SEC Filing Html Data
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2001 Commission file number 1-13905
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COMPX INTERNATIONAL INC.
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(Exact name of Registrant as specified in its charter)
Delaware 57-0981653
- ------------------------------- --------------------------
(State or other jurisdiction of (IRS Employer
organization) Identification No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 448-1400
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Number of shares of Class A common stock outstanding on May 4, 2001: 5,117,280.
COMPX INTERNATIONAL INC.
INDEX
Page
number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 2000
and March 31, 2001 3-4
Consolidated Statements of Income -
Three months ended March 31, 2000 and 2001 5
Consolidated Statements of Comprehensive Income -
Three months ended March 31, 2000 and 2001 6
Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 2001 7-8
Consolidated Statement of Stockholders' Equity -
Three months ended March 31, 2001 9
Notes to Consolidated Financial Statements 10-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13-15
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 16
COMPX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS December 31, March 31,
2000 2001
------ ------
Current assets:
Cash and cash equivalents ........................ $ 9,820 $ 8,710
Accounts receivable .............................. 30,833 30,631
Income taxes receivable from affiliates .......... 305 203
Refundable income taxes .......................... 2,165 996
Inventories ...................................... 36,246 36,160
Prepaid expenses and other ....................... 2,408 1,999
Deferred income taxes ............................ 1,209 1,150
-------- --------
Total current assets ......................... 82,986 79,849
-------- --------
Other assets:
Goodwill ......................................... 42,213 41,188
Other intangible assets .......................... 2,646 2,623
Deferred income taxes ............................ 1,813 1,754
Other ............................................ 868 743
-------- --------
Total other assets ........................... 47,540 46,308
-------- --------
Property and equipment:
Land ............................................. 5,709 5,676
Buildings ........................................ 34,500 36,146
Equipment ........................................ 78,357 75,794
Construction in progress ......................... 9,787 11,896
-------- --------
128,353 129,512
Less accumulated depreciation .................... 33,394 35,584
-------- --------
Net property and equipment ................... 94,959 93,928
-------- --------
$225,485 $220,085
======== ========
COMPX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, March 31,
2000 2001
-------- -------
Current liabilities:
Current maturities of long-term debt ........... $ 1,638 $ 413
Accounts payable and accrued liabilities ....... 26,487 20,073
Payable to affiliate ........................... -- 94
Deferred income taxes .......................... 103 32
Income taxes ................................... 648 518
--------- ---------
Total current liabilities .................. 28,876 21,130
--------- ---------
Noncurrent liabilities:
Long-term debt ................................. 39,000 45,011
Deferred income taxes .......................... 4,852 5,170
Accrued pension costs .......................... 1,168 1,114
Other .......................................... 626 807
--------- ---------
Total noncurrent liabilities ............... 45,646 52,102
--------- ---------
Stockholders' equity:
Preferred stock ................................ -- --
Class A common stock ........................... 62 62
Class B common stock ........................... 100 100
Additional paid-in capital ..................... 119,194 119,194
Retained earnings .............................. 51,395 53,230
Accumulated other comprehensive income
- currency translation ........................ (11,123) (14,626)
Treasury stock ................................. (8,665) (11,107)
--------- ---------
Total stockholders' equity ................. 150,963 146,853
--------- ---------
$ 225,485 $ 220,085
========= =========
Commitments and contingencies (Note 1)
COMPX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2000 and 2001
(In thousands, except per share data)
2000 2001
---- ----
Net sales .............................................. $ 66,067 $ 59,583
-------- --------
Costs and expenses:
Cost of sales ........................................ 48,523 45,711
Selling, general and administrative .................. 6,818 7,067
Other income, net .................................... (227) (239)
Interest expense ..................................... 533 804
-------- --------
55,647 53,343
-------- --------
Income before income taxes and minority interest ... 10,420 6,240
Provision for income taxes ............................. 3,855 2,515
-------- --------
Income before minority interest .................... 6,565 3,725
Minority interest ...................................... (3) --
-------- --------
Net income ......................................... $ 6,568 $ 3,725
======== ========
Basic and diluted earnings per common share ............ $ .41 $ .24
======== ========
Cash dividends per share ............................... $ 0.125 $ 0.125
======== ========
Shares used in the calculation of per share amounts:
Basic earnings per common share ...................... 16,148 15,255
Dilutive impact of outstanding stock options ......... 8 1
-------- --------
Diluted earnings per common share .................... 16,156 15,256
======== ========
COMPX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31, 2000 and 2001
(In thousands)
2000 2001
---- ----
Net income ........................................... $ 6,568 $ 3,725
Other comprehensive income -
currency translation adjustment, net of tax ........ (2,002) (3,503)
------- -------
Comprehensive income ........................... $ 4,566 $ 222
======= =======
COMPX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 2001
(In thousands)
2000 2001
---- ----
Cash flows from operating activities:
Net income ............................................ $ 6,568 $ 3,725
Depreciation and amortization ......................... 3,235 3,596
Deferred income taxes ................................. 326 334
Other, net ............................................ (354) 103
-------- -------
9,775 7,758
Change in assets and liabilities:
Accounts receivable ................................. (635) (833)
Inventories ......................................... (2,692) (803)
Accounts payable and accrued liabilities ............ (1,547) (5,409)
Accounts with affiliates ............................ (33) 174
Income taxes ........................................ 606 1,153
Other, net .......................................... (237) (80)
-------- -------
Net cash provided by operating activities ......... 5,237 1,960
-------- -------
Cash flows from investing activities:
Capital expenditures .................................. (4,322) (3,766)
Purchase of business unit ............................. (9,409) --
Other, net ............................................ 263 --
-------- -------
Net cash used by investing activities ............. (13,468) (3,766)
-------- -------
Cash flows from financing activities:
Indebtedness:
Additions .......................................... 12,062 7,000
Principal payments ................................. (375) (2,268)
Dividends ............................................. (2,019) (1,890)
Common stock reacquired ............................... -- (2,442)
Issuance of common stock .............................. 36 --
-------- -------
Net cash provided by financing activities ......... 9,704 400
-------- -------
Net increase (decrease) in cash and cash equivalents .... $ 1,473 $(1,406)
======== =======
COMPX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 2000 and 2001
(In thousands)
2000 2001
---- ----
Cash and cash equivalents:
Net change from operating, investing
and financing activities ........................... $ 1,473 $(1,406)
Business unit acquired .............................. 250 --
Currency translation ................................ (175) 296
-------- -------
1,548 (1,110)
Balance at beginning of period ...................... 12,169 9,820
-------- -------
Balance at end of period ............................ $ 13,717 $ 8,710
======== =======
Supplemental disclosures:
Cash paid for:
Interest .......................................... $ 453 $ 963
Income taxes ...................................... 2,915 1,054
Business unit acquired - net assets consolidated:
Cash and cash equivalents ......................... $ 250 $ --
Goodwill and other intangible assets .............. 2,514 --
Other non-cash assets ............................. 8,429 --
Liabilities ....................................... (1,784) --
-------- -------
Cash paid ......................................... $ 9,409 $ --
======== =======
COMPX INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three months ended March 31, 2001
(In thousands)
Accumulated
other
comprehensive
Additional income - Total
Common Stock paid-in Retained currency Treasury stockholders'
Class A Class B capital earnings translation stock equity
---- ---- --------- -------- ----------- --------- --------
Balance at December 31, 2000 .. $62 $100 $119,194 $ 51,395 $(11,123) $ (8,665) $ 150,963
Net income .................... -- -- -- 3,725 -- -- 3,725
Other comprehensive income, net -- -- -- -- (3,503) -- (3,503)
Cash dividends ................ -- -- -- (1,890) -- -- (1,890)
Common stock reacquired ....... -- -- -- -- -- (2,442) (2,442)
--- ---- -------- -------- -------- -------- ---------
Balance at March 31, 2001 ..... $62 $100 $119,194 $ 53,230 $(14,626) $(11,107) $ 146,853
=== ==== ======== ======== ======== ======== =========
COMPX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of presentation:
The consolidated balance sheet of CompX International Inc. and Subsidiaries
(collectively, the "Company") at December 31, 2000 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 2001 and the consolidated statements of
income, comprehensive income, stockholders' equity and cash flows for the
interim periods ended March 31, 2000 and 2001 have been prepared by the Company,
without audit. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the consolidated
financial position, results of operations and cash flows have been made. The
results of operations for the interim periods are not necessarily indicative of
the operating results for a full year or of future operations. Certain
information normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
has been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 (the "2000 Annual Report").
Basic earnings per share of common stock is based upon the weighted average
number of common shares actually outstanding during each period. Diluted
earnings per share of common stock includes the impact of outstanding dilutive
stock options.
Commitments and contingencies are discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the 2000 Annual
Report.
The Company is 69% owned by Valhi, Inc. (NYSE: VHI) and Valhi's
wholly-owned subsidiary Valcor, Inc. Contran Corporation holds, directly or
through subsidiaries, approximately 93% of Valhi's outstanding common stock.
Substantially all of Contran's outstanding voting stock is held 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 such companies and the Company.
The Company adopted 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 are
recognized as either assets or liabilities and measured at fair value. The
accounting for changes in fair value of derivatives depends upon the intended
use of the derivative, and such changes are recognized either in net income or
other comprehensive income. As permitted by the transition requirements of SFAS
No. 133, as amended, the Company has exempted 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, the
Company was not a party to any significant derivative or hedging instrument
covered by SFAS No. 133 during the first quarter of 2001. 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 was not material.
Note 2 - Business segment information:
The Company operates in one business segment - the manufacture and sale of
hardware components for office furniture and other markets. The Company's
products consist of ergonomic computer systems, precision ball bearing slides
and security products.
Three months ended
March 31,
2000 2001
---- ----
(In thousands)
Net sales .................................... $ 66,067 $ 59,583
======== ========
Operating income ............................. $ 10,726 $ 6,805
Interest expense ............................. (533) (804)
General corporate income, net ................ 227 239
-------- --------
Income before income taxes ............... $ 10,420 $ 6,240
======== ========
Note 3 - Inventories:
December 31, March 31,
2000 2001
------ ------
(In thousands)
Raw materials ............................ $11,866 $13,989
Work in process .......................... 11,454 11,617
Finished products ........................ 12,811 10,425
Supplies ................................. 115 129
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$36,246 $36,160
======= =======
Note 4 - Accounts payable and accrued liabilities:
December 31, March 31,
2000 2001
----- -----
(In thousands)
Accounts payable ........................... $12,560 $ 9,257
Accrued liabilities:
Employee benefits ........................ 7,898 7,294
Insurance ................................ 311 160
Royalties ................................ 470 279
Other .................................... 5,248 3,083
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$26,487 $20,073
======= =======
Note 5 - Indebtedness:
December 31, March 31,
2000 2001
------ ------
(In thousands)
Revolving bank credit facility ................... $39,000 $45,000
Capital lease obligations and other .............. 1,638 424
------- -------
40,638 45,424
Less current maturities .......................... 1,638 413
------- -------
$39,000 $45,011
======= =======
Note 6 - Other income:
Three months ended
March 31,
2000 2001
---- ----
(In thousands)
Interest income .................................... $128 $ 153
Foreign currency transactions, net ................. 84 109
Other, net ......................................... 15 (23)
---- -----
$227 $ 239
==== =====
Note 7 - Provision for income taxes:
Three months ended
March 31,
2000 2001
---- ----
(In thousands)
Expected tax expense ............................... $ 3,647 $ 2,184
Non-U.S. tax rates ................................. 62 (97)
No tax benefit for amortization of goodwill ........ 156 174
Other, net ......................................... (10) 254
------- -------
$ 3,855 $ 2,515
======= =======
Note 8 - Foreign currency forward contracts:
Certain of the Company's sales generated by its non-U.S. operations are
denominated in U.S. dollars. The Company periodically uses currency forward
contracts to manage a portion of foreign exchange rate risk associated with
receivables 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. These contracts are not accounted for as hedging instruments
under SFAS No. 133. 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. $1.482 per
U.S. dollar. Such contracts matured through March 2001. At March 31, 2001, the
Company did not hold any such contracts.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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Overview
The Company reported net income of $3.7 million in the first quarter of
2001, a decrease of 43% from net income of $6.6 million for the first quarter of
2000.
Results of Operations
Net sales. Net sales decreased $6.5 million, or 10%, to $59.6 million in
the first quarter of 2001 from $66.1 million in the first quarter of 2000. The
decrease is principally due to decreased demand for the Company's office
furniture products resulting from continued weak economic conditions in the
manufacturing sector in North America and Europe, and the negative effects of
fluctuations in currency exchange rates. Net sales of slide products decreased
14% in the first quarter of 2001 compared to the first quarter of 2000, and
sales of ergonomic and security products decreased 2% and 8%, respectively for
the same comparable periods.
Operating income. Operating income in the first quarter of 2001 was $6.8
million compared to $10.7 million for the first quarter of 2000, decreasing 37%
over the first quarter of 2000. As a percentage of net sales, operating income
was 11% for the first quarter of 2001 compared to 16% for the first quarter of
2000. Reductions in manufacturing fixed costs and selling, general and
administrative expenses from the fourth quarter of 2000 partially offset the
effect of the decline in net sales. Despite these cost reductions, the decline
in volume levels and the related impact on manufacturing efficiencies together
with the effects of changes in the sales mix, adversely impacted the operating
income margins for the first quarter of 2001 as compared to the first quarter of
2000.
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, approximately 60% of CompX's sales
generated from its Canadian operations 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 the first quarter of 2001, currency exchange rate fluctuations
of the Canadian dollar and the euro negatively impacted the Company's sales
comparisons with the corresponding period of the prior year (principally with
respect to slide products). Excluding the effect of currency, the Company's
sales decreased 8% in the first quarter of 2001 compared to the corresponding
period in 2000. Currency exchange rate fluctuations with respect to the Canadian
dollar positively affected CompX's operating income comparisons with the
corresponding period of the prior year whereas exchange rate fluctuations in the
euro and other currencies did not materially impact these operating income
comparisons. Excluding the effect of currency, operating income decreased 42% in
the first quarter of 2001 compared to 2000.
Outlook. The current weak economic cycle is expected to continue and will
resultantly have a negative impact on the Company's sales. Therefore, the
Company continues implementing various cost control initiatives, including
ongoing company-wide headcount rationalization efforts which have reduced
headcount by 12% during the first quarter of 2001, operational cost improvements
and certain reductions in selling, general and administrative expenses. These
cost reduction measures are designed to minimize the adverse effect of lower
sales and more favorably position the Company when the economy recovers.
Nevertheless, the Company remains concerned regarding the duration and severity
of the weak economic cycle and its overall impact on the Company's business.
Liquidity and Capital Resources
Consolidated cash flows
Operating activities. Trends in cash flows from operating activities,
excluding changes in assets and liabilities, are generally similar to the trends
in the Company's earnings. Such cash flows totaled $9.8 million and $7.8 million
in the first quarter of 2000 and 2001, respectively, compared to net income of
$6.6 million and $3.7 million, respectively.
Changes in assets and liabilities result primarily from the timing of
production, sales and purchases. Such changes in assets and liabilities
generally tend to even out over time and result in trends in cash flows from
operating activities generally reflecting earnings trends.
Investing activities. Net cash used by investing activities totaled $13.5
million and $3.8 million in the first quarter of 2000 and 2001, respectively.
Investing activities in the first quarter of 2000 included $9.4 million used to
acquire substantially all of the operating assets of Chicago Lock Company. No
such business acquisitions occurred in the first quarter of 2001.
The capital expenditures for 2001 relate primarily to capacity expansion
and tooling costs at the Company's facilities and equipment additions designed
to improve manufacturing efficiencies at the Company's security products and
ergonomic and slide products facilities. Capital expenditures for 2001 are
estimated at approximately $15 million to $18 million, the majority of which
relate to projects that emphasize improved production efficiency and increased
production capacity. Firm purchase commitments for capital projects not
commenced at March 31, 2001 were not material.
Financing activities. Net cash provided by financing activities totaled
$9.7 million and $400,000 in the first quarter of 2000 and 2001, respectively.
The Company paid its regular quarterly dividend of $1.9 million, or $.125 per
share, in the first quarter of 2001 and used $2.4 million to reacquire 243,100
shares of its Class A common stock. The Company also increased its borrowings
under its unsecured revolving bank credit facility by a net amount of $6.0
million and repaid its short-term bank borrowing denominated in New Taiwan
dollars during the first quarter of 2001.
Management believes that cash generated from operations and borrowing
availability under the Company's unsecured revolving bank credit facility ($55
million available for borrowing at March 31, 2001), together with cash on hand,
will be sufficient to meet the Company's liquidity needs for working capital,
capital expenditures, debt service and dividends for the foreseeable future.
The Company periodically evaluates its liquidity requirements, alternative
uses of capital, capital needs and available resources in view of, among other
things, its capital expenditure requirements in light of its capital resources
and estimated future operating cash flows. As a result of this process, the
Company may in the future seek to raise additional capital, refinance or
restructure indebtedness, issue additional securities, modify its dividend
policy, repurchase shares of its common stock or take a combination of such
steps to manage its liquidity and capital resources. In the normal course of
business, the Company may review opportunities for acquisitions, joint ventures
or other business combinations in the component products industry. In the event
of any such transaction, the Company may consider using available cash, issuing
additional equity securities or increasing the indebtedness of the Company or
its subsidiaries.
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that the statements in this
Quarterly Report on Form 10-Q relating to matters that are not historical facts
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 Quarterly Report and those described
from time to time in the Company's other filings with the Securities and
Exchange Commission. While it is not possible to identify all factors, the
Company continues to face many risks and uncertainties including, but not
limited to, future supply and demand for the Company's products, 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.
Part II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Employment agreement between Registrant and Wouter J. Dammers,
effective August 30, 1999.
(b) Reports on Form 8-K
Reports on Form 8-K for the quarter ended March 31, 2001.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPX INTERNATIONAL INC.
-----------------------------
(Registrant)
Date May 10, 2001 By /s/ Stuart M. Bitting
---------------------------
Stuart M. Bitting
Vice President and
Chief Financial Officer
Employment Agreement
Maastricht, August 30, 1999
The undersigned:
o CompX International Inc., represented in this matter by Mr. J. S.
Compofelice, C.E.O., hereinafter to be called the "Employer"; and
o Mr. Wouter J. Dammers, born on April 9, 1952, and residing in Heiloo the
Netherlands, hereinafter to be called the "Employee";
WHEREAS:
o The employer wishes to employ Mr. Dammers as the President of its various
operations in Europe and other areas of the world, a/o as Managing Director
of Thomas Regout International B.V. which company will fulfill all of
Employers obligations as stated in and/or resulting from this employment
contract. o The parties hereby wish to document the employment contract in
writing.
HEREBY AGREE AS FOLLOWS:
1. As from September 20, 1999, Mr. Dammers will enter the company's
employment. This Employment Contract is concluded for an indefinite period,
but will in any event end on the day on which the Employee reaches the
retirement age. The first six months of this employment will be a trial
period. During that period, both parties may terminate this Employment
Contract without cause or compensation.
2. Employee's duties may change from time to time at the discretion of the
C.E.O. of CompX International Inc.
3. The gross annual salary is NLG 320,000 (three hundred and twenty thousand
Dutch guilders), including 8% holiday allowance, which salary will be paid
in 12 equal monthly installments in arrears.
4. The Employee will take part in the (performance) bonus system of CompX
International Inc. The bonus scheme applicable to the Employee fully
described Appendix 1 to this Employment Contract. The basic targets are the
following percentages of base pay: 25% at Level A; 50% at Level B; and 75%
at Level C.
5. The Employee may each year be granted employee share options with regard to
shares in CompX International Inc. listed on the New York Stock Exchange.
The employee share option scheme of CompX International Inc. is set out in
Appendix 2 to this Employment Contract. Initial grant will be 10,000 shares
subject to the approval of the Board of Directors of CompX at the next
regularly scheduled meeting.
6. Employee's base salary, target bonus percentages and stock options awards
will be reviewed periodically in accordance with the practices followed by
CompX International Inc. for its senior executives.
7. The Employee will be reimbursed for all ordinary and necessary business
expense incurred in accordance with the practices and policies at CompX
International Inc. and consistent with Dutch tax regulations.
8. Employer will provide the Employee with a company car with a catalogue
value of approximately NLG 100,000. All other costs will also be for the
company's account. The Employee is permitted to use the car for private
purposes.
9. The pension insurance rights are set out in Appendix 3, which will be
attached to this Employment Contract.
10. The company has taken out collective medical expenses insurance. If the
Employee takes part in this insurance, he will receive a compensation of
50% of the premium to be paid for full insurance on the basis of class 2B
for the parents and class 3 for the children.
11. In the even of sickness or disablement, Employer will continue to pay the
Employee his annual salary as described above for a period of one year,
increased by all perquisites attached thereto, on a net basis. The rules
applicable at the company on reporting sick and on medical inspections
apply accordingly.
12. Supplemental disablement insurance will be taken out in relation to the
amount by which the Employee's income exceeds the income limit under the
WAO (Dutch Disablement Benefits Act), without any costs being involved for
the Employee. The disablement pension amounts to 70% of the difference
between the most recently applicable annual salary and the most recently
applicable annual wage on which the benefits under the WAO are calculated.
The insured pension is subject to a maximum limit which in 1999 amounts to
fl. 102,434. In the event of partial disablement, the insured pension will
be proportionally lower.
13. If and in so far as the Employee can exercise any claim for damages against
one or more parties on the grounds of loss of salary with regard to his
disablement, the payments referred to above will be paid by way of
advances, subject to the condition that the Employee assign his claims up
to the amounts that he has thus received as advances to the company.
14. Accident insurance and business travel insurance policies have been taken
out for employees of Employer, without any costs being involved for them.
15. The Employee is entitled to 25 days' holiday a year, as well as 13 days in
connection with the reduction of working hours (ATV). Some of those days
are collectively fixed each year.
16. Employee acknowledges and agrees that he will not, without the prior
written consent of the Employer, at any time during the term of this
Agreement or any time thereafter, except as may be required by competent
legal authority or as required by the Employer to be disclosed in the
course of performing Employee's duties under this Agreement for the
Employer, use or disclose to any person, firm or other legal entity, any
confidential records, secrets or information related to the Employer or any
parent, subsidiary or affiliated person on entity (collectively,
"Confidential Information"). Confidential Information shall include,
without limitation, information about the Employer's Inventions, customer
lists, marketing, management information systems and production processes.
Employee acknowledges and agrees that all Confidential Information of
Employer and/or its affiliates that he may acquire will be received in
confidence and as a fiduciary of the Employer. Employee will exercise
utmost diligence to protect and guard such Confidential Information.
Employee agrees that he will not take with him upon the termination of his
employment with Employer, any document or paper, or any photocopy or
reproduction or duplication thereof, relating to any Confidential
Information.
17. Employer is entitled in the Netherlands and abroad to any patents arising
from inventions that the Employee may come up with during the term of his
employment and for a period of one year after its termination that are
related to the activities or products of Employer.
18. The Employee will make every effort to properly perform his work and will
accept management positions at the request of affiliated companies without
stipulating any compensation therefore. Termination of this Employment
Contract automatically implies termination of the work referred to here.
19. Upon termination of this Employment Contract for reasons other than cause,
the Employee shall observe a notice period of three months. Under current
legislation, the notice period to be observed by Employer is six months.
Severance pay in the event of termination for reasons other than cause
shall be six months of base pay before move takes place and one year
thereafter. Cause is defined as breach of Employee's fiduciary
responsibility and in engaging in illegal activity that causes harm to the
Employer. Notice of termination may be given only effective from the end of
a calendar month.
20. Employee will be reimbursed for the actual cost of moving to the Maastricht
general area including the normal cost of removal, commission and fees.
21. The Employee's work area covers several countries, but under this
Employment Contract the Netherlands must be regarded as his operational
base, which means that this Employment Contract is governed by Dutch law.
Agreed in Maastricht, the Netherlands, and drawn up in three original copies on
August 30, 1999.
CompX International Inc. Employee
/s/ Joseph S. Compofelice /s/ Wouter J. Dammers
- ------------------------------------- ------------------------------------
Joseph S. Compofelice Wouter J. Dammers
Chief Executive Officer
Appendix III to the Employment Contract concluded between CompX International
Inc. and Mr. Wouter J. Dammers
Pension
The pension insurance has been placed with the pension fund for the Metal
Industry PMI, up to the maximum amount to be insured at that pension fund.
The pensionable salary is set at the total gross annual income, minus the fixed
amount (10/7 x AOW (benefits under the Dutch General Old Age Pensions Act) for
married persons).
The pension rights under the pension fund of the Metal Industry PMI are:
a. an old age pension commencing at the age of 65, amounting to 1.75% of the
pensionable salary for each fictitious year of service yet to be worked
until the age of 65;
b. a widow's pension, amounting to 70% of the old age pension;
c. an orphans' pension, amounting to 20% of the insured widow's pension per
orphan, or to 40% in the even of full orphans, to be paid until the orphan
reaches the age of 18. At present, 7.6% of the premium due is payable by
the Employee.
You will not take part in our supplemental collective pension insurance, but
will continue an existing private policy. After the commencement of your
employment, that policy may be amended only with the Employer's permission.
All premiums are split 2/3 Employer, 1/3 Employee.
The premiums payable by you will be paid by means of monthly withholdings from
your salary.