# Compx International Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Compx International Inc](/companies/cix.md) (CIK 1049606)
- Form: 10-Q
- Filed: 2024-11-06
- Accepted by EDGAR: Nov 6, 2024, 16:16 ET
- Period: 2024-09-30
- Accession: 0001558370-24-014631
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1049606/000155837024014631/cix-20240930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1049606/000155837024014631/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $33.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $107.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $24.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $77.2m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $9.5m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $30.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $6.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $18.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $3.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $12.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $3.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $3.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $12.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.28 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.98 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.28 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.98 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 12,319,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 12,316,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $15.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $35.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $58.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $103.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $160.1m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $13.8m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-09-30 | $145.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,410 characters.

### Business Overview

We are a leading manufacturer of engineered components utilized in a variety of applications and industries. Through our Security Products segment we manufacture mechanical and electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications. We also manufacture wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through our Marine Components segment.

### General

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Quarterly Report that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information. In some cases, you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Quarterly Report and those described from time to time in our other filings with the SEC and include, but are not limited to, the following:

- Future demand for our products,
- Changes in our raw material and other operating costs (such as zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs,
- Price and product competition from low-cost manufacturing sources (such as China),
- The impact of pricing and production decisions,
- Customer and competitor strategies including substitute products,
- Uncertainties associated with the development of new products and product features,
- Pending or possible future litigation,
- Our ability to protect or defend our intellectual property rights,
- Potential difficulties in integrating future acquisitions,
- Decisions to sell operating assets other than in the ordinary course of business,
- Environmental matters (such as those requiring emission and discharge standards for existing and new facilities),
- The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform,
- Government laws and regulations and possible changes therein, including new environmental, health and safety, sustainability or other regulations,
- General global economic and political conditions that disrupt our supply chain, reduce demand or perceived demand for component products or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises),
- Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises);
- Technology related disruptions (including, but not limited to, cyber attacks; software implementation, upgrades or improvements; technology processing failures; or other events) related to our technology infrastructure that could impact our ability to continue operations, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders; and
- Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts.

Should one or more of these risks materialize or if the consequences worsen, or if the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

### Operating Income Overview

Operating income in the third quarter of 2024 was $3.3 million compared to $6.6 million in the third quarter of 2023. The decrease in operating income in the third quarter of 2024 compared to 2023 is due to lower sales and gross margin at both Security Products and Marine Components. Operating income for the first nine months of 2024 was $12.1 million compared to $18.0 million in the first nine months of 2023. The decrease in operating income in the first nine months of 2024 compared to 2023 is primarily due to lower Marine Components sales and gross margin.

We sell a large number of products that have a wide variation in selling price and manufacturing cost, which results in certain practical limitations on our ability to quantify the impact of changes in individual product sales quantities and selling prices on our net sales, cost of sales and gross margin. In addition, small variations in period-to-period net sales, cost of sales and gross margin can result from changes in the relative mix of our products sold.

### Results of Operations

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2023 | ​ ​ ​ ​% ​ | ​ ​ 2024 | ​ ​ ​ ​% ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Net sales | ​ | $40,355 | 100.0% | **$33,667** | **100.0%** |
| Cost of sales | ​ | 27,736 | 68.7 **​** | **24,199** | **71.9** **​** |
| Gross margin | ​ | 12,619 | 31.3 **​** | **9,468** | **28.1** **​** |
| Operating costs and expenses | ​ | 6,074 | 15.1 **​** | **6,119** | **18.2** **​** |
| Operating income | ​ | $6,545 | 16.2% | **$3,349** | **9.9%** |

| ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, |
| --- | --- | ---: |
| **​** |  | **2023%** **2024%** **​** |
| **​** | **​** | **(Dollars in thousands)** |
| Net sales | ​ | $118,122 100.0% **$107,525** **100.0%** |
| Cost of sales | ​ | 82,526 69.9 **​** **77,225** **71.8** **​** |
| Gross margin | ​ | 35,596 30.1 **​** **30,300** **28.2** **​** |
| Operating costs and expenses | ​ | 17,644 14.9 **​** **18,155** **16.9** **​** |
| Operating income | ​ | $17,952 15.2% **$12,145** **11.3%** |

*Net sales*. Net sales decreased $6.7 million in the third quarter of 2024 compared to the same period in 2023 primarily due to lower Security Products sales to a government security customer and to a lesser extent lower Marine Components sales primarily to the towboat market. Net sales decreased $10.6 million for the first nine months of 2024 compared to the same period in 2023 primarily due to lower Marine Components sales to the towboat market. See segment discussion below.

*Cost of sales and gross margin.* Cost of sales as a percentage of sales increased 3.2% in the third quarter of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales decreased over the same period. Gross margin percentage decreased in the third quarter of 2024 compared to the same period in 2023 primarily due to lower gross margin percentages at both Security Products and Marine Components. Cost of sales as a percentage of sales increased 1.9% for the first nine months of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales declined over the same period. The decline in gross margin percentage for the nine-month comparative period is primarily due to lower gross margin percentage at Marine Components. See segment discussion below.

*Operating costs and expenses.* Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as any gains and losses on property and equipment. Operating costs and expenses for the third quarter of 2024 were comparable to the same period in 2023. For the first nine months of 2024, operating costs and expenses increased $.6 million compared to the same period in 2023 primarily due to higher employee salaries and benefits at Security Products during the first half of the year. Operating costs and expenses as a percentage of net sales increased for the third quarter of 2024 compared to the same period in 2023 due to decreased coverage of operating costs and expenses as a result of lower sales. Operating costs and expenses as a percentage of net sales increased for the first nine months of 2024 compared to the same period in 2023 due to decreased coverage of operating costs and expenses as a result of lower sales and higher operating costs as noted above.

*Operating income.* As a percentage of net sales, operating income for the third quarter and the first nine months of 2024 compared to the same periods of 2023 was primarily impacted by the factors affecting sales, cost of sales, gross margin and operating costs and expenses. See segment discussion below.

*Interest income.* Interest income increased $.2 million and $.8 million in the third quarter and for the first nine months of 2024, respectively, compared to the same periods in 2023 primarily due to higher average interest rates and higher average investment balances, somewhat offset by lower average balances on the revolving promissory note receivable from Valhi. See Notes 3 and 10 to our Condensed Consolidated Financial Statements.

*Provision for income taxes.* A tabular reconciliation of our actual tax provision to the U.S. federal statutory income tax rate is included in Note 7 to the Condensed Consolidated Financial Statements. Our operations are wholly within the U.S. and therefore our effective income tax rate is primarily reflective of the U.S. federal statutory rate and applicable state taxes.

### Segment Results

Key performance indicators for our segments are gross margin and operating income.

*(Dollars in thousands)*

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ Security Products: | ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​% 2024 ​ ​ | ​ ​ ​ ​ Change ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​% 2024 ​ ​ | ​ ​ Change ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | ​ | $31,376 **​** | **$26,567** | (15)% | $84,390 **​** | **$84,667** | —% |
| Cost of sales | ​ | 21,347 **​** | **18,486** | (13) ​ | 58,475 **​** | **58,862** | 1 ​ |
| Gross margin | ​ | 10,029 **​** | **8,081** | (19) ​ | 25,915 **​** | **25,805** | — ​ |
| Operating costs and expenses | ​ | 3,533 **​** | **3,528** | — ​ | 9,906 **​** | **10,360** | 5 ​ |
| Operating income | ​ | $6,496 **​** | **$4,553** | (30) ​ | $16,009 **​** | **$15,445** | (4) ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ |
| Gross margin | ​ | 32.0% | **30.4%** | ​ ​ | 30.7% | **30.5%** | ​ |
| Operating income margin | ​ | 20.7 **​** | **17.1** | ​ ​ | 19.0 ​ | **18.2** | ​ |

*Security Products*. Security Products net sales decreased 15% in the third quarter of 2024 compared to the same period in 2023 primarily due to lower sales for a government security customer related to a pilot project that began shipping in the third quarter of 2023 for which there were no related sales in the third quarter of 2024. Relative to prior year, sales were $5.0 million lower to the government security market and $1.4 million lower to the transportation market, partially offset by $1.2 million higher sales to the healthcare market. Security Products net sales in the first nine months of 2024 were comparable to the same period in 2023, as $1.5 million higher sales to the healthcare market and $.6 million higher sales to the tool storage market were offset by $1.1 million lower sales to the transportation market, $.7 million lower sales to distributors and $.4 million lower sales to the government security market.

Gross margin as a percentage of net sales decreased for the third quarter of 2024 compared to the same period in 2023 primarily due to lower sales, higher materials costs (primarily brass and electronics), higher labor costs and decreased coverage of fixed costs as a result of lower sales. Operating income as a percentage of net sales decreased in the third quarter of 2024 compared to the same period in 2023 due to the factors impacting gross margin as well as decreased coverage of operating costs and expenses on lower sales. Gross margin as a percentage of net sales for the first nine months of 2024 is comparable to the same period in 2023. Operating income as a percentage of net sales decreased in the first nine months of 2024 compared to the same period in 2023 due to increased operating costs and expenses including higher employee salaries and benefits of $.4 million, primarily in the first half of the year.

*(Dollars in thousands)*

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ Marine Components: | ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 ​ | ​ ​ ​ ​ ​% 2024 ​ ​ | ​ ​ ​ ​ ​ Change ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 ​ | ​ ​ ​ ​ ​% 2024 ​ ​ | ​ ​ Change ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | ​ | $8,979 **​** | **$7,100** | (21)% | $33,732 **​** | **$22,858** | (32)% |
| Cost of sales | ​ | 6,389 **​** | **5,713** | (11) ​ | 24,051 **​** | **18,363** | (24) ​ |
| Gross margin | ​ | 2,590 **​** | **1,387** | (46) ​ | 9,681 **​** | **4,495** | (54) ​ |
| Operating costs and expenses | ​ | 897 **​** | **784** | (13) ​ | 2,728 **​** | **2,471** | (9) ​ |
| Operating income | ​ | $1,693 **​** | **$603** | (64) ​ | $6,953 **​** | **$2,024** | (71) ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ |
| Gross margin | ​ | 28.8% | **19.5%** | ​ ​ | 28.7% | **19.7%** | ​ |
| Operating income margin | ​ | 18.9 **​** | **8.5** | ​ **​** | 20.6 ​ | **8.9** | ​ |

*Marine Components*. Marine Components net sales decreased 21% in the third quarter of 2024 compared to the same period in 2023. Relative to prior year, the decrease in third quarter sales was primarily due to $1.3 million lower sales to the towboat market and $.5 million lower sales to the industrial market. Marine Components net sales decreased 32% in the first nine months of 2024 compared to the same period in 2023. Relative to prior year, the decrease in sales for the first nine months was primarily due to $8.7 million lower sales to the towboat market, $1.1 million lower sales to the industrial market and $.6 million lower sales to each the engine builder market and distributors.

Gross margin as a percentage of sales decreased in the third quarter of 2024 compared to the same period in 2023 primarily due to lower sales and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix as well as lower employee salaries and benefits of approximately $.5 million related to headcount reductions. Operating income as a percentage of net sales decreased in the third quarter of 2024 compared to the same period in 2023 due to the factors impacting gross margin as well as decreased coverage of operating costs and expenses on lower sales, partially offset by slightly reduced operating costs and expenses, including lower employee salaries and benefits of approximately $.1 million. For the first nine months of 2024, gross margin as a percentage of net sales declined compared to the same period in 2023 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix as well as lower employee salaries and benefits of approximately $1.7 million related to headcount reductions. Operating income as a percentage of net sales decreased in the first nine months of 2024 compared to the same period in 2023 due to the factors impacting gross margin as well as decreased coverage of operating costs and expenses on lower sales, partially offset by reduced operating costs and expenses, including lower employee salaries and benefits of $.2 million.

*Outlook.* As previously noted, beginning in the third quarter of 2023 Security Products had significant sales from a pilot project to a government security customer. Excluding these sales in 2023, sales would have increased in the first nine months of 2024 as compared to the first nine months of 2023 due to increased sales across a variety of markets, particularly increased sales of mechanical locks to the government security market. At Marine Components, the decline in sales to the towboat market as a result of the contraction in the recreational marine industry that began late in the first quarter of 2023 has continued. We are focused on aligning our resources with current demand levels, and particularly at

Marine Components, we are adjusting inventory levels, operating expenses and labor resources to align with current orders while also preserving our ability to respond quickly when demand increases. Raw material prices have been relatively stable during the first nine months of 2024; however, we are beginning to experience price increases in certain raw materials. Our supply chains are stable and transportation and logistical delays are minimal. We have adjusted our order patterns in response to our customer demand levels and the stability of our raw materials supplies.

We expect Security Products sales comparisons for the remainder of the year will be challenged by lower government security sales as the 2023 pilot project to a government security customer will not repeat. We expect our recurring Security Products sales for the remainder of the year to continue to be strong relative to the prior year. Overall, we expect Security Products gross margin and operating income margin for 2024 will be lower than 2023 primarily due to reduced coverage of fixed, selling, general and administrative costs as a result of lower expected sales as well as a less favorable product mix and higher materials and labor costs in the current economic environment. We expect Marine Components net sales for the full year of 2024 will be lower as compared to 2023 due to decreased demand in the towboat market. The recreational marine industry faces strong headwinds due to higher interest rates and broader market weakness. Overall, we expect Marine Components gross margin as a percentage of net sales for 2024 to be lower than 2023 due to lower coverage of fixed overhead as a result of lower expected sales, and operating income as a percentage of net sales to be similarly lower as a result of reduced coverage of selling, general and administrative expenses due to lower expected sales. We ended 2023 with elevated inventory balances at our Marine Components segment as a result of increased orders of certain raw materials due to previously long lead times coupled with the rapidly changing towboat demand which created a misalignment of our raw materials with near term demand. We made significant progress in aligning our Marine Components inventory balances with current demand in the first nine months of 2024; however, we expect further reduction of inventory quantities will be offset by higher raw materials costs for certain projects in the industrial and other marine components markets, outside of the towboat market, which in many instances are more expensive than the stainless steel inventory used in towboat products.

Our expectations for our operations and the markets we serve are based on a number of factors outside our control. We have experienced global and domestic supply chain challenges, and any future impacts on our operations will depend on, among other things, any future disruption in our operations or our suppliers’ operations, the impact of economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

### Liquidity and Capital Resources

### Consolidated cash flows –

*Operating activities*. Trends in cash flows from operating activities, excluding changes in assets and liabilities, have generally been similar to the trends in operating earnings. Changes in assets and liabilities result primarily from the timing of production, sales and purchases. Changes in assets and liabilities generally tend to even out over time. However, period-to-period relative changes in assets and liabilities can significantly affect the comparability of cash flows from operating activities.

Our net cash provided by operating activities for the first nine months of 2024 increased by $3.8 million as compared to the first nine months of 2023. The increase in net cash provided is primarily due to the net effects of:

- A $8.2 million increase in the amount of net cash provided by relative changes in our inventories, receivables, prepaids, payables and non-tax related accruals in 2024;
- A $5.9 million decrease in operating income in 2024; and
- A $1.4 million increase in interest received in 2024 due to higher interest rates and increased investment balances, partially offset by lower average balances on our loan to an affiliate.

Changes in working capital can have a significant effect on cash flows from operating activities. As shown below, the change in our average days sales outstanding from December 31, 2023 to September 30, 2024 varied by segment primarily as a result of relative changes in the timing of sales and collections relative to the end of the quarter. For comparative purposes, we have provided December 31, 2022 and September 30, 2023 numbers below.

|  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | **​** | **December 31,** | **​** | **September 30,** | **​** | **December 31,** | **​** | **September 30,** |
| **Days Sales Outstanding:** |  | **2022** |  | **2023** |  | **2023** |  | **2024** |
| Security Products |  | 45 Days |  | 48 Days | ​ | 37 Days |  | 40 Days |
| Marine Components |  | 30 Days |  | 33 Days | ​ | 31 Days |  | 37 Days |
| Consolidated CompX |  | 41 Days |  | 45 Days | ​ | 36 Days |  | 39 Days |

Our average number of days in inventory increased from December 31, 2023 to September 30, 2024 primarily due to the increase at Security Products somewhat offset by the decline at Marine Components. Security Products days in inventory at December 31, 2023 is lower than usual due to the fulfillment and shipping of a significant order during the fourth quarter of 2023 and September 30, 2024 is more favorable to September 30, 2023 balances due to planned inventory reductions. The average number of days in inventory for Marine Components declined from December 31, 2023 to September 30, 2024 as a result of planned inventory reductions. For comparative purposes, we have provided December 31, 2022 and September 30, 2023 numbers below.

|  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | **​** | **December 31,** | **​** | **September 30,** | **​** | **December 31,** | **​** | **September 30,** | **​** |
| **Days in Inventory:** |  | **2022** |  | **2023** |  | **2023** |  | **2024** | **​** |
| Security Products |  | 101 Days |  | 103 Days | ​ | 77 Days |  | 98 Days | ​ |
| Marine Components |  | 95 Days |  | 144 Days | ​ | 175 Days |  | 130 Days | ​ |
| Consolidated CompX |  | 99 Days |  | 112 Days | ​ | 95 Days |  | 105 Days | ​ |

*Investing activities.* Our capital expenditures were $1.2 million and $.6 million in the first nine months of 2024 and 2023, respectively. During the first nine months of 2024, Valhi repaid a net $2.7 million under the promissory note ($17.7 million of gross borrowings and $20.4 million of gross repayments). During the first nine months of 2023, Valhi repaid a net $1.2 million under the promissory note ($20.7 million of gross borrowings and $21.9 million of gross repayments). See Note 10 to our Condensed Consolidated Financial Statements.

During the first nine months of 2024, we received gross proceeds totaling $36.0 million related to U.S. treasury bill maturities. During the first nine months of 2023, we had gross purchases of U.S. treasury marketable securities aggregating $36.3 million and received gross proceeds totaling $24.0 million related to U.S. treasury bill maturities. See Note 3 to our Condensed Consolidated Financial Statements.

*Financing activities.* Financing activities consisted only of cash dividends. In February 2024, our board of directors increased our regular quarterly dividend from $.25 per share to $.30 per share beginning in the first quarter of 2024. During the first nine months of 2024 and 2023, we paid aggregate quarterly dividends to CompX stockholders of $11.1 million and $9.2 million, respectively. Additionally, in August 2024 our board of directors declared a special dividend on our Class A common stock of $2.00 per share ($24.6 million). The declaration and payment of future dividends and the amount thereof, if any, is discretionary and is dependent upon our results of operations, financial condition, cash requirements for our businesses, contractual requirements and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which we might pay.

### Future cash requirements –

*Liquidity*. Our primary source of liquidity on an ongoing basis is our cash flow from operating activities, which is generally used to (i) fund capital expenditures, (ii) repay short-term or long-term indebtedness incurred primarily for capital expenditures, investment activities or reducing our outstanding stock, (iii) provide for the payment of dividends (if declared), and (iv) lend to affiliates. From time-to-time, we will incur indebtedness, primarily to fund capital expenditures or business combinations.

Periodically, we evaluate liquidity requirements, alternative uses of capital, capital needs and available resources in view of, among other things, our capital expenditure requirements, dividend policy and estimated future operating cash flows. As a result of this process, we have in the past and may in the future seek to raise additional capital, refinance or restructure indebtedness, issue additional securities, modify our dividend policy or take a combination of such steps to manage our liquidity and capital resources. In the normal course of business, we may review opportunities for acquisitions, joint ventures or other business combinations in the component products industry. In the event of any such transaction, we may consider using available cash, issuing additional equity securities or increasing our indebtedness or that of our subsidiaries.

We believe that cash generated from operations together with cash on hand, as well as our ability to obtain external financing, will be sufficient to meet our liquidity needs for working capital, capital expenditures, debt service, dividends (if declared) and any amounts we might loan from time to time under the terms of our revolving loan to Valhi discussed in Note 10 to our Condensed Consolidated Financial Statements (which loans would be solely at our discretion) for both the next 12 months and five years. To the extent that our actual operating results or other developments differ from our expectations, our liquidity could be adversely affected.

All of our $58.8 million aggregate cash and cash equivalents at September 30, 2024 were held in the U.S.

*Capital expenditures.* Firm purchase commitments for capital projects in process at September 30, 2024 totaled $.6 million. We expect our capital expenditures for 2024 will be approximately $2.1 million primarily to meet our existing customer demand and those required to properly maintain our facilities and technology infrastructure.

*Stock repurchase program.* At September 30, 2024, we have 523,647 shares available for repurchase under a stock repurchase program authorized by our board of directors.

***Commitments and contingencies –***

We are subject to certain commitments and contingencies, as more fully described in our 2023 Annual Report, or in Note 8 to our Condensed Consolidated Financial Statements or in Part II, Item 1 of this report, including certain legal proceedings.

### Recent accounting pronouncements –

See Note 11 to our Condensed Consolidated Financial Statements.

### Critical accounting policies –

There have been no changes in the first nine months of 2024 with respect to our critical accounting policies presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report.

## Market risk

As filed, 375 characters.

We are exposed to market risk from changes in interest rates and raw material prices. There have been no material changes in these market risks since we filed our 2023 Annual Report, and we refer you to Part I, Item 7A – “Quantitative and Qualitative Disclosure About Market Risk” in our 2023 Annual Report. See also Note 9 to our Condensed Consolidated Financial Statements.

## Controls and procedures

As filed, 3,057 characters.

**Evaluation of Disclosure Controls and Procedures.** We maintain disclosure controls and procedures which, as defined in Exchange Act Rule 13a-15(e), means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit to the SEC under the Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Our management with the participation of Scott C. James, our President and Chief Executive Officer, and Amy A. Samford, our Executive Vice President and Chief Financial Officer, has evaluated the design and operating effectiveness of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the date of such evaluation.

**Internal Control Over Financial Reporting**. Our management is responsible for establishing and maintaining adequate internal control over financial reporting which, as defined in Exchange Act Rule 13a-15(f), means a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

- Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets,
- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
- Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of our assets that could have a material effect on our Condensed Consolidated Financial Statements.

**Changes in Internal Control Over Financial Reporting**. There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 6, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-014631. Last ingested by Listed: Nov 4, 2026, 17:29 ET. No prices; not investment advice.