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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2000 Commission file number 1-13905 ------------- ------- COMPX INTERNATIONAL INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 57-0981653 - ------------------------------- ----------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 16825 Northchase Drive, Suite 1200, Houston, Texas 77060 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (281) 423-3377 -------------- 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 Number of shares of Class A common stock outstanding on August 4, 2000: 6,182,680.

COMPX INTERNATIONAL INC. AND SUBSIDIARIES INDEX Page number Part I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets - December 31, 1999 and June 30, 2000 3-4 Consolidated Statements of Income - Three months and six months ended June 30, 1999 and 2000 5 Consolidated Statements of Comprehensive Income - Six months ended June 30, 1999 and 2000 6 Consolidated Statement of Stockholders' Equity - Six months ended June 30, 2000 7 Consolidated Statements of Cash Flows - Six months ended June 30, 1999 and 2000 8-9 Notes to Consolidated Financial Statements 10-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 14-16 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K. 17

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS December 31, June 30, 1999 2000 ---- ---- Current assets: Cash and cash equivalents ........................ $ 12,169 $ 12,784 Accounts receivable .............................. 29,053 32,603 Income taxes receivable from affiliates .......... 22 -- Refundable income taxes .......................... 462 704 Inventories ...................................... 27,659 35,993 Prepaid expenses and other ....................... 1,858 1,524 Deferred income taxes ............................ 1,258 1,293 -------- -------- Total current assets ......................... 72,481 84,901 -------- -------- Other assets: Goodwill ......................................... 41,697 42,843 Other intangible assets .......................... 2,787 2,769 Deferred income taxes ............................ 2,499 1,710 Other ............................................ 203 656 -------- -------- Total other assets ........................... 47,186 47,978 -------- -------- Property and equipment: Land ............................................. 3,549 3,626 Buildings ........................................ 27,898 28,807 Equipment ........................................ 70,242 70,353 Construction in progress ......................... 6,710 12,709 -------- -------- 108,399 115,495 Less accumulated depreciation .................... 25,154 28,620 -------- -------- Net property and equipment ................... 83,245 86,875 -------- -------- $202,912 $219,754 ======== ======== See accompanying notes to consolidated financial statements.

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY December 31, June 30, 1999 2000 ---- ---- Current liabilities: Current maturities of long-term debt ........... $ 1,367 $ 450 Accounts payable and accrued liabilities ....... 25,389 26,388 Income taxes payable to affiliates ............. -- 20 Income taxes ................................... 91 569 --------- --------- Total current liabilities .................. 26,847 27,427 --------- --------- Noncurrent liabilities: Long-term debt ................................. 20,900 31,101 Deferred income taxes .......................... 3,223 3,144 Accrued pension costs .......................... 1,209 1,326 Other .......................................... 1,274 1,125 --------- --------- Total noncurrent liabilities ............... 26,606 36,696 --------- --------- Minority interest ................................ 103 -- --------- --------- Stockholders' equity: Preferred stock ................................ -- -- Class A common stock ........................... 61 61 Class B common stock ........................... 100 100 Additional paid-in capital ..................... 118,067 118,151 Retained earnings .............................. 37,415 47,003 Accumulated other comprehensive income - currency translation ........................ (6,287) (9,684) --------- --------- Total stockholders' equity ................. 149,356 155,631 --------- --------- $ 202,912 $ 219,754 ========= ========= Commitments and contingencies (Note 1)

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three months ended Six months ended June 30, June 30, ----------- -------- 1999 2000 1999 2000 ---- ---- ---- ---- Net sales .......................................... $ 54,970 $ 65,136 $ 110,173 $ 131,203 -------- -------- --------- --------- Costs and expenses: Cost of sales ..................................... 39,075 46,616 78,146 95,139 Selling, general and administrative ............... 6,166 7,014 12,700 13,832 Other income, net ................................. (30) (62) (155) (289) Interest expense .................................. 442 538 836 1,071 -------- -------- --------- --------- 45,653 54,106 91,527 109,753 -------- -------- --------- --------- Income before income taxes and minority interest ........................ 9,317 11,030 18,646 21,450 Provision for income taxes ......................... 3,261 3,972 6,711 7,827 -------- -------- --------- --------- Income before minority interest ................ 6,056 7,058 11,935 13,623 Minority interest .................................. (24) -- (66) (3) -------- -------- --------- --------- Net income ..................................... $ 6,080 $ 7,058 $ 12,001 $ 13,626 ======== ======== ========= ========= Basic and diluted earnings per common share .................................. $ .38 $ .44 $ .74 $ .84 ======== ======== ========= ========= Cash dividends per share ........................... $ -- $ .125 $ -- $ .25 ======== ======== ========= ========= Shares used in the calculation of per share amounts: Basic earnings per common share ................. 16,146 16,151 16,146 16,149 Dilutive impact of outstanding stock options .................................. -- 31 -- 20 -------- -------- --------- --------- Diluted earnings per common share ............... 16,146 16,182 16,146 16,169 ======== ======== ========= =========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Three months ended Six months ended June 30, June 30, ------------ ----------- 1999 2000 1999 2000 ---- ---- ---- ---- Net income ....................... $ 6,080 $ 7,058 $ 12,001 $ 13,626 Other comprehensive income - currency translation adjustment, net of tax ..................... (1,641) (1,395) (4,207) (3,397) ------- ------- -------- -------- Comprehensive income ....... $ 4,439 $ 5,663 $ 7,794 $ 10,229 ======= ======= ======== ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Six months ended June 30, 2000 (In thousands) Accumulated other comprehensive Additional income - Total Common Stock paid-in Retained currency stockholders' Class A Class B capital earnings translation equity ------- ------- ---------- --------- ----------- --------- Balance at December 31, 1999 .. $61 $100 $118,067 $ 37,415 $(6,287) $ 149,356 Net income .................... -- -- -- 13,626 -- 13,626 Other comprehensive income, net -- -- -- -- (3,397) (3,397) Issuance of common stock ...... -- -- 84 -- -- 84 Cash dividends ................ -- -- -- (4,038) -- (4,038) --- ---- -------- -------- ------- --------- Balance at June 30, 2000 ...... $61 $100 $118,151 $ 47,003 $(9,684) $ 155,631 === ==== ======== ======== ======= ========= See accompanying notes to consolidated financial statements.

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1999 and 2000 (In thousands) 1999 2000 ---- ---- Cash flows from operating activities: Net income ........................................... $ 12,001 $ 13,626 Depreciation and amortization ........................ 4,607 6,264 Deferred income taxes ................................ (169) 209 Other, net ........................................... (178) (282) -------- -------- 16,261 19,817 Change in assets and liabilities: Accounts receivable ................................ (1,968) (2,393) Inventories ........................................ (26) (4,504) Accounts payable and accrued liabilities ........... (6,326) 1,111 Accounts with affiliates ........................... 13 41 Income taxes ....................................... (1,326) 3 Other, net ......................................... 481 (205) -------- -------- Net cash provided by operating activities ........ 7,109 13,870 -------- -------- Cash flows from investing activities: Capital expenditures ................................. (8,924) (10,189) Purchase of business units ........................... (53,084) (9,475) Other, net ........................................... 3 309 -------- -------- Net cash used by investing activities ............ (62,005) (19,355) -------- -------- Cash flows from financing activities: Indebtedness: Additions ......................................... 20,000 12,081 Principal payments ................................ (467) (1,728) Dividends ............................................ -- (4,038) Issuance of common stock ............................. -- 36 -------- -------- Net cash provided by financing activities ........ 19,533 6,351 -------- -------- Net increase (decrease) in cash and cash equivalents ... $(35,363) $ 866 ======== ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Six months ended June 30, 1999 and 2000 (In thousands) 1999 2000 ---- ---- Cash and cash equivalents: Net change from operating, investing and financing activities .......................... $(35,363) $ 866 Business units acquired ............................ 4,157 -- Currency translation ............................... (982) (251) -------- -------- (32,188) 615 Balance at beginning of period ..................... 47,363 12,169 -------- -------- Balance at end of period ........................... $ 15,175 $ 12,784 ======== ======== Supplemental disclosures: Cash paid for: Interest ......................................... $ 545 $ 973 Income taxes ..................................... 8,676 7,386 Business units acquired - net assets consolidated: Cash and cash equivalents ........................ $ 4,157 -- Goodwill and other intangible assets ............. 15,800 2,539 Other non-cash assets ............................ 52,799 8,458 Liabilities ...................................... (19,672) (1,522) -------- -------- Cash paid ........................................ $ 53,084 $ 9,475 ======== ========

COMPX INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of presentation: The consolidated balance sheet of CompX International Inc. and subsidiaries (collectively, the "Company") at December 31, 1999 has been condensed from the Company's audited consolidated financial statements at that date. The consolidated balance sheet at June 30, 2000 and the consolidated statements of income, comprehensive income, stockholders' equity and cash flows for the interim periods ended June 30, 1999 and 2000 have been prepared by the Company, without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations. Certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. The accompanying consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Annual Report"). 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. Commitments and contingencies are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the 1999 Annual Report. The Company is 64% owned by Valhi, Inc. (NYSE: VHI) and Valhi's wholly-owned subsidiary Valcor, Inc. 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 such companies and the Company. The Company will adopt Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, 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. As permitted by the transition requirements of SFAS No. 133, as amended, the Company will exempt from the scope of SFAS No. 133 all host contracts containing embedded derivatives which were issued or acquired prior to January 1, 1999.

The Company will adopt the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition, as amended, in the fourth quarter of 2000. SAB No. 101 provides guidance on the recognition, presentation and disclosure of revenue, including specifying basic criteria which must be met before revenue can be recognized. The impact on the Company of adopting SAB No. 101 has not been determined, in part because the SEC is continuing to provide additional informal guidance and clarification concerning the exact requirements of SAB No. 101. If the impact of adopting SAB No. 101 is material, the Company will adopt SAB No. 101 retroactively to the beginning of 2000, and previously reported results of operations for the first three quarters of 2000 would be restated. Note 2 - Business segment information: The Company operates in one business segment - the manufacture and sale of hardware components for office furniture and other markets. The Company's products consist of ergonomic computer support systems, precision ball bearing slides, and security products. Three months ended Six months ended June 30, June 30, ---------- -------- 1999 2000 1999 2000 ---- ---- ---- ---- (In thousands) Net sales ................ $ 54,970 $ 65,136 $ 110,173 $ 131,203 ======== ======== ========= ========= Operating income ......... $ 9,729 $ 11,506 $ 19,327 $ 22,232 Interest expense ......... (442) (538) (836) (1,071) Other, net ............... 30 62 155 289 -------- -------- --------- --------- Income before income taxes ............ $ 9,317 $ 11,030 $ 18,646 $ 21,450 ======== ======== ========= ========= Note 3 - Inventories: December 31, June 30, 1999 2000 ------ ------ (In thousands) Raw materials ............................ $ 9,038 $11,390 Work in process .......................... 8,669 12,524 Finished products ........................ 9,898 11,938 Supplies ................................. 54 141 ------- ------- $27,659 $35,993 ======= =======

Note 4 - Accounts payable and accrued liabilities: December 31, June 30, 1999 2000 ---- ---- (In thousands) Accounts payable $ 9,850 $12,256 Accrued liabilities: Employee benefits ........................ 7,746 8,369 Insurance ................................ 707 612 Royalties ................................ 504 301 Other .................................... 6,582 4,850 ------- ------- $25,389 $26,388 ======= ======= Note 5 - Indebtedness: December 31, June 30, 1999 2000 --------- -------- (In thousands) Revolving bank credit facility ................... $20,000 $31,000 Capital lease obligations and other .............. 2,267 551 ------- ------- 22,267 31,551 Less current maturities .......................... 1,367 450 ------- ------- $20,900 $31,101 ======= ======= Note 6 - Other income: Three months ended Six months ended June 30, June 30, ----------------- ----------------- 1999 2000 1999 2000 ------- ------ ------ ------ (In thousands) Interest income ........................ $ 175 $ 157 $ 420 $ 285 Foreign currency transactions, net ..... (218) (131) (411) (47) Other, net ............................. 73 36 146 51 ----- ----- ----- ----- $ 30 $ 62 $ 155 $ 289 ===== ===== ===== =====

Note 7 - Provision for income taxes: Three months ended Six months ended June 30, June 30, ------------------ ------------------ 1999 2000 1999 2000 ------- ------- ------- ------ (In thousands) Expected tax expense ............... $ 3,261 $ 3,861 $ 6,525 $ 7,508 Non-U.S. tax rates ................. 57 22 115 84 No tax benefit for amortization of goodwill .......................... 131 155 278 311 Other, net ......................... (188) (66) (207) (76) ------- ------- ------- ------- $ 3,261 $ 3,972 $ 6,711 $ 7,827 ======= ======= ======= ======= Note 8 - Acquisitions: In January 2000, the Company acquired substantially all of the operating assets of Chicago Lock Company for approximately $9.4 million in cash. The purchase price has been allocated to the individual assets acquired and liabilities assumed based upon preliminary estimated fair values. The actual allocation may be different from the preliminary allocation due to refinements in the estimates of the fair values of the net assets acquired. CompX used borrowings under its existing credit facility to pay the cash purchase price. The pro forma effect of this acquisition is not material. Note 9 - Foreign 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 portion of foreign exchange rate risk associated with such receivables, or similar exchange rate risk associated with future sales, denominated in a currency other than the holder's functional currency. At each balance sheet date, outstanding currency forward contracts are marked-to-market with any resulting gain or loss recognized in income currently. At June 30, 2000, the Company held such forward exchange contracts to exchange an aggregate of $18.2 million for an equivalent amount of Canadian dollars at exchange rates between Cdn. $1.4547 and Cdn. $1.4676. Such contracts mature through December 2000.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Overview The Company reported net income of $7.1 million in the second quarter of 2000, an increase of 16% over net income of $6.1 million for the second quarter of 1999. The Company reported net income of $13.6 million in the first six months of 2000, a 13% increase over net income of $12.0 million in the first six months of 1999. In January 2000, the company acquired substantially all the operating assets of Chicago Lock Company. The purchase price of approximately $9.4 million in cash includes substantially all of Chicago Lock's operating assets, excluding real estate. Results of Operations Net sales. Net sales increased $10.1 million, or 18%, to $65.1 million in the second quarter of 2000 from $55.0 million in the second quarter of 1999. For the first six months of 2000, net sales of $131.2 million increased 19% when compared to net sales of $110.2 million for the first six months of 1999. The increases are principally due to increased demand for the Company's office furniture products, market share gains in slide products, and acquisitions. Excluding the effect of acquisitions, net sales increased 6% over the second quarter of 1999 with net sales of slides increasing 14%, and net sales of ergonomics and security products remaining essentially flat. For the six month period ended June 30, 2000, net sales, exclusive of acquisitions, increased 7% over the corresponding period of the prior year. Net sales of slides provided the majority of the change, increasing 13%, while net sales of ergonomics and security products remained flat. During the second quarter of 2000, weakness in the euro negatively impacted certain of the Company's net sales (principally slide products) which are denominated in euros. Excluding the effects of currency and acquisitions, net sales increased 8% and 9%, respectively, for the three and six month periods ended June 30, 2000 compared to the same periods in 1999, with net sales of slide products increasing 19% and 18% over the corresponding periods in 1999. Operating income. Operating income in the second quarter of 2000 was $11.5 million, a 19% increase over operating income of $9.7 million for the second quarter of 1999. For the first six months of 2000, operating income increased $2.9 million, or 15%, to $22.2 million from $19.3 million for the first six months of 1999. Excluding acquisitions and the negative effects of foreign currency fluctuations, discussed above, operating income in the second quarter and first six months of 2000 increased 15% and 12%, respectively, compared to the same periods in 1999. The increases are due primarily to the increase in net sales discussed above. As a percentage of net sales, operating income in the second quarter and the first six months of 2000 remained essentially constant with the comparable 1999 periods. Excluding the effect of acquisitions, operating income as a percentage of net sales increased from 18% to 19% in the second quarter of 2000 compared to the second quarter of 1999, and increased from 19% to 20%, respectively, in the six month periods ended June 30, 1999 and 2000. These increases reflect improved manufacturing efficiencies associated with increased net sales. The effect of acquisitions in the second quarter and first six months of 2000 reflects lower margin sales of the Company's newly acquired Chicago Lock operations.

Liquidity and Capital Resources Consolidated cash flows Operating activities. Trends in cash flows from operating activities, excluding changes in assets and liabilities are generally similar to the trends in the Company's earnings. Such cash flows totaled $7.1 million and $13.9 million in the first six months of 1999 and 2000, respectively, compared to net income of $12.0 million and $13.6 million, respectively. 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 $62.0 million and $19.4 million in the first six months of 1999 and 2000, respectively. Included in cash used by investing activities in the first six months of 1999 and 2000 is the $53.1 million and $9.4 million related to the acquisitions of Thomas Regout and substantially all of the operating assets of Chicago Lock Company, respectively. Capital expenditures for 2000 relate primarily to capacity expansion, equipment additions designed to improve manufacturing efficiencies and tooling. Capital expenditures for 2000 are estimated at approximately $25 million, the majority of which relate to projects emphasizing improved production efficiency and increased production capacity. In connection with the expansion of certain of its domestic production facilities, the Company has outstanding firm purchase commitments of $1.9 million at June 30, 2000. Firm purchase commitments for capital projects not commenced at June 30, 2000 were not material. Financing activities. Net cash provided by financing activities totaled $19.5 million and $6.4 million in the first six months of 1999 and 2000, respectively. The Company paid its quarterly dividend of $2.0 million, or $.125 per share, in the first and second quarters of 2000. No dividends were paid during the first six months of 1999. Cash flows from financing activities in the first six months of 1999 includes $20.0 million of borrowings used to finance a portion of the acquisition of Thomas Regout. Similarly, cash flows from financing activities in the first quarter of 2000 includes $12.1 million of borrowings, $9.4 million of which were used to finance the acquisition of substantially all of the assets of Chicago Lock Company. Repayments of long-term debt totaled $1.7 million during the first six months of 2000 compared to $.5 million for the first six months of 1999. Management believes that cash generated from operations and borrowing availability under the Company's unsecured Revolving Senior Credit Facility ($69 million available for borrowing at June 30, 2000), 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, its capital resources and its 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. As provided by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions that the statements in this Quarterly Report on Form 10-Q relating to matters that are not historical facts, including, but not limited to, statements found in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Forward-looking statements can be identified by the use of such words 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 assurance 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. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this Quarterly 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.

Part II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders. The Company held its Annual Meeting of Shareholders on May 11, 2000. Paul M. Bass, Jr., David A. Bowers, Joseph S. Compofelice, Edward J. Hardin, Ann Manix, Glenn R. Simmons and Steven L. Watson were elected as directors, each receiving votes "For" their election from over 99% of the 104.9 million votes eligible to be voted at the Annual Meeting. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Intercorporate Services Agreement between the Registrant and Valhi, Inc. effective as of January 1, 2000. 10.2 Intercorporate Services Agreement between the Registrant and NL Industries, Inc. effective as of January 1, 2000 - incorporated by reference to Exhibit 10.6 to NL Industries, Inc.'s Quarterly Report on Form 10-Q (File No. 1-640) for the quarter ended June 30, 2000. 27.1 Financial Data Schedule for the six-month period ended June 30, 2000. (b) Reports on Form 8-K Reports on Form 8-K for the quarter ended June 30, 2000. April 17, 2000 - Reported Items 5 and 7. April 18, 2000 - Reported Items 5 and 7. May 11, 2000 - Reported Items 5 and 7. May 30, 2000 - Reported Items 5 and 7.

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMPX INTERNATIONAL INC. ----------------------------- (Registrant) Date August 10, 2000 By: /s/ John A. Miller ------------------ ------------------ John A. Miller Vice President and Chief Financial Officer (Principal Financial Officer) Date August 10, 2000 By: /s/ Todd W. Strange ------------------ ------------------- Todd W. Strange Vice President and Controller (Principal Accounting Officer)

                        INTERCORPORATE SERVICES AGREEMENT


         This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"),  effective as
of January 1, 2000, amends and supersedes that certain  Intercorporate  Services
Agreement  effective  as of  January 1, 1999  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 in the development and  implementation  of Recipient's
corporate business strategies, plans and objectives;

         (b)  Consultation  in management  and conduct of corporate  affairs and
corporate governance consistent with the charter and bylaws of Recipient;

         (c)  Consultation  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  in  cash  management  and  in  arranging   financing
necessary to implement the business plans of Recipient;

         (e)  Consultation  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  with respect to employee benefit plans and incentive
compensation arrangements; and

         (g) 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 $139,000
quarterly, commencing as of January 1, 2000, 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, 2000 to
December 31, 2000.

         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.



         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.



                             /s/ Bobby D. O'Brien
                       By:   ---------------------------------------
                             Bobby D. O'Brien
                             Vice President and Treasurer


                             COMPX INTERNATIONAL INC.



                             /s/ John A. Miller
                       By:   ---------------------------------------
                             John A. Miller
                             Vice President, Chief Financial Officer
                              and Treasurer

  


                     5

THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPX
INTERNATIONAL INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.

                         0001049606
                        COMPX INTERNATIONAL INC.
                                   1,000

                             
                   6-MOS
                              DEC-31-2000
                                 JAN-01-2000
                                   JUN-30-2000
                                         12,784
                                   0
                                  33,396
                                   793
                                    35,993
                               84,901
                                         115,495
                                 28,620
                                 219,754
                          27,427
                                        31,101
                          0
                                    0
                                       161
                                     155,470
                   219,754
                                        131,203
                               131,203
                                          95,139
                                  95,139
                               0
                               153
                             1,071
                                21,450
                                   7,827
                            13,626
                                 0
                                0
                                      0
                                   13,626
                                    .84
                                  .84