SEC Filing Html Data
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, 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.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
- ----------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 233-1700
--------------------
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.
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 March 2, 2001, 5,117,280 shares of Class A common stock were
outstanding. The aggregate market value of the 4.7 million shares of voting
stock held by nonaffiliates of Valhi, Inc. as of such date approximated $50.0
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.
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 2000, CompX
generated net sales of $253.3 million, a 12% increase from 1999. In 2000,
ergonomic computer support systems, precision ball bearing slides and security
products accounted for approximately 16%, 50% and 34% of net sales,
respectively.
Valhi, Inc. and Valhi's wholly-owned subsidiary Valcor, Inc. owned 68% of
the Company's outstanding common stock at December 31, 2000. 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 by trusts established for the benefit of certain children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is sole trustee. 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 security products producers. In 1999,
CompX acquired two more slide producers and in January 2000 acquired another
security products 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 beliefs 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, changes in costs of raw materials and other operating costs (such as
energy costs), 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 trade barriers, the impact of pricing
and production decisions, fluctuations in the value of the U.S. dollar relative
to other currencies (such as the euro and Canadian dollar), potential
difficulties in integrating completed acquisitions, uncertainties associated
with new product development, 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 publicly
or revise such statements whether as a result of new information, future events
or otherwise.
Industry Overview
During the mid 1990's and 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 security products industry in 1998 and 2000 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 63% 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 and other non-office furniture
applications result in the potential for higher rates of growth than the office
furniture industry as a whole.
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, Chicago Lock and TuBAR 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.
Ergonomic computer support systems include adjustable computer keyboard
support arms, designed to attach to office desks in the workplace and home
office environments to alleviate possible strains and stress and maximize usable
workspace, adjustable computer table mechanisms which provide variable workspace
heights, CPU storage devices which minimize adverse effects of dust and moisture
and a number of complementary accessories, including ergonomic wrist rest aids,
mouse pad supports and computer monitor support arms. These products include
CompX's Leverlock ergonomic keyboard arm, which is designed to make the
adjustment of the keyboard arm easier for all (including physically-challenged
users). In addition, the Company offers its engineering and design capabilities
for the design and manufacture of products on a proprietary basis for key
customers. Development of height adjustable work surfaces utilizing the
Company's patented twin-lift mechanism and height adjustable tables using
CompX's patented counterbalancing feature is also proceeding and is expected to
further enhance the Company's product offerings.
Precision ball bearing slides. CompX manufactures a complete line of
precision ball bearing slides for use in office furniture, computer related
equipment, tool storage cabinets, imaging equipment, file cabinets, desk drawers
and other applications. These products include CompX's Integrated Slide Lock in
which a file cabinet manufacturer can reduce the possibility of multiple drawers
being opened at the same time, and the adjustable Ball Lock which reduces the
risk of heavily-filled drawers, such as auto mechanic tool boxes, from opening
while in movement. 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 CompX's basic precision ball bearing slide product lines,
sales based on patented innovations such as the Butterfly Take Apart System, the
Integrated Slide Lock and the Ball Lock have accounted for an increasing
proportion of the Company's sales. These applications have expanded the
Company's product offerings within the office furniture industry as well as
adding products for heavy-duty tool storage cabinets, electromechanical imaging
equipment and computer server network cabinets.
Security products. The Company believes that it is a North American market
leader in the manufacture and sale of cabinet locks and other locking
mechanisms. CompX provides security products to various industries including
institutional furniture, banking, vending and computer. CompX's security
products are sold under the National Cabinet Lock, Fort Lock, Timberline Lock
and Chicago Lock brand names. The Company's products can also be found in
various applications including ignition systems, office furniture, vending and
gaming machines, parking meters, electrical circuit panels, storage compartments
for motorcycles, security devices for laptop and desktop computers as well as
mechanical and electronic locks for the toolbox industry. Some of these products
may include CompX's KeSet high security system, which has the ability to change
the keying on a single lock 64 times without removing the lock from its
enclosure.
The Company manufactures disc tumbler locking mechanisms at all of its
security products facilities, which mechanisms provide moderate security and
generally represent the lowest cost lock to produce. CompX also manufactures pin
tumbler locking mechanisms, including its KeSet, ACE II and TuBAR brand locks,
which mechanisms are more costly to produce and are used in applications
requiring higher levels of security. A substantial portion of the Company's
sales consist of products with specialized adaptations to individual
manufacturers' enclosure specifications. CompX, however, also has a standardized
product line suitable for many customers. This standardized product line is
offered through a North American distribution and factory centers network as
well as to large OEMs through the Company's STOCK LOCKS distribution program.
Sales, Marketing and Distribution
CompX sells components to OEMs and to distributors through a dedicated
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 manufacturers' 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. The Company also operates a small tractor/trailer fleet associated with
its Canadian facilities.
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
1998, 1999 and 2000, sales to the Company's ten largest customers accounted for
approximately 40%, 33% and 35% of sales, respectively. In 1999 and 2000, 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 the past three years, nine of the Company's top ten customers
were located in the United States.
Manufacturing and operations
At December 31, 2000, CompX operated seven manufacturing facilities in
North America (three in Illinois, two in Canada 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, Michigan and Taiwan. Security
products are manufactured in the facilities located in South Carolina and
Illinois. The Company owns all of these facilities except for one of the
Illinois facilities and one of the Taiwan facilities, which are leased. See also
Item 2. During 2000, the Company closed its Chicago Lock manufacturing facility
in Pleasant Prairie, Wisconsin and consolidated those operations with the
Company's security products facilities in Mauldin, South Carolina. 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.
Consequently, overall operating margins can be affected by such raw material
cost pressures.
Competition
The office furniture and security products markets are highly competitive.
The Company competes primarily on the basis of product design, including
ergonomic and aesthetic factors, product quality and durability, price, on-time
delivery, 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 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 domestic and foreign manufacturers that compete primarily on the basis
of product quality and price. The Company's security products compete with a
variety of relatively small domestic and foreign 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
The Company 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, KeSet, Fort Lock, Timberline Lock, Chicago Lock, ACE II, 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, the
Netherlands and Taiwan. The majority of the Company's 2000 non-U.S. sales are to
customers located in Canada and Europe. Foreign operations are subject to, among
other things, currency exchange rate fluctuations. 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, 2000, the Company employed approximately 2,270
employees, including 895 in the United States, 875 in Canada, 365 in the
Netherlands and 135 in Taiwan. Approximately 85% of the Company's employees in
Canada are represented by a labor union. The Company's collective bargaining
agreement with such union expires in 2003. The Company believes that its labor
relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in approximately
1,000 square feet of leased space at 5430 LBJ Freeway, Dallas, Texas 75240. The
following table sets forth the location, size and general product types produced
for each of the Company's facilities.
Products
Facility Name Location Size Produced
- ------------- -------- ---- --------
(square feet)
Owned Facilities:
- ----------------
Manitou Kitchener, Ontario 280,000 Slides
Trillium Kitchener, Ontario 116,000 Ergonomic products
Thomas Regout Maastricht,
the Netherlands 270,000 Slides
Grand Rapids, M 60,000 Slides
National Cabinet
Lock Mauldin, SC 197,000 Security products
Fort Lock River Grove, IL 100,000 Security products
Timberline Lake Bluff, IL 16,000 Security products
Dynaslide Taipei, Taiwan 43,000 Slides
Leased Facilities:
- -----------------
Dynaslide Taipei, Taiwan 32,000 Slides
Chicago Tubar Hoffman Estates, IL 5,000 Security products
Distribution Center Chino, CA 6,000 Product distribution
The Manitou, Thomas Regout - 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.
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 material
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, 2000.
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 March 2, 2001, there were approximately 25
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 1999
and 2000, according to the New York Stock Exchange Composite Tape, and dividends
paid per share during such periods. On March 2, 2001 the closing price per share
of CompX Class A common stock according to the NYSE Composite Tape was $10.55.
Dividends
High Low paid
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
Year ended December 31, 2000
First Quarter .................... $19 7/8 $17 7/8 $.125
Second Quarter ................... 23 7/16 17 13/16 .125
Third Quarter .................... 23 3/16 19 5/16 .125
Fourth Quarter ................... 20 15/16 8 15/16 .125
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 $1.8 million in 1998. In addition, on December 12, 1997,
the Company paid a $50 million dividend to Valcor in the form of a note payable.
The Company utilized borrowings under its Revolving Senior Credit Facility to
repay in full the note payable to Valcor in 1998.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Consolidated Financial Statements and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's operations are comprised of a 52 or 53 week fiscal year.
Excluding 1998, each of the years 1996 through 2000 consisted of a 52 week year.
1998 was a 53 week year.
Years ended December 31,
--------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
($ in millions, except per share data)
Income Statement Data
Net sales ...................... $ 88.7 $ 108.7 $ 152.1 $ 225.9 $ 253.3
Operating income ............... $ 21.6 $ 27.1 $ 30.8 $ 40.1 $ 37.3
Income before income taxes and
minority interest ............ $ 22.1 $ 27.7 $ 32.5 $ 39.2 $ 35.5
Income taxes ................... 9.1 11.0 12.0 14.1 13.4
Minority interest in losses .... -- -- (.2) (.1) --
-------- -------- -------- -------- --------
Net income ................... $ 13.0 $ 16.7 $ 20.7 $ 25.2 $ 22.1
======== ======== ======== ======== ========
Cash dividends (1) ............. $ 6.2 $ 6.1 $ 1.8 $ 2.0 $ 8.1
Basic earnings per share data:
Net income ................... $ 1.30 $ 1.67 $ 1.37 $ 1.56 $ 1.37
Cash dividends ............... $ .62 $ .61 $ .18 $ .125 $ .50
Weighted average common shares
Outstanding ................... 10.0 10.0 15.1 16.1 16.1
Balance Sheet Data
(at year end):
Cash and other current assets $ 32.2 $ 45.4 $ 86.5 $ 72.5 $ 83.0
Total assets ................. 48.5 63.8 152.4 202.9 225.5
Current liabilities .......... 8.1 64.4 20.3 26.8 28.9
Long-term debt, including
current maturities .......... .2 50.4 1.7 22.3 40.6
Stockholders' equity (deficit) 39.2 (1.2) 130.0 149.4 151.0
(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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company reported net income of $22.1 million, or $1.37 per diluted
share for the year ended December 31, 2000, a decrease of 12% compared to net
income of $25.2 million or $1.56 per diluted share for the year ended December
31, 1999. The Company's net income in 1998 was $20.7 million, or $1.37 per
diluted share.
Beginning in 1998, the Company has grown through a series of strategic
acquisitions that have allowed the Company to expand its product offerings to
customers outside of its traditional office furniture customer base. The
Company's customer base now also includes customers in the vending, computer and
related products, transportation and recreation industries. In 1998, the Company
expanded it's security products capacity through the acquisitions of Fort Lock
Corporation and related assets for approximately $33 million and Timberline
Lock, Ltd. and related assets for approximately $8 million. The Company expanded
it's offerings in the precision ball bearing slide and ergonomic products
markets in 1999 through it's acquisitions of Thomas Regout for approximately $53
million and Dynaslide for approximately $12 million. In January 2000, the
Company acquired substantially all of the operating assets of Chicago Lock
Company for approximately $9 million, further expanding it's security products
capacity. These acquisitions were financed through a combination of cash on hand
and increased borrowings under the Company's Revolving Senior Credit Facility.
Of the Company's acquisitions, only the pro forma effects of the Thomas
Regout and Fort Lock acquisitions were material. Assuming these 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.
Results of Operations
Net sales and operating income
Years ended December 31, % Change
-------------------------- ---------------
1998 1999 2000 1998-1999 1999-2000
---- ---- ---- --------- ---------
(In millions)
Net sales .................. $152.1 $225.9 $253.3 +49% +12%
Operating income ........... 30.8 40.1 37.3 +30% - 7
Operating income margin 20% 18% 15%
Year ended December 31, 2000 compared to year ended December 31, 1999
Net sales increased $27.4 million, or 12%, in 2000 compared to 1999 due to
the effect of acquisitions. Sales of security products in 2000 increased 14%
compared to 1999, and sales of slide products increased 18%. During 2000, sales
of CompX's ergonomic products decreased 5% compared to 1999. Excluding the
effect of acquisitions, net sales in 2000 were essentially flat compared to net
sales in 1999, with sales of slide products up 8% and sales of ergonomic
products and security products down 5% and 7%, respectively, compared to 1999.
Sales of ergonomic products were negatively impacted in the second half of 2000
by softening demand in the office furniture industry in North America and loss
of market share due to competition from imports. The lower security products
sales were due to weakness in the computer and related products industry and
increased competition from low-cost imports. The increase in sales of slide
products is due to market share gains and increased demand for CompX's slide
products.
Operating income for 2000 decreased $2.8 million, or 7% compared to 1999.
Excluding the results of acquisitions, operating income decreased 11% from the
prior year. Along with the softening demand from the office furniture industry,
operating income was also impacted by a change in the product mix, with a lower
percentage of sales being generated by certain higher-margin products in 2000
compared to 1999, as well as incremental costs incurred in moving the operations
of the Chicago Lock plant to the Company's Mauldin, South Carolina plant, higher
costs associated with the expansion of the Company's Grand Rapids, Michigan
plant and higher administrative expenses.
Year ended December 31, 1999 compared to year ended December 31, 1998
Net sales increased $73.8 million, or 49% in 1999 compared to 1998
primarily due to the effect of acquisitions. Excluding the effect of
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.
In 1999, operating income increased $9.3 million, or 30% 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.
General
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
45% of the Company's total cost of sales. In 1999 and 2000 steel prices did not
change significantly compared to the respective prior year. 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 2001 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.
At December 31, 2000, none of the Company's employees in the U.S., the
Netherlands or Taiwan were represented by bargaining units, and wage increases
for such employees historically have been in line with overall inflation
indices. Approximately 85% of the Company's Canadian employees are covered by a
three year collective bargaining agreement that expires in 2003 and provides for
annual wage increases of approximately 3.5%. Wage increases for these Canadian
employees historically have also 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
1999 and 2000 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.
CompX has substantial operations and assets located outside the United
States (principally in Canada, the Netherlands and Taiwan). A portion of CompX's
sales generated from its non-U.S. operations are denominated in currencies other
than the U.S. dollar, principally the Canadian dollar, the Dutch guilder, the
euro and the New Taiwan dollar. In addition, a portion of CompX's sales
generated from its non-U.S. operations (principally in Canada) are denominated
in the U.S. dollar. Most raw materials, labor and other production costs for
such non-U.S. operations are denominated primarily in local currencies.
Consequently, the translated U.S. dollar value of CompX's foreign sales and
operating results are subject to currency exchange rate fluctuations which may
favorably or unfavorably impact reported earnings and may affect comparability
of period-to--period operating results. During 2000, weakness in the euro
negatively impacted the Company's sales and operating income comparisons with
1999 (principally with respect to slide products). Excluding the effect of
currency and acquisitions, the Company's sales increased 3% in 2000 compared to
1999, and operating income decreased 9%. Fluctuations in the value of the U.S.
dollar against such other currencies did not significantly impact CompX's sales
or operating income in 1999 compared to 1998.
Due in part to expected continued soft manufacturing sector economic
conditions in North America and Europe, CompX currently expects its operating
income in the first half of 2001 to be lower compared to the first half of 2000.
If demand improves later in 2001, CompX believes its operating income in the
second half of 2001 could be higher compared to the second half of 2000. These
current expectations and beliefs are subject to certain risks and uncertainties,
some of which are set forth in "Business-General." CompX also intends to focus
on cost control to improve its operating margins.
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 1998, 1999 and 2000, are generally similar to the trends in the Company's
earnings. Cash provided by operating activities (excluding the non-cash stock
award charge in 1998) totaled, $24.3 million, $28.4 million and $28.4 million
for the years ended December 31, 1998, 1999 and 2000, respectively, compared to
net income of $20.7 million, $25.2 million and $22.1 million, respectively.
Depreciation and amortization increased during the past three years in part due
to the acquisitions discussed above and additional expenditures on facilities
expansion discussed below.
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 $54.2
million, $84.6 million and $32.4 million for the years ended December 31, 1998,
1999 and 2000, respectively. Cash used by investing activities in 1998 includes
an aggregate of $41.6 million for the Fort Lock and Timberline acquisitions.
Likewise, $65.0 million in cash was used for the Thomas Regout and Dynaslide
acquisitions in 1999 and approximately $9.3 million was used for the Chicago
Lock acquisition in 2000. 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 1999 relates primarily to the additions of a fourth plating line
at the Company's Kitchener facility, facility expansions in Kitchener, the
acquisition of an adjoining manufacturing building at Fort Lock and the addition
of automation equipment at all facilities. The capital expenditure increases in
2000 relate primarily to the completion of facility expansions mentioned above
and additional facility expansions at the Company's Grand Rapids and Mauldin
facilities.
Capital expenditures for 2001 are estimated at approximately $21 million,
the majority of which relate to projects that emphasize improved production
efficiency and increased production capacity. Firm purchase commitments for
capital projects in process at December 31, 2000 approximated $5 million.
Financing activities. Net cash provided by financing activities totaled
$58.7 million, $17.0 million and $2.1 million for the years ended December 31,
1998, 1999 and 2000, 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 $1.8 million in 1998. See Notes 9 and 10 to the Consolidated
Financial Statements. The Company also paid its first regular quarterly dividend
since the initial public offering of $0.125 per share in December 1999. Total
cash dividends paid in 1999 and 2000 were $2.0 million and $8.1 million,
respectively.
The Company's board of directors has authorized the Company to purchase up
to approximately 1.1 million shares of its common stock in open market or
privately-negotiated transactions at unspecified prices and over an unspecified
period of time. As of December 31, 2000, the Company had purchased approximately
844,000 shares for an aggregate of $8.7 million pursuant to such authorization.
In February 2001, the Company purchased approximately 243,000 shares for an
aggregate purchase price of $2.4 million.
At December 31, 2000, the Company had $59 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 has in the past and may in the future seek to raise additional capital,
refinance or restructure indebtedness, issue additional securities, repurchase
shares of its common stock, 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 periodically uses
currency forward contracts to manage a portion of foreign exchange rate risk
associated with receivables, or similar exchange rate risk associated with
future sales, denominated in a currency other than the holder's functional
currency. 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, 1999 and 2000. See Note 1 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 and 2000, substantially all of the Company's
outstanding indebtedness were variable rate borrowings. Such borrowings at
December 31, 2000 related principally to $39 million ($20 million at December
31, 1999) in borrowings under the Revolving Senior Credit Facility. The
outstanding balances at December 31, 1999 and 2000 (which approximate fair
value) had a weighted-average interest rate of 6.2% and 6.7%, respectively.
Amounts outstanding under this credit facility are due in 2003. In addition,
Dynaslide had $1.2 million in short-term bank borrowings outstanding at December
31, 2000. These borrowings bear interest at 6.8%, are denominated in New Taiwan
dollars and were repaid in January 2001. Information for such foreign-currency
denominated indebtedness is presented in its U.S. dollar equivalent using the
December 31, 2000 exchange rate of 33.0 New Taiwan dollars per U.S. dollar. The
remaining indebtedness outstanding at December 31, 1999 and 2000 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 outside the United States (principally
Canada, the Netherlands and Taiwan). A portion of CompX's sales generated from
its non-U.S. operations are denominated in currencies other than the U.S.
dollar, principally the Canadian dollar, the Dutch guilder/the euro and the New
Taiwan dollar. In addition, a portion of CompX's sales generated from its
non-U.S. operations (principally in Canada) are denominated in the U.S. dollar.
Most raw materials, labor and other production costs for such non-U.S.
operations are denominated primarily in local currencies. Consequently, the
translated U.S. dollar value of CompX's foreign sales and operating results are
subject to currency exchange rate fluctuations which may favorably or
unfavorably impact reported earnings and may affect comparability of
period-to-period operating results.
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 receivables, or similar exchange rate risk
associated with future sales, at December 31, 2000 CompX had entered into a
series of short-term forward exchange contracts maturing through March 2001 to
exchange an aggregate of $9.1 million for an equivalent amount of Canadian
dollars at an exchange rate of Cdn $1.482 per U.S. dollar. Similar contracts
were outstanding at December 31, 1999 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. At each balance sheet date,
outstanding currency forward contracts are marked-to-market with any resulting
gain or loss recognized in income currently. The difference between the
estimated fair value and the face value of all such outstanding forward
contracts at December 31, 1999 and 2000 is not material.
Other. Beginning January 1, 1999, eleven of the fifteen members of the
European Union ("EU"), including the Netherlands, 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.
As of January 1, 2001, the functional currencies of the Company's Thomas
Regout operations in Maastricht, the Netherlands, had 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. Such forward-looking statements are
subject to certain risks and uncertainties some of which are listed in
"Business-General."
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-1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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.
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-1) are filed as part of this Annual Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter
ended December 31, 2000.
(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, 2000 - incorporated
by reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 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.
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.
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 - incorporated by
reference to Exhibit 10.8 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999.
10.9 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.
10.10* Release agreement between the Registrant and Joseph S.
Compofelice, effective as of November 6, 2000.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Annual Report of the CompX 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, 2000.
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, 2000.
*Management contract, compensatory plan or agreement
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/ Brent A. Hagenbuch
------------------------------------------------
Brent A. Hagenbuch
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/ Glenn R. Simmons Chairman of the Board March 16, 2001
- -----------------------------
Glenn R. Simmons
/s/ Brent A. Hagenbuch President and March 16, 2001
- ----------------------------- Chief Executive Officer
Brent A. Hagenbuch (Principal Executive and
Financial Officer)
/s/ David A. Bowers Vice Chairman of the Board March 16, 2001
- ----------------------------- and Chief Operating Officer
David A. Bowers
/s/ Todd W. Strange Vice President and March 16, 2001
- ----------------------------- Controller (Principal
Todd W. Strange Accounting Officer)
/s/ Edward J. Hardin Director March 16, 2001
- -----------------------------
Edward J. Hardin
/s/ Paul M. Bass, Jr. Director March 16, 2001
- -----------------------------
Paul M. Bass, Jr.
/s/ Ann Manix Director March 16, 2001
- -----------------------------
Ann Manix
/s/ Steven L. Watson Director March 16, 2001
- -----------------------------
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-2
Consolidated Balance Sheets - December 31, 1999 and 2000 ............ F-3
Consolidated Statements of Income -
Years ended December 31, 1998, 1999 and 2000 ....................... F-5
Consolidated Statements of Comprehensive Income -
Years ended December 31, 1998, 1999 and 2000 ....................... F-6
Consolidated Statements of Cash Flows -
Years ended December 31, 1998, 1999 and 2000 ....................... F-7
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1998, 1999 and 2000 ....................... F-9
Notes to Consolidated Financial Statements .......................... F-10
Financial Statement Schedule
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of CompX International Inc.:
In our opinion, the accompanying consolidated balance sheets 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, 1999 and 2000, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. 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 these financial
statements in accordance with auditing standards generally accepted in the
United States of America, 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 9, 2001
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 2000
(In thousands, except share data)
ASSETS 1999 2000
---- ----
Current assets:
Cash and cash equivalents ........................ $ 12,169 $ 9,820
Accounts receivable, less allowance for
doubtful accounts of $725 and $487 .............. 29,053 30,833
Income taxes receivable from affiliates .......... 22 305
Refundable income taxes .......................... 462 2,165
Inventories ...................................... 27,659 36,246
Prepaid expenses ................................. 1,858 2,408
Deferred income taxes ............................ 1,258 1,209
-------- --------
Total current assets ......................... 72,481 82,986
-------- --------
Other assets:
Goodwill ......................................... 41,697 42,213
Other intangible assets .......................... 2,787 2,646
Deferred income taxes ............................ 2,499 1,813
Other ............................................ 203 868
-------- --------
Total other assets ........................... 47,186 47,540
-------- --------
Property and equipment:
Land ............................................. 3,549 5,709
Buildings ........................................ 27,898 34,500
Equipment ........................................ 70,242 78,357
Construction in progress ......................... 6,710 9,787
-------- --------
108,399 128,353
Less accumulated depreciation .................... 25,154 33,394
-------- --------
Net property and equipment ................... 83,245 94,959
-------- --------
$202,912 $225,485
See accompanying notes to consolidated financial statements.
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 1999 and 2000
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 2000
---- ----
Current liabilities:
Current maturities of long-term debt ................. $ 1,367 $ 1,638
Accounts payable and accrued liabilities ............. 25,389 26,487
Income taxes ......................................... 91 648
Deferred income taxes ................................ -- 103
--------- ---------
Total current liabilities ........................ 26,847 28,876
--------- ---------
Noncurrent liabilities:
Long-term debt ....................................... 20,900 39,000
Deferred income taxes ................................ 3,223 4,852
Accrued pension costs ................................ 1,209 1,168
Other ................................................ 1,274 626
--------- ---------
Total noncurrent liabilities ..................... 26,606 45,646
--------- ---------
Minority interest ...................................... 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; 6,147,380 and 6,204,680
shares issued ....................................... 61 62
Class B common stock, $.01 par value;
10,000,000 shares authorized, issued and outstanding 100 100
Additional paid-in capital ........................... 118,067 119,194
Retained earnings .................................... 37,415 51,395
Accumulated other comprehensive income-
currency translation ................................ (6,287) (11,123)
Treasury stock, at cost - nil and 844,300 shares ..... -- (8,665)
--------- ---------
Total stockholders' equity ....................... 149,356 150,963
--------- ---------
$ 202,912 $ 225,485
Commitments and contingencies (Note 11)
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1998, 1999 and 2000
(In thousands, except per share data)
1998 1999 2000
---- ---- ----
Net sales ................................................... $ 152,093 $ 225,888 $ 253,294
--------- --------- ---------
Costs and expenses:
Cost of sales ............................................. 102,004 160,628 187,299
Selling, general and administrative ....................... 19,706 25,220 28,693
Other expense (income), net ............................... (412) (104) 9
General corporate expense (income), net ................... (2,834) (572) (452)
Interest expense .......................................... 1,094 1,554 2,302
--------- --------- ---------
119,558 186,726 217,851
--------- --------- ---------
Income before income taxes and
minority interest .................................... 32,535 39,162 35,443
Provision for income taxes .................................. 12,034 14,102 13,390
Minority interest in losses ................................. (165) (103) (3)
--------- --------- ---------
Net income ............................................ $ 20,666 $ 25,163 $ 22,056
========= ========= =========
Basic and diluted earnings per common share ................. $ 1.37 $ 1.56 $ 1.37
========= ========= =========
Cash dividends per share .................................... $ .18 $ .125 $ .50
========= ========= =========
Shares used in the calculation of earnings per share amounts:
Basic earnings per share .................................. 15,052 16,146 16,115
Dilutive impact of stock options .......................... 32 3 32
--------- --------- ---------
Diluted earnings per share ................................ 15,084 16,149 16,147
========= ========= =========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 1998, 1999 and 2000
(In thousands)
1998 1999 2000
---- ---- ----
Net income .............................. $ 20,666 $ 25,163 $ 22,056
-------- -------- --------
Other comprehensive income -
currency translation adjustment:
Pre-tax amount ...................... (2,001) (3,875) (5,159)
Less income tax benefit ............. (668) -- (323)
-------- -------- --------
Total other comprehensive income .... (1,333) (3,875) (4,836)
-------- -------- --------
Comprehensive income .............. $ 19,333 $ 21,288 $ 17,220
======== ======== ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1999 and 2000
(In thousands)
1998 1999 2000
---- ---- ----
Cash flows from operating activities:
Net income .................................. $ 20,666 $ 25,163 $ 22,056
Depreciation and amortization ............... 4,538 9,406 12,416
Deferred income taxes ....................... (830) 1,423 2,310
Noncash stock award of Management Shares .... 3,298 -- --
Minority interest ........................... (165) (103) (3)
Other, net .................................. (85) (243) (73)
Change in assets and liabilities:
Accounts receivable ....................... (1,319) (3,186) (826)
Inventories ............................... (375) (1,992) (7,421)
Accounts payable and accrued liabilities .. 1,486 (2,470) 2,746
Accounts with affiliates .................. (904) 532 (284)
Income taxes .............................. (687) (1,579) (1,033)
Other, net ................................ (1,357) 1,471 (1,458)
--------- -------- --------
Net cash provided by operating activities 24,266 28,422 28,430
--------- -------- --------
Cash flows from investing activities:
Capital expenditures ........................ (12,928) (19,703) (23,128)
Purchase of business units .................. (41,646) (64,975) (9,346)
Other, net .................................. 398 54 111
--------- -------- --------
Net cash used by investing activities ... (54,176) (84,624) (32,363)
--------- -------- --------
Cash flows from financing activities:
Long-term debt:
Additions ................................. 75,475 20,000 20,274
Principal payments ........................ (75,157) (1,009) (2,454)
Deferred financing costs paid ............. (200) -- --
Repayment of demand note to Valcor .......... (50,000) -- --
Issuance of common stock .................... 110,378 -- 1,027
Dividends ................................... (1,800) (2,018) (8,076)
Common stock reacquired ..................... -- -- (8,665)
Other ....................................... -- -- 13
--------- -------- --------
Net cash provided by financing activities 58,696 16,973 2,119
--------- -------- --------
Net increase (decrease) ....................... $ 28,786 $(39,229) $ (1,814)
========= ======== ========
See accompanying notes to consolidated financial statements.
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1998, 1999 and 2000
(In thousands)
1998 1999 2000
---- ---- ----
Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing
Activities .................................... $ 28,786 $(39,229) $ (1,814)
Business units acquired ........................ 387 4,785 --
Currency translation ........................... (997) (750) (535)
Balance at beginning of year ..................... 19,187 47,363 12,169
-------- -------- --------
Balance at end of year ........................... $ 47,363 $ 12,169 $ 9,820
======== ======== ========
Supplemental disclosures:
Cash paid for:
Interest ....................................... $ 1,244 $ 1,253 $ 2,086
Income taxes ................................... 14,449 13,284 12,562
Net assets consolidated - business units acquired:
Cash and cash equivalents ...................... $ 387 $ 4,785 $ --
Goodwill ....................................... 23,145 22,700 4,837
Other intangible assets ........................ 3,057 -- 254
Other non-cash assets .......................... 21,653 54,966 7,144
Liabilities .................................... (6,596) (17,476) (2,889)
-------- -------- --------
Cash paid ...................................... $ 41,646 $ 64,975 $ 9,346
======== ======== ========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1998, 1999 and 2000
(In thousands)
Accumulated other
comprehensive Total
Additional Retained income stockholders'
Common stock paid-in earnings currency Treasury equity
Class A Class B capital (deficit) translation stock (deficit)
---- ---- -------- --------- ----------- ----- -----------
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
Net income ................. -- -- -- 22,056 -- -- 22,056
Other comprehensive income . -- -- -- -- (4,836) -- (4,836)
Cash dividends ............. -- -- -- (8,076) -- -- (8,076)
Issuance of common stock ... 1 -- 1,072 -- -- -- 1,073
Common stock reacquired .... -- -- -- -- -- (8,665) (8,665)
Other ...................... -- -- 55 -- -- -- 55
--- ---- -------- -------- -------- ------- ---------
Balance at December 31, 2000 $62 $100 $119,194 $ 51,395 $(11,123) $(8,665) $ 150,963
=== ==== ======== ======== ======== ======= =========
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Organization. CompX International Inc. (NYSE: CIX) is 68% owned by Valhi,
Inc. (NYSE: VHI) and Valhi's wholly-owned subsidiary Valcor, Inc. at December
31, 2000. 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 by trusts
established for the benefit of certain children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee. 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 accounting principles generally accepted in the United States 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, 1999 and 2000 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 applicable 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 $512,000 in
1998, ($290,000) in 1999 and ($117,000) in 2000.
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 and title has
passed to the customer. Amounts charged for shipping and handling are included
in net sales. Costs incurred for shipping and handling, generally netted against
sales, were $3.9 million in 1998, $4.8 million in 1999 and $6.6 million in 2000.
The Company adopted the Securities and Exchange Commission's Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition, as amended, in 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 of adopting SAB No. 101 was not material.
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. Upon sale
or retirement of an asset, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is recognized in income
currently.
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 $2.7 million at
December 31, 1999 and $5.1 million at December 31, 2000.
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 12.25 years remaining at December
31, 2000) and are stated net of accumulated amortization of $.4 million at
December 31, 1999 and $.8 million at December 31, 2000.
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
Canadian 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, any such outstanding currency forward
contract is marked-to-market with any resulting gain or loss recognized in
income currently. At December 31, 2000, the Company held contracts to manage
such exchange rate risk to exchange an aggregate of U.S. $9.1 million for an
equivalent amount of Canadian dollars at an exchange rate of Cdn. $1.4816 per
U.S. dollar. Such contracts mature through March 2001. Similar contracts were
also outstanding at December 31, 1999 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. These contracts matured in March 2000. The estimated
fair value of all such currency forward contracts is not material at December
31, 1999 and 2000. At December 31, 2000, the actual exchange rate was Cdn. $1.50
per U.S. dollar (1999 - Cdn. $1.44 per U.S. dollar).
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 aggregated $32 million at December 31, 1999
and $48 million at December 31, 2000.
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
847,922 in 2000 and 472,514 in 1999 (nil in 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.
Other. Advertising costs, expensed as incurred, were $423,000 in 1998,
$1,030,000 in 1999 and $931,000 in 2000. Research and development costs,
expensed as incurred, were $643,000 in 1998, $1,032,000 in 1999 and $1,082,000
in 2000.
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, as amended, effective January 1, 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, and such
changes will be recognized either in net income or other comprehensive income.
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.
Other than certain currency forward contracts discussed above, the Company is
not a party to any significant derivative or hedging instrument covered by SFAS
No. 133 at December 31, 2000. The accounting for such currency forward contracts
under SFAS No. 133 is not materially different from the accounting for such
contracts under prior accounting rules, and therefore the impact to the Company
of adopting SFAS No. 133 will not be material.
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.
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 borrowings 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.
In January 2000, the Company acquired substantially all of the operating
assets of Chicago Lock Company for approximately $9.4 million in cash. CompX
used borrowings under its existing credit facility to pay the cash purchase
price.
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. The purchase price
for all 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.,
Dynaslide and Chicago Lock 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.
Note 3 - Business and geographic segments:
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. 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.
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, 1999 and
2000, the net assets of non-U.S. subsidiaries included in consolidated net
assets approximated $92 million.
Years ended December 31,
1998 1999 2000
---- ---- ----
(In thousands)
Operating income ................. $ 30,795 $ 40,144 $ 37,293
Interest expense ................. (1,094) (1,554) (2,302)
General corporate income, net .... 2,834 572 452
--------- --------- ---------
Income before income taxes and
minority interest ........... $ 32,535 $ 39,162 $ 35,443
========= ========= =========
Net sales:
Point of origin:
Canada ....................... $ 92,272 $ 96,915 $ 99,088
United States ................ 58,018 89,036 106,294
The Netherlands .............. -- 36,834 35,767
Taiwan ....................... -- 706 12,145
Other ........................ 1,803 2,397 --
--------- --------- ---------
$ 152,093 $ 225,888 $ 253,294
========= ========= =========
Years ended December 31,
1998 1999 2000
---- ---- ----
(In thousands)
Point of destination:
United States ............... $105,189 $133,700 $159,658
Canada ...................... 40,284 43,556 43,903
Europe ...................... 3,664 41,498 34,858
Other ....................... 2,956 7,134 14,875
-------- -------- --------
$152,093 $225,888 $253,294
======== ======== ========
December 31,
1998 1999 2000
---- ---- ----
(In thousands)
Total assets:
Operating segment .................. $121,645 $202,028 $222,376
Corporate .......................... 30,737 884 3,109
-------- -------- --------
$152,382 $202,912 $225,485
======== ======== ========
Net property and equipment:
United States ...................... $ 20,607 $ 34,235 $ 47,555
Canada ............................. 18,307 25,217 24,410
The Netherlands .................... -- 17,602 17,259
Other Europe ....................... 1,356 1,281 --
Other .............................. -- 4,910 5,735
-------- -------- --------
$ 40,270 $ 83,245 $ 94,959
======== ======== ========
Note 4 - Inventories:
December 31,
1999 2000
---- ----
(In thousands)
Raw materials ............................ $ 9,038 $11,866
Work in process .......................... 8,669 11,454
Finished products ........................ 9,898 12,811
Supplies ................................. 54 115
------- -------
$27,659 $36,246
Note 5 - Accounts payable and accrued liabilities:
December 31,
1999 2000
---- ----
(In thousands)
Accounts payable ........................... $ 9,850 $12,560
Accrued liabilities:
Employee benefits ........................ 7,746 7,898
Insurance ................................ 707 311
Royalties ................................ 504 470
Other .................................... 6,582 5,248
------- -------
$25,389 $26,487
Note 6 - Indebtedness:
December 31,
1999 2000
---- ----
(In thousands)
Revolving bank credit facility ................... $20,000 $39,000
Capital lease obligations and other .............. 2,267 1,638
------- -------
22,267 40,638
Less current portion ............................. 1,367 1,638
------- -------
$20,900 $39,000
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
6.7% at December 31, 2000) and is due no later than February 2003. Borrowings
are available for the Company's general corporate purposes, including potential
acquisitions. At December 31, 2000, $59 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, 2000, $12.8 million is
available for dividends under the terms of the agreement.
Other indebtedness at December 31, 2000 includes approximately $1.2 million
in debt relating to a short-term bank borrowing. This borrowing, denominated in
New Taiwan dollars, bore interest at an interest rate of 6.8% and was fully
repaid in January 2001.
Capital lease obligations, stated net of imputed interest, are due through
2001.
Aggregate maturities of long-term debt at December 31, 2000 are shown in
the table below.
Years ending December 31, Amount
(In thousands)
2001 $ 1,638
2002 -
2003 39,000
-------
$40,638
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 $1,074,000 in 1998,
$1,472,000 in 1999 and $1,608,000 in 2000.
Defined benefit plans. The Company maintains a defined benefit pension plan
covering substantially all full-time employees of Thomas Regout B.V. Variances
from actuarially assumed rates will result in increases or decreases in
accumulated pension obligations, pension expense and funding requirements in
future periods.
The rates used in determining the actuarial present value of benefit
obligations are presented below:
December 31,
1999 2000
---- ----
Discount rate ........................................ 4.0% 4.0%
Rate of increase in future
compensation levels ................................. 3.0% 3.0%
Long-term rate of return on assets ................... 4.0% 4.0%
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.
Years ended December 31,
1999 2000
---- ----
(In thousands)
Change in projected benefit obligations ("PBO"):
PBO at beginning of the year ..................... $ -- $ 2,261
Acquisition of Thomas Regout ..................... 2,366 --
Service cost ..................................... 151 131
Interest ......................................... 92 80
Change in foreign exchange rates ................. (348) (171)
------- -------
PBO at end of the year ....................... $ 2,261 $ 2,301
======= =======
Change in fair value of plan assets:
Fair value of plan assets at beginning of the year $ -- $ 990
Acquisition of Thomas Regout ..................... 977 --
Actual return on plan assets ..................... 41 35
Employer contributions ........................... 62 54
Participant contributions ........................ 58 51
Change in foreign exchange rates ................. (148) (75)
------- -------
Fair value of plan assets at end of year ..... $ 990 $ 1,055
======= =======
Funded status at year-end -
Plan assets less than PBO ........................ $ 1,271 $ 1,246
======= =======
Amounts recognized in the statement of
financial position - accrued pension
cost:
Current ........................................ $ 62 $ 78
Noncurrent ..................................... 1,209 1,168
------- -------
$ 1,271 $ 1,246
======= =======
Net periodic pension cost:
Service cost benefits ............................ $ 151 $ 131
Interest cost on PBO ............................. 92 80
Expected return on plan assets ................... (41) (35)
------- -------
$ 202 $ 176
======= =======
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.
Years ended December 31,
1998 1999 2000
---- ---- ----
(In thousands)
Components of pre-tax income:
United States ......................... $ 6,835 $ 14,112 $ 7,746
Non-U.S ............................... 25,700 25,050 27,697
-------- -------- --------
$ 32,535 $ 39,162 $ 35,443
======== ======== ========
Provision for income taxes:
Currently payable:
U.S. federal and state .............. $ 3,351 $ 4,493 $ 2,385
Foreign ............................. 9,513 8,186 8,695
-------- -------- --------
12,864 12,679 11,080
-------- -------- --------
Deferred taxes:
U.S ................................. (714) 38 1,034
Foreign ............................. (116) 1,385 1,276
-------- -------- --------
(830) 1,423 2,310
-------- -------- --------
$ 12,034 $ 14,102 $ 13,390
======== ======== ========
Expected tax expense, at the U.S. federal
statutory income tax rate of 35% ....... $ 11,387 $ 13,708 $ 12,405
Non-U.S. tax rates ...................... 134 241 (90)
Incremental U.S. tax on earnings of
foreign subsidiary ..................... -- -- 198
No tax benefit for goodwill amortization 290 625 610
State income taxes and other, net ....... 223 (472) 267
-------- -------- --------
$ 12,034 $ 14,102 $ 13,390
======== ======== ========
Comprehensive provision (benefit)
for income taxes allocable to:
Pre-tax income ........................ $ 12,034 $ 14,102 $ 13,390
Other comprehensive income -
currency translation ................. (668) -- (323)
-------- -------- --------
$ 11,366 $ 14,102 $ 13,067
======== ======== ========
The components of net deferred tax assets (liabilities) are summarized
below.
December 31,
1999 2000
---- ----
(In thousands)
Tax effect of temporary differences relating to:
Inventories ............................................ $ (114) $ 283
Property and equipment ................................. (5,559) (7,505)
Accrued liabilities and other deductible differences ... 3,582 2,674
Tax loss and credit carryforwards ...................... 4,812 3,890
Other taxable differences .............................. (1,420) (1,275)
Valuation allowance .................................... (767) --
------- -------
$ 534 $(1,933)
======= =======
Net current deferred tax assets .......................... $ 1,258 $ 1,209
Net current deferred tax liabilities ..................... -- (103)
Net noncurrent deferred tax assets ....................... 2,499 1,813
Net noncurrent deferred tax liabilities .................. (3,223) (4,852)
------- -------
$ 534 $(1,933)
======= =======
At December 31, 2000, the Company had $.7 million of foreign tax credit
carryforwards, which expire through 2001. 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. Such valuation allowance was eliminated
during 2000 due to utilization of foreign tax credits in excess of amounts
previously estimated.
At December 31, 2000, 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 $300,000 in 1999 and nil in 2000 to offset tax expense of
$105,000 and nil, respectively. 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:
Shares of common stock
Class A Class B
Issued and
Issued Treasury Outstanding Outstanding
Balance at December 31, 1997 .... -- -- -- 10,000,000
Issued at initial public offering 5,980,000 -- 5,980,000 --
Stock award grants .............. 164,880 -- 164,880
-------- ---------- ----------
Balance at December 31, 1998 .... 6,144,880 -- 6,144,880 10,000,000
Issued .......................... 2,500 -- 2,500 --
--------- -------- ---------- ----------
Balance at December 31, 1999 .... 6,147,380 -- 6,147,380 10,000,000
Issued .......................... 57,300 -- 57,300 --
Reacquired ...................... -- (844,300) (844,300) --
--------- -------- ---------- ----------
Balance at December 31, 2000 .... 6,204,680 (844,300) 5,360,380 10,000,000
========= ======== ========== ==========
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.
Reacquired common stock. The Company's board of directors has authorized
the Company to purchase up to approximately 1.1 million shares of its common
stock in open market or privately-negotiated transactions at unspecified prices
and over an unspecified period of time. As of December 31, 2000, the Company had
purchased approximately 844,000 shares for an aggregate of $8.7 million pursuant
to such authorization.
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, vest over five years and expire ten years from the
date of grant.
The following table sets forth changes in outstanding options during the
past three years. 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.
Amount
Exercise payable
price per upon
Shares share exercise
(In thousands, except
per share amounts)
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
Granted ...................................................... 292 12.50 - 19.63 5,360
Exercised .................................................... (57) 17.94 - 20.00 (1,073)
Canceled ..................................................... (171) 15.88 - 20.00 (3,290)
---- -------------- --------
Outstanding at December 31, 2000 ............................. 722 $12.50 - 20.00 $ 13,781
==== ============== ========
Outstanding options at December 31, 2000 represent approximately 13% of the
Company's outstanding Class A common shares at that date and expire through 2010
with a weighted-average remaining term of 8 years. At December 31, 2000, options
to purchase 183,000 of the Company's shares were exercisable at prices ranging
from $20.00 to $15.88 per share, or an aggregate amount payable upon exercise of
$3.6 million. These exercisable options are exercisable through 2009 at prices
higher than the Company's December 31, 2000 market price of $8.94 per share. At
December 31, 2000, options to purchase 135,000 shares are scheduled to become
exercisable in 2001 and an aggregate of 554,000 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, 1999 and 2000 were $12.83, $11.56 and $7.86 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 37% to 44%, risk-free rates of return of
5.1% to 6.9%, dividend yields of nil to 4.0% 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, $1.0 million and $1.3
million in 1998, 1999 and 2000 respectively, or $.05, $.06 and $.08 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 $460,000 in 1998. The Valcor Note was repaid in February
1998 using proceeds from the Company's 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, certain occupancy and related office
services are provided based upon square footage occupied. Fees pursuant to these
agreements aggregated $354,000 in 1998, $433,000 in 1999 and $689,000 in 2000.
Certain of the Company's insurance coverages are arranged for and brokered
by EWI Re, Inc. Parties related to Contran own all of the outstanding common
stock of EWI. Through December 31, 2000, a son-in-law of Harold C. Simmons
managed the operations of EWI. Subsequent to December 31, 2000, such son-in-law
provides advisory services to EWI as requested by 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
$391,000 in 1998, $431,000 in 1999 and $563,000 in 2000. 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 credit of $(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 material
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 the 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 40%, 33% and 35% of sales in 1998, 1999
and 2000, respectively. In 1999 and 2000, 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 $1,105,000 in 1998, $1,097,000 in 1999 and
$1,073,000 in 2000. Royalties relate principally to certain products
manufactured in Canada and sold in the United States under the terms of a
third-party patent license agreement.
Rent expense, principally for equipment, was $496,000 in 1998, $609,000 in
1999 and $1,072,000 in 2000. At December 31, 2000, future minimum rentals under
noncancellable operating leases are approximately $698,000 in 2001, $584,000 in
2002, $250,000 in 2003, $26,000 in 2004 and $9,000 in 2005.
Firm purchase commitments for capital projects in process at December 31,
2000 approximated $5 million.
Note 12 - Quarterly results of operations (unaudited):
Quarter ended
-------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
(In millions, except per share amounts)
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
2000:
Net sales .......................... $ 66.1 $ 65.1 $ 63.0 $ 59.0
Operating income ................... 10.7 11.5 9.1 5.9
Net income ......................... 6.6 7.1 5.5 2.9
Basic and diluted earnings per share $ .41 $ .44 $ .34 $ .18
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.
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
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 9, 2001, appearing on page F-2 of this 2000 Annual Report
on Form 10-K of CompX International Inc., also included an audit of the
financial statement schedule listed in the index on page F-1 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 9, 2001
COMPX INTERNATIONAL INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
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, 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 $ (101) $ 12 $ 494 $ 725
======= ======= ====== ====== ====== ======
Amortization of goodwill .............. $ 828 $ 1,902 $ -- $ -- $ -- $2,730
======= ======= ====== ====== ====== ======
Amortization of other intangible assets $ 216 $ 210 $ -- $ -- $ -- $ 426
======= ======= ====== ====== ====== ======
Year ended December 31, 2000:
Allowance for doubtful accounts ....... $ 725 $ (123) $ (79) $ (36) $ -- $ 487
======= ======= ====== ====== ====== ======
Amortization of goodwill .............. $ 2,730 $ 2,335 $ -- $ -- $ -- $5,065
======= ======= ====== ====== ====== ======
Amortization of other intangible assets $ 426 $ 359 $ -- $ -- $ -- $ 785
======= ======= ====== ====== ====== ======
(a) Business units acquired.
RELEASE AGREEMENT
This Release Agreement (this "Agreement") is effective as of November 6,
2000 between Joseph S. Compofelice ("Compofelice") and CompX International Inc.,
a Delaware corporation (the "CompX"). In consideration of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
Section 1. Resignation of All Position. If Compofelice has not provided an
earlier resignation date in writing to CompX or any of its affiliated entities
(collectively, the "Affiliated Entities"), Compofelice acknowledges his
resignation from all positions with the Affiliated Entities effective as of the
date of this Agreement, and agrees to provide such letters as may be reasonably
requested of him to evidence his resignation from all positions with the
Affiliated Entities.
Section 2. General Release
(a) Compofelice hereby releases, acquits, and forever discharges any
and all claims and demands of whatever kind or character that Compofelice
or his family members may now have or assert or hereafter have or assert
against the Affiliated Entities or any of their officers, directors,
employees, agents or insurers for any liability, whether vicarious,
derivative or direct, whether fixed, liquidated or contingent, or whether
known or unknown, with respect to the period commencing at the beginning of
time and continuing through the effective date of this Agreement.
(b) CompX hereby releases, acquits, and forever discharges any and all
claims and demands of whatever kind or character that CompX may now have or
assert or hereafter have or assert against Compofelice for any liability,
whether vicarious, derivative or direct, whether fixed, liquidated or
contingent, or whether known or unknown, with respect to the period
commencing at the beginning of time and continuing through the effective
date of this Agreement.
Section 3. Payment. CompX agrees upon the execution of this Agreement to
pay Compofelice $500,000 in a form reasonably satisfactory to Compofelice less
applicable withholding for tax purposes.
Section 4. Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement.
Section 5. Jurisdiction. It is understood and agreed that the construction
and interpretation of this Agreement shall at all times and in all respects be
governed by and construed in accordance with the laws of the state of Texas. Any
action brought under this Agreement or otherwise brought by CompX or its
affiliates against Compofelice shall be brought in a court seated in Dallas
County, Texas and the parties waive any right to object to such location as an
improper venue for such claim.
Section 6. Complete Agreement. This Agreement contains the entire Agreement
and the understanding by and between the parties with respect to the subject
hereof and supersedes any previously existing agreements between the parties.
This Agreement may not be modified or amended in any respect except by an
instrument in writing signed by both of the parties hereto.
IN WITHESS WHEREOF, effective as of the date first set forth above,
Compofelice has executed this Agreement and CompX has caused this Agreement to
be executed on its behalf by its duly authorized officer.
CompX International Inc.
/s/ Joseph S. Compofelice By: /s/ Glenn R. Simmons
- ------------------------------ -------------------------------------------
Joseph S. Compofelice Glenn R. Simmons, Chairman of the Board and
Chief Executive Officer
EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
% of Voting
Securities
Jurisdiction of Held at December
Incorporation or 31,
Name of Corporation Organization 2000
- ----------------------------------- ---------------- -------
Waterloo Furniture Components Limited .............. Canada 100
Fort Lock Corporation .............................. Illinois 100
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
CompX SFC, Inc. .................................... 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 9, 2001 on our audits of the consolidated financial
statements and financial statement schedule of CompX International Inc. and
Subsidiaries included in this Annual Report on Form 10-K for the year ended
December 31, 2000.
PricewaterhouseCoopers LLP
Houston, Texas
March 16, 2001