SEC Filing Html Data
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant: [ ]
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
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[ ] Definitive Additional Materials by Rule 14a-6(e)(2)
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CompX International Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (Set forth amount on which the
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[LOGO GOES HERE]
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
April 14, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 Annual Meeting of Stockholders
of CompX International Inc., which will be held on Wednesday, May 19, 2004, at
10:00 a.m., local time, at CompX's corporate offices at Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas. The matters to be acted upon at the
meeting are described in the attached Notice of Annual Meeting of Stockholders
and Proxy Statement.
Whether or not you plan to attend the meeting, please complete, date, sign
and return the enclosed proxy card or voting instruction form in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes.
Sincerely,
/s/ David A. Bowers
David A. Bowers
President and Chief Executive Officer
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2004
To the Stockholders of CompX International Inc.:
NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of Stockholders (the
"Meeting") of CompX International Inc., a Delaware corporation ("CompX"), will
be held on Wednesday, May 19, 2004, at 10:00 a.m., local time, at CompX's
corporate offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas for the following purposes:
(1) To elect seven directors to serve until the 2005 Annual Meeting of
Stockholders and until their successors are duly elected and qualified
or their earlier removal, resignation or death; and
(2) To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The board of directors of CompX set the close of business on March 29, 2004
as the record date (the "Record Date") for the Meeting. Only holders of CompX's
class A common stock, par value $0.01 per share, and class B common stock, par
value $0.01 per share, at the close of business on the Record Date are entitled
to notice of, and to vote at, the Meeting. CompX's stock transfer books will not
be closed following the Record Date. A complete list of stockholders entitled to
vote at the Meeting will be available for examination during normal business
hours by any stockholder of CompX, for purposes related to the Meeting, for a
period of ten days prior to the Meeting at the place where CompX will hold the
Meeting.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting in person, please complete, date and sign the accompanying
proxy card or voting instruction form and return it promptly in the enclosed
envelope to ensure that your shares are represented and voted in accordance with
your wishes. You may revoke your proxy by following the procedures set forth in
the accompanying proxy statement. If you choose, you may still vote in person at
the Meeting even though you previously submitted your proxy.
By Order of the Board of Directors,
/s/ A. Andrew R. Louis
A. Andrew R. Louis, Secretary
Dallas, Texas
April 14, 2004
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
______________________
PROXY STATEMENT
______________________
GENERAL INFORMATION
This proxy statement and the accompanying proxy card or voting instruction
form are being furnished in connection with the solicitation of proxies by and
on behalf of the board of directors (the "Board of Directors") of CompX
International Inc., a Delaware corporation ("CompX"), for use at the 2004 Annual
Meeting of Stockholders of CompX to be held on Wednesday, May 19, 2004 and at
any adjournment or postponement thereof (the "Meeting"). The accompanying Notice
of Annual Meeting of Stockholders (the "Notice") sets forth the time, place and
purposes of the Meeting. The Notice, this proxy statement, the accompanying
proxy card or voting instruction form and CompX's Annual Report to Stockholders,
which includes CompX's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 (the "Annual Report"), are first being mailed to the holders
of CompX's class A common stock, par value $0.01 per share ("CompX Class A
Common Stock"), and CompX"s class B common stock, par value $0.01 per share
("CompX Class B Common Stock" and collectively with the CompX Class A Common
Stock, the "CompX Common Stock"), on or about April 14, 2004. CompX's principal
executive offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite
1700, Dallas, Texas 75240-2697.
QUORUM, VOTING RIGHTS AND PROXY SOLICITATION
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Meeting was the close of
business on March 29, 2004 (the "Record Date"). As of the Record Date, there
were 5,124,780 shares of CompX Class A Common Stock and 10,000,000 shares of
CompX Class B Common Stock issued and outstanding. Each share of CompX Class A
Common Stock entitles its holder to one vote on all matters to be acted on at
the Meeting. Each share of CompX Class B Common Stock entitles its holder to ten
votes with respect to the election of directors and one vote on all other
matters to be acted on at the Meeting. The presence, in person or by proxy, of
the holders of a majority of the votes of CompX Common Stock entitled to vote at
the Meeting, counted as a single class, is necessary to constitute a quorum for
the conduct of business at the Meeting. Shares of CompX Common Stock that are
voted to abstain from any business coming before the Meeting and broker/nominee
non-votes will be counted as being in attendance at the Meeting for purposes of
determining whether a quorum is present.
If a quorum is present, a plurality of the affirmative votes of the CompX
Class A and Class B Common Stock, voting together as a single class, represented
and entitled to be voted at the Meeting, is necessary to elect each director of
CompX. The accompanying proxy card or voting instruction form provides space for
a stockholder to withhold authority to vote for any of the nominees of the Board
of Directors. Neither shares as to which the authority to vote on the election
of directors has been withheld nor broker/nominee non-votes will be counted as
affirmative votes to elect director nominees to the Board of Directors. However,
since director nominees need only receive the vote of a plurality of the votes
represented and entitled to vote at the Meeting, a vote withheld from a
particular nominee will not affect the election of such nominee.
Except as applicable laws may otherwise provide, if a quorum is present,
the approval of any other matter that may properly come before the Meeting will
require the affirmative vote of a majority of the votes represented and entitled
to vote at the Meeting. Shares of CompX Common Stock that are voted to abstain
from any other business coming before the Meeting and broker/nominee non-votes
will not be counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Meeting "FOR" the election of the nominees for director of the Board of
Directors and, to the extent allowed by the federal securities laws, in the
discretion of the agents on any other matter that may properly come before the
Meeting.
Computershare Investor Services, L.L.C. or its successor ("Computershare"),
the transfer agent and registrar for CompX Class A and Class B Common Stock as
of the Record Date, has been appointed by the Board of Directors to ascertain
the number of shares represented, receive proxies and ballots, tabulate the vote
and serve as inspector of election at the Meeting.
Each holder of record of CompX Common Stock giving the proxy enclosed with
this proxy statement may revoke it at any time prior to the voting at the
Meeting by delivering to Computershare a written revocation of the proxy or a
duly executed proxy bearing a later date or by voting in person at the Meeting.
Attendance by a stockholder at the Meeting will not in itself constitute the
revocation of such stockholder's proxy.
Employees participating in the CompX Contributory Retirement Plan, as
amended (the "CompX 401(k) Plan"), who are beneficial owners of CompX Class A
Common Stock under such plan may use the enclosed voting instruction form to
instruct the plan trustee how to vote the shares held for such employees. The
trustee will, subject to the terms of the plan, vote in accordance with such
instructions.
The Board of Directors is making this proxy solicitation. CompX will pay
all expenses related to the solicitation, including charges for preparing,
printing, assembling and distributing all materials delivered to stockholders.
In addition to the solicitation by mail, directors, officers and regular
employees of CompX may solicit proxies by telephone or in person, for which such
persons will receive no additional compensation. CompX has retained Georgeson
Shareholder Communications, Inc. to aid in the distribution of this proxy
statement and related materials at a cost CompX estimates at $1,400. Upon
request, CompX will reimburse banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries for their reasonable out-of-pocket expenses
incurred in distributing proxy materials and voting instructions to the
beneficial owners of CompX Class A Common Stock that such entities hold of
record.
CONTROLLED COMPANY
Valcor, Inc. ("Valcor") directly holds 100% of the outstanding shares of
CompX Class B Common Stock as of the Record Date, which represents approximately
66.1% of the outstanding shares of CompX Class A and B Common Stock combined.
Valcor is a wholly owned subsidiary of Valhi, Inc. ("Valhi"). TIMET Finance
Management Company ("TFMC") is a wholly owned subsidiary of Titanium Metals
Corporation ("TIMET"). TIMET is also related to Valhi. Valcor, TFMC, TIMET and
Valhi are all related to Contran Corporation ("Contran"). TFMC and Valhi
directly hold approximately 24.6% and 7.3%, respectively, of the outstanding
shares of CompX Class A Common Stock as of the Record Date (approximately 8.3%
and 2.5%, respectively, of the combined voting power of the CompX Common Stock).
Together Valcor, TFMC and Valhi hold approximately 76.9% of the combined voting
power of the CompX Common Stock (approximately 96.7% for the election of
directors) as of the Record Date. Harold C. Simmons may be deemed to control
TFMC, TIMET, Valcor, Valhi and Contran.
Valcor, TFMC and Valhi have each indicated their intention to have their
shares of CompX Common Stock represented at the Meeting and voted "FOR" the
election of each of the nominees for director of the Board of Directors. If
Valcor alone attends the Meeting in person or by proxy and votes as indicated,
the Meeting will have a quorum present and the stockholders will elect all the
nominees for the Board of Directors.
Because of the CompX Common Stock ownership of Valcor, TFMC and Valhi,
CompX is considered a controlled company under the listing standards of the New
York Stock Exchange (the "NYSE"). Pursuant to the listing standards, a
controlled company may choose not to have a majority of independent directors,
independent compensation, nominating or corporate governance committees or
charters for these committees. CompX has chosen not to have a majority of
independent directors or an independent nominating or corporate governance
committee. The Board of Directors believes that the full Board of Directors best
represents the interests of all of CompX's stockholders and that it is
appropriate for all matters that would be considered by a nominating or
corporate governance committee to be considered and acted upon by the full Board
of Directors. Applying the requirements of the NYSE listing standards, the Board
of Directors has determined that three of its directors are independent and have
no material relationship with CompX. While the members of CompX's management
development and compensation committee (the "MD&C Committee") currently satisfy
the independence requirements of the NYSE listing standards, CompX has chosen
not to satisfy all of the NYSE listing standards for a compensation committee.
See "Meetings and Committees of the Board of Directors" for more information on
the committees of the Board of Directors. See also "Stockholder Proposals for
the 2005 Annual Meeting" for a description of CompX's policies and procedures
for stockholder nominations of directors.
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ELECTION OF DIRECTORS
The bylaws of CompX provide that the Board of Directors shall consist of
one or more members as determined by the Board of Directors or the stockholders.
The Board of Directors has currently set the number of directors at seven. The
directors elected at the Meeting will hold office until the 2005 Annual Meeting
of Stockholders and until their successors are duly elected and qualified or
their earlier removal, resignation or death.
All of the nominees are currently directors of CompX whose terms will
expire at the Meeting. All of the nominees have agreed to serve if elected. If
any nominee is not available for election at the Meeting, a proxy will be voted
"FOR" an alternate nominee to be selected by the Board of Directors, unless the
stockholder executing such proxy withholds authority to vote for such nominee.
The Board of Directors believes that all of its present nominees will be
available for election at the Meeting and will serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. The respective nominees for election as directors of
CompX for terms expiring at the 2005 Annual Meeting of Stockholders have
provided the following information.
Paul M. Bass, Jr., age 68, has been a director of CompX since 1997 and is a
member of CompX's audit committee and chairman of the MD&C Committee. Mr. Bass
also serves as a director of Keystone Consolidated Industries, Inc.
("Keystone"), a steel fabricated wire products, industrial wire and carbon steel
rod company related to Contran. From prior to 1999, Mr. Bass has served as vice
chairman of First Southwest Company, a privately owned investment banking firm.
Mr. Bass is also chairman of the board of MACC Private Equities Inc. Mr. Bass is
currently serving as chairman of the board of trustees of the Southwestern
Medical Foundation.
David A. Bowers, age 66, has served as CompX's president and chief
executive officer since 2002. He has also served as CompX's vice chairman of the
board since 2000 and as a director of CompX since 1993. Mr. Bowers has
continuously served in various executive officer positions for CompX or its
predecessors since prior to 1999. Mr. Bowers has been employed by CompX and its
predecessors since 1960 in various sales, marketing and executive positions,
having been named president of CompX's security products and related businesses
in 1979. Mr. Bowers is a trustee and chairman of the board of Monmouth College,
Monmouth, Illinois.
Keith R. Coogan, age 51, has served as a director of CompX since 2002 and
is the chairman of CompX's audit committee. Mr. Coogan is chief executive
officer of Software Spectrum, Inc., a global business-to-business software
services provider that is currently a wholly owned subsidiary of Level 3
Communications, but from 1991 to 2002 was a publicly traded corporation. From
1990 to 2002, he served in various other executive officer positions of Software
Spectrum, including vice president of finance and operations and chief operating
officer. Mr. Coogan is also a director of Keystone and chairman of its audit
committee.
Edward J. Hardin, age 61, has served as a director of CompX since 1997. Mr.
Hardin has been a partner of the law firm of Rogers & Hardin LLP since its
formation in 1976.
Ann Manix, age 51, has served as a director of CompX since 1998 and is a
member of CompX's audit committee and the MD&C Committee. Since prior to 1999,
Ms. Manix has served as a managing partner of Ducker Research Corporation, a
privately held industrial research firm.
-3-
Glenn R. Simmons, age 76, has served as chairman of the board of CompX
since 2000 and a director of CompX since 1993. From October 2000 to December
2000, Mr. Simmons served as chief executive officer of CompX. Mr. Simmons has
been vice chairman of the board of Valhi and Contran since prior to 1999. Mr.
Simmons also serves as chairman of the board of Keystone; as a director of
Valhi's majority owned subsidiary, NL Industries, Inc. ("NL"), and its
subsidiary, Kronos Worldwide, Inc. ("Kronos Worldwide"), both engaged in the
manufacture of titanium dioxide pigments; and as a director of TIMET, an
integrated producer of titanium metals products that is related to Valhi. In
February 2004, Keystone filed a voluntary petition for reorganization under
federal bankruptcy laws. Mr. Simmons has been an executive officer or director
of various companies related to Contran since 1969. Mr. Simmons is a brother of
Harold C. Simmons. See footnote (4) to the "Security Ownership-Ownership of
CompX" table below for a description of certain entities that Harold C. Simmons
may be deemed to control, including, Contran, Valhi and CompX.
Steven L. Watson, age 53, has served as a director of CompX since 2000. Mr.
Watson has been chief executive officer of Valhi since 2002 and president and a
director of Valhi and Contran since prior to 1999. Mr. Watson also serves as a
director of Keystone, Kronos Worldwide, NL and TIMET. Mr. Watson has served as
an executive officer or director of various companies related to Valhi and
Contran since 1980.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings and took action by written
consent in lieu of a meeting on two occasions in 2003. Each director
participated in at least 75% of all of the 2003 meetings of the Board of
Directors and its committees on which the director served at the time. It is
CompX's policy that each director attend its annual meeting of stockholders,
which is generally held immediately before the annual meeting of the Board of
Directors. All members of the Board of Directors attended CompX's 2003 annual
stockholders meeting.
The Board of Directors has established and delegated authority to the
following two standing committees.
Audit Committee. The audit committee assists the Board of Directors'
oversight responsibilities relating to the financial accounting and
reporting processes and auditing processes of CompX. The responsibilities
of the audit committee are more specifically set forth in the audit
committee charter attached as Appendix A to this proxy statement. Applying
the requirements of the NYSE listing standards and Securities and Exchange
Commission ("SEC") regulations, as applicable, the Board of Directors has
determined that
- each member of the audit committee is financially literate and
independent and has no material relationship with CompX; and
- Mr. Keith R. Coogan is the "audit committee financial expert."
No member of the audit committee serves on more than three public
company audit committees. For further information on the role of the audit
committee, see "Independent Auditor Matters-Audit Committee Report." The
current members of the audit committee are Keith R. Coogan (chairman), Paul
M. Bass, Jr. and Ann Manix. The audit committee held nine meetings in 2003.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve certain
matters involving executive compensation; to take action or to review and
approve certain matters regarding CompX's employee benefit plans or
programs; to administer and grant awards under the CompX International Inc.
1997 Long-Term Incentive Plan (the "1997 Plan"); to approve certain annual
incentive compensation awards; and to review and administer such other
compensation matters as the Board of Directors may direct from time to
time. The Board of Directors has determined that each member of the MD&C
Committee is independent by applying the requirements of the NYSE listing
standards. For further information on the role of the MD&C Committee, see
"Report On Executive Compensation." The current members of the MD&C
Committee are Paul M. Bass, Jr. (chairman) and Ann Manix. The MD&C
Committee held two meetings and took action by written consent in lieu of a
meeting on one occasion in 2003. The MD&C Committee does not have a written
charter.
The Board of Directors is expected to elect the members of the
standing committees at the Board of Directors annual meeting immediately
following the Meeting. The Board of Directors has previously established,
and from time to time may establish, other committees to assist it in the
discharge of its responsibilities.
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EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of CompX. Each executive officer serves at the pleasure of the Board of
Directors. Biographical information with respect to Glenn R. Simmons and David
A. Bowers is set forth under "Election of Directors-Nominees for Director."
Name Age Position(s)
- ---------------------------- --- -----------------------------------------------------------------
Glenn R. Simmons............ 76 Chairman of the Board
David A. Bowers............. 66 Vice Chairman of the Board, President and Chief Executive Officer
Darryl R. Halbert........... 39 Vice President, Chief Financial Officer and Controller
Scott C. James.............. 38 Vice President
Darryl R. Halbert has served as CompX's chief financial officer since
December 2002 and as vice president and controller of CompX since August 2001.
From 1999 to 2001, Mr. Halbert served as chief operating officer, chief
financial officer and secretary of Image2Web, Inc., a subsidiary of Micrografx,
Inc.
Scott C. James has served as vice president of CompX since 2002 and
president of CompX Security Products Inc., a wholly owned subsidiary of CompX,
since 2002. Since 1992, Mr. James has served in various sales, marketing and
executive positions with CompX's security products operations.
-5-
SECURITY OWNERSHIP
Ownership of CompX. The following table and footnotes set forth as of the
Record Date the beneficial ownership, as defined by regulations of the SEC, of
CompX Class A and Class B Common Stock held by each person or group of persons
known to CompX to own beneficially more than 5% of the outstanding shares of
CompX Class A or Class B Common Stock, each director of CompX, each current
executive officer of CompX named in the Summary Compensation Table in this proxy
statement (a "named executive officer") and all current directors and executive
officers of CompX as a group. See footnote (4) below for information concerning
individuals and entities that may be deemed to own indirectly and beneficially
those shares of CompX Common Stock that Valcor, TFMC and Valhi directly hold.
All information is taken from or based upon ownership filings made by such
persons with the SEC or upon information provided by such persons.
CompX Class
A and Class
B Common
CompX Class A Common Stock CompX Class B Common Stock Stock
-------------------------------- ------------------------------ Combined
Amount and Nature of Percent Amount and Nature Percent of
Beneficial of Class of Beneficial Percent Class
Beneficial Owner Ownership (1) (1)(2) Ownership (1) of Class (1)(2)
- ------------------------------- ---------------------- -------- -------------------- -------- -----------
Harold C. Simmons (3)......... 82,300 (4) 1.6% -0- (4) -0- *
Valcor, Inc. (3)........... -0- (4) -0- 10,000,000 (4) 100% 66.1%
TIMET Finance Management
Company (3).............. 1,259,210 (4) 24.6% -0- (4) -0- 8.3%
Valhi, Inc. (3)............ 374,000 (4) 7.3% -0- (4) -0- 2.5%
Spouse..................... 20,000 (4) * -0- (4) -0- *
---------- -----------
1,735,510 (4) 33.9% 10,000,000 (4) 100% 77.6%
Dalton, Greiner, Hartman, Maher
& Co....................... 829,100 (5) 16.2% -0- -0- 5.5%
Rutabaga Capital Management... 795,710 (6) 15.5% -0- -0- 5.3%
Royce & Associates, LLC....... 482,200 (7) 9.4% -0- -0- 3.2%
MassMutual Institutional Funds
- MassMutual Small Cap Value
Equity Fund................ 446,300 (8) 8.7% -0- -0- 3.0%
Yale University............... 295,350 (9) 5.8% -0- -0- 2.0%
Paul M. Bass, Jr.............. 10,100 (10) * -0- -0- *
David A. Bowers............... 96,000 (10) 1.8% -0- -0- *
Keith R. Coogan............... 1,500 * -0- -0- *
Edward J. Hardin.............. 13,600 (10) * -0- -0- *
Ann Manix..................... 9,100 (10) * -0- -0- *
Glenn R. Simmons.............. 67,100 (4)(10) 1.3% -0- -0- *
Steven L. Watson.............. 17,600 (4)(10) * -0- -0- *
Darryl R. Halbert............. 5,000 (10) * -0- -0- *
Scott C. James................ 25,864 (10) * -0- -0- *
All current directors and
executive officers of CompX
as a group (9 persons) .... 245,864 (4)(10) 4.6% -0- -0- 1.6%
________________
* Less than 1%.
-6-
(1) Except as otherwise noted, the listed entities, individuals and group have
sole investment power and sole voting power as to all shares of CompX
Common Stock set forth opposite their names. The number of shares and
percentage of ownership of CompX Common Stock for each person or group
assumes the exercise by such person or group (exclusive of the exercise by
others) of stock options that such person or group may exercise within 60
days subsequent to the Record Date.
(2) The percentages are based on 5,124,780 shares of CompX Class A Common Stock
outstanding as of the Record Date.
(3) The business address of Valcor, Valhi and Harold C. Simmons is Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697. The
business address of TFMC is 300 Delaware Avenue, 9th Floor, Wilmington,
Delaware 19801.
(4) Valhi is the direct holder of 100% of the outstanding common stock of
Valcor. TIMET is the direct holder of 100% of the outstanding common stock
of TFMC. Tremont LLC ("Tremont"), The Combined Master Retirement Trust (the
"CMRT"), Harold C. Simmons' spouse and Valhi are the direct holders of
approximately 39.7%, 8.4%, 6.3% and 1.2% of the outstanding TIMET common
stock, par value $0.01 per share ("TIMET Common Stock"). The TIMET Common
Stock ownership of Mr. Simmons' spouse is based on the 1,600,000 6 5/8%
Convertible Preferred Securities, Beneficial Unsecured Convertible
Securities of TIMET Capital Trust I (the "BUCs") that she directly owns,
which are convertible into 214,240 shares of TIMET Common Stock. The TIMET
Common Stock ownership of Valhi includes 1,968 shares of TIMET Common Stock
that Valhi has the right to acquire upon conversion of 14,700 BUCs that
Valhi directly holds. The percentage ownership of TIMET Common Stock held
by Mr. Simmons' spouse and Valhi assumes the full conversion of only the
BUCS she or Valhi owns, respectively.
As of the Record Date, Valhi holds, directly and indirectly through TFMC
and Valcor, approximately 76.9% of the combined voting power of the CompX
Common Stock (approximately 96.7% for the election of directors). In
certain instances, shares of CompX Class B Common Stock are automatically
convertible into shares of CompX Class A Common Stock.
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"), Contran,
the Harold Simmons Foundation, Inc. (the "Foundation"), the Contran
Deferred Compensation Trust No. 2 (the "CDCT No. 2") and the CMRT are the
direct holders of approximately 77.6%, 9.1%, 3.1%, 0.9%, 0.4% and 0.1%,
respectively, of the outstanding shares of Valhi common stock, par value
$0.01 per share ("Valhi Common Stock"). National, NOA, Inc. ("NOA") and
Dixie Holding Company ("Dixie Holding") are the direct holders of
approximately 73.3%, 11.4% and 15.3%, respectively, of the outstanding
common stock of VGI. Contran and NOA are the direct holders of
approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the direct holder of 100%
of the outstanding common stock of Dixie Holding. Contran is the holder of
100% of the outstanding common stock of Dixie Rice and approximately 88.9%
of the outstanding common stock of Southwest.
Substantially all of Contran' outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold
C. Simmons (the "Trusts"), of which Mr. Simmons is the sole trustee. As
sole trustee of the Trusts, Mr. Simmons has the power to vote and direct
the disposition of the shares of Contran stock held by the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any Contran shares that
the Trusts hold.
Harold C. Simmons is the chairman of the board of Tremont, Valcor, Valhi,
VGI, National, NOA, Dixie Holding, Dixie Rice, Southwest and Contran. By
virtue of the holding of the offices, the stock ownership and his services
as trustee, all as described above, Mr. Simmons may be deemed to control
certain of such entities, and Mr. Simmons and certain of such entities may
be deemed to possess indirect beneficial ownership of the shares of CompX
Common Stock that Valcor, TFMC or Valhi hold directly. Mr. Simmons,
however, disclaims beneficial ownership of the shares of CompX Common Stock
beneficially owned, directly or indirectly, by any of such entities.
-7-
Harold C. Simmons'spouse is the direct beneficial owner of 20,000 shares
of CompX Class A Common Stock, or approximately 0.4% of the outstanding
CompX Class A Common Stock. Mr. Simmons may be deemed to share indirect
beneficial ownership of such shares. Mr. Simmons disclaims all such
beneficial ownership.
Glenn R. Simmons and Steven L. Watson are directors and executive officers
of Valhi and Contran. Messrs. Glenn Simmons and Watson disclaim beneficial
ownership of any shares of CompX Common Stock directly or indirectly held
by Contran, Valhi or any of their subsidiaries.
The Foundation directly holds approximately 0.9% of the outstanding shares
of Valhi Common Stock. The Foundation is a tax-exempt foundation organized
for charitable purposes. Harold C. Simmons is the chairman of the board of
the Foundation. Mr. Simmons, however, disclaims beneficial ownership of any
shares of Valhi Common Stock the Foundation holds.
The CDCT No. 2 directly holds approximately 0.4% of the outstanding shares
of Valhi Common Stock. U.S. Bank National Association serves as trustee of
the CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable "rabbi
trust" to assist Contran in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons. If the CDCT No. 2 assets are
insufficient to satisfy such obligations, Contran must satisfy the balance
of such obligations. Pursuant to the terms of the CDCT No. 2, Contran
retains the power to vote the shares held by the CDCT No. 2, retains
dispositive power over such shares and may be deemed the indirect
beneficial owner of such shares. Mr. Simmons, however, disclaims such
beneficial ownership of the shares beneficially owned, directly or
indirectly, by the CDCT No. 2, except to the extent of his interest as a
beneficiary of the CDCT No. 2.
The CMRT directly holds approximately 8.4% of the outstanding shares of
TIMET common stock and 0.1% of the outstanding shares of Valhi Common
Stock. Valhi established the CMRT to permit the collective investment by
master trusts that maintain the assets of certain employee benefit plans
Valhi and related companies adopt. Harold C. Simmons is the sole trustee of
the CMRT and a member of the trust investment committee for the CMRT. Paul
M. Bass, Jr. is also a member of the trust investment committee for the
CMRT. Valhi's board of directors selects the trustee and members of the
trust investment committee for the CMRT. Harold C. Simmons, Glenn R.
Simmons and Steven L. Watson are members of Valhi's board of directors and
along with David A. Bowers are participants in one or more of the employee
benefit plans that invest through the CMRT. Each of such persons disclaims
beneficial ownership of the shares the CMRT holds, except to the extent of
his individual vested beneficial interest, if any, in the assets the CMRT
holds.
Valmont Insurance Company ("Valmont"), NL and a subsidiary of NL directly
hold 1,000,000, 3,522,967 and 1,186,200 shares, respectively, of Valhi
Common Stock. Valmont is a wholly owned subsidiary of Valhi. NL is a
majority-owned subsidiary of Valhi. Pursuant to Delaware law, Valhi treats
the shares that Valmont, NL and NL's subsidiary directly hold as treasury
stock for voting purposes and for purposes of calculating the percentage
ownership of the outstanding shares of Valhi Common Stock as of the Record
Date in this proxy statement such shares are not deemed outstanding.
A trust of which Harold C. Simmons and his spouse are co-trustees and the
beneficiaries are the grandchildren of his spouse is the direct holder of
4,760 shares of TIMET Common Stock. Mr. Simmons disclaims beneficial
ownership of these shares.
The business address of VGI, National, NOA, Dixie Holding, the Foundation,
the CMRT and Contran is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700,
Dallas, Texas 75240-2697. The business address of Dixie Rice is 600
Pasquiere Street, Gueydan, Louisiana 70542. The business address of
Southwest is 402 Canal Street, Houma, Louisiana 70360.
-8-
(5) Based on Amendment No. 5 to Schedule 13G dated February 4, 2004 Dalton,
Greiner, Hartman, Maher & Co. ("Dalton Greiner") filed with the SEC. Dalton
Greiner has sole voting power over 802,858 of these shares and sole
dispositive power over all of these shares. The address of Dalton Greiner
is 1100 Fifth Avenue South, Suite 301, Naples, Florida 34102.
(6) Based on Amendment No. 4 to Schedule 13G dated February 4, 2004 Rutabaga
Capital Management ("Rutabaga") filed with the SEC. Rutabaga is an
investment advisor that has sole dispositive power over all of these
shares, sole voting power over 319,260 of these shares and shared voting
power over 476,450 of these shares. The address of Rutabaga is 64 Broad
Street, 3rd Floor, Boston, Massachusetts 02109.
(7) Based on Amendment No. 1 to Schedule 13G dated January 30, 2004 Royce &
Associates, LLC ("Royce") filed with the SEC. The address of Royce is 1414
Avenue of the Americas, New York, New York 10019.
(8) Based on Amendment No. 1 to Schedule 13G dated February 7, 2000 MassMutual
Institutional Funds - MassMutual Small Cap Value Equity Fund ("MassMutual")
filed with the SEC. These shares represent shares that the MassMutual
Institutional Funds own for which Massachusetts Mutual Life Insurance
Company is an investment advisor. The address of MassMutual is 1295 State
Street, Springfield, Massachusetts 01111.
(9) Based on a Schedule 13G dated February 13, 2004 Yale University ("Yale")
filed with the SEC. Yale has shared voting and dispositive power over all
of these shares. The address of Yale is to the attention of the Investments
Office, 55 Whitney Avenue, 5th Floor, New Haven, Connecticut 06510-1300.
(10) The shares of CompX Class A Common Stock shown as beneficially owned by
such person include the following number of shares such person has the
right to acquire upon the exercise of stock options granted pursuant to the
1997 Plan that such person may exercise within 60 days subsequent to the
Record Date:
Shares of CompX Class A Common
Stock Issuable Upon the
Exercise of Stock Options
Name of Beneficial Owner On or Before May 28, 2004
--------------------------- ------------------------------
Paul M. Bass, Jr........... 6,600
David A. Bowers............ 72,000
Edward J. Hardin........... 6,600
Ann Manix.................. 5,600
Glenn R. Simmons........... 55,600
Steven L. Watson........... 13,600
Darryl R. Halbert.......... 4,000
Scott C. James............. 24,800
CompX understands that Contran and related entities may acquire or dispose
of shares of CompX Common Stock through open-market or privately negotiated
transactions, depending upon future developments, including, but not limited to,
the availability and alternative uses of funds, the performance of CompX Class A
Common Stock in the market, an assessment of the business of and prospects for
CompX, financial and stock market conditions and other factors deemed relevant
by such entities. CompX may similarly consider acquisitions of shares of CompX
Class A Common Stock and acquisitions or dispositions of securities issued by
related entities.
-9-
Ownership of TIMET and Valhi. CompX directors and executive officers own
equity securities of certain CompX related companies. The following table and
footnotes set forth the beneficial ownership, as of the Record Date, of the
shares of TIMET and Valhi Common Stock held by each director of CompX, each
named executive officer and all current directors and executive officers of
CompX as a group. All information is taken from or based upon ownership filings
made by such persons with the SEC or upon information provided by such persons.
TIMET Common Stock Valhi Common Stock
------------------------------- -------------------------------
Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3)
- --------------------------------- ----------------- ---------- ----------------- ----------
Paul M. Bass, Jr................. -0- -0- -0- (4) -0-
David A. Bowers.................. -0- -0- -0- (4) -0-
Keith R. Coogan.................. -0- -0- -0- -0-
Edward J. Hardin................. -0- -0- 4,000 *
Ann Manix........................ -0- -0- -0- -0-
Glenn R. Simmons................. 1,000 (4)(5)(6) * 13,247 (4) *
Steven L. Watson................. 3,050 (4)(5) * 117,246 (4)(5) *
Darryl R. Halbert................ -0- -0- -0- -0-
Scott C. James................... -0- -0- -0- -0-
All current directors and
executive officers of
CompX as a group
(9 persons)................... 4,050 (4)(5)(6) * 134,493 (4)(5) *
________________
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares set forth opposite
their names. The number of shares and percentage of ownership for each
person or group assumes the exercise by such person or group (exclusive of
others) of stock options that such person or group may exercise within 60
days subsequent to the Record Date.
(2) The percentages are based on 3,179,602 shares of TIMET Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 119,466,678 shares of Valhi Common Stock
outstanding as of the Record Date. For purposes of calculating the
outstanding shares of Valhi Common Stock as of the Record Date, 1,000,000,
3,522,967 and 1,186,200 shares of Valhi Common Stock held by Valmont, NL
and a subsidiary of NL, respectively, are excluded from the amount of Valhi
Common Stock outstanding. Pursuant to Delaware corporate law, Valhi treats
these excluded shares held by these majority owned subsidiaries as treasury
stock for voting purposes.
(4) Excludes certain shares that such individual may be deemed to indirectly
and beneficially own as to which such individual disclaims beneficial
ownership. See footnote (4) to the "Ownership of CompX" table.
-10-
(5) The shares of TIMET Common Stock or Valhi Common Stock shown as
beneficially owned by such person or group include the following number of
shares such person or group has the right to acquire upon the exercise of
stock options granted pursuant to TIMET or Valhi stock option plans that
such person or group may exercise within 60 days subsequent to the Record
Date:
Shares of TIMET Common Stock Shares of Valhi Common Stock
Issuable Upon the Exercise Issuable Upon the Exercise of
of Stock Options Stock Options
Name of Beneficial Owner On or Before May 28, 2004 On or Before May 28, 2004
----------------------------------------- ---------------------------- -----------------------------
Glenn R. Simmons......................... 1,000 -0-
Steven L. Watson......................... 1,500 100,000
(6) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 800 shares his wife holds in her retirement account, with
respect to which shares he disclaims beneficial ownership.
-11-
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. Directors of CompX who are not employees of
CompX or its subsidiaries are entitled to receive compensation for their
services as directors. Directors who received such compensation in 2003 were
Paul M. Bass, Jr., Keith R. Coogan, Edward J. Hardin, Ann Manix, Glenn R.
Simmons and Steven L. Watson.
Prior to May 19, 2003, nonemployee directors received quarterly retainers
of $3,750, plus a fee of $1,000 per day for attendance at meetings and at a
daily rate ($125 per hour) for other services rendered on behalf of the Board of
Directors or committees thereof. Directors also received quarterly retainers of
$250 for each committee on which they served.
Beginning on May 19, 2003, nonemployee directors received quarterly
retainers of $5,000 plus a fee of $1,000 per day for attendance at meetings and
at a daily rate ($125 per hour) for other services rendered on behalf of the
Board of Directors or committees thereof. Directors also received quarterly
retainers of $500 for each committee on which they served. After May 19, 2003,
if any nonemployee director dies while serving on the Board of Directors, his or
her designated beneficiary or estate will be entitled to receive a death benefit
equal to the amount of the annual retainer then in effect.
Throughout the year, CompX reimbursed its nonemployee directors for
reasonable expenses incurred in attending meetings and in the performance of
other services rendered on behalf of the Board of Directors or its committees.
On May 19, 2003, the Board of Directors also changed the equity
compensation paid to the nonemployee directors. The Board of Directors
terminated the annual grant of stock options to the nonemployee directors but
authorized a grant of shares of CompX Class A Common Stock to each nonemployee
director on the date of each annual stockholders meeting as determined by the
following formula based on the closing price of a share of CompX Class A Common
Stock on the date of grant.
Range of Closing Price Per Shares of Class A Common
Share on the Date of Grant Stock to Be Granted
-------------------------- ------------------------
Under $5.00 2,000
$5.00 to $9.99 1,500
$10.00 to $20.00 1,000
Over $20.00 500
As a result of the $5.55 per share closing price of CompX Class A Common Stock
on May 19, 2003, each nonemployee director received a grant of 1,500 shares
CompX Class A Common Stock.
-12-
Summary of Cash and Certain Other Compensation of Executive Officers. The
Summary Compensation Table set forth below provides information concerning
annual and long-term compensation paid or accrued by CompX and its subsidiaries
for services rendered to CompX and its subsidiaries during 2003, 2002 and 2001
by CompX's chief executive officer and each of CompX's two other most highly
compensated executive officers whose total salary and bonus or cost to CompX in
2003 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation (1)
----------------
Awards
----------------
Annual Compensation (2) Shares
Name and ----------------------------------- Underlying All Other
Principal Position Year Salary Bonus Options (#) Compensation
- ----------------------------------- ----- ------------- ------------- ---------------- -------------
David A. Bowers.................... 2003 $ 296,646 $ 175,000 -0- $ 19,024 (3)
Vice Chairman of the Board, 2002 258,750 80,000 -0- 21,281 (3)
President and Chief 2001 248,079 25,000 30,000 16,668 (3)
Executive Officer
Darryl R. Halbert (4).............. 2003 215,000 (4) -0- (4) -0- -0- (4)
Vice President, Chief Financial 2002 136,930 60,000 -0- 5,335 (3)
Officer and Controller 2001 40,868 20,000 10,000 -0- (3)
Scott C. James (5)................. 2003 178,075 100,000 -0- 19,024 (3)
Vice President 2002 151,175 60,000 -0- 21,187 (3)
___________________________________
(1) No shares of restricted stock were granted to the named executive officers
nor payouts made to the named executive officers pursuant to long-term
incentive plans during the last three years. Therefore, the columns for
such compensation have been omitted.
(2) Other annual compensation for each of the named executive officers included
perquisites, which perquisites were less than the level required for
reporting. Therefore, the column for other annual compensation has been
omitted.
-13-
(3) All other compensation for 2003, 2002, and 2001 for Messrs. Bowers, Halbert
and James consisted of CompX's matching contributions to certain of their
accounts under the CompX 401(k) Plan and CompX's contributions to certain
of their accounts under the CompX Capital Accumulation Pension Plan, a
defined contribution plan (the "CAP Plan"), as follows:
Employer's
CompX 401(k) Employer's
Plan Matching CAP Plan
Named Executive Officer Year Contributions Contributions Total
-------------------------------------- ---- ------------- ------------- -------------
David A. Bowers....................... 2003 $ 8,426 $ 10,598 $ 19,024
2002 8,889 12,392 21,281
2001 7,194 9,474 16,668
Darryl R. Halbert..................... 2003 -0- (a) -0- (a) -0- (a)
2002 2,644 2,691 5,335
2001 -0- -0- -0-
Scott C. James........................ 2003 8,426 10,598 19,024
2002 8,795 12,392 21,187
(a) Mr. Halbert became an employee of Contran effective January 1, 2003.
(4) Mr. Halbert became an executive officer of CompX as of August 20, 2001.
Effective January 1, 2003, Mr. Halbert became an employee of Contran and
now provides executive officer services to CompX pursuant to the
intercorporate services agreement between Contran and CompX (the "Contran
ISA"). For 2003, the amount shown in the table as salary compensation for
Mr. Halbert represents the portion of the fees CompX and its subsidiaries
paid to Contran pursuant to the Contran ISA attributable to the services he
rendered to CompX and its subsidiaries.
(5) Mr. James became an executive officer of CompX as of August 31, 2002.
-14-
No Grants of Stock Options or Stock Appreciation Rights. Neither CompX nor
any of its parent or subsidiary corporations granted stock options or stock
appreciation rights ("SARs") to the named executive officers during 2003.
Stock Option Holdings. The following table provides information concerning
the value of unexercised stock options for CompX Class A Common Stock the named
executive officers held as of December 31, 2003. In 2003, no named executive
officer exercised any stock options. Neither CompX nor any of its parent or
subsidiary corporations has granted any SARs.
DECEMBER 31, 2003 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Name December 31, 2003 (#) at December 31, 2003 (1)
- ---------------------- --------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ ------------- ------------ -------------
David A. Bowers....... 64,000 31,000 $ -0- $ -0-
Darryl R. Halbert..... 4,000 6,000 -0- -0-
Scott C. James........ 22,600 15,400 -0- -0-
______________________
(1) The aggregate amount is based on the difference between the exercise price
of the individual stock options and the $6.40 per share closing sales price
of the CompX Class A Common Stock as reported on the NYSE on December 31,
2003. In each case, the exercise price per share for the stock options was
higher than $6.40.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides summary information with respect to CompX's
equity compensation plans under which CompX's equity securities may be issued to
employees or nonemployees (such as directors, consultants, advisers, vendors,
customers, suppliers and lenders) in exchange for consideration in the form of
goods or services. The 1997 Plan, which has been approved by CompX's
stockholders, is the only such CompX equity compensation plan.
Column (A) Column (B) Column (C)
-------------------------- ------------------------- -------------------------
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to be Weighted-Average Exercise Equity Compensation Plans
Issued Upon Exercise of Price of Outstanding (Excluding Securities
Outstanding Options, Options, Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (A))
- --------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans
approved by security
holders.................... 618,500 $17.28 632,820
Equity compensation plans
not approved by security
holders.................... -0- -0- -0-
Total...................... 618,500 $17.28 632,820
-15-
CODE OF BUSINESS CONDUCT AND ETHICS
CompX has adopted a code of business conduct and ethics that applies to all
of CompX's directors, officers and employees, including CompX's principal
executive officer, principal financial officer, principal accounting officer and
controller. Any person may obtain a copy of the code, without charge, by sending
a written request to CompX's corporate secretary at CompX International Inc.,
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
Only the Board of Directors may amend the code. The code will be available on
CompX's website at www.compxnet.com in accordance with the NYSE listing
standards. Only CompX's audit committee or other committee of the Board of
Directors with specific delegated authority may grant a waiver of the code.
CompX will disclose amendments to, or waivers of, the code as required by law
and the applicable rules of the NYSE.
CORPORATE GOVERNANCE GUIDELINES
CompX intends to adopt corporate governance guidelines that will comply
with the NYSE listing standards. CompX will also make the guidelines and its
audit committee charter available on CompX's website at www.compxnet.com in
accordance with the NYSE listing standards. Any person will be able to obtain a
copy of the guidelines (when adopted) or the audit committee charter, without
charge, by sending a written request to CompX's corporate secretary at CompX
International Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas 75240-2697.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires CompX's executive officers, directors and persons who
own more than 10% of a registered class of CompX's equity securities to file
reports of ownership with the SEC, the NYSE and CompX. Based solely on the
review of the copies of such forms and representations by certain reporting
persons, CompX believes that for 2003 its executive officers, directors and 10%
stockholders complied with all applicable filing requirements under Section
16(a), except for one late Form 4 filing for Mr. Coogan due to inadvertence by
CompX personnel.
-16-
REPORT ON EXECUTIVE COMPENSATION
During 2003, CompX's independent directors, consisting of Paul M. Bass,
Jr., Keith R. Coogan, and Ann Manix (the "Independent Directors"), and the MD&C
Committee administered matters regarding the compensation of CompX's executive
officers.
Independent Director Determination
The Board of Directors, with directors other than Independent Directors
abstaining, considered and approved the terms of the Contran ISA, pursuant to
which Contran provided to CompX, among other services, the services of CompX's
chief financial officer and controller. The amount of the fee CompX pays under
the Contran ISA with respect to the chief financial officer represents, in the
view of the Board of Directors, the reasonable equivalent of "compensation" for
such services. The fee Contran charged CompX for the chief financial officer's
services for 2003 is reported in his 2003 salary column in the Summary
Compensation Table set forth above. The Independent Directors, in considering
the fee CompX pays under the Contran ISA with respect to the chief financial
officer, considered the overall fee charged under the Contran ISA for the
services Contran provides CompX. No specific formulas, guidelines or comparable
positions were considered in determining the amount of such fee, nor was there
any specific relationship between CompX's current or future performance and the
level of such fee.
MD&C Committee Determinations
The MD&C Committee reviews and approves compensation policies and practices
related to CompX's executive officers and certain other employees, including
stock-based compensation. See "Meetings and Committees of the Board of Directors
- - Management Development and Compensation Committee." CompX's executive
compensation system generally consists of two primary components: salary and a
discretionary incentive compensation award. Through the use of the foregoing,
the MD&C Committee seeks to achieve a balanced compensation package that will
attract and retain high quality key executives, appropriately reflect each such
executive officer's individual performance, contributions, and general market
value, and provide further incentives to the executive officers to maximize
annual operating performance and long-term stockholder value. In 2003, the MD&C
Committee made no separate determinations regarding cash compensation to be paid
to the chairman of the board or the chief financial officer since these persons
were employees of Contran.
Annual Salaries
Annual base salaries for executive officers of CompX have been established
on a position-by-position basis. The chief executive officer has the
responsibility to conduct annual internal reviews of executive officer salary
levels in order to rank salary, individual performance and job value to each
position. The chief executive officer then makes recommendations on salaries,
other than his own, to the MD&C Committee. The chairman of the board makes
recommendations on the chief executive officer's salary to the MD&C Committee.
The MD&C Committee reviews the recommendations regarding changes in salaries for
executive officers. The MD&C Committee may take such action, including
modifications to the recommendations, as it deems appropriate. The
determinations of the MD&C Committee may be based on a variety of factors,
including a subjective evaluation of past and potential future individual
performance and contributions and alternative career opportunities that might be
available to the executives. The MD&C Committee may also review compensation
data from companies employing executives in positions similar to those whose
salaries were being reviewed, as well as market conditions for executives in
general with similar skills, responsibilities, background and performance
levels, both inside and outside of CompX's businesses (such companies may
include companies contained in the peer group index plotted on the Performance
Graph following this report), and other companies with similar financial and
business characteristics as CompX.
In December 2002, the MD&C Committee approved 2003 base salary increases
for the chief executive officer and one other executive officer, Mr. Scott
James. The MD&C Committee based its actions regarding 2003 salaries primarily
upon the chairman of the board's recommendation regarding the chief executive
officer, the chief executive officer's recommendation regarding Mr. James and
the MD&C Committee members' general business knowledge. In 2003, no specific
survey or study was utilized to make salary determinations. The chief executive
officer's 2003 annual salary was not based on any specific measure of CompX's
financial performance.
-17-
Annual Incentive Compensation
In August 2002, the MD&C Committee determined that the amount of any annual
incentive compensation to be paid to CompX's executive officers, including the
chief executive officer, would be awarded on a year-end discretionary evaluation
of each such officer's performance, attitude and potential, rather than achieved
operating income. Accordingly, the MD&C Committee awarded 2003 incentive
compensation to certain of CompX's executive officers based on a discretionary
evaluation of each such officer's performance, attitude and potential. The MD&C
Committee based its actions regarding 2003 incentive compensation primarily upon
the chairman of the board's recommendation regarding the chief executive
officer, the chief executive officer's recommendations regarding the other
executive officers and the MD&C Committee members' general business knowledge.
No specific overall performance measures were utilized and there is no specific
relationship between overall performance measures and an executive's incentive
compensation. Additionally, there is no specific weighing of factors considered
in the determination of incentive compensation paid to executive officers. The
2003 discretionary bonuses the named executive officers received are disclosed
in the bonus column in the Summary Compensation Table set forth above.
Stock-Based Compensation
The MD&C administers matters regarding the stock-based compensation of
CompX's executive officers. With regard to stock-based compensation (e.g. stock
bonuses, stock options, restricted stock or stock appreciation rights, among
other types of stock-based compensation), the MD&C Committee determines whether
to grant stock-based compensation based upon the chairman of the board's
recommendation regarding the chief executive officer, the chief executive
officer's recommendations regarding the other executive officers and the MD&C
Committee members' general business knowledge. The MD&C Committee does not
currently anticipate granting stock-based compensation to anyone other than
annual grants of stock to CompX's nonemployee directors for their services as
directors.
Defined Contribution Plans
The MD&C Committee also reviews and approves CompX's discretionary annual
contributions to the CAP Plan, a profit sharing defined contribution plan, and
the CompX 401(k) Plan. Participants of these plans are employees of certain of
CompX's domestic operations. Under the CAP Plan for the 2003 plan year, the MD&C
Committee approved a contribution of 7.25% of 2003 earnings before taxes of
CompX's National and Timberline divisions and similar contributions for other
participants, subject to certain limitations under the Cap Plan and the Internal
Revenue Code of 1986, as amended (the "Code"). Under the CompX 401(k) Plan for
the 2003 plan year, the MD&C Committee approved matching contributions based on
each participant's business unit that ranged between 36% to 100% of the such
employee's contribution, subject to certain limitations under the CompX 401(k)
Plan and the Code. Certain of the named executive officers received such
contributions, which are disclosed in the all other compensation column in the
Summary Compensation Table set forth above. For the 2003 plan year, the MD&C
committee approved contributions to the CAP Plan and the CompX 401(k) Plan in an
aggregate amount of approximately $1.2 million, subject to certain limitations
of the Code and the respective plans.
-18-
Tax Code Limitation on Executive Compensation Deductions
In 1993, Congress amended the Code to impose a $1.0 million deduction limit
on compensation paid to the chief executive officer and the four other most
highly compensated executive officers of public companies, subject to certain
transition rules and exceptions for compensation received pursuant to
non-discretionary performance-based plans approved by such company's
shareholders. It is CompX's general policy to structure the performance-based
portion of the compensation of its executive officers in a manner that permits
CompX to deduct fully such compensation.
The following individuals submit the foregoing report in their capacities
as indicated below:
Paul M. Bass, Jr. Ann Manix
Chairman of the MD&C Committee Member of the MD&C Committee
Keith R. Coogan
Independent Director
-19-
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on CompX Class A Common Stock against the
cumulative total return of the Russell 2000 Stock Index and a self-selected peer
group of companies index for the period commencing December 31, 1998 and ending
December 31, 2003. The self-selected peer group index is comprised of Bush
Industries, Inc., Herman Miller, Inc., HON Industries Inc., Interface, Inc.,
Knape & Vogt Manufacturing Company, Leggett & Platt, Incorporated and Steelcase
Inc. The graph shows the value at December 31 of each year assuming an original
investment of $100 and the reinvestment of cash dividends to stockholders.
Comparison of Cumulative Return Among CompX International Inc.
Class A Common Stock, the Russell 2000 Stock Index
and a Self-Selected Peer Group Index
[PERFORMANCE GRAPH GOES HERE]
December 31,
----------------------------------------------
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
CompX International Inc........ $100 $ 70 $ 35 $ 53 $ 36 $ 28
Russell 2000 Stock Index....... 100 121 118 121 96 141
Self-Selected Peer Group Index. 100 93 98 105 97 116
-20-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties. As set forth under the caption
"Security Ownership," Harold C. Simmons, through Contran, may be deemed to
control CompX. CompX and other entities 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, tax sharing agreements, 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 that resulted in the
acquisition by one related party of a publicly held equity interest in another
related party. CompX considers, reviews and evaluates and understands that
Contran and related entities consider, review and evaluate transactions of the
type described above. Depending upon the business, tax and other objectives then
relevant, it is possible that CompX might be a party to one or more of such
transactions in the future. In connection with these activities CompX may
consider issuing additional equity securities or incurring additional
indebtedness. CompX's acquisition activities may in the future include
participation in the acquisition or restructuring activities conducted by other
companies that may be deemed to be controlled by Mr. Simmons. It is the policy
of CompX to engage in transactions with related parties on terms, in the opinion
of CompX, no less favorable to CompX than could be obtained from unrelated
parties.
Certain directors or executive officers of Contran, Keystone, Kronos
Worldwide, NL, TIMET and Valhi, also serve as directors or executive officers of
CompX. Such relationships may lead to possible conflicts of interest. These
possible conflicts of interest may arise from the duties of loyalty owed by
persons acting as corporate fiduciaries to two or more companies under
circumstances in which such companies may have adverse interests. No specific
procedures are in place that govern the treatment of transactions among CompX
and its related entities, although such entities may implement specific
procedures as appropriate for particular transactions. In addition, under
applicable principles of law, in the absence of stockholder ratification or
approval by directors who may be deemed disinterested, transactions involving
contracts among companies under common control must be fair to all companies
involved. Furthermore, directors owe fiduciary duties of good faith and fair
dealing to all stockholders of the companies for which they serve.
Intercorporate Services Agreement and Rent. Under the Contran ISA, Contran
renders or provides for certain executive, management, financial, internal
audit, accounting, tax, legal, insurance, risk management, treasury, technical,
consulting, administrative and other services to CompX on a fee basis. Such fees
are based upon estimates of time devoted to the affairs of CompX by the
individual providers of such services and Contran's costs for providing such
services. CompX paid Contran fees of approximately $2.1 million for services
rendered under the Contran ISA in 2003. In addition, CompX paid Valhi
approximately $18,000 in rent for 2003 for use of a portion of Valhi's corporate
office space as CompX's principal offices. The current Contran ISA has an
initial term that expires on December 31, 2004 and thereafter automatically
extends on a quarter-to-quarter basis, generally subject to the termination by
either party pursuant to a written notice delivered 30 days prior to the start
of the next quarter. CompX anticipates paying Contran $2.3 million for services
rendered under the Contran ISA in 2004.
Insurance Matters. Contran and CompX participate in a combined risk
management program. Pursuant to the program, Contran and certain of its
subsidiaries and affiliates, including CompX and certain of its subsidiaries and
affiliates, purchase certain of their insurance policies as a group, with the
costs of the jointly owned policies being apportioned among the participating
companies. Tall Pines Insurance Company ("Tall Pines"), Valmont and EWI RE, Inc.
("EWI") provide for or broker these insurance policies. Tall Pines and Valmont
are captive insurance companies wholly owned by Valhi, and EWI is a reinsurance
brokerage firm wholly owned by NL. A son-in-law of Harold C. Simmons serves as
EWI's chairman of the board and chief marketing officer and is compensated as an
employee of EWI. Consistent with insurance industry practices, Tall Pines,
Valmont and EWI receive commissions from insurance and reinsurance underwriters
for the policies that they provide or broker.
With respect to certain of such jointly owned insurance policies, it is
possible that unusually large losses incurred by one or more insureds during a
given policy period could leave the other participating companies without
adequate coverage under that policy for the balance of the policy period. As a
result, Contran and certain of its subsidiaries or affiliates, including CompX
and certain of its subsidiaries or affiliates, have entered into a loss sharing
agreement under which any uninsured loss is shared by those entities who have
submitted claims under the relevant policy. CompX believes the benefits in the
form of reduced premiums and broader coverage associated with the group coverage
for such policies justify the risks associated with the potential for any
uninsured loss.
-21-
During 2003, Contran and its related parties paid premiums of approximately
$16.7 million for policies Tall Pines or Valmont provided or EWI brokered,
including approximately $1.0 million CompX and its subsidiaries paid. These
amounts principally included payments for reinsurance and insurance premiums
paid to unrelated third parties, but also included commissions paid to Tall
Pines, Valmont and EWI. In CompX's opinion, the amounts that CompX and its
subsidiaries paid for these insurance policies and the allocation among CompX
and its affiliates of relative insurance premiums are reasonable and at least as
favorable to those they could have obtained through unrelated insurance
companies or brokers. CompX expects that these relationships with Tall Pines,
Valmont and EWI will continue in 2004.
State Income Taxes. CompX is a separate United States federal income
taxpayer and is not a member of Contran's consolidated United States federal
income tax group. CompX is, however, a part of consolidated tax returns filed by
Contran in certain United States state jurisdictions. For such consolidated
state tax returns, intercompany allocations of state tax provisions are computed
on a separate company basis, and CompX makes payments to, or receives payments
from, Valhi in the amounts that would have been paid to or received from the
respective state tax authority had CompX not been a part of the consolidated
state tax return. In 2003, pursuant to these consolidated state tax returns
filed by Contran, CompX paid Valhi $210,000, but also received from Valhi
$602,000.
Law Firm Relationship. In 2003, Contran and its affiliates, including
CompX, paid to Rogers & Hardin, LLP, a law firm of which CompX's director Edward
J. Hardin is a partner, fees for services Rogers & Hardin LLP rendered to such
entities. CompX presently expects, and understands that Contran and its other
affiliates presently expect, to continue their relationship with Rogers & Hardin
LLP in 2004.
-22-
INDEPENDENT AUDITOR MATTERS
Independent Auditor. The firm of PricewaterhouseCoopers LLP ("PwC") served
as CompX's independent auditor for the year ended December 31, 2003. CompX's
audit committee has appointed PwC to review CompX's quarterly unaudited
consolidated financial statements to be included in its Quarterly Reports on
Form 10-Q for the first three quarters of 2004. CompX expects PwC will be
considered for appointment to audit CompX's annual consolidated financial
statements for the year ending December 31, 2004. Representatives of PwC are not
expected to attend the Meeting.
Audit Committee Report. The audit committee of the Board of Directors is
comprised of three directors and operates under a written charter adopted by the
Board of Directors. All members of the audit committee meet the independence
standards established by the Board of Directors, the NYSE and promulgated by the
SEC under the Sarbanes-Oxley Act of 2002. The Board of Directors adopted
revisions to the audit committee's charter in February 2004. The revised audit
committee charter is included as Appendix A to this proxy statement, and will be
available on CompX's website at www.compxnet.com in accordance with the NYSE
listing standards.
CompX's management is responsible for preparing CompX's consolidated
financial statements in accordance with accounting principles generally accepted
in the United States of America ("GAAP"). CompX's independent auditor is
responsible for auditing CompX's consolidated financial statements in accordance
with auditing standards generally accepted in the United States of America and
for expressing an opinion on the conformity of CompX's financial statements with
GAAP. The audit committee assists the Board of Directors in fulfilling its
responsibility to oversee management's implementation of CompX's financial
reporting process. In its oversight role, the audit committee reviewed and
discussed the audited financial statements with management and with PwC, CompX's
independent auditor for 2003.
The audit committee met privately with PwC and discussed any issues deemed
significant by the independent auditor, including the required matters to be
discussed by Statement of Auditing Standards No. 61, Communication With Audit
Committee, as amended. PwC has provided to the audit committee written
disclosures and the letter required by Independence Standards Board No. 1,
Independence Discussions with Audit Committees, and the audit committee
discussed with PwC that firm's independence. The audit committee also concluded
that PwC's provision of non-audit services to CompX and its affiliates is
compatible with PwC's independence.
Based upon the foregoing considerations, the audit committee recommended to
the Board of Directors that CompX's audited financial statements be included in
its Annual Report on Form 10-K for 2003.
Members of the audit committee of the Board of Directors respectfully
submit the foregoing report.
Keith R. Coogan Ann Manix
Chairman of the Audit Committee Member of the Audit Committee
Paul M. Bass, Jr.
Member of the Audit Committee
-23-
Fees Paid to PwC. The following table shows the aggregate fees PwC has
billed or is expected to bill to CompX and its subsidiaries for services
rendered for 2002 and 2003.
Type of Fees 2002 2003
- ------------------------------------- ----------- -----------
Audit Fees (1)....................... $ 283,058 $ 321,031
Audit-Related Fees (2)............... 53,839 12,932
Tax Fees (3)......................... 54,632 37,354
All Other Fees (4)................... 10,680 25,810
Total................................ $ 402,209 $ 397,127
_________
(1) Fees for the following services:
(a) audits of CompX's consolidated year-end financial statements for each
year;
(b) reviews of the unaudited quarterly financial statements appearing in
CompX's Forms 10-Q for each of the first three quarters of each year;
(c) normally provided statutory or regulatory filings or engagements for
each year; and
(d) the estimated out-of-pocket costs PwC incurred in providing all of
such services for which CompX reimburses PwC.
(2) Fees for employee benefit plan audits.
(3) Fees for tax compliance, tax advice and tax planning services.
(4) Fees for all services not described in the other categories. For 2002, the
disclosed fees include consulting and software services. For 2003, the
disclosed fees include fees for an annual software license and maintenance
and an agreed upon procedures report for the Dutch government related to an
employee severance plan.
Preapproval Polices and Procedures. The audit committee has adopted a
preapproval policy, a copy of which is attached as Appendix B to this proxy
statement. As of May 6, 2003, the audit committee became responsible for
preapproving every engagement of PwC to perform audit or nonaudit services on
behalf of CompX or any of its subsidiaries. Since May 6, 2003, 10% of the all
other fees paid to PwC in 2003 were for services for which the de minimus
exception, as defined in Section 202 of the Sarbanes-Oxley Act of 2002, applied.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their reasonable
judgment.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2005 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at CompX's annual stockholders meetings, consistent with rules adopted by
the SEC. CompX must receive such proposals not later than December 15, 2004 to
be considered for inclusion in the proxy statement and form of proxy card
relating to the Annual Meeting of Stockholders in 2005. CompX's bylaws require
that the proposal must set forth a brief description of the proposal, the name
and address of the proposing stockholder as they appear on CompX's books, the
number of shares of CompX Common Stock the stockholder holds and any material
interest the stockholder has in the proposal.
-24-
The Board of Directors will consider the director nominee recommendations
of CompX stockholders. CompX's bylaws require that a nomination set forth the
name and address of the nominating stockholder, a representation that the
stockholder will be a stockholder of record entitled to vote at the annual
stockholders meeting and intends to appear in person or by proxy at the meeting
to nominate the nominee, a description of all arrangements or understandings
between the stockholder and the nominee (or other persons pursuant to which the
nomination is to be made), such other information regarding the nominee as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the SEC and the consent of the nominee to serve as a CompX director if
elected.
The Board of Directors has no specific minimum qualifications for director
candidates. The Board of Directors will consider a potential director nominee's
ability to satisfy the need, if any, for any required expertise on the Board of
Directors or one of its committees. Historically, CompX management has
recommended director nominees to the Board of Directors. Because under the NYSE
listing standards CompX may be deemed to be a controlled company, the Board of
Directors believes that it is appropriate that CompX not have any additional
policies or procedures with regard to the consideration of director candidates
recommended by its stockholders.
For proposals or director nominations to be brought at the 2005 Annual
Meeting of Stockholders but not included in the proxy statement for such
meeting, CompX's bylaws require that the proposal or nomination must be
delivered or mailed to the principal executive offices of CompX no later than
forty-five days prior to the earlier of the date (as if in the current year) on
which notice of the date of the last annual meeting was mailed or public
disclosure of the date of the meeting was made. Proposals and nominations should
be addressed to: Corporate Secretary, CompX International Inc., Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders who wish to communicate with the Board of Directors may do so
through the following procedures. Stockholder communications not involving
complaints or concerns regarding accounting, internal accounting controls and
auditing matters related to CompX ("Accounting Complaints or Concerns") may be
sent to CompX's corporate secretary at CompX International Inc., Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697. Stockholder
communications that relate to matters that are within the scope of the
responsibilities of the Board of Directors and its committees, or summaries of
such communications, will be forwarded to the chairman of the audit committee.
Accounting Complaints or Concerns, which may be made anonymously, should be
sent to CompX's general counsel with a copy to CompX's chief financial officer
at the same address as the corporate secretary. Accounting Complaints or
Concerns will be forwarded to the chairman of the audit committee. CompX will
keep Accounting Complaints or Concerns confidential and anonymous, to the extent
feasible, subject to applicable law. Information contained in an Accounting
Complaint or Concern may be summarized, abstracted and aggregated for purposes
of analysis and investigation.
2003 ANNUAL REPORT ON FORM 10-K
A copy of CompX's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, as filed with the SEC, is included as part of the annual
report mailed to CompX's stockholders with this proxy statement. This Annual
Report on Form 10-K may also be accessed on CompX's website at www.compxnet.com.
ADDITIONAL COPIES
Pursuant to an SEC rule concerning the delivery of annual reports and proxy
statements, a single set of these documents may be sent to any household at
which two or more stockholders reside if they appear to be members of the same
family. Each stockholder continues to receive a separate proxy card. This
procedure, referred to as householding, reduces the volume of duplicate
information stockholders receive and reduces mailing and printing expenses. A
number of brokerage firms have instituted householding. Certain beneficial
stockholders who share a single address may have received a notice that only one
annual report and proxy statement would be sent to that address unless a
stockholder at that address gave contrary instructions. If, at any time, a
stockholder who holds shares through a broker no longer wishes to participate in
householding and would prefer to receive a separate proxy statement and related
materials, or if such stockholder currently receives multiple copies of the
proxy statement and related materials at his or her address and would like to
request householding of CompX communications, the stockholder should notify his
or her broker. Additionally, CompX will promptly deliver a separate copy of
CompX's 2003 annual report or this proxy statement to any stockholder at a
shared address to which a single copy of such documents was delivered, upon the
written or oral request of the stockholder.
-25-
To obtain copies of CompX's 2003 annual report or this proxy statement
without charge, please mail your request to A. Andrew R. Louis, Corporate
Secretary, at CompX International Inc., Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240-2697, or call him at 972.233.1700.
CompX International Inc.
Dallas, Texas
April 14, 2004
-26-
Appendix A
CompX International Inc.
Audit Committee Charter
Adopted February 24, 2004
____________________
ARTICLE I.
PURPOSE
The audit committee assists the board of directors' oversight
responsibilities relating to the financial accounting and reporting processes
and auditing processes of the corporation. The audit committee shall assist in
the oversight of:
- the integrity of the corporation's financial statements;
- the corporation's compliance with legal and regulatory requirements;
- the independent auditor's qualifications and independence; and
- the performance of the corporation's internal audit function and
independent auditor.
ARTICLE II.
RELATIONSHIP WITH MANAGEMENT AND THE INDEPENDENT AUDITOR
Management is responsible for preparing the corporation's financial
statements. The corporation's independent auditor is responsible for auditing
the financial statements. The activities of the audit committee are in no way
designed to supersede or alter these traditional responsibilities. The
corporation's independent auditor and management have more time, knowledge and
detailed information about the corporation than do the audit committee members.
Accordingly, the audit committee's role does not provide any special assurances
with regard to the corporation's financial statements. Each member of the audit
committee, in the performance of such member's duties, will be entitled to rely
in good faith upon the information, opinions, reports or statements presented to
the audit committee by any of the corporation's officers or employees or by any
other person as to matters such member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the corporation.
ARTICLE III.
AUTHORITY AND RESOURCES
The audit committee shall have the authority and resources necessary or
appropriate to discharge its responsibilities. The audit committee shall be
provided with full access to all books, records, facilities and personnel of the
corporation in carrying out its duties. The audit committee shall have the sole
authority with regard to the independent auditor as set forth in Article V, and
the authority to engage independent counsel and other advisors, as it determines
is necessary to carry out its duties. The corporation shall provide appropriate
funding, as the audit committee determines is necessary or appropriate in
carrying out its duties, for the committee to engage and compensate the
independent auditor or legal counsel or other advisors to the committee, and to
pay the committee's ordinary administrative expenses.
A-1
ARTICLE IV.
COMPOSITION AND MEETINGS
The board of directors shall set the number of directors comprising the
audit committee from time to time, which number shall not be less than three.
The board of directors shall designate a chairperson of the audit committee. The
number of directors comprising the audit committee and the qualifications, which
members will all be financially literate with at least one being an audit
committee financial expert, and independence of each member of the audit
committee shall at all times satisfy all applicable requirements, regulations or
laws, including, without limitation, the rules of any exchange or national
securities association on which the corporation's securities trade. Simultaneous
service on more than three non-affiliated public company audit committees
requires a special determination by the board of directors and, if required,
disclosure in the annual proxy statement. The board of directors shall
determine, in its business judgment, whether the members of the audit committee
satisfy all such requirements, regulations or laws.
The audit committee shall meet at least quarterly and as circumstances
dictate. Regular meetings of the audit committee may be held with or without
prior notice at such time and at such place as shall from time to time be
determined by the chairperson of the audit committee, any of the corporation's
executive officers or the secretary of the corporation. Special meetings of the
audit committee may be called by or at the request of any member of the audit
committee, any of the corporation's executive officers, the secretary of the
corporation or the independent auditor, in each case on at least twenty-four
hours notice to each member.
A majority of the audit committee members shall constitute a quorum for the
transaction of the audit committee's business. The audit committee shall act
upon the vote of a majority of its members at a duly called meeting at which a
quorum is present. Any action of the audit committee may be taken by a written
instrument signed by all of the members of the audit committee. Meetings of the
audit committee may be held at such place or places as the audit committee shall
determine or as may be specified or fixed in the respective notice or waiver of
notice for a meeting. Members of the audit committee may participate in audit
committee proceedings by means of conference telephone or similar communications
equipment by means of which all persons participating in the proceedings can
hear each other, and such participation shall constitute presence in person at
such proceedings.
ARTICLE V.
RESPONSIBILITIES
To fulfill its responsibilities, the audit committee shall perform the
following activities.
Financial Disclosure
- Review and discuss the corporation's annual audited financial
statements and quarterly financial statements with management and the
independent auditor, and the corporation's related disclosure under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
- Recommend to the board of directors, if appropriate, that the audited
financial statements be included in the corporation's Annual Report on
Form 10-K to be filed with the U.S. Securities and Exchange
Commission.
- Generally discuss (i.e., a discussion of the types of information to
be disclosed and the type of presentation to be made) with management
and the independent auditor, as appropriate, earnings press releases
and financial information and earnings guidance provided to analysts
and rating agencies. The audit committee need not discuss in advance
each earnings release or each instance in which the corporation may
provide earnings guidance.
- Prepare such reports of the audit committee for the corporation's
public disclosure documents as applicable requirements, regulations or
laws may require from time to time, which includes the audit committee
report as required by the U.S. Securities and Exchange Commission to
be included in the corporation's annual proxy statement.
A-2
- Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements or proposed pronouncements,
and understand their impact on the corporation's financial statements.
- Ascertain from officers signing certifications whether there existed
any significant deficiencies or any material weaknesses of internal
control and any fraud.
Independent Auditor
- Appoint, compensate, retain and oversee (including the resolution of
disagreements between management and the independent auditor regarding
financial reporting) the work of any independent auditor engaged for
the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the corporation.
- Provide that the independent auditor report directly to the audit
committee.
- Annually review the qualifications, independence and performance of
the independent auditor, including an evaluation of the lead partner
- Receive such reports and communications from the independent auditor
and take such actions as are required by auditing standards generally
accepted in the United States of America or applicable requirements,
regulations or laws, including, to the extent so required, the
following:
o prior to the annual audit, review with management and the
independent auditor the scope and approach of the annual audit;
o review any changes in the independent auditor's scope during the
audit, and after the annual audit, review with management and the
independent auditor the independent auditor's reports on the
results of the annual audit;
o review with the independent auditor any audit problems or
difficulties and management's response;
o review with the independent auditor prior to filing the audit
report with the U.S. Securities and Exchange Commission the
matters required to be discussed by the Statement on Accounting
Standards 61, as amended, supplemented or superseded; and
o at least annually, obtain and review a report by the independent
auditor describing:
* the independent auditor's internal quality control
procedures;
* any material issues raised by the most recent internal
quality control review, or peer review, of the independent
auditor or by any inquiry or investigation by governmental
or professional authorities, within the preceding five
years, with respect to one or more independent audits
carried out by the independent auditor, and any steps taken
to deal with any such issues; and
* all relationships between the independent auditor and the
corporation in order to assess the auditor's independence,
including the written disclosures required by Independence
Standards Board Standard No. 1, Independence Discussions
with Audit Committees, as amended, supplemented or
superseded.
- Establish preapproval policies and procedures for audit and
permissible non-audit services provided by the independent auditor.
The audit committee shall be responsible for the preapproval of all of
the independent auditor's engagement fees and terms, as well as all
permissible non-audit engagements of the independent auditor, as
required by applicable requirements, regulations or laws. The audit
committee may delegate to one or more of its members who are
independent directors the authority to grant such preapprovals,
provided the decisions of any such member to whom authority is
delegated shall be presented to the full audit committee at its next
scheduled meeting.
A-3
- Set clear hiring policies for employees or former employees of the
independent auditor.
- Ensure that significant findings and recommendations made by the
independent auditor are received and discussed on a timely basis with
the audit committee and management.
Other Responsibilities
- Discuss periodically with management the corporation's policies
regarding risk assessment and risk management.
- Meet separately, periodically, with management, the internal auditors
(or other personnel responsible for the internal audit function) and
the independent auditor.
- Establish procedures for the receipt, retention and treatment of
complaints received by the corporation regarding accounting, internal
accounting controls or auditing matters, including procedures for the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
- Review periodically the reports and activities of the internal audit
function and the coordination of the internal audit function with the
independent auditor.
- Conduct an annual evaluation of its own performance.
- Report regularly to the board of directors on its oversight
responsibilities set forth in Article I.
- Review and reassess this charter periodically. Report to the board of
directors any suggested changes to this charter.
- Meet periodically with officers of the corporation responsible for
legal and regulatory compliance by the corporation.
ARTICLE VI.
MISCELLANEOUS
The audit committee may from time to time perform any other activities
consistent with this charter, the corporation's charter and bylaws and
applicable requirements, regulations or laws, as the audit committee or the
board of directors deems necessary or appropriate.
ADOPTED BY THE BOARD OF DIRECTORS OF
COMPX INTERNATIONAL INC. ON FEBRUARY 24,
2004.
/s/ A. Andrew R. Louis
A. Andrew R. Louis, Secretary
A-4
Appendix B
CompX International Inc.
Audit Committee Preapproval Policy
Adopted February 24, 2004
____________________
Section 1. - Statement of Principles
The Audit Committee is required, subject to any de-minimus exceptions
permitted by applicable law or regulation, to preapprove the audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such services do not impair the auditors' independence.
This Policy applies to services provided by the accounting firm that serves
CompX International Inc. and its subsidiaries (the "Company") as its primary
independent auditor, and any international affiliates thereof.
Unless a type of service to be provided by the independent auditor is
subject to preapproval under Sections 3 or 4 of this Policy, it will require
specific preapproval by the Audit Committee under Section 2 of this Policy. In
addition, any proposed services subject to preapproval under Section 3 of this
Policy that exceeds the applicable preapproved fee level will also require
preapproval under either Section 2 or Section 4 of this Policy. Notwithstanding
the foregoing, the preapproval requirements under this Policy is waived with
respect to the provision of permitted non-Audit Services to the extent allowed
by applicable law or regulation.
Section 2. - Specific Preapproval
Subject to Sections 4 and 5 of this Policy, the following describes the
Audit and Audit-related services to be provided by the independent auditor that
must have the specific preapproval of the Audit Committee before the independent
auditor can be engaged:
- Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
- Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q;
- Services associated with registration statements filed by the Company
with the Securities and Exchange Commission ("SEC"), including
responding to SEC comment letters and providing comfort letters;
- Statutory audits or annual audits of the annual financial statements
of subsidiaries of the Company;
- Quarterly review procedures of the interim financial statements of
subsidiaries of the Company;
- Services associated with potential business acquisitions/dispositions
involving the Company;
- Any other services provided to the Company not specifically described
above or in Section 3 of this Policy; and
- Any material changes in terms, conditions or fees with respect to the
foregoing resulting from changes in audit scope, Company structure or
other applicable matters.
Section 3. - Other Categories of Preapproval
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements and that are traditionally performed by the independent
auditor. The Audit Committee believes that the provision of all of the services
described below does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence.
B-1
Subject to Section 5 of this Policy, the following Audit, Audit-related,
Tax and All Other services to be provided by the independent auditor will have
the preapproval of the Audit Committee, subject to the limitation that the
aggregate fees for such services provided by the independent auditor in any
calendar year may not exceed the limits established by the Audit Committee. The
Audit Committee will periodically revise the list of pre-approved services and
the fee limitation based on subsequent determinations as it deems appropriate.
- Audit Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies; and
o Assistance with responding to SEC comment letters received by the
Company other than in connection with a registration statement
filed with the SEC.
- Audit-related Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies (note, under SEC rules, some
consultations may be "audit" rather than "audit-related").
o Financial statement audits of employee benefit plans of the
Company;
o Agreed-upon or expanded audit procedures related to the Company's
accounting records required to respond to or comply with
financial, accounting, legal, regulatory or contractual reporting
requirements; and
o Internal control reviews and assistance with internal control
reporting requirements of the Company (to the extent permitted by
applicable rule or regulation).
- Tax Services:
o Consultations with the Company's management as to the tax
treatment of transactions or events and/or the actual or
potential tax impact of final or proposed laws, rules and
regulations in U.S. federal, state and local and international
jurisdictions;
o Consultations with the Company's management related to compliance
with existing or proposed tax laws, rules and regulations in U.S.
federal, state and local and international jurisdictions; o
Assistance in the preparation of and review of the Company's U.S.
federal, state and local and international income, franchise and
other tax returns;
o Assistance with tax inquiries, audits and appeals of the Company
before the U.S. Internal Revenue Service and similar state, local
and international agencies;
o Consultations with the Company's management regarding domestic
and international statutory, regulatory or administrative tax
developments;
o Transfer pricing and cost segregation studies of the Company; and
o Expatriate tax assistance and compliance for the Company and its
employees.
- Other Services:
o Assistance with corporate governance matters (including
preparation of board minutes and resolutions) and assistance with
the preparation and filing of documents (such as paperwork to
register new companies or to de-register existing companies)
involving the Company with non-U.S. governmental and regulatory
agencies, provided, however, that the non-U.S. jurisdiction in
which such services are provided does not require that the
individual providing such service be licensed, admitted or
otherwise qualified to practice law.
Any services provided by the independent auditor under this Section of the
Policy shall be reported to the full Audit Committee by an officer of the
Company at the first meeting of the Audit Committee held subsequent to the
engagement of the independent auditor to provide such services. Such report
shall include detailed back-up documentation provided by the independent auditor
regarding the services provided.
B-2
Section 4. - Delegation
Subject to Section 5 of this Policy, the Audit Committee has delegated
preapproval authority to the Audit Committee Chairman or his/her designee for
(i) any proposed services described in Section 3 of this Policy to the extent
that the aggregate fees for such services provided by the independent auditor
during the then-current calendar year has exceeded the limits established by the
Audit Committee or (ii) any other proposed services that are not described in
Section 3 of this Policy that the Audit Committee Chairman or his/her designee
determines to be appropriate or necessary. The Chairman or his/her designee
shall report any pre-approval decisions under this Section 4 of the Policy to
the full Audit Committee at the first meeting of the Audit Committee held
subsequent to such pre-approval decision. The Audit Committee does not delegate
its responsibilities to pre-approve services performed by the independent
auditor to management.
Section 5. - Prohibited Non-Audit Services
The following is a list of non-audit services for which the independent
auditor is prohibited from providing to the Company under the terms of the SEC's
rules on auditor independence:
- Bookkeeping or other services related to the accounting records or
financial statements of the Company;
- Financial information systems design and implementation;
- Appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
- Actuarial services;
- Internal audit outsourcing services;
- Management functions;
- Human resources;
- Broker, dealer, investment adviser or investment banking services;
- Legal services to the extent that the jurisdiction in which such
services are provided requires that the individual providing such
service be licensed, admitted or otherwise qualified to practice law;
and
- Expert services unrelated to the audit.
Section 6. - Procedures
Applications to provide services that require preapproval by the Audit
Committee under Section 2 of this Policy, or that require preapproval of the
Chairman of the Audit Committee or his/her designee under Section 4 of this
Policy, must be made by an auditor in writing. Such an application, which shall
include detailed back-up documentation provided by the independent auditor
regarding the services provided, shall be submitted to the Audit Committee or
the Chairman of the Audit Committee, as applicable, for final resolution.
Section 7. - Engagement Letters
Engagement of the independent auditor under this Policy to provide the
following services must be evidenced pursuant to a written engagement letter
with the independent auditor that must at least be signed by the Chairman of the
Audit Committee or his/her designee before the engagement can commence:
- Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
- Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q;
- Services associated with registration statements filed by the Company
with the SEC, including responding to SEC comment letters and
providing comfort letters; and
B-3
- Any other engagement as may be determined from time-to-time by the
Audit Committee or the Chairman of the Audit Committee or his/her
designee.
Any other engagement of the independent auditor under this Policy may be
evidenced pursuant to a written engagement letter with the independent auditor,
as may be required by the Audit Committee, the Chairman of the Audit Committee
or his/her designee, the independent auditor or an officer of the Company,
before the engagement can commence. Any such engagement letter may, but is not
required to, be signed by the Chairman of the Audit Committee or his/her
designee.
B-4
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
- --------------------------------------------------------------------------------
Proxy - CompX International Inc.
- --------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMPX INTERNATIONAL INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 19, 2004
The undersigned hereby appoints David A. Bowers, Darryl R. Halbert and A. Andrew
R. Louis, and each of them, proxy and attorney-in-fact for the undersigned, with
full power of substitution, to vote on behalf of the undersigned at the 2004
Annual Meeting of Stockholders (the "Meeting") of CompX International Inc., a
Delaware corporation ("CompX"), to be held at CompX's corporate offices at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Wednesday, May
19, 2004, at 10:00 a.m. (local time), and at any adjournment or postponement of
the Meeting, all of the shares of class A and class B common stock, par value
$0.01 per share, of CompX standing in the name of the undersigned or that the
undersigned may be entitled to vote on the proposals set forth, and in the
manner directed, on this proxy card.
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE COMPX PROXY
STATEMENT THAT ACCOMPANIED THIS PROXY CARD.
The proxies, if this card is properly executed, will vote in the manner directed
on this card. If no direction is made, the proxies will vote "FOR" all nominees
named on the reverse side of this card for election as directors and, to the
extent allowed by the federal securities laws, in the discretion of the proxies
as to all other matters that may properly come before the Meeting and any
adjournment or postponement thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE SIDE.
CompX International Inc.
[Name]
[Address]
[ ] Mark this box with an X if you have made changes to your name or address
details above.
- --------------------------------------------------------------------------------
Annual Meeting Proxy Card
- --------------------------------------------------------------------------------
A. Election of Directors
1. The board of directors recommends a vote FOR the listed nominees.
For Withhold
01 Paul M. Bass, Jr. [ ] [ ]
02 David A. Bowers [ ] [ ]
03 Keith R. Coogan [ ] [ ]
04 Edward J. Hardin [ ] [ ]
05 Ann Manix [ ] [ ]
06 Glenn R. Simmons [ ] [ ]
07 Steven L. Watson [ ] [ ]
B. Other Matters
The board of directors recommends a vote FOR the following proposal.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment or
postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. Authorized Signatures - Sign Here - This section must be completed for
your instructions to be executed.
NOTE: Please sign exactly as the name that appears on this card. Joint owners
should each sign. When signing other than in an individual capacity,
please fully describe such capacity. Each signatory hereby revokes all
proxies heretofore given to vote at said Meeting and any adjournment or
postponement thereof.
Signature 1 - Signature 2 - Date (mm/dd/yyyy)
Please keep signature Please keep signature
within box within box
[ ] [ ] [ ][ ]/[ ][ ]/[ ][ ][ ][ ]
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