line of precision ball
bearing slides ("Dynaslide"). These acquisitions expand the Company's market
presence in the precision, ball bearing slide market, allowing it to service the
high- medium- and low-end segments of the market. These products in the U.S., in
Europe and in Asia are utilized in highly engineered applications such as
computer network server cabinets where convenient access for hardware upgrades
and maintenance is required while providing stability and protection to critical
network system components.
Security products. The Company believes that it is a North American
market leader in the manufacturer and sale of cabinet locks and other locking
mechanisms. The Company manufactures locking mechanisms that generally fall into
three categories: disc tumbler cabinet locks, pin tumbler locks and KeSet and
Tubar high security locks.
Disc tumbler locks, also called wafer tumbler or plate tumbler locks,
derive their keying from a series of flat tumblers with a window in the middle
through which the key passes to open the lock. This type of lock is normally
limited to two levels of keying, a passkey and one master key. A disc tumbler
lock provides moderate security and is manufactured at all four of the Company's
security products facilities. Disc tumbler locks represent the lowest cost lock
to produce, resulting in lower selling prices to customers.
Pin tumbler locks are keyed with a series of small pins manufactured on
in-house automatic screw machines. A stack of pins is required for each cut in a
key. Due to the increased number of parts, this type of lock is more costly to
manufacture than a disc tumbler lock, and offers increased variety in keying
with more than one level of master keying. Pin tumbler locks also provide
substantially more security and are commonly used in banking, vending, computer
and institutional furniture industries. Tubular key pin tumbler locks are
designed for significant special applications for major customers, particularly
in the vending industry. These proprietary products are redesigned frequently,
which requires a substantial ongoing engineering effort.
The Company's industrial customers include manufacturers of cabinet
enclosures, from office furniture to electrical circuit panels to vending
machines. A substantial portion of the Company's sales volume involves
specialized adaptations to individual manufacturers' enclosure specifications.
CompX also has a standardized product line suitable for many customers. However,
a substantial portion of the Company's volume involves specialized adaptations
to individual manufacturer's enclosure specifications.
The Company's acquisition of Fort Lock in March 1998 expanded the
Company's offering of locking mechanisms to include several new market segments.
These include locks for ignition systems and storage compartments for a major
motorcycle manufacturer and products to major OEM's including manufacturers of
aftermarket security devices for desktop and laptop computers. Electronic locks
utilized in safes in hotel rooms and sold in retail stores, as well as versions
for securing tool boxes are also a significant product line added as a result of
the Fort Lock acquisition.
The Company's KeSet high security system is a proprietary design of a
pin tumbler lock with parts manufactured from hardened steel components to
prevent forced entry. A significant feature of the product line is the ability
to change the keying on a single lock 64 times without removing the lock from
its enclosure. This product is used primarily to protect money in applications
such as soft drink vending machines, gaming machines and parking meters where
higher levels of security are required as is the patented Tubar high security
lock gained in the Company's acquisition of the assets of Chicago Lock Company,
discussed below.
Each of the industries served with cabinet locks has a distribution
segment for replacement needs or for supplying small shops whose volume is not
substantial enough to buy directly from a lock manufacturer. CompX has met this
need in part with its industry-industry-unique STOCK LOCKS inventory program.
Partially as a result of this program, the Company believes it holds the largest
cabinet lock market share in North America in both locksmith and hardware
component distribution.
The Company's STOCK LOCKS distribution program represents approximately
15% of its security products sales. This program is comprised of over 1,200
stock keeping units (also referred to as SKUs) of standardized locking products.
This program plans, manufactures and packages locks to inventory with a variety
of keying and finishes for shipment to customers generally within 24 hours of
receipt of the customer order, and is being expanded to include products from
all of CompX's securities products companies.
Sales under this program are made both to a North American distribution
and Factory Centers network as well as to large OEMs when special needs require
either smaller quantities or non-special products other than their normal volume
requirements. This network supplies the Company's products both to after-market
replacement markets and to cabinet shops who do not purchase directly from the
Company due to their smaller size.
The established distributor network for STOCK LOCKS has been used to
develop a standardized product line in other segments of the Company's products.
Currently both ergonomic computer support systems and, to a limited extent,
precision ball bearing slides, are enjoying growing marketing success through
these and new ergonomic distribution channels.
In January 2000, the Company acquired substantially all of the
operating assets of Chicago Lock Company, including its wholly owned subsidiary,
Tubar Security Products. The acquisition of Chicago Lock expands the Company's
product offerings into the vending and gaming industries.
Sales, Marketing and Distribution
CompX sells components to OEMs and to distributors through a
specialized sales force. The majority of the Company's sales are to OEMs, while
the balance represents standardized products sold through distribution channels.
Sales to large OEM customers are made through the efforts of
factory-based sales and marketing professionals and engineers working in concert
with salaried field salespeople and independent manufacturer's representatives.
Manufacturers' representatives are selected based on special skills in certain
markets or with current or potential customers.
A significant portion of the Company's sales are made through
distributors. The Company has a significant market share of cabinet lock sales
to the locksmith distribution channel. CompX supports its distributor sales with
a line of standardized products used by the largest segments of the marketplace.
These products are packaged and merchandised for easy availability and handling
by distributors and the end user. Based on the Company's successful STOCK LOCKS
inventory program, similar programs have been implemented for distributor sales
of ergonomic computer support systems and to some extent precision ball bearing
slides. Since their addition to the Company's distributor product line in 1992,
sales of these products to the distributor market have grown to represent
approximately 10% of combined ergonomic computer support systems and precision
ball bearing slide net sales.
To afford a competitive advantage to the Company as well as to
customers, ergonomic computer support system and precision ball bearing slides
in North America are delivered primarily by means of a Company-owned
tractor/trailer fleet. This satellite-monitored fleet improves the timely and
economic delivery of products to customers. Another important economic advantage
to the Company's customers of an in-house trucking fleet is that it allows the
shipment of many products in returnable metal baskets (in lieu of corrugated
paper cartons), which avoids both the environmental and economic burden of
disposal.
The Company does not believe it is dependent upon one or a few
customers, the loss of which would have a material adverse effect on its
operations. In 1997, 1998 and 1999, sales to the Company's ten largest customers
accounted for approximately 30%, 40% and 30% of sales, respectively. In 1997 and
1999, sales to the Company's largest customer were less than 10% of the
Company's total sales. In 1998, one customer, Hon Industries Inc., accounted for
approximately 10% of sales. In 1997, six of the Company's top ten customers were
located in the United States. In 1998 and 1999, nine of the Company's top ten
customers were located in the United States.
Acquisitions
In January 1999, the Company acquired Thomas Regout Holding N.V. ("Thomas
Regout"), a producer of precision ball bearing slides based in the Netherlands,
for $53.2 million. In November 1999, the Company acquired the business that
manufactures the Dynaslide line of precision ball bearing slides, which are
produced in two manufacturing plants in Taipei, Taiwan. The Company believes
that Dynaslide is one of the lowest cost producers of precision ball bearing
slides in the world, and this acquisition enables CompX to offer products to its
customers at the low, middle and high-end requirements of the precision ball
bearing slide market. See Note 2 to the Consolidated Financial Statements.
As previously reported, in March and November 1998 the Company acquired
two locking systems producers - Fort Lock Corporation and related assets and
Timberline Lock, Ltd. and related assets.
In January 2000, the Company acquired substantially all of the
operating assets of Chicago Lock Company for approximately $9.2 million in cash.
CompX used borrowings under its existing credit facility to pay the cash
purchase price.
Manufacturing and operations
At December 31, 1999, CompX operated six manufacturing facilities in
North America (two in each of Canada and Illinois and one in each of South
Carolina and Michigan), one facility in the Netherlands and two facilities in
Taiwan. Ergonomic products or precision ball bearing slides are manufactured in
the facilities located in Canada, the Netherlands and Taiwan. Security products
are manufactured in the facilities located in South Carolina and Illinois. CompX
also leases a distribution center in California. CompX believes that all its
facilities are well maintained and satisfactory for their intended purposes.
Raw Materials
Coiled steel is the major raw material used in the manufacture of
precision ball bearing slides and ergonomic computer support systems. Plastic
resins for injection molded plastics are also an integral material for ergonomic
computer support systems. Purchased components, including zinc castings, are the
principal raw materials used in the manufacture of security products. These raw
materials are purchased from several suppliers and are readily available from
numerous sources.
The Company occasionally enters into raw material arrangements to
mitigate the short-term impact of future increases in raw material costs. While
these arrangements do not commit the Company to a minimum volume of purchases,
they generally provide for stated unit prices based upon achievement of
specified volume purchase levels. This allows the Company to stabilize raw
material purchase prices provided the specified minimum monthly purchase
quantities are met. Materials purchased on the spot market are sometimes subject
to unanticipated and sudden price increases. Due to the competitive nature of
the markets served by the Company's products, it is often difficult to recover
such increases in raw material costs through increased product selling prices
and consequently overall operating margins can be affected by such raw material
cost pressures.
Competition
The office furniture market is highly competitive. Suppliers to office
furniture OEMs compete on the basis of (i) product design, including ergonomic
and aesthetic factors, (ii) product quality and durability, (iii) price, (iv)
on-time delivery and (v) service and technical support. The Company focuses its
efforts on the middle- and high-end segments of the market, where product
design, quality, durability and service are placed at a premium.
The market for the Company's security products is also highly
competitive. This market is highly fragmented with a number of small- to
medium-sized manufacturers who supply the market. There are a number of small-
to medium-sized importers of products manufactured in Asia. Lock manufacturers
and distributors compete on the basis of (i) product design, (ii) custom
engineering capability, (iii) price and (iv) order fulfillment lead times.
Through its Fort Lock, Timerbline Lock and Chicago Lock acquisitions, the
Company has broadened its product offering. The Company has also continued to
place a high level of emphasis on customer service and responsiveness to
individual customer needs.
The Company believes it derives a significant competitive advantage as
a result of its focus on (i) a collaborative approach to product design and
engineering, (ii) increased manufacturing and assembly automation and (iii)
implementation of distribution programs that reduce order fulfillment times.
The Company competes in the ergonomic computer support systems market
with one major producer and a number of small manufacturers that compete
primarily on the basis of product quality, features and price. The Company
competes in the precision ball bearing slide market with two large manufacturers
and a number of smaller manufacturers that compete primarily on the basis of
product quality and price. The Company's security products compete with a
variety of relatively small competitors, which makes significant price increases
difficult.
Although the Company believes that it has been able to compete
successfully in its markets to date, there can be no assurance that it will be
able to continue to do so in the future.
Patents and Trademarks
CompX holds a number of patents relating to its component products,
certain of which are believed to be important to CompX and its continuing
business activity. CompX's major trademarks and brand names, including National
Cabinet Lock, Fort Lock, Timberline Lock, Chicago Lock, Tubar, Thomas Regout,
STOCK LOCKS, ShipFast, Waterloo Furniture Components Limited and Dynaslide, are
protected by registration in the United States and elsewhere with respect to the
products it manufactures and sells. The Company believes such trademarks are
well recognized in the component products industry.
Foreign operations
The Company has substantial operations and assets located outside the
United States, principally slide and ergonomic product operations in Canada, and
beginning in 1999, in the Netherlands and Taiwan. See Note 2 to the Consolidated
Financial Statements. Substantially all of the Company's 1999 non-U.S. sales are
to customers located in Canada and Europe. Foreign operations are subject to,
among other things, currency exchange rate fluctuations and the Company's
results of operations have in the past been both favorably and unfavorably
affected by fluctuations in currency exchange rates. Political and economic
uncertainties in certain of the countries in which the Company operates may
expose the Company to risk of loss. The Company does not believe that there is
currently any likelihood of material loss through political or economic
instability, seizure, nationalization or similar event. The Company cannot
predict, however, whether events of this type in the future could have a
material effect on its operations. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 7A -
"Quantitative and Qualitative Disclosures About Market Risk" and Note 1 to the
Consolidated Financial Statements.
Environmental Matters
The Company's operations are subject to federal, state, local and
foreign laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal and remediation of, and
exposure to, hazardous and non-hazardous substances, materials and wastes
("Environmental Laws"). The Company's operations also are subject to federal,
state, local and foreign laws and regulations relating to worker health and
safety. The Company believes that it is in substantial compliance with all such
laws and regulations. The costs of maintaining compliance with such laws and
regulations have not significantly impacted the Company to date, and the Company
has no significant planned costs or expenses relating to such matters. There can
be no assurance, however, that compliance with future Environmental Laws or with
future laws and regulations governing worker health and safety will not require
the Company to incur significant additional expenditures, or that such
additional costs would not have a material adverse effect on the Company's
business, consolidated financial condition, results of operations or liquidity.
Employees
As of December 31, 1999, the Company employed approximately 2,145
employees, including 700 in the United States, 890 in Canada, 385 in the
Netherlands, 130 in Taiwan and 40 in France. Approximately 85% of the Company's
employees in Canada are represented by a labor union. The Company's collective
bargaining agreement with such union expired in January 2000 and is currently
being renegotiated. The provisions of the expired agreement are being maintained
during the negotiation period. In addition, substantially all of the hourly
employees, at the Company's recently acquired Chicago Lock facility (which
employed approximately 240 employees, approximately 170 of which were hourly
employees, at January 10, 2000, the date of acquisition) are covered by a
collective bargaining agreement expiring in October 2000. The Company believes
that its labor relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in approximately
3,200 square feet of leased space at 16825 Northchase Drive, Houston, Texas
77060. The following table sets forth the location, size and general product
types produced for each of the Company's facilities.
<TABLE>
<CAPTION>
Products
Facility Name Location Size Produced
- ------------- -------- ---- --------
(square feet)
Owned Facilities:
- ----------------
<S> <C> <C> <C>
Manitou Kitchener, Ontario 280,000 Slides
Trillium Kitchener, Ontario 116,000 Ergonomic products
Thomas Regout Maastricht,
the Netherlands 270,000 Slides
Grand Rapids, MI 60,000 Slides and Ergonomic
products
National Cabinet
Lock Mauldin, SC 163,000 Locks
Fort Lock River Grove, IL 100,000 Locks
Timberline Lake Bluff, IL 16,000 Locks
Dynaslide Taipei, Taiwan 43,000 Slides
Leased Facilities:
- -----------------
Dynaslide Taipei, Taiwan 32,000 Slides
Chicago Lock Pleasant Prairie, WI 65,000 Locks
Chicago Tubar Hoffman Estates, IL 5,000 Locks
Chicago Lock Hoffman Estates, IL 5,000 Lock distribution
Distribution Center Chino, CA 6,000 Product distribution
</TABLE>
The Manitou, Maastricht, and National Cabinet Lock facilities are
ISO-9001 registered. The Dynaslide owned facility is ISO-9002 registered.
ISO-9001 registration of the Trillium, Grand Rapids and Fort Lock facilities is
anticipated in 2001. The Company believes that all its facilities are well
maintained and satisfactory for their intended purposes. The leases associated
with Chicago Lock facilities were assumed in January 2000.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved, from time to time, in various environmental,
contractual, product liability, patent (or intellectual property) and other
claims and disputes incidental to its business. Currently no environmental or
other material litigation is pending or, to the knowledge of the Company,
threatened. The Company currently believes that the disposition of all claims
and disputes, individually or in the aggregate, should not have a material
adverse effect on the Company's consolidated financial condition, results of
operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A common stock is listed and traded on the New York
Stock Exchange (symbol: CIX). As of February 29, 2000, there were approximately
31 holders of record of CompX Class A common stock. The following table sets
forth the high and low closing sales prices for CompX Class A common stock for
1998 and 1999 (subsequent to the Company's March 1998 initial public offering),
according to the New York Stock Exchange Composite Tape, and dividends paid per
share during such periods. On February 29, 2000 the closing price per share of
CompX Class A common stock according to the NYSE Composite Tape was $18 5/8.
<TABLE>
<CAPTION>
Dividends
High Low paid
Year ended December 31, 1998
<S> <C> <C> <C>
First Quarter $24 3/16 $23 1/8 $ -
Second Quarter 27 1/2 19 5/8 -
Third Quarter 24 11/16 16 3/4 -
Fourth Quarter 26 1/2 16 3/16 -
Year ended December 31, 1999
First Quarter $26 7/16 $12 3/4 $ -
Second Quarter 17 7/8 12 1/8 -
Third Quarter 19 15 1/2 -
Fourth Quarter 19 1/2 17 5/8 .125
</TABLE>
Subsequent to the Company's March 1998 initial public offering of
shares of its Class A common stock, the Company paid its first regular quarterly
dividend in December 1999. The declaration and payment of future dividends and
the amount thereof will be dependent upon the Company's results of operations,
financial condition, cash requirements for its businesses, contractual
requirements and restrictions and other factors deemed relevant by the Board of
Directors.
Prior to the March 1998 initial public offering, the Company paid
dividends to Valcor aggregating $6.1 million in 1997 and $1.8 million in 1998.
In addition, on December 12, 1997, the Company paid a $50 million dividend to
Valcor in the form of a note payable. The Company utilized borrowings under its
Revolving Senior Credit Facility to repay in full the note payable to Valcor in
1998.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Consolidated Financial Statements and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's operations are comprised of a 52 or 53 week fiscal year.
Each of the years 1995 through 1997 and 1999 consisted of a 52 week year and
1998 was a 53 week year.
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
($ in millions, except per share data)
Income Statement Data
<S> <C> <C> <C> <C> <C>
Net sales ...................... $ 80.2 $ 88.7 $ 108.7 $ 152.1 $ 225.9
Operating income ............... $ 19.4 $ 21.6 $ 27.1 $ 30.8 $ 40.1
Income before income taxes ..... $ 19.9 $ 22.1 $ 27.7 $ 32.5 $ 39.2
Income taxes ................... 7.8 9.1 11.0 12.0 14.1
Minority interest in losses .... -- -- -- (.2) (.1)
------- ------- ------- ------- -------
Net income ................... $ 12.1 $ 13.0 $ 16.7 $ 20.7 $ 25.2
======= ======= ======= ======= =======
Cash dividends (1) ............. $ 6.0 $ 6.2 $ 6.1 $ 1.8 $ 2.0
Basic earnings per share data .. $ 1.21 $ 1.30 $ 1.67 $ 1.37 $ 1.56
Weighted average common shares
outstanding ................... 10.0 10.0 10.0 15.1 16.1
Balance Sheet Data
(at year end):
Cash and other current assets $ 27.7 $ 32.2 $ 45.4 $ 86.5 $ 72.5
Total assets ................. 44.4 48.5 63.8 152.4 202.9
Current liabilities .......... 9.6 8.1 64.4 20.3 27.0
Long-term debt, including
current maturities .......... .1 .2 50.4 1.7 22.3
Stockholders' equity (deficit) 32.6 39.2 (1.2) 130.0 149.4
</TABLE>
(1) In addition to the amounts shown above, in December 1997 the Company
paid a $50 million dividend to Valcor in the form of a demand note payable. The
note was repaid in February 1998 using borrowings under the Company's Revolving
Senior Credit Facility. See Note 10 to the Consolidated Financial Statements.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company sells ergonomic computer support systems and precision ball
bearing slides and security products which consist of cabinet locks and locking
mechanisms. The Company manufactures its ergonomic and slide products in
facilities located in Canada, the Netherlands, Taiwan and Michigan. The
Company's security products are manufactured in facilities located in South
Carolina, Illinois and Wisconsin. During the mid-1990's, prior to 1998,
approximately 75% of the Company's net sales were to customers in the office
furniture industry. Beginning in 1998, the Company has increased its net sales
and net income through internal growth and through a series of strategic
acquisitions. The acquisitions have allowed the Company to expand its product
offerings and customer base to include a larger number of non-office furniture
industry products and customers. In 1998, primarily as a result of the Fort Lock
acquisition, approximately 50% of the Company's net sales were to customers in
the office furniture industry. In 1999, the Company acquired two precision ball
bearing slide producers allowing it to expand its product offering to encompass
the high, medium, and low ends of the precision ball bearing slide market. In
1999, approximately 62% of the Company's net sales were to customers in the
office furniture industry. The Company's customer base now includes customers in
the computer and related products, transportation and recreation industries as
well as its traditional office furniture industry customers.
In March 1998, the Company completed the acquisition of the Fort Lock
Corporation and related assets for an aggregate purchase price of approximately
$33 million (the "Fort Lock Acquisition"). Funding of the Fort Lock Acquisition
was provided by available cash on hand and borrowings under the Revolving Senior
Credit Facility, which borrowings were repaid with a portion of the net proceeds
of the Company's initial public offering. In November 1998, the Company acquired
Timberline Lock, Ltd. and related assets, a manufacturer of locks for wood
furniture applications, for approximately $8 million in cash funded by available
cash on hand.
In January 1999, the Company acquired Thomas Regout, a precision ball
bearing slide producer, for a purchase price of $53.2 million using available
cash on hand and $20 million of borrowings under the Company's $100 million
revolving bank credit facility. In November 1999, the Company acquired Dynaslide
for $11.8 million in cash.
Assuming the Thomas Regout and Fort Lock Acquisitions occurred January
1, 1998, the Company's unaudited pro forma net sales would have been $212.6
million in 1998 and pro forma operating income would have been $32.5 million.
The pro forma financial information is not necessarily indicative of actual
results had the transactions occurred at the beginning of the period, nor do
they purport to represent results of future operations of the merged companies.
The pro forma effects of the Timberline Lock and Dynaslide acquisitions are not
material.
The Company's profitability primarily depends on its ability to utilize
its production capacity effectively, which is affected by, among other things,
the demand for its products, and its ability to control its manufacturing costs,
primarily comprised of raw materials such as zinc, copper, coiled steel and
plastic resins and of labor costs. Raw material costs represent approximately
47% of the Company's total cost of sales. Beginning in August 1998, steel prices
declined approximately 5%, resulting in an overall decrease in raw material
costs of approximately 2% in 1998 compared to 1997. In 1999, steel prices did
not change significantly. The Company occasionally enters into raw material
supply arrangements to mitigate the short-term impact of future increases in raw
material costs. While these arrangements do not commit the Company to a minimum
volume of purchases, they generally provide for stated unit prices based upon
achievement of specified volume purchase levels. This allows the Company to
stabilize raw material purchase prices provided the specified minimum monthly
purchase quantities are met. The Company currently anticipates entering into
such arrangements for zinc, coiled steel and plastic resins in 2000 and does not
anticipate significant changes in the cost of these materials from their current
levels. Materials purchased on the spot market are sometimes subject to
unanticipated and sudden price increases. Due to the competitive nature of the
markets served by the Company's products, it is often difficult to recover such
increases in raw material costs through increased product selling prices and
consequently overall operating margins can be affected by such raw material cost
pressures.
Labor costs represent approximately 20% of the Company's total cost of
sales. At December 31, 1999, none of The Company's U.S. employees were
represented by bargaining units and wage increases historically have been in
line with overall inflation indices. Approximately 84% of the Company's Canadian
employees are covered by a three year collective bargaining agreement that
expired in January 2000 and provided for annual wage increases of 2% - 3%. The
provisions of the expired agreement will be maintained while a new collective
bargaining agreement is negotiated. Wage increases for these employees
historically have been in line with overall inflation indices.
Selling, general and administrative costs consist primarily of
salaries, commissions and advertising expenses directly related to product sales
and in 1997 and 1999 have been consistent as a percentage of net sales. In 1998,
in connection with the Company's initial public offering in March 1998, five of
the Company's officers and directors were awarded 164,880 shares of Class A
Common Stock. Accordingly, the Company recognized a $3.3 million pre-tax charge,
included in selling, general and administrative expenses, equal to the aggregate
value of the Class A shares awarded based on the initial public offering price.
About 74%, 66% and 43% of the Company's net sales in 1997, 1998 and
1999, respectively, were generated by its Canadian operations. About 60% of
these Canadian-produced sales are denominated in U.S. dollars while
substantially all of the related costs are incurred in Canadian dollars.
Consequently, relative changes in the U.S. dollar/Canadian dollar exchange rate
affect operating results. Since U.S. dollar/Canadian dollar exchange rates did
not fluctuate significantly from 1993 through 1997, the impact on operating
income of fluctuations in the value of the U.S. dollar relative to the Canadian
dollar during this period was not material. Compared to the prior period,
fluctuations in the value of the U.S. dollar relative to the Canadian dollar
increased operating income (excluding the effect of the stock award charge) by
3% and reduced net sales by approximately 1% in 1998 and reduced operating
income by 1% and reduced net sales by less than 1% in 1999.
Likewise, approximately 17% of the Company's 1999 net sales were
generated by its operations in the Netherlands. Approximately 83% of these sales
are denominated in Dutch guilders or the euro while substantially all of the
related cost are incurred in Dutch guilders or the euro. Fluctuations in the
value of the U.S. dollar relative to the Dutch guilder and/or euro did not have
a material impact on operating income or net sales in 1999.
Sales of slides and ergonomic products were impacted in the first half
of 1999 by softening demand in the office furniture industry. This slowdown was
consistent with growth rate statistics published by The Business and
Institutional Furniture Manufacturers Association (BIFMA), an association of
office furniture manufacturers and their associates. During the first half of
1999, the slowdown in the office furniture industry resulted in decreased demand
for the Company's slides and ergonomic products compared to 1998. In the third
quarter of 1999, demand for the Company's slide and ergonomic products began to
recover and the Company's net sales of slide and ergonomic products in the
second half of 1999 reflected the increased demand. Overall, due in part to
expected improved demand in the office furniture industry, the Company expects
its sales and operating income to be higher in 2000 compared to 1999.
Results of Operations
Year ended December 31, 1999 compared to year ended December 31, 1998
Net sales. Net sales increased $73.8 million, or 49% in 1999 compared
to 1998. This increase is primarily due to the inclusion of the results of
operations for the full year of Timberline Lock and Thomas Regout and the
November and December results for Dynaslide. Excluding the effect of these
acquisitions, net sales in 1999 increased 5% compared to net sales in 1998. The
5% increase reflects an increase in the Company's product sales to the office
furniture industry (primarily slides and ergonomic products), which increased 5%
along with increased sales of the Company's security products, which improved 3%
over the prior year.
Operating income. In 1999, operating income increased $7.7 million, or
22% over 1998. The majority of this growth was due to the acquisitions mentioned
earlier. Excluding the effect of the acquisitions and excluding the effect of
the $3.3 million stock award which occurred in 1998, operating income increased
$1.3 million or 4% over the prior year. Sales of slides and ergonomic products
were impacted in the first half of 1999 by softening demand in the office
furniture industry, however such sales and operating income improved in the
second half of 1999 as office furniture demand improved.
Year ended December 31, 1998 compared to year ended December 31, 1997
Net sales. Net sales increased $43.4 million, or 40% in 1998 compared to
1997, primarily due to increased volumes in all product lines and the inclusion
of the results of Fort Lock beginning March 3, 1998. Combined net sales from the
Company's ergonomic computer support systems and precision ball bearing slide
products increased $11.6 million, or 14%, based on higher unit volumes and
relatively stable prices. Security products net sales increased $31.8 million,
or 113%, primarily due to sales attributable to Fort Lock. Excluding the Fort
Lock acquisition, net sales of security products increased 4%.
Operating income. Operating income increased $6.9 million in 1998
compared to 1997 (excluding the $3.3 million stock award charge), or 24%, due
primarily to the increased volumes in all product lines and the inclusion of the
results of Fort Lock which was acquired on March 3, 1998. Excluding the Fort
Lock Acquisition and the $3.3 million stock award charge, operating income
increased 14% over 1997. The increase is due to increased net sales as discussed
above and a decline in certain raw material costs. Beginning in August 1998,
steel prices declined approximately 5%, resulting in an overall decrease in raw
material costs of approximately 2% in 1998 compared to 1997.
Year 2000 Issue
General. As a result of certain computer programs being written using
two digits rather than four to define the applicable year, certain computer
programs that had date-sensitive software may have recognized a date using "00"
as the year 1900 rather than the year 2000. This could have resulted in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities.
Over the past few years, the Company addressed the Year 2000 Issue in
an attempt to ensure that its computer systems would function properly after
December 31, 1999. This process included, among other things, the identification
of all systems and applications potentially affected by the Year 2000 Issue, the
determination of which systems and applications required remediation and the
completion thereof and the testing of systems and applications following
remediation for Year 2000 compliance. As part of its normal business operations,
the Company had already installed upgraded information systems at certain of its
locations which addressed the Year 2000 Issue. In addition, confirmations were
requested from major software and hardware vendors, suppliers and customers that
they were developing and implementing plans to become, or that they had become,
Year 2000 compliant. Contingency plans were also developed to address potential
Year 2000 issues related to business interruption in the event one or more of
the Company's internal systems or the systems of third parties upon which it
relied ultimately proved not to be Year 2000 compliant. After all of the efforts
described above, the Company believed that its key systems were Year 2000
compliant prior to December 31, 1999. Excluding the cost of ongoing system
upgrades, the amount spent by CompX to address the Year 2000 Issue was not
significant.
To date in 2000, none of the Company's manufacturing facilities have
suffered any significant downtime due to non-compliant systems, nor have any
significant problems associated with the Year 2000 Issue been identified in any
of such companies' systems. The Company will continue to monitor its major
systems in order to ensure that such systems continue to be Year 2000 compliant.
However, based primarily upon the length of time into 2000 which has elapsed
without the identification of any significant problems related to the Year 2000
Issue, the Company does not currently expect any significant Year 2000
Issue-related problems will develop for any of its systems.
Impact of accounting standards not yet adopted
See Note 1 to the Consolidated Financial Statements.
Liquidity and Capital Resources
Consolidated cash flows
Operating activities. Trends in cash flows from operating activities,
excluding changes in assets and liabilities and non-cash stock award charges,
for 1997, 1998 and 1999, are generally similar to the trends in the Company's
earnings. Cash flow provided by operating activities (excluding the non-cash
stock award charge) totaled, $23.0 million, $24.3 million and $28.4 million for
the years ended December 31, 1997, 1998 and 1999, respectively, compared to net
income of $16.7 million, $20.7 million and $25.2 million, respectively.
Depreciation and amortization increased in 1998 and 1999 in part due to the
acquisitions discussed above.
Changes in assets and liabilities result primarily from the timing of
production, sales and purchases. Such changes in assets and liabilities
generally tend to even out over time and result in trends in cash flows from
operating activities generally reflecting earnings trends.
Investing activities. Net cash used by investing activities totaled
$5.5 million, $54.2 million and $84.6 million for the years ended December 31,
1997, 1998 and 1999, respectively. Cash used by investing activities in 1998
includes an aggregate of $41.6 million for the Fort Lock and Timberline
acquisitions. Likewise in 1999, $65.0 million in cash was used for the Thomas
Regout and Dynaslide acquisitions. Other cash flows from investing activities in
each of the past three years related principally to capital expenditures.
Capital expenditures in the past three years emphasized manufacturing equipment
which utilizes new technologies and increases automation of the manufacturing
process to provide for increased productivity and efficiency. The increase in
capital expenditures in 1998 and 1999 relates primarily to the additions of a
third plating line at the Company's Kitchener facility, facility expansions in
Mauldin and Kitchener, the acquisition of an adjoining manufacturing building at
Fort Lock and the addition of automation equipment at all facilities.
Capital expenditures for 2000 are estimated at approximately $25.1
million, the majority of which relate to projects that emphasize improved
production efficiency and increase production capacity and development of
e-commerce capabilities. Firm purchase commitments for capital projects in
process at December 31, 1999 approximated $4 million. As discussed above, the
Company acquired substantially all of the operating assets of Chicago Lock
Company for approximately $9.2 million in cash during January 2000. Funds for
this acquisition were provided by borrowings on the Company's existing revolving
credit facility.
Financing activities. Net cash provided (used) by financing activities
totaled ($5.9) million, $58.7 million and $17.0 million for the years ended
December 31, 1997, 1998 and 1999, respectively. Net cash provided in 1998
includes $110.4 million of net proceeds from the Company's March 1998 initial
public offering and the repayment of the $50 million note payable to Valcor,
discussed below. Prior to the initial public offering, the Company paid
dividends to its parent company aggregating $6.1 million in 1997 and $1.8
million in 1998. In addition, on December 12, 1997, the Company paid a $50
million dividend to Valcor in the form of a note payable. The Company utilized
borrowings under the Revolving Senior Credit Facility to repay the note payable
to Valcor. See Notes 9 and 10 to the Consolidated Financial Statements. The
Company also paid its first regular quarterly dividend of $0.125 per share in
December 1999 since the initial public offering. Total cash dividends paid in
1999 were $2.0 million.
At December 31, 1999, after borrowing $20 million to fund acquisitions,
the Company had $80 million of borrowing availability under its Revolving Senior
Credit Facility.
Other
Management believes that cash generated from operations and borrowing
availability under the Revolving Senior Credit Facility, together with cash on
hand, will be sufficient to meet the Company's liquidity needs for working
capital, capital expenditures, debt service and dividends.
The Company periodically evaluates its liquidity requirements,
alternative uses of capital, capital needs and available resources in view of,
among other things, its capital expenditure requirements in light of its capital
resources and estimated future operating cash flows. As a result of this
process, the Company may in the future seek to raise additional capital,
refinance or restructure indebtedness, issue additional securities, modify its
dividend policy or take a combination of such steps to manage its liquidity and
capital resources. In the normal course of business, the Company may review
opportunities for acquisitions, joint ventures or other business combinations in
the component products industry. In the event of any such transaction, the
Company may consider using available cash, issuing additional equity securities
or increasing the indebtedness of the Company or its subsidiaries.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General. The Company is exposed to market risk from changes in foreign
currency exchange rates and interest rates. The Company has also periodically
entered into currency forward contracts to either manage a very nominal portion
of foreign exchange rate market risk associated with receivables denominated in
a currency other than the holder's functional currency or to hedge specific
foreign currency commitments. Otherwise, the Company does not generally enter
into forward or option contracts to manage such market risks, nor does the
Company enter into any such contract or other type of derivative instrument for
trading or speculative purposes. Other than the contracts discussed below, the
Company was not a party to any forward or derivative option contract related to
foreign exchange rates or interest rates at December 31, 1998 and 1999. See
Notes 1 and 11 to the Consolidated Financial Statements.
Interest rates. The Company is exposed to market risk from changes in
interest rates, primarily related to indebtedness.
At December 31, 1999, substantially all of the Company's outstanding
indebtedness were variable rate borrowings and related principally to $20
million in borrowings under the Company's existing $100 million revolving senior
credit facility. The outstanding balance at December 31, 1999 (which
approximates fair value) had a weighted-average interest rate of 6.21%. Amounts
outstanding under this credit facility are due in 2003. The remaining
indebtedness outstanding at December 31, 1999, and all outstanding indebtedness
at December 31, 1998, is not material.
Foreign currency exchange rates. The Company is exposed to market risk
arising from changes in foreign currency exchange rates as a result of
manufacturing and selling its products worldwide. Earnings are primarily
affected by fluctuations in the value of the U.S. dollar relative to the
Canadian dollar, the Dutch guilder, the euro and beginning in November 1999, the
New Taiwanese dollar.
Certain of CompX's sales generated by its Canadian operations are
denominated in U.S. dollars. To manage a portion of the foreign exchange rate
market risk associated with such receivables, at December 31, 1999 CompX had
entered into a series of short-term forward exchange contracts maturing through
March 2000 to exchange an aggregate of $6.0 million for an equivalent amount of
Canadian dollars at exchange rates ranging between Cdn$ 1.491 and Cdn $ 1.486
per U.S. dollar. The Company was not a party to such contract at December 31,
1998.
Solely in connection with the January 1999 acquisition of Thomas
Regout, on December 30, 1998 the Company entered into a short-term currency
forward contract to purchase NLG 75.0 million for $40.1 million which contract
was executed on January 19, 1999. See Note 2 to the Consolidated Financial
Statements. The Company was not a party to any such contract at December 31,
1999.
The estimated fair value of all such outstanding forward contracts at
December 31, 1998 and 1999 is not material.
Other. Beginning January 1, 1999, eleven of the fifteen members of the
European Union ("EU"), including the Netherlands and France, adopted a new
European currency unit (the "euro") as their common legal currency. Following
the introduction of the euro, the participating countries' national currencies
remain legal tender as denominations of the euro from January 1, 1999 through
January 1, 2002, and the exchange rates between the euro and such national
currency units are fixed.
The functional currencies of the Company's Thomas Regout operations in
Maastricht, the Netherlands, have begun conversion to the euro from its national
currency. This is expected to be completed in 2001. Although not expected, the
euro conversion may impact the Company's operations including, among other
things, changes in product pricing decisions necessitated by cross-border price
transparencies. Such changes in product pricing decisions could impact both
selling prices and purchasing costs and, consequently, favorably or unfavorably
impact results of operations. Because of the inherent uncertainty of the
ultimate effect of the euro conversion, the Company cannot accurately predict
the impact of the euro conversion on its results of operations, financial
condition or liquidity.
The above discussion includes forward-looking statements of market risk
which assume hypothetical changes in market prices. Actual future market
conditions will likely differ materially from such assumptions. Accordingly,
such forward-looking statements should not be considered to be projections by
the Company of future events or losses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is contained in a separate
section of this Annual Report. See "Index of Financial Statements and Schedules"
(page F).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to
CompX's definitive Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this report (the "CompX Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the CompX Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
the CompX Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the CompX Proxy Statement. See Note 10 to the Consolidated Financial Statements.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) and (d) Financial Statements and Schedules
The Registrant
The consolidated financial statements and schedules listed on
the accompanying Index of Financial Statements and Schedules
(see page F) are filed as part of this Annual Report.
(b) Reports on Form 8-K
Reports on Form 8-K filed for the quarter ended
December 31, 1999.
October 15, 1999 - Reported Items 5 and 7. October
18, 1999 - Reported Items 5 and 7. November 19, 1999-
Reported Items 5 and 7. November 30, 1999- Reported
Items 5 and 7. December 15, 1999- Reported Items 5
and 7.
(c) Exhibits
Included as exhibits are the items listed in the
Exhibit Index. CompX will furnish a copy of any of
the exhibits listed below upon payment of $4.00 per
exhibit to cover the costs to CompX of furnishing the
exhibits. Instruments defining the rights of holders
of long-term debt issues which do not exceed 10% of
consolidated total assets will be furnished to the
Commission upon request.
Item No. Exhibit Item
3.1 Restated Certificate of Incorporation of Registrant - incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement on
Form S-1 (File No. 333-42643).
3.2 Bylaws of Registrant - incorporated by reference to Exhibit 3.2 of the
Registrant's Registration Statement on Form S-1 (File No. 333-42643).
10.1 Intercorporate Services Agreement between the Registrant and Valhi,
Inc. effective as of January 1, 1999.
10.2 Intercorporate Services Agreement between the Registrant and NL
Industries, Inc. effective as of January 1, 1999 - incorporated by
reference to Exhibit 10.1 to NL Industries, Inc.'s Quarterly Report on
Form 10-Q (File No. 1-640) for the quarter ended June 30, 1999.
10.3* CompX International Inc. 1997 Long-Term Incentive Plan - incorporated
by reference to Exhibit 10.2 of the Registrant's Registration Statement
on Form S-1 (File No. 333-42643).
10.4* CompX International Inc. Variable Compensation Plan effective as of
January 1, 1999 - incorporated by reference to Exhibit 10.4 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1998.
<PAGE>
Item No. Exhibit Item
10.5 Agreement between Haworth, Inc. and Waterloo Furniture Components, Ltd.
and Waterloo Furniture Components, Inc. effective October 1, 1992 -
incorporated by reference to Exhibit 10.3 of the Registrant's
Registration Statement on Form S-1 (File No. 333-42643).
10.6 Tax Sharing Agreement among the Registrant, Valcor, Inc. and Valhi,
Inc. dated as of January 2, 1998 - incorporated by reference to Exhibit
10.4 of the Registrant's Registration Statement on Form S-1 (File No.
333-42643).
10.7 $100,000,000 Credit Agreement between the Registrant, Bankers Trust
Company, as Agent and various lending institutions dated February 26,
1998 - incorporated by reference to Exhibit 10.5 of the Registrant's
Registration Statement on Form S-1 (File No. 333-42643).
10.8 Amendment No. 1 to Credit Agreement between Registrant, Bankers Trust
Company, as Agent and various lending institutions, dated December 15,
1999.
10.9 Stock Purchase Agreement between CompX International Inc. and
Shareholders of Fort Lock Corporation dated February 3, 1998 -
incorporated by reference to Exhibit 10.7 of the Registrant's
Registration Statement on Form S-1 (File No. 333-42643).
10.10 Offer and Acquisition Agreement dated December 18, 1998 between CompX
International Inc. and Thomas Regout Holding N.V. - incorporated by
reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K
dated January 29, 1999.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule for the year ended December 31, 1999.
99.1 Annual Report of the National Cabinet Lock, Inc. Contributory
Retirement Plan (Form 11-K) to be filed under Form 10-K/A to this
Annual Report on Form 10-K within 180 days after December 31, 1999.
99.2 Annual Report of the 401(k) Plan of The Fort Lock Corporation (Form
11-K) to be filed under Form 10-K/A to this Annual Report on Form 10-K
within 180 days after December 31, 1999.
*Management contract, compensatory plan or agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
COMPX INTERNATIONAL INC.
By: /s/ Joseph S. Compofelice
Joseph S. Compofelice
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
Signature Title Date
/s/ Joseph S. Compofelice Chairman of the Board, President March 22, 2000
- --------------------------- and Chief Executive Officer
Joseph S. Compofelice
/s/ John A. Miller Vice President, March 22, 2000
- ----------------------------- Chief Financial Officer and Treasurer
John A. Miller (Principal Financial Officer)
/s/ David A. Bowers Vice President and President March 22, 2000
- ----------------------------- of CompX Security Products
David A. Bowers and Director
/s/ Todd W. Strange Vice President and March 22, 2000
- ----------------------------- Controller (Principal
Accounting Officer)
/s/ Glenn R. Simmons Director March 22, 2000
- -----------------------------
Glenn R. Simmons
/s/ Edward J. Hardin Director March 22, 2000
- -----------------------------
Edward J. Hardin
/s/ Paul M. Bass, Jr. Director March 22, 2000
- -----------------------------
Paul M. Bass, Jr.
/s/ Ann Manix Director March 22, 2000
- ----------------------------
Ann Manix
/s/ Steven L. Watson Director March 22, 2000
- -----------------------------
Steven L. Watson
Annual Report on Form 10-K
Items 8, 14(a) and 14(d)
Index of Financial Statements and Schedules
Financial Statements Page
Report of Independent Accountants F-1
Consolidated Balance Sheets - December 31, 1998 and 1999 F-2
Consolidated Statements of Income -
Years ended December 31, 1997, 1998 and 1999 F-4
Consolidated Statements of Comprehensive Income -
Years ended December 31, 1997, 1998 and 1999 F-5
Consolidated Statements of Cash Flows -
Years ended December 31, 1997, 1998 and 1999 F-6
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1997, 1998 and 1999 F-8
Notes to Consolidated Financial Statements F-9
Financial Statement Schedules
Report of Independent Accountants S-1
Schedule II - Valuation and qualifying accounts S-2
Schedules I, III and IV are omitted because they are not applicable.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of CompX International Inc.:
In our opinion, the accompanying consolidated balance sheets of CompX
International Inc. and Subsidiaries, and the related consolidated statements of
income, comprehensive income, cash flows and stockholders' equity, present
fairly, in all material respects, the consolidated financial position of CompX
International Inc. and Subsidiaries as of December 31, 1998 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of the consolidated financial statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
February 13, 2000
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1998 1999
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents ........................ $ 47,363 $ 12,169
Accounts receivable, less allowance for
doubtful accounts of $310 and $725 .............. 18,976 29,053
Income taxes receivable from affiliates .......... 573 22
Refundable income taxes .......................... 524 462
Inventories ...................................... 16,952 27,659
Prepaid expenses ................................. 1,381 1,858
Deferred income taxes ............................ 688 1,258
-------- --------
Total current assets ......................... 86,457 72,481
-------- --------
Other assets:
Goodwill ......................................... 22,317 41,697
Other intangible assets .......................... 2,938 2,787
Deferred income taxes ............................ -- 2,499
Other ............................................ 400 203
-------- --------
Total other assets ........................... 25,655 47,186
-------- --------
Property and equipment:
Land ............................................. 1,219 3,549
Buildings ........................................ 13,678 27,898
Equipment ........................................ 39,216 70,242
Construction in progress ......................... 3,533 6,710
-------- --------
57,646 108,399
Less accumulated depreciation .................... 17,376 25,154
-------- --------
Net property and equipment ................... 40,270 83,245
-------- --------
$152,382 $202,912
======== ========
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 1998 and 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1999
---- ----
Current liabilities:
<S> <C> <C>
Current maturities of long-term debt ............. $ 609 $ 1,367
Accounts payable and accrued liabilities ......... 17,243 25,389
Income taxes ..................................... 2,415 91
-------- --------
Total current liabilities .................... 20,267 26,847
-------- --------
Noncurrent liabilities:
Long-term debt ................................... 1,082 20,900
Deferred income taxes ............................ 983 3,223
Accrued pension costs ............................ -- 1,209
Other ............................................ -- 1,274
-------- --------
Total noncurrent liabilities ................. 2,065 26,606
-------- --------
Minority interest .................................. 4 103
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000 shares
authorized, none issued ......................... -- --
Class A common stock, $.01 par value;
20,000,000 shares authorized; 6,144,880 and 6,147,380
shares issued and outstanding ................... 61 61
Class B common stock, $.01 par value;
10,000,000 shares authorized, issued and outstanding 100 100
Additional paid-in capital ....................... 118,027 118,067
Retained earnings ................................ 14,270 37,415
Accumulated other comprehensive income-
currency translation ............................ (2,412) (6,287)
-------- --------
Total stockholders' equity ................... 130,046 149,356
-------- --------
$152,382 $202,912
======== ========
</TABLE>
Commitments and contingencies (Notes 2 and 11)
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1997, 1998 and 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Net sales ................................. $ 108,652 $ 152,093 $ 225,888
--------- --------- ---------
Costs and expenses:
Cost of sales ........................... 70,638 102,004 160,628
Selling, general and administrative ..... 10,546 19,706 25,220
Other expense (income), net ............. 401 (412) (104)
General corporate expense (income), net . (801) (2,834) (572)
Interest expense ........................ 199 1,094 1,554
--------- --------- ---------
80,983 119,558 186,726
--------- --------- ---------
Income before income taxes and
minority interest .................. 27,669 32,535 39,162
Provision for income taxes ................ 11,019 12,034 14,102
Minority interest ......................... -- (165) (103)
--------- --------- ---------
Net income .......................... $ 16,650 $ 20,666 $ 25,163
========= ========= =========
Basic and diluted earnings per common share $ 1.67 $ 1.37 $ 1.56
========= ========= =========
Shares used in the calculation of earnings
per share amounts:
Basic earnings per share ................ 10,000 15,052 16,146
Dilutive impact of stock options ........ -- 32 3
--------- --------- ---------
Diluted earnings per share .............. 10,000 15,084 16,149
========= ========= =========
</TABLE>
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net income .............................. $ 16,650 $ 20,666 $ 25,163
-------- -------- --------
Other comprehensive income -
currency translation adjustment:
Pre-tax amount ...................... (1,472) (2,001) (3,875)
Less income tax benefit ............. (515) (668) --
-------- -------- --------
Total other comprehensive income .... (957) (1,333) (3,875)
-------- -------- --------
Comprehensive income .............. $ 15,693 $ 19,333 $ 21,288
======== ======== ========
</TABLE>
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income .............................. $16,650 $20,666 $25,163
Depreciation and amortization ........... 2,811 4,538 9,406
Deferred income taxes ....................... (651) (830) 1,423
Noncash stock award of Management Shares .... -- 3,298 --
Minority interest ........................... -- (165) (103)
Other, net .................................. 338 (85) (243)
Change in assets and liabilities:
Accounts receivable ....................... (3,117) (1,319) (3,186)
Inventories ............................... (194) (375) (1,992)
Accounts payable and accrued liabilities .. 4,531 1,486 (2,470)
Accounts with affiliates .................. 710 (904) 532
Income taxes .............................. 1,502 (687) (1,579)
Other, net ................................ 372 (1,357) 1,471
-------- --------- --------
Net cash provided by operating activities 22,952 24,266 28,422
-------- --------- --------
Cash flows from investing activities:
Capital expenditures ........................ (5,536) (12,928) (19,703)
Purchase of business units .................. -- (41,646) (64,975)
Other, net .................................. 15 398 54
-------- --------- --------
Net cash used by investing activities ... (5,521) (54,176) (84,624)
-------- --------- --------
Cash flows from financing activities:
Long-term debt:
Additions ................................. 369 75,475 20,000
Principal payments ........................ (156) (75,157) (1,009)
Deferred financing costs paid ............. -- (200) --
Repayment of demand note to Valcor .......... -- (50,000) --
Issuance of common stock .................... -- 110,378 --
Dividends ................................... (6,098) (1,800) (2,018)
-------- --------- --------
Net cash provided (used) by financing
activities ............................. (5,885) 58,696 16,973
-------- --------- --------
Net increase (decrease) ....................... $ 11,546 $ 28,786 $(39,229)
======== ========= ========
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing
<S> <C> <C> <C>
activities ............................... $ 11,546 $ 28,786 $(39,229)
Business units acquired ................... -- 387 4,785
Currency translation ...................... (909) (997) (750)
Balance at beginning of year ................ 8,550 19,187 47,363
-------- -------- --------
Balance at end of year ...................... $ 19,187 $ 47,363 $ 12,169
======== ======== ========
Supplemental disclosures:
Cash paid for:
Interest .................................. $ 35 $ 1,244 $ 1,253
Income taxes .............................. 9,617 14,449 13,284
Dividend in the form of a demand note payable $ 50,000 $ -- $ --
Net assets consolidated -
business units acquired:
Cash and cash equivalents ................. $ -- $ 387 $ 4,785
Goodwill .................................. -- 23,145 22,700
Other intangible assets ................... -- 3,057 --
Other non-cash assets ..................... -- 21,653 54,966
Liabilities ............................... -- (6,596) (17,476)
-------- -------- --------
Cash paid ................................. $ -- $ 41,646 $ 64,975
======== ======== ========
</TABLE>
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1997, 1998 and 1999
(In thousands)
<TABLE>
<CAPTION>
Accumulated other
comprehensive
income - Total
Additional Retained currency stockholders'
Common stock paid-in earnings translation equity
Class A Class B capital (deficit) (deficit)
------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $- $100 $ 4,412 $ 34,852 $ (122) $ 39,242
Net income ................. -- -- -- 16,650 -- 16,650
Other comprehensive income . -- -- -- -- (957) (957)
Dividends:
Cash ..................... -- -- -- (6,098) -- (6,098)
Noncash .................. -- -- -- (50,000) -- (50,000)
--- ---- -------- -------- ------- ---------
Balance at December 31, 1997 -- 100 4,412 (4,596) (1,079) (1,163)
Net income ................. -- -- -- 20,666 -- 20,666
Other comprehensive income . -- -- -- -- (1,333) (1,333)
Cash dividends ............. -- -- -- (1,800) -- (1,800)
Issuance of common stock:
Initial public offering .. 60 -- 110,318 -- -- 110,378
Management shares ........ 1 -- 3,297 -- -- 3,298
--- ---- -------- -------- ------- ---------
Balance at December 31, 1998 61 100 118,027 14,270 (2,412) 130,046
Net income ................. -- -- -- 25,163 -- 25,163
Other comprehensive income . -- -- -- -- (3,875) (3,875)
Cash dividends ............. -- -- -- (2,018) -- (2,018)
Issuance of common stock ... -- -- 40 -- -- 40
--- ---- -------- -------- ------- ---------
Balance at December 31, 1999 $61 $100 $118,067 $ 37,415 $(6,287) $ 149,356
=== ==== ======== ======== ======= =========
</TABLE>
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Organization. CompX International Inc. (NYSE: CIX) is 64% owned by
Valhi, Inc. (NYSE: VHI) and Valhi's wholly-owned subsidiary Valcor, Inc. Prior
to the Company's March 1998 initial public offering, the Company was a
wholly-owned subsidiary of Valcor. The Company manufactures and sells component
products (ergonomic computer support systems, precision ball bearing slides and
security products). Contran Corporation holds, directly or through subsidiaries,
approximately 93% of Valhi's outstanding common stock. Substantially all of
Contran's outstanding voting stock is held either by trusts established for the
benefit of certain children and grandchildren of Harold C. Simmons, of which Mr.
Simmons is sole trustee, or by Mr. Simmons directly. Mr. Simmons, the Chairman
of the Board and Chief Executive officer of each of Contran, Valhi and Valcor,
may be deemed to control each of such companies and the Company.
Management estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amount of revenues and expenses
during the reporting period. Ultimate actual results may, in some instances,
differ from previously estimated amounts.
Principles of consolidation. The accompanying consolidated financial
statements include the accounts of CompX International Inc. and its
majority-owned subsidiaries. All material intercompany accounts and balances
have been eliminated. Certain prior year amounts have been reclassified to
conform to the current year presentation.
Fiscal year. The Company's operations are reported on a 52 or 53-week
fiscal year. The years ended December 31, 1997 and 1999 each consisted of 52
weeks, and the year ended December 31, 1998 consisted of 53 weeks.
Translation of foreign currencies. Assets and liabilities of
subsidiaries whose functional currency is other than the U.S. dollar are
translated at year-end rates of exchange and revenues and expenses are
translated at average exchange rates prevailing during the year. Resulting
translation adjustments are accumulated in stockholders' equity as part of
accumulated other comprehensive income, net of related deferred income taxes and
minority interest. Currency transaction gains and losses are recognized in
income currently. The net foreign currency transaction gain (loss), included in
other income, net, was $303,000 in 1997, $512,000 in 1998 and ($290,000) in
1999.
Cash and cash equivalents. Cash equivalents consist principally of bank
time deposits and government and commercial notes with original maturities of
three months or less.
Net sales. Sales are recorded when products are shipped. Title generally
passes at the point of shipment.
Inventories and cost of sales. Inventories are stated at the lower of
cost or market. Inventories are based on average cost or the first-in, first-out
method.
Property, equipment and depreciation. Property and equipment, including
purchased computer software for internal use, are stated at cost. Expenditures
for maintenance, repairs and minor renewals are expensed; expenditures for major
improvements are capitalized. Depreciation for financial reporting purposes is
computed principally by the straight-line method over the estimated useful lives
of 15 to 40 years for buildings and three to 10 years for equipment. Accelerated
depreciation methods are used for income tax purposes, as permitted.
When events or changes in circumstances indicate that assets may be
impaired, an evaluation is performed to determine if impairment does exist. Such
events or changes in circumstances include, among other things, significant
current and prior periods or current and projected periods operating losses, a
significant decrease in the market value of an asset or a significant change in
the extent or manner in which an asset is used. All relevant factors are
considered. The test for impairment is performed by comparing the estimated
future undiscounted cash flows (exclusive of interest expense) associated with
the asset to the asset's net carrying value to determine if a write-down to
market value or discounted cash flow value is required. If the asset being
tested for impairment was acquired in a business combination accounted for by
the purchase method, any goodwill which arose out of that business combination
may also be considered in the impairment test if the goodwill related
specifically to the acquired asset and not to other aspects of the acquired
business, such as the customer base or product lines.
Intangible assets and amortization. Goodwill, representing the excess of
cost over fair value of individual net assets acquired in business combinations
accounted for by the purchase method, is amortized by the straight-line method
over 20 years and is stated net of accumulated amortization of $.8 million at
December 31, 1998 and $2.7 million at December 31, 1999.
Other intangible assets, consisting primarily of the estimated fair
value of certain patents acquired, are being amortized by the straight-line
method over the lives of such patents (approximately 13.25 years remaining at
December 31, 1999) and are stated net of accumulated amortization of $.2 million
at December 31, 1998 and $.4 million at December 31, 1999.
When events or changes in circumstances indicate that goodwill and
other intangible assets may be impaired, an evaluation is performed to determine
if impairment does exist. Such events or circumstances include, among other
things, a prolonged period of time during which the Company's consolidated net
book value per share is less than the Company's quoted market price for its
common stock or significant current and prior periods or current and projected
periods operating losses related to the applicable business. All relevant
factors are considered in determining whether impairment exists. If impairment
is determined to exist, goodwill and, if appropriate, the underlying long-lived
assets associated with the goodwill, are written down to reflect the estimated
future discounted cash flows expected to be generated by the underlying
business.
Currency forward contracts. Certain of the Company's sales generated by
its non-U.S. operations are denominated in U.S. dollars. The Company
periodically uses currency forward contracts to manage a very nominal portion of
foreign exchange rate risk associated with receivables denominated in a currency
other than the holder's functional currency. The Company has not entered into
these contracts for trading or speculative purposes in the past, nor does the
Company currently anticipate entering into such contracts for trading or
speculative purposes in the future. At each balance sheet date, any such
outstanding currency forward contract is marked-to-market with any resulting
gain or loss recognized in income currently. At December 31, 1999, he Company
held contracts designated as a hedge against such receivables to exchange an
aggregate of U.S. $6.0 million for an equivalent amount of Canadian dollars at
exchange rates ranging between Cdn. $1.491 and Cdn. $1.486. Such contracts
mature through March 2000. No such contracts were outstanding at December 31,
1998.
The Company also will periodically use currency forward contracts to
hedge specific foreign currency commitments. Gains and losses on such contracts
are deferred and included in the basis of the hedged transaction when it is
consummated. In connection with CompX's acquisition of a slide producer in
January 1999 (see Note 2), on December 30, 1998 CompX entered into a short-term
currency forward contract to purchase NLG 75 million for $40.1 million, which
contract was executed on January 19, 1999. The Company was not a party to any
such contract at December 31, 1999.
The estimated fair value of all such currency forward contracts is not
material at December 31, 1998 and 1999.
Income taxes. Prior to March 1998, the Company was a member of Contran's
consolidated United States federal income tax group (the "Contran Tax Group").
The policy for intercompany allocation of federal income taxes provided that
subsidiaries included in the Contran Tax Group compute the provision for federal
income taxes on a separate company basis. The Company made payments to, or
received payments from, Contran in the amount they would have paid to or
received from the Internal Revenue Service had it not been a member of the
Contran Tax Group. The separate company provisions and payments were computed
using the tax elections made by Contran. Subsequent to the Company's initial
public offering of shares of its Class A common stock in March 1998, the Company
became a separate U.S. federal income taxpayer and ceased being a member of the
Contran Tax Group. The Company continues to be a part of consolidated tax
returns filed by Contran in certain U.S. state jurisdictions.
Deferred income tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the income tax
and financial reporting carrying amounts of assets and liabilities, including
undistributed earnings of foreign subsidiaries which are not deemed to be
permanently reinvested. The Company periodically evaluates its deferred tax
assets and adjusts any related valuation allowance based on the estimate of the
amount of such deferred tax assets which the Company believes does not meet the
"more-likely-than-not" recognition criteria. Earnings of foreign subsidiaries
deemed to be permanently reinvested aggregate $16 million at December 31, 1998
and $32 million at December 31, 1999.
Earnings per share. Basic earnings per share of common stock is based
upon the weighted average number of common shares actually outstanding during
each period. Diluted earnings per share of common stock includes the impact of
outstanding dilutive stock options. The weighted average number of outstanding
stock options which were excluded from the calculation of diluted earnings per
share because their impact would have been antidilutive aggregated approximately
472,514 in 1999 (nil in 1997 and 1998).
Stock options. The Company accounts for stock-based employee
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and its various interpretations. Under
APBO No. 25, no compensation cost is generally recognized for fixed stock
options in which the exercise price is not less than the market price on the
grant date. Compensation cost recognized by the Company in accordance with APBO
No. 25 has not been significant in any of the past three years.
<PAGE>
Other. Advertising costs, expensed as incurred, were $555,000 in 1997,
$423,000 in 1998 and $1,030,000 in 1999. Research and development costs,
expensed as incurred, were $468,000 in 1997, $643,000 in 1998 and $1,032,000 in
1999.
New accounting principle not yet adopted. The Company will adopt
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, no later than the first quarter
of 2001. Under SFAS No. 133, all derivatives will be recognized as either assets
or liabilities and measured at fair value. The accounting for changes in fair
value of derivatives will depend upon the intended use of the derivative. The
impact on the Company of adopting SFAS No. 133, if any, has not yet been
determined but will be dependent upon the extent to which the Company is a party
to derivative contracts or hedging activities covered by SFAS No. 133 at the
time of adoption, including derivatives embedded in non-derivative host
contracts.
Note 2 - Business units acquired:
In 1998, the Company acquired two U.S. lock producers (Fort Lock
Corporation and related assets in March 1998 and Timberline Lock, Ltd. and
related assets in November 1998) for an aggregate cash purchase price of
approximately $41.6 million. Funding for these acquisitions was provided by cash
on hand and $25 million of borrowings under the Company's $100 million revolving
credit facility discussed in Note 6. The Company accounted for these
acquisitions by the purchase method of accounting and, accordingly, the results
of operations and cash flows of the businesses acquired are included in the
Company's consolidated financial statements subsequent to the respective dates
of acquisition.
In January 1999, the Company acquired Thomas Regout Holding N.V.
("Thomas Regout"), a precision ball bearing slide producer based in the
Netherlands for aggregate cash consideration of NLG 98 million ($53.2 million),
using funds on hand and $20 million of borrowing under the Company's revolving
credit facility. In November 1999, the Company acquired the business that
produces the Dynaslide line of precision ball bearing drawer slides in two
manufacturing plants in Taipei, Taiwan ("Dynaslide"). The purchase price of
$11.8 million includes all the assets and operations that produce the Dynaslide
products and was financed with existing cash. These acquisitions were also
accounted for by the purchase method, and accordingly, the results of operations
and cash flows of the acquired businesses have been included in the Company's
consolidated financial statements subsequent to the respective acquisition
dates.
The purchase price for all four of these acquisitions has been
allocated to the individual assets acquired and liabilities assumed based upon
estimated fair values.
Assuming the Thomas Regout and Fort Lock Corporation acquisitions
occurred as of January 1, 1998, the Company's unaudited pro forma net sales,
operating income and net income in 1998 would have been $212.6 million, $32.5
million and $20.1 million, respectively. Diluted pro forma earnings per common
share would have been $1.33 per share. The pro forma effect of the Timberline
Lock, Ltd. and Dynaslide acquisitions is not material. The unaudited pro forma
financial information is not necessarily indicative of the actual results had
the transactions occurred at the beginning of the period, nor do they purport to
represent the results of future operations of the combined companies.
In January 2000, the Company acquired substantially all of the
operating assets of Chicago Lock Company for approximately $9.2 million in cash.
CompX used borrowings under its existing credit facility to pay the cash
purchase price.
Note 3 - Business and geographic segments:
The Company operates in one business segment - the manufacture and sale
of ergonomic and slide products (ergonomic computer support systems and
precision ball bearing slides) and security products for furniture and other
markets. The Company evaluates segment performance based on segment operating
income. The accounting policies of the reportable operating segments are the
same as those described in Note 1. Capital expenditures include additions to
property and equipment but exclude amounts attributable to business units
acquired in business combinations accounted for by the purchase method. See Note
2.
In 1999, the Company changed its definition of segment operating
income. Operating income is now defined as income before income taxes and
interest expense, exclusive of all interest and dividend income, foreign
currency transaction gains and losses and certain non-recurring items (such as
gains and losses on disposition of business units). The prior definition of
operating income included foreign currency transaction gains and losses and a
portion of interest and dividend income. The effect of this change in definition
on previously reported total segment operating income is a decrease of $1.3
million and $1.1 million in 1997 and 1998, respectively. Operating income in
1997 and 1998, as presented below, has been restated based on the Company's new
definition.
Segment assets are comprised of all assets attributable to the
reportable operating segments. Corporate assets are not attributable to the
operating segments and consist primarily of cash and cash equivalents. For
geographic information, net sales are attributed to the place of manufacture
(point-of-origin) and the location of the customer (point-of-destination);
property and equipment are attributed to their physical location. At December
31, 1998 and 1999, the net assets of non-U.S. subsidiaries included in
consolidated net assets approximated $38 million and $92 million, respectively.
<TABLE>
<CAPTION>
Years ended December 31,
1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating income ..................... $ 27,067 $ 30,795 $ 40,144
Interest expense ..................... (199) (1,094) (1,554)
General corporate income, net ........ 801 2,834 572
--------- --------- ---------
Income before income taxes ....... $ 27,669 $ 32,535 $ 39,162
========= ========= =========
Net sales:
Point of origin:
Canada ........................... $ 80,632 $ 92,272 $ 96,915
United States .................... 28,020 58,018 89,036
The Netherlands .................. -- -- 36,834
Other ............................ -- 1,803 3,103
--------- --------- ---------
$ 108,652 $ 152,093 $ 225,888
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
1997 1998 1999
---- ---- ----
(In thousands)
Point of destination:
<S> <C> <C> <C>
United States ............... $ 70,354 $105,189 $133,700
Canada ...................... 33,974 40,284 43,556
Europe ...................... 951 3,664 41,498
Other ....................... 3,373 2,956 7,134
-------- -------- --------
$108,652 $152,093 $225,888
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
1997 1998 1999
---- ---- ----
(In thousands)
Total assets:
<S> <C> <C> <C>
Operating segment .................. $ 63,794 $121,645 $202,028
Corporate .......................... -- 30,737 884
-------- -------- --------
$ 63,794 $152,382 $202,912
======== ======== ========
Net property and equipment:
Canada ............................. $ 12,567 $ 18,307 $ 25,217
United States ...................... 5,596 20,607 34,235
The Netherlands .................... -- -- 17,602
Other Europe ....................... -- 1,356 1,281
Other .............................. -- -- 4,910
-------- -------- --------
$ 18,163 $ 40,270 $ 83,245
======== ======== ========
</TABLE>
Note 4 - Inventories:
<TABLE>
<CAPTION>
December 31,
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Raw materials ............................ $ 6,520 $ 9,038
Work in process .......................... 5,748 8,669
Finished products ........................ 4,634 9,898
Supplies ................................. 50 54
------- -------
$16,952 $27,659
</TABLE>
Note 5 - Accounts payable and accrued liabilities:
<TABLE>
<CAPTION>
December 31,
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Accounts payable ........................... $8,589 $9,850
Accrued liabilities:
Employee benefits ........................ 4,498 7,746
Insurance ................................ 842 707
Royalties ................................ 504 504
Other .................................... 2,810 6,582
------- -------
$17,243 $25,389
</TABLE>
Note 6 - Indebtedness:
<TABLE>
<CAPTION>
December 31,
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Revolving bank credit facility ................... $ -- $20,000
Capital lease obligations and other .............. 1,691 2,267
------- -------
1,691 22,267
Less current portion ............................. 609 1,367
------- -------
$ 1,082 $20,900
</TABLE>
The Company has a $100 million unsecured revolving bank credit facility
which bears interest at the Eurodollar Rate plus between 17.5 and 90.0 basis
points depending on certain coverage ratios (resulting in an interest rate of
6.21% at December 31, 1999) and is due no later than February 2003. Borrowings
are available for the Company's general corporate purposes, including potential
acquisitions. At December 31, 1999, $80 million was available for borrowing
under this facility. The facility contains certain covenants and restrictions
customary in lending transactions of this type, including restrictions on the
payment of dividends and requirements to maintain specified levels of
consolidated net worth (as defined). At December 31, 1999, $25.9 million is
available for dividends under the terms of the agreement.
Capital lease obligations, stated net of inputed interest, are due
through 2001. The Company's other debt obligations are not material.
Aggregate maturities of long-term debt at December 31, 1999 are shown in
the table below.
<TABLE>
<CAPTION>
Years ending December 31, Amount
(In thousands)
<S> <C>
2000 $ 1,367
2001 592
2002 92
2003 20,080
2004 54
Thereafter 82
-------
$22,267
</TABLE>
Note 7 - Employee benefit plans:
Defined contribution plans. The Company maintains various defined
contribution plans with Company contributions based on matching or other
formulas. Defined contribution plan expense approximated $1,051,000 in 1997,
$1,074,000 in 1998 and $1,472,000 in 1999.
Defined benefit plans. The Company maintains a defined benefit pension
plan covering substantially all full-time employees of Thomas Regout. Variances
from actuarially assumed rates will result in increases or decreases in
accumulated pension obligations, pension expense and funding requirements in
future periods.
<PAGE>
The rates used in determining the actuarial present value of benefit
obligations are presented below:
<TABLE>
<CAPTION>
December 31, 1999
<S> <C>
Discount rate 4.0%
Rate of increase in future
compensation levels 3.0%
Long-term rate of return on assets 4.0%
</TABLE>
The funded status of the Company's defined benefit pension plans, the
components of net periodic defined benefit pension cost and the rates used in
determining the actuarial present value of benefit obligations are presented in
the tables below.
<TABLE>
<CAPTION>
Year ended December 31,
1999
(In thousands)
Change in projected benefit obligations ("PBO"):
<S> <C>
PBO at beginning of the year ..................... $ --
Acquisition of Thomas Regout ..................... 2,366
Service cost ..................................... 151
Interest ......................................... 92
Change in foreign exchange rates ................. (348)
Benefits paid .................................... --
-------
PBO at end of the year ....................... $ 2,261
=======
Change in fair value of plan assets:
Fair value of plan assets at beginning of the year $ --
Acquisition of Thomas Regout ..................... 977
Actual return on plan assets ..................... 41
Employer contributions ........................... 62
Participant contributions ........................ 58
Change in foreign exchange rates ................. (148)
Benefits paid .................................... --
-------
Fair value of plan assets at end of year ..... $ 990
=======
Funded status at year-end -
Plan assets less than PBO ........................ $ 1,271
=======
Amounts recognized in the statement of
financial position - accrued pension cost:
Current ........................................ $ 62
Noncurrent ..................................... 1,209
-------
$ 1,271
Net periodic pension cost:
Service cost benefits ............................ $ 151
Interest cost on PBO ............................. 92
Expected return on plan assets ................... (41)
-------
$ 202
</TABLE>
Note 8 - Income taxes:
The components of pre-tax income and the provision for income taxes, the
difference between the provision for income taxes and the amount that would be
expected using the U.S. federal statutory income tax rate of 35% and the
comprehensive provision for income taxes are presented below.
<TABLE>
<CAPTION>
Years ended December 31,
1997 1998 1999
---- ---- ----
(In thousands)
Components of pre-tax income:
<S> <C> <C> <C>
United States ............................ $ 7,136 $ 6,835 $ 14,112
Non-U.S .................................. 20,533 25,700 25,050
-------- -------- --------
$ 27,669 $ 32,535 $ 39,162
======== ======== ========
Provision for income taxes:
Currently payable:
U.S. federal and state ................. $ 2,747 $ 3,351 $ 4,493
Foreign ................................ 8,923 9,513 8,186
-------- -------- --------
11,670 12,864 12,679
-------- -------- --------
Deferred taxes:
U.S .................................... (85) (714) 38
Foreign ................................ (566) (116) 1,385
-------- -------- --------
(651) (830) 1,423
-------- -------- --------
$ 11,019 $ 12,034 $ 14,102
======== ======== ========
Expected tax expense, at the U.S. federal
statutory income tax rate of 35% .......... $ 9,684 $ 11,387 $ 13,708
Non-U.S. tax rates ......................... 550 134 241
Incremental U.S. tax on earnings of
Canadian subsidiary ....................... 631 -- --
No tax benefit for goodwill amortization ... -- 290 625
State income taxes and other, net .......... 154 223 (472)
-------- -------- --------
$ 11,019 $ 12,034 $ 14,102
======== ======== ========
Comprehensive provision (benefit) for
income taxes allocable to:
Pre-tax income ........................... $ 11,019 $ 12,034 $ 14,102
Other comprehensive income -
currency translation .................... (515) (668) --
-------- -------- --------
$ 10,504 $ 11,366 $ 14,102
======== ======== ========
</TABLE>
The components of net deferred tax assets (liabilities) are summarized
below.
<TABLE>
<CAPTION>
December 31,
1998 1999
---- ----
(In thousands)
Tax effect of temporary differences relating to:
<S> <C> <C>
Inventories ............................................ $ 299 $ (114)
Property and equipment ................................. (3,023) (5,559)
Accrued liabilities and other deductible differences ... 2,458 3,582
Tax loss and credit carryforwards ...................... -- 4,812
Other taxable differences .............................. (29) (1,420)
Valuation allowance .................................... -- (767)
------- -------
$ (295) $ 534
======= =======
Net current deferred tax assets .......................... $ 688 $ 1,258
Net noncurrent deferred tax assets ....................... -- 2,499
-------
Net noncurrent deferred tax liabilities .................. (983) (3,223)
------- -------
$ (295) $ 534
======= =======
</TABLE>
At December 31, 1999, the Company had $1.6 million of foreign tax
credit carryforwards, which expire through 2002. The valuation allowance at
December 31, 1999 represents an offset to a change in gross deferred income tax
assets due to a change in estimate of the Company's ability to utilize a portion
of these foreign tax credit carryforwards.
At December 31, 1999, the Company has net operating loss ("NOL")
carryforwards, which expire in 2007 through 2018, of approximately $8.4 million
for U.S. federal income tax purposes. The NOL carryforwards arose from the
acquisition of Thomas Regout's U.S. subsidiary. These losses may only be used to
offset future taxable income of the acquired subsidiary and are not available to
offset taxable income of other subsidiaries. Utilization of such NOL
carryforward is limited to approximately $400,000 annually. The Company utilized
NOL carryforwards of $400,000 in 1999 to offset tax expense of $140,000. The
Company believes that it is more-likely-than-not that all such NOLs will be
utilized to reduce future income tax liabilities. Consequently, no valuation
allowance has been recorded to offset the deferred tax asset related to these
NOLs.
Note 9 - Stockholders' equity:
<TABLE>
<CAPTION>
Shares of common stock
Class A Class B
Issued Issued
<S> <C> <C>
Balance at December 31, 1996 and 1997 ......... -- 10,000,000
Issued at initial public offering ............. 5,980,000 --
Stock award grants ............................ 164,880
----------
Balance at December 31, 1998 .................. 6,144,880 10,000,000
Issued ........................................ 2,500 --
--------- ----------
Balance at December 31, 1999 .................. 6,147,380 10,000,000
========= ==========
</TABLE>
Class A and Class B common stock. The shares of Class A Common Stock and
Class B Common Stock are identical in all respects, except for certain voting
rights and certain conversion rights in respect of the shares of the Class B
Common Stock. Holders of Class A Common Stock are entitled to one vote per
share. Valcor, which holds all of the outstanding shares of Class B Common
Stock, is entitled to one vote per share in all matters except for election of
directors, for which Valcor is entitled to ten votes per share. Holders of all
classes of common stock entitled to vote will vote together as a single class on
all matters presented to the stockholders for their vote or approval, except as
otherwise required by applicable law. Each share of Class A Common Stock and
Class B Common Stock have an equal and ratable right to receive dividends to be
paid from the Company's assets when, and if declared by the Board of Directors.
In the event of the dissolution, liquidation or winding up of the Company, the
holders of Class A Common Stock and Class B Common Stock will be entitled to
share equally and ratably in the assets available for distribution after
payments are made to the Company's creditors and to the holders of any preferred
stock of the Company that may be outstanding at the time. Shares of the Class A
Common Stock have no conversion rights. Under certain conditions, shares of
Class B Common Stock will convert, on a share-for-share basis, into shares of
Class A Common Stock.
Public offering. In March 1998, the Company completed an initial public
offering of 5,980,000 shares of the Company's Class A Common Stock at an
offering price to the public of $20.00 per share. The net proceeds to the
Company were approximately $110.4 million. A majority of the net proceeds to the
Company from the offering were used to repay borrowings under the Company's
revolving credit facility discussed in Note 6.
Stock award grants. In March 1998, the Company granted 164,880 shares of
Class A Common Stock to certain key individuals of the Company (the "Management
Shares") for their services in connection with the initial public offering. The
Company valued such Class A shares awarded at the initial public offering price
of $20 per share, and the aggregate value of the Class A shares awarded was
approximately $3.3 million. The Company recognized a charge, at the time of the
completion of the public offering, equal to the aggregate value of the Class A
shares awarded.
Incentive compensation plan. The CompX International Inc. 1997
Long-Term Incentive Plan provides for the award or grant of stock options, stock
appreciation rights, performance grants and other awards to employees and other
individuals providing services to the Company. Up to 1.5 million shares of Class
A Common Stock may be issued pursuant to the plan. Generally, employee stock
options are granted at prices not less than the market price of the Company's
stock on the date of grant, and vest over five years and expire ten years from
the date of grant.
The following table sets forth changes in outstanding options during
1998 and 1999. The options granted in 1998 were issued concurrent with
completion of the initial public offering discussed above at an exercise price
equal to the $20 per share initial public offering price.
<PAGE>
<TABLE>
<CAPTION>
Amount
Exercise payable
price per upon
Shares share exercise
(In thousands, except
per share amounts)
<S> <C> <C> <C>
Outstanding at December 31, 1997 ....... -- $ -- $ --
Granted ................................ 440 20.00 8,800
Canceled ............................... (21) 20.00 (410)
---- -------------- --------
Outstanding at December 31, 1998 ....... 419 20.00 8,390
Granted ................................ 253 15.88- 20.00 4,647
Canceled ............................... (14) 17.94- 20.00 (253)
---- -------------- --------
Outstanding at December 31, 1999 ....... 658 $15.88-$20.00 $ 12,784
==== ============== ========
</TABLE>
Outstanding options at December 31, 1999 represent approximately 11% of
the Company's outstanding Class A common shares at that date and expire through
2009 with a weighted-average remaining term of 9 years. At December 31, 1999,
options to purchase 77,000 of the Company's shares were exercisable at $20.00
per share, or an aggregate amount payable upon exercise of $1.6 million. These
exercisable options are exercisable through 2008 at a price higher than the
Company's December 31, 1999 market price of $18.38 per share. At December 31,
1999, options to purchase 131,000 shares are scheduled to become exercisable in
2000 and an aggregate of 674,000 shares were available for future grants.
Other. The following pro forma information, required by Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," is based on an estimation of the fair value of CompX options
issued subsequent to January 1, 1998. The weighted average fair values of CompX
options granted during 1998 and 1999 were $12.83 and $11.56 per share,
respectively. The fair values of such options were calculated using the
Black-Scholes stock option valuation model with the following weighted-average
assumptions: stock price volatility of 39% to 44%, risk-free rates of return of
5.1% to 6.6%, dividend yields of nil and an expected term of 10 years. The
Black-Scholes model was not developed for use in valuing employee stock options,
but was developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable. In addition, it
requires the use of subjective assumptions including expectations of future
dividends and stock price volatility. Such assumptions are only used for making
the required fair value estimate and should not be considered as indicators of
future dividend policy or stock price appreciation. Because changes in the
subjective assumptions can materially affect the fair value estimate, and
because employee stock options have characteristics significantly different from
those of traded options, the use of the Black-Scholes option-pricing model may
not provide a reliable estimate of the fair value of employee stock options.
Had the Company elected to account for its stock-based employee
compensation for all awards granted subsequent to January 1, 1998 in accordance
with the fair value-based accounting method of SFAS No. 123, the Company's
reported net income would have decreased by $.7 million and $1.0 million in 1998
and 1999 respectively, or $.05 and $.06 per basic share, respectively. For
purposes of this pro forma disclosure, the estimated fair value of options is
amortized to expense over the options' vesting period. Such pro forma impact on
net income and basic earnings per share is not necessarily indicative of future
effects on net income or earnings per share.
Note 10 - Related party transactions:
The Company may be deemed to be controlled by Harold C. Simmons. See
Note 1. Corporations that may be deemed to be controlled by or affiliated with
Mr. Simmons sometimes engage in (a) intercorporate transactions such as
guarantees, management and expense sharing arrangements, shared fee
arrangements, joint ventures, partnerships, loans, options, advances of funds on
open account, and sales, leases and exchanges of assets, including securities
issued by both related and unrelated parties, and (b) common investment and
acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases, and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions which resulted in the acquisition by one related
party of a publicly-held minority equity interest in another related party. The
Company continuously considers, reviews and evaluates, and understands that
Contran and related entities consider, review and evaluate, such transactions.
Depending upon the business, tax and other objectives then relevant, it is
possible that the Company might be a party to one or more such transactions in
the future.
It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.
In December 1997, the Company paid a $50 million dividend to Valcor in
the form of a $50 million demand note payable (the "Valcor Note"). The Valcor
Note was unsecured and bore interest at a fixed rate of 6%. Interest expense
related to the Valcor Note was $164,000 in 1997 and $460,000 in 1998. The Valcor
Note was repaid in February 1998 using proceeds from the Company's new revolving
credit facility discussed in Note 6.
Under the terms of Intercorporate Service Agreements with Valhi and NL
Industries, Inc. ("NL"), a majority-owned subsidiary of Valhi. Valhi and NL
perform certain management, financial and administrative services for the
Company on a fee basis. Such fees are based upon estimates of time devoted to
the affairs of the Company by individual Valhi or NL employees and the
compensation of such persons. In addition, NL provides certain occupancy and
related office services based upon square footage occupied. Fees pursuant to
these agreements aggregated $260,000 in 1997, $354,000 in 1998 and $433,000 in
1999.
Certain of the Company's insurance coverages are arranged for and
brokered by EWI Re, Inc. Parties related to Contran own 90% of the outstanding
common stock of EWI, and a son-in-law of Harold C. Simmons manages the
operations of EWI. The Company generally does not compensate EWI directly for
insurance, but understands that consistent with insurance industry practice, EWI
receives a commission for its services from the insurance underwriters.
The Company and other entities related to Contran participate in a
combined risk management program. Net charges from related parties related to
this buying program, principally charges for insuring property and other risks,
aggregated $208,000 in 1997, $391,000 in 1998 and $265,000 in 1999. These fees
and charges are principally pass-through in nature and, in the Company's
opinion, are reasonable and not materially different from those that would have
been incurred on a stand-alone basis.
Certain employees of the Company have been awarded shares of restricted
Valhi common stock and/or granted options to purchase Valhi common stock under
the terms of Valhi's stock option plans. Prior to March 1998, the Company paid
Valhi the aggregate difference between the option price and the market value of
Valhi's common stock on the exercise date of such options. For financial
reporting purposes, the Company accounted for the related expense (credit) of
$472,000 in 1997 and $(274,000) in 1998 in a manner similar to accounting for
stock appreciation rights. Effective March 1998, the Company no longer pays
Valhi upon the exercise of such options. Restricted stock which was granted was
forfeitable unless certain periods of employment were completed. The Company
paid Valhi the market value of the restricted shares on the dates the
restrictions expired, and accrued the related expense over the restriction
period.
Note 11 - Commitments and contingencies:
Legal proceedings. The Company is involved, from time to time, in
various contractual, product liability, patent (or intellectual property) and
other claims and disputes incidental to its business. Currently no environmental
or other material litigation is pending or, to the knowledge of the Company,
threatened. The Company currently believes that the disposition of all claims
and disputes, individually or in the aggregate, should not have a material
adverse effect on the Company's consolidated financial condition, results of
operations or liquidity.
Environmental matters and litigation. The Company's operations are
governed by various federal, state, local and foreign environmental laws and
regulations. The Company's policy is to comply with environmental laws and
regulations at all of its plants and to continually strive to improve
environmental performance in association with applicable industry initiatives.
The Company believes that its operations are in substantial compliance with
applicable requirements of environmental laws. From time to time, the Company
may be subject to environmental regulatory enforcement under various statutes,
resolution of which typically involves the establishment of compliance programs.
Income taxes. The Company is undergoing examinations of certain of its
income tax returns, and tax authorities have or may propose tax deficiencies.
The Company believes that it has adequately provided accruals for additional
income taxes and related interest expense which may ultimately result from such
examinations and believes that the ultimate disposition of all such examinations
should not have a material adverse effect on its consolidated financial
position, results of operations or liquidity.
Prior to the Company's IPO, the Company was a member of the Contran Tax
Group for U.S. federal income tax purposes. The Company and Valcor were parties
to a tax sharing agreement which provided for the allocation of U.S. federal
income tax liabilities and tax payments as described in Note 1. The Company was
jointly and severally liable for the federal income tax of Contran and the other
companies included in the Contran Tax Group for all periods in which the Company
was included in Contran Tax Group for U.S. federal income tax purposes. Valcor
and Valhi have agreed, however, to indemnify the Company for any liability for
federal income taxes of the Contran Tax Group in excess of the Company's tax
liability computed in accordance with the tax sharing agreement.
Concentration of credit risk. The Company's products are sold primarily
in North America and Europe to original equipment manufacturers. The ten largest
customers accounted for approximately 33%, 40% and 33% of sales in 1997, 1998
and 1999, respectively. In 1997 and 1999, no single customer accounted for more
than 10% of sales. In 1998, one customer Hon Industries Inc., accounted for
approximately 10% of sales.
Other. Royalty expense was $849,000 in 1997, $1,105,000 in 1998 and
$1,097,000 in 1999. Royalties relate principally to certain Canadian-produced
products sold in the United States and are based upon volume.
Rent expense, principally for equipment, was $425,000 in 1997, $496,000
in 1998 and $609,000 in 1999. At December 31, 1999, future minimum rentals under
noncancellable operating leases are approximately $490,000 in 2000, $401,000 in
2001, $252,000 in 2002 and $19,000 in 2003.
Firm purchase commitments for capital projects in process at December
31, 1999 approximated $4 million at December 31, 1999.
Note 12 - Quarterly results of operations (unaudited):
<TABLE>
<CAPTION>
Quarter ended
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
(In millions, except per share amount)
1998:
<S> <C> <C> <C> <C>
Net sales ................................ $ 32.1 $ 39.7 $ 38.7 $ 41.6
Operating income ......................... 3.8 8.8 8.6 9.6
Net income ............................... 2.2 6.1 6.0 6.5
Basic and diluted earnings per share ..... $ .18$ .38$ .37$ .40
1999:
Net sales ................................ $ 55.2 $ 55.0 $ 55.9 $ 59.8
Operating income ......................... 9.6 9.7 9.4 11.4
Net income ............................... 5.9 6.1 6.1 7.1
Basic and diluted earnings per share ..... $ .37$ .38$ .38 .44
</TABLE>
The sum of the quarterly per share amounts may not equal the annual per
share amounts due to relative changes in the weighted average number of shares
used in the per share computations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Stockholders and Board of Directors of CompX International Inc.:
Our audits of the consolidated financial statements referred to in our
report dated February 13, 2000 appearing in the 1999 Annual Report to
Shareholders of CompX International Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial statement schedules listed in Item
14(a)(2) of this Form 10-K. In our opinion, these financial statement schedules
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Houston, Texas
February 13, 2000
<PAGE>
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Recoveries Balance
beginning costs and and currency at end
Description of year expenses Deductions translation Other(a) of year
Year ended December 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts ....... $ 167 $ 193 $ (58) $ 9 $-- $ 311
===== ====== ====== ===== ===== ======
Amortization of other intangible assets $ 27 $ 12 $ -- $-- $-- $ 39
===== ====== ====== ===== ===== ======
Year ended December 31, 1998:
Allowance for doubtful accounts ....... $ 311 $ 109 $ (210) $ (10) $ 110 $ 310
===== ====== ====== ===== ===== ======
Amortization of goodwill .............. $-- $ 828 $ -- $-- $-- $ 828
===== ====== ====== ===== ===== ======
Amortization of other intangible assets $ 39 $ 182 $ -- $ (5) $-- $ 216
===== ====== ====== ===== ===== ======
Year ended December 31, 1999:
Allowance for doubtful accounts ....... $ 310 $ 10 $ (89) $-- $ 494 $ 725
===== ====== ====== ===== ===== ======
Amortization of goodwill .............. $ 828 $1,902 $ -- $-- $-- $2,730
===== ====== ====== ===== ===== ======
Amortization of other intangible assets $ 216 $ 210 $ -- $-- $-- $ 426
===== ====== ====== ===== ===== ======
</TABLE>
(a) 1998 and 1999 - Business units acquired.
COMPX INTERNATIONAL INC.
------------------------------
AMENDMENT NO. 1 TO THE
CREDIT AGREEMENT
dated as of December 15, 1999
------------------------------
BANKERS TRUST COMPANY,
as Agent
and
VARIOUS LENDING INSTITUTIONS
<PAGE>
AMENDMENT NO. 1 TO
CREDIT AGREEMENT
This Amendment Number 1 to Credit Agreement (this "Agreement")
is entered into as of December 15, 1999, by the and among COMPX INTERNATIONAL
INC., a Delaware corporation (the "Company"), each of the several financial
institutions signatory hereto (collectively, the "Majority Lenders") and Bankers
Trust Company, a New York banking corporation, individually and as agent (the
"Agent") for the benefit of the Lenders under the Credit Agreement hereinafter
referred to.
RECITALS
A. The Company, the Agent and the financial institutions from time to
time party thereto are parties to that certain Credit Agreement dated as of
February 26, 1998 (the "Credit Agreement"). Unless otherwise specified herein,
capitalized terms used in this Agreement shall have the meanings ascribed to
them by the Credit Agreement, as amended hereby.
B. The Borrowers, the Agent and the Majority Lenders have agreed to
amend the Credit Agreement on terms and conditions herein set forth subject to
the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual execution
hereof and other good and valuable consideration, the parties hereto agree as
follows:
1. Amendments to Credit Agreement. Section 8.5 of the Credit Agreement
is hereby amended by deleting the clause "after
the second anniversary hereof" where such words first appear after the words
"provided, however, that" in such section.
2. Representations and Warranties of the Borrowers. The Company
represents and warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement have been duly authorized by all necessary corporate
action and that this Agreement is a legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforcement thereof
may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally;
(b) Each of the representations and warranties contained in the
Credit Agreement is true and correct in all material respects
on and as of the date hereof as if made on the date hereof,
except to the extent that any such representation or warranty
relates to an earlier date, in which case such representation
or warranty shall be true and correct in all material respects
as of such earlier date; and
(c) After giving effect to this Agreement, no Default or Unmatured
Default has occurred and is continuing.
3. Conditions to Effectiveness of Agreement. This Agreement shall
become effective on the date (the "Effective Date") each of the following
conditions precedent is satisfied:
(a) Execution and Delivery. The Company, the Agent and the
Majority Lenders shall have executed and delivered this
Agreement.
(b) No Defaults. After giving effect to this Agreement, no
Unmatured Event of Default or Event of Default under the
Credit Agreement shall have occurred and be continuing.
(c) Representations and Warranties. After giving effect to the
amendments contemplated by this Agreement, the representations
and warranties of the Company contained in this Agreement, the
Credit Agreement and the other Loan Documents shall be true
and correct in all respects as of the Effective Date, with the
same effect as though made on such date, except to the extent
that any such representation or warranty relates to an earlier
date, in which case such representation or warranty shall be
true and correct in all material respects as of such earlier
date.
(d) General. The Agent shall have received such other documents,
Certificates and opinions, as it may reasonably require.
4. Reference to and Effect Upon the Credit Agreement.
(a) Upon the Effective Date, each reference in the Credit
Agreement to "this Agreement," "hereunder," "hereof,"
"herein," or words of like import and each reference to the
Credit Agreement in each Loan Document shall mean and be a
reference to the Credit Agreement as amended and restated
hereby and the Credit Agreement is amended as set forth herein
and is hereby restated in its entirety to read as set forth in
the Credit Agreement with the amendments specified herein.
(b) Except as specifically amended above, all of the terms,
conditions and covenants of the Credit Agreement and the other
Loan Documents shall remain unaltered and in full force and
effect and are hereby ratified and confirmed in all respects.
(c) The execution, delivery and effectiveness of this Agreement
shall not operate as a waiver of any right, power or remedy of
the Agent or any Lender under the Credit Agreement or any
other Loan Document, nor constitute a waiver of any provision
of the Credit Agreement or any Loan Document, except as
specifically set forth herein.
5. Costs and Expenses. The Company hereby affirms its obligation under
Section 11.04 of the Credit Agreement to reimburse the Agent for all reasonable
costs, internal charges and out-of-pocket expenses paid or incurred by the Agent
in connection with the preparation, negotiation, execution and delivery of this
Agreement, including but not limited to the attorneys' fees and time charges of
attorneys for the Agent with respect thereto.
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
(signature pages follow)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date above first written.
COMP X INTERNATIONAL INC., a Delaware
corporation
By:
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY, individually as a
Lender and as Agent
By:
Name:
Title:
<PAGE>
BANK OF AMERICA, N.A., (Formerly NationsBank,
N.A.), as a Lender
By:
Name:
Title:
<PAGE>
BANK OF TOYKO, as Lender
By:
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By:
Name:
Title:
<PAGE>
WACHOVIA BANK, N.A., as a Lender
By:
Name:
Title:
<PAGE>
REAFFIRMATION OF GUARANTY
Each of the undersigned acknowledges receipt of a copy of the Amendment
No. 1 to the Credit Agreement (the "Amendment") dated as of December 17, 1999,
consents to such Amendment and hereby reaffirms its obligations under that
certain Subsidiary Guaranty Agreement dated February 26, 1998.
Dated as of December 17, 1999.
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as
of January 1, 1999, amends and supersedes that certain Intercorporate Services
Agreement effective as of January 1, 1998 between VALHI, INC., a Delaware
corporation ("Valhi"), and COMPX INTERNATIONAL INC., a Delaware corporation
("Recipient").
Recitals
A. Employees and agents of Valhi and affiliates of Valhi perform
management, financial and administrative functions for Recipient without direct
compensation from Recipient.
B. Recipient does not separately maintain the full internal capability
to perform all necessary management, financial and administrative functions that
Recipient requires.
C. The cost of maintaining the additional personnel by Recipient
necessary to perform the functions provided for by this Agreement would exceed
the fee set forth in Section 3 of this Agreement and that the terms of this
Agreement are no less favorable to Recipient than could otherwise be obtained
from a third party for comparable services.
D. Recipient desires to continue receiving the management, financial
and administrative services presently provided by Valhi and affiliates of Valhi
and Valhi is willing to continue to provide such services under the terms of
this Agreement.
Agreement
For and in consideration of the mutual premises, representations and
covenants herein contained, the parties hereto mutually agree as follows:
Section 1. Services to be Provided. Valhi agrees to make available to
Recipient the following services (the "Services") to be rendered by the internal
staff of Valhi and affiliates of Valhi:
(a) Consultation and assistance in the development and
implementation of Recipient's corporate business strategies,
plans and objectives;
(b) Consultation and assistance in management and conduct of
corporate affairs and corporate governance consistent with the
charter and bylaws of Recipient;
(c) Consultation and assistance in maintenance of financial
records and controls, including preparation and review of
periodic financial statements and reports to be filed with
public and regulatory entities and those required to be
prepared for financial institutions or pursuant to indentures
and credit agreements;
(d) Consultation and assistance in cash management and in
arranging financing necessary to implement the business plans
of Recipient;
(e) Consultation and assistance in tax management and
administration, including, without limitation, preparation and
filing of tax returns, tax reporting, examinations by
government authorities and tax planning;
(f) Consultation and assistance in performing internal audit and
control functions;
(g) Consultation and assistance with respect to employee benefit
plans and incentive compensation arrangements; and
(h) Such other services as may be requested by Recipient or deemed
necessary and proper from time to time.
Section 2. Miscellaneous Services. It is the intent of the parties
hereto that Valhi provide only the Services requested by Recipient in connection
with routine management, financial and administrative functions related to the
ongoing operations of Recipient and not with respect to special projects,
including corporate investments, acquisitions and divestitures. The parties
hereto contemplate that the Services rendered in connection with the conduct of
Recipient's business will be on a scale compared to that existing on the
effective date of this Agreement, adjusted for internal corporate growth or
contraction, but not for major corporate acquisitions or divestitures, and that
adjustments may be required to the terms of this Agreement in the event of such
major corporate acquisitions, divestitures or special projects. Recipient will
continue to bear all other costs required for outside services including, but
not limited to, the outside services of attorneys, auditors, trustees,
consultants, transfer agents and registrars, and it is expressly understood that
Valhi assumes no liability for any expenses or services other than those stated
in Section 1. In addition to the fee paid to Valhi by Recipient for the Services
provided pursuant to this Agreement, Recipient will pay to Valhi the amount of
out-of-pocket costs incurred by Valhi in rendering such Services.
Section 3. Fee for Services. Recipient agrees to pay to Valhi $81,000
quarterly, commencing as of January 1, 1999, pursuant to this Agreement.
Section 4. Original Term. Subject to the provisions of Section 5
hereof, the original term of this Agreement shall be from January 1, 1999 to
December 31, 1999.
Section 5. Extensions. This Agreement shall be extended on a
quarter-to-quarter basis after the expiration of its original term unless
written notification is given by Valhi or Recipient thirty (30) days in advance
of the first day of each successive quarter or unless it is superseded by a
subsequent written agreement of the parties hereto.
Section 6. Limitation of Liability. In providing its Services
hereunder, Valhi shall have a duty to act, and to cause its agents to act, in a
reasonably prudent manner, but neither Valhi nor any officer, director, employee
or agent of Valhi or its affiliates shall be liable to Recipient for any error
of judgment or mistake of law or for any loss incurred by Recipient in
connection with the matter to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Valhi.
Section 7. Indemnification of Valhi by Recipient. Recipient shall
indemnify and hold harmless Valhi, its affiliates and their respective officers,
directors and employees from and against any and all losses, liabilities,
claims, damages, costs and expenses (including attorneys' fees and other
expenses of litigation) to which Valhi or any such person may become subject
arising out of the Services provided by Valhi to Recipient hereunder, provided
that such indemnity shall not protect any person against any liability to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on the part of such person.
Section 8. Further Assurances. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
Section 9. Notices. All communications hereunder shall be in writing
and shall be addressed, if intended for Valhi, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such other
address as it shall have furnished to Recipient in writing, and if intended for
Recipient, to Two Greenspoint Plaza, 16825 Northchase Drive, Suite 1200,
Houston, Texas 77060, Attention: Chairman of the Board, or such other address as
it shall have furnished to Valhi in writing.
Section 10. Amendment and Modification. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated other than by
agreement in writing signed by the parties hereto.
Section 11. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Valhi and Recipient and their respective
successors and assigns, except that neither party may assign its rights under
this Agreement without the prior written consent of the other party.
Section 12. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the state of Texas.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
VALHI, INC.
By:
Steven L. Watson
President
COMPX INTERNATIONAL INC.
By:
Joseph S. Compofelice
Chairman of the Board,
President and Chief
Executive Officer
EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
% of Voting
Securities
Jurisdiction of Held at
Incorporation or December 31,
Name of Corporation Organization 1999
- ----------------------------------- ---------------- -------
Waterloo Furniture Components Limited Canada 100
Fort Lock Corporation Illinois 100
Fort Securite SA France 58
Timberline Lock, Ltd. Illinois 100
CompX Europe B.V. Netherlands 100
Thomas Regout Holding B.V. Netherlands 100
Thomas Regout U.S.A., Inc. Michigan 100
Thomas Regout Nederland B.V. Netherlands 100
Thomas Regout B.V. Netherlands 100
Thomas Regout International B.V. Netherlands 100
CompX Asia Holding Corporation Malaysia 100
Yin Da Slide Co., Ltd. Taiwan 100
Chicago Lock Company Delaware 100
Chicago Tubar Company Delaware 100
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in CompX International
Inc.'s (i) Registration Statement (Form S-8 No. 333-47539) and related
Prospectus pertaining to the CompX International Inc. 1997 Long-Term Incentive
Plan and (ii) Registration Statement (Form S-8 No. 333-56163) and related
Prospectus pertaining to the National Cabinet Lock, Inc. Contributory Retirement
Plan, of our report dated February 13, 2000 on our audits of the consolidated
financial statements and financial statement schedules of CompX International
Inc. and Subsidiaries included in this Annual Report on Form 10-K for the year
ended December 31, 1999.
PricewaterhouseCoopers LLP
Houston, Texas
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPX
INTERNATIONAL INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,169
<SECURITIES> 0
<RECEIVABLES> 29,778
<ALLOWANCES> 725
<INVENTORY> 27,659
<CURRENT-ASSETS> 72,481
<PP&E> 108,399
<DEPRECIATION> 25,154
<TOTAL-ASSETS> 202,912
<CURRENT-LIABILITIES> 26,847
<BONDS> 20,900
0
0
<COMMON> 161
<OTHER-SE> 149,195
<TOTAL-LIABILITY-AND-EQUITY> 202,912
<SALES> 225,888
<TOTAL-REVENUES> 225,888
<CGS> 160,628
<TOTAL-COSTS> 160,628
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 1,554
<INCOME-PRETAX> 39,162
<INCOME-TAX> 14,102
<INCOME-CONTINUING> 25,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,163
<EPS-BASIC> 1.56
<EPS-DILUTED> 0
</TABLE>
