UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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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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COMPX INTERNATIONAL INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
April 11, 2006
To our Stockholders:
You are cordially invited to attend the 2006 Annual Meeting of Stockholders
of CompX International Inc., which will be held on Tuesday, May 16, 2006, at
10:00 a.m., local time, at our 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 16, 2006
To the Stockholders of CompX International Inc.:
The 2006 Annual Meeting of Stockholders of CompX International Inc. will be
held on Tuesday, May 16, 2006, at 10:00 a.m., local time, at our 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 2007 Annual Meeting of
Stockholders; and
(2) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The close of business on March 28, 2006 has been set as the record date for
the meeting. Only holders of our class A and class B common stock at the close
of business on the record date are entitled to notice of, and to vote at, the
meeting. A complete list of stockholders entitled to vote at the meeting will be
available for examination during normal business hours by any of our
stockholders, for purposes related to the meeting, for a period of ten days
prior to the meeting at our corporate offices.
You are cordially invited to attend the meeting. Whether or not you plan to
attend the meeting, please complete, date and sign the accompanying proxy card
or voting instruction form and return it promptly in the enclosed envelope. If
you choose, you may still vote in person at the meeting even though you
previously submitted your proxy card.
By Order of the Board of Directors,
/s/ A. Andrew R. Louis, Secretary
A. Andrew R. Louis, Secretary
Dallas, Texas
April 11, 2006
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS.....................................................................i
GLOSSARY OF TERMS....................................................................ii
GENERAL INFORMATION...................................................................1
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING........................................1
CONTROLLED COMPANY....................................................................3
ELECTION OF DIRECTORS.................................................................4
Nominees for Director........................................................4
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS.....................................6
Audit Committee..............................................................6
Management Development and Compensation Committee............................6
EXECUTIVE OFFICERS....................................................................8
SECURITY OWNERSHIP....................................................................9
Ownership of CompX...........................................................9
Ownership of Related Companies..............................................13
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND OTHER INFORMATION...............15
Compensation of Directors...................................................15
Intercorporate Services Agreements..........................................15
Summary of Cash and Certain Other Compensation of Executive Officers........16
No Grants of Stock Options or Stock Appreciation Rights.....................17
Stock Option Exercises and Holdings.........................................17
EQUITY COMPENSATION PLAN INFORMATION.................................................18
CORPORATE GOVERNANCE DOCUMENTS.......................................................18
Code of Business Conduct and Ethics.........................................18
Corporate Governance Guidelines.............................................18
Audit Committee Charter.....................................................18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..............................18
EXECUTIVE COMPENSATION REPORT........................................................19
CERTAIN RELATIONSHIPS AND TRANSACTIONS...............................................22
Relationships with Related Parties..........................................22
Intercorporate Services Agreements..........................................22
Loans between Related Parties...............................................23
Insurance Matters...........................................................23
Tax Matters.................................................................23
Simmons Family Matters......................................................24
Law Firm Relationship.......................................................24
PERFORMANCE GRAPH....................................................................25
AUDIT COMMITTEE REPORT...............................................................26
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM MATTERS................................27
Independent Registered Public Accounting Firm...............................27
Fees Paid to PricewaterhouseCoopers LLP.....................................27
Preapproval Policies and Procedures.........................................27
OTHER MATTERS........................................................................28
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2007 ANNUAL MEETING...........28
COMMUNICATIONS WITH THE BOARD OF DIRECTORS...........................................29
2005 ANNUAL REPORT ON FORM 10-K......................................................29
ADDITIONAL COPIES....................................................................29
APPENDIX A -- AMENDED AND RESTATED AUDIT COMMITTEE CHARTER...........................A-1
GLOSSARY OF TERMS
"401(k) Plan" means the CompX Contributory Retirement Plan, a defined
contribution plan.
"CDCT No. 2" means the Contran Deferred Compensation Trust No. 2, an irrevocable
"rabbi trust" established by Contran to assist it in meeting certain deferred
compensation obligations that it owes to Harold C. Simmons.
"CGI" means CompX Group, Inc., one of our parent corporations.
"CMRT" means The Combined Master Retirement Trust, a trust Contran sponsors that
permits the collective investment by master trusts that maintain assets of
certain employee benefit plans Contran and related entities adopt.
"Computershare" means Computershare Investor Services L.L.C., our stock transfer
agent.
"CompX," "us," "we" or "our" mean CompX International Inc.
"Contran" means Contran Corporation, the parent corporation of our consolidated
tax group.
"Dixie Holding" means Dixie Holding Company, one of our parent corporations.
"Dixie Rice" means Dixie Rice Agricultural Corporation, Inc., one of our parent
corporations.
"Foundation" means the Harold C. Simmons Foundation, Inc., a tax-exempt
foundation organized for charitable purposes.
"independent directors" means the following directors: Paul M. Bass, Jr., Keith
R. Coogan and Ann Manix.
"ISA" means an intercorporate services agreement between or among Contran
related companies pursuant to which employees of one or more related companies
provide certain services, including executive officer services, to another
related company on a fee basis.
"Keystone" means Keystone Consolidated Industries, Inc., one of our sister
corporations that manufactures steel fabricated wire products, industrial wire
and carbon steel rod.
"Kronos Worldwide" means Kronos Worldwide, Inc., one of our publicly held sister
corporations that is an international manufacturer of titanium dioxide pigments.
"named executive officer" means our executive officers named in the summary
compensation table in this proxy statement.
"National" means National City Lines, Inc., one of our parent corporations.
"NL" means NL Industries, Inc., one of our publicly held parent corporations
that is a diversified holding company with principal investments in Kronos
Worldwide and us.
"NOA" means NOA, Inc., one of our parent corporations.
"nonemployee directors" means the following directors: Paul M. Bass, Jr., Keith
R. Coogan, Edward J. Hardin, Ann Manix, Glenn R. Simmons and Steven L. Watson.
"non-management directors" means the following directors who are not one of our
executive officers: Paul M. Bass, Jr., Keith R. Coogan, Edward J. Hardin, Ann
Manix and Steven L. Watson.
"NYSE" means the New York Stock Exchange, Inc.
"PwC" means PricewaterhouseCoopers LLP, our independent registered public
accounting firm.
"record date" means the close of business on March 28, 2006, the date our board
of directors set for the determination of stockholders entitled to notice of and
to vote at the 2006 annual meeting of our stockholders.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Southwest" means Southwest Louisiana Land Company, Inc., one of our parent
corporations.
"Tall Pines" means Tall Pines Insurance Company, an indirect wholly owned
captive insurance subsidiary of Valhi.
"TFMC" means TIMET Finance Management Company, a wholly owned subsidiary of
TIMET.
"TIMET" means Titanium Metals Corporation, one of our publicly held sister
corporations that is an integrated producer of titanium metals products.
"TIMET series A preferred stock" means TIMET's 6 3/4% Series A Convertible
Preferred Stock, par value $0.01 per share.
"Tremont" means Tremont LLC, a wholly owned subsidiary of Valhi.
"Valhi" means Valhi, Inc., one of our publicly held parent corporations that is
a diversified holding company with principal investments in NL, TIMET and Kronos
Worldwide.
"VGI" means Valhi Group, Inc., one of our parent corporations.
"VHC" means Valhi Holding Company, one of our parent corporations.
"Waterloo" means Waterloo Furniture Components Limited, one of our wholly owned
subsidiaries.
COMPX INTERNATIONAL INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
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PROXY STATEMENT
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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 our board of directors for use at our 2006 Annual Meeting of
Stockholders to be held on Tuesday, May 16, 2006 and at any adjournment or
postponement of the meeting. The accompanying notice of annual meeting of
stockholders sets forth the time, place and purposes of the meeting. The notice,
this proxy statement, the accompanying proxy card or voting instruction form and
our Annual Report to Stockholders, which includes our Annual Report on Form 10-K
for the fiscal year ended December 31, 2005, are first being mailed on or about
April 11, 2006 to the holders of our class A and class B common stock at the
close of business on March 28, 2006. Our principal executive offices are located
at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
Please refer to the Glossary of Terms on page ii for the definitions of
capitalized or other terms used in this proxy statement.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Q: What is the purpose of the annual meeting?
A: At the annual meeting, stockholders will vote on the election of seven
directors and any other matter that may properly come before the meeting.
Q: How does the board recommend that I vote?
A: The board of directors recommends that you vote FOR each of the nominees
for director.
Q: Who is allowed to vote at the annual meeting?
A: The board of directors has set the close of business on March 28, 2006 as
the record date for the determination of stockholders entitled to notice of
and to vote at the meeting. Only holders of record of our common stock as
of the close of business on the record date are entitled to vote at the
meeting. On the record date, 5,234,280 shares of our class A common stock
and 10,000,000 shares of our class B common stock were issued and
outstanding. Each share of our class A common stock entitles its holder to
one vote. Each share of our class B common stock entitles its holder to ten
votes with respect to the election of directors and one vote on all other
matters.
Q: How do I vote?
A: If your shares are held by a bank, broker or other nominee (i.e., in
"street name"), you must follow the instructions from your nominee on how
to vote your shares.
If you are a stockholder of record, you may:
o vote in person at the annual meeting; or
o instruct the agents named on the proxy card how to vote your shares by
completing, signing and mailing the enclosed proxy card in the
envelope provided.
If you execute a proxy card but do not indicate how you would like your
shares voted for one or more of the nominees, the agents will vote FOR the
election of each such nominee for director and, to the extent allowed by
applicable law, in the discretion of the agents on any other matter that
may properly come before the meeting.
Q: Who will count the votes?
A: The board of directors has appointed Computershare, our transfer agent and
registrar, to receive proxies and ballots, ascertain the number of shares
represented, tabulate the vote and serve as inspector of election for the
meeting.
Q: May I change or revoke my proxy or voting instructions?
A: If you are a stockholder of record, you may change or revoke your proxy
instructions at any time before the meeting in any of the following ways:
o delivering to Computershare a written revocation;
o submitting another proxy card bearing a later date; or
o voting in person at the meeting.
If your shares are held by a bank, broker or other nominee, you must follow
the instructions from your nominee on how to change or revoke your voting
instructions.
Q: What constitutes a quorum?
A: A quorum is the presence, in person or by proxy, of a majority of the votes
from holders of the outstanding shares of our class A and class B common
stock, counted as a single class, entitled to vote at the meeting. Under
the applicable rules of the NYSE and the SEC, brokers or other nominees
holding shares of record on behalf of a client who is the actual beneficial
owner of such shares are authorized to vote on certain routine matters
without receiving instructions from the beneficial owner of the shares. If
such a broker/nominee who is entitled to vote on a routine matter delivers
an executed proxy card and does not vote on the matter, such a vote is
referred to in this proxy statement as a "broker/nominee non-vote." Shares
of 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.
Q: What vote is required to elect a director nominee or approve any other
matter?
A: If a quorum is present, a plurality of the affirmative votes of the holders
of our outstanding class A and class B shares of common stock, voting
together as a single class, represented and entitled to be voted at the
meeting is necessary to elect each nominee for director. The accompanying
proxy card or voting instruction form provides space for you to withhold
authority to vote for any of the nominees. 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. However, since director nominees need only receive the
plurality of the affirmative votes from the holders represented and
entitled to vote at the meeting to be elected, 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 votes of the holders of a majority of the
outstanding shares of our class A and class B common stock, voting together
as a single class, represented and entitled to vote at the meeting. Shares
of our 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.
Q: Who will pay for the cost of soliciting the proxies?
A: We 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, our directors,
officers and regular employees may solicit proxies by telephone or in
person for which such persons will receive no additional compensation. We
have retained Georgeson Shareholder Communications, Inc. to aid in the
distribution of this proxy statement and related materials at an estimated
cost of $1,200. Upon request, we 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 our common stock that
such entities hold of record.
CONTROLLED COMPANY
CGI directly held approximately 82.6%, of the outstanding shares of our
combined class A and B common stock as of the record date. CGI has indicated its
intention to have its shares of our common stock represented at the meeting and
voted FOR the election of each of the director nominees to our board of
directors. If CGI 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 to the board of directors.
Because of CGI's ownership of our common stock, we are considered a
controlled company under the listing standards of 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. We have chosen not to
have a majority of independent directors or an independent nominating or
corporate governance committee. Our board of directors believes that the full
board of directors best represents the interests of all of our 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 NYSE director independence standards, the board
of directors has determined that three of our directors are independent and have
no material relationship with us other than serving as our directors. See
"Meetings and Committees of the Board of Directors--Audit Committee" for certain
relationships the board of directors considered in making this determination.
While the members of our management development and compensation committee
currently satisfy the independence requirements of the NYSE, we have 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 and
Director Nominations for the 2007 Annual Meeting" for a description of our
policies and procedures for stockholder nominations of directors.
ELECTION OF DIRECTORS
Our bylaws provide that the board of directors will consist of one or more
members as determined by our board of directors or stockholders. The board of
directors has currently set the number of directors at seven. The directors
elected at the meeting will hold office until our 2007 Annual Meeting of
Stockholders and until their successors are duly elected and qualified or their
earlier removal, resignation or death.
Except for Mr. Norman S. Edelcup, all of the nominees are currently members
of our board of directors whose terms will expire at the meeting. Mr. Keith R.
Coogan, our current audit committee chairman and "audit committee financial
expert" is not standing for reelection. It is our expectation that our director
nominee, Mr. Edelcup, if elected as one of our directors at the meeting, will
serve as our audit committee chairman and "audit committee financial expert"
when elected. All of the nominees have agreed to serve if elected. If any
nominee is not available for election at the meeting, all shares represented by
a proxy card will be voted FOR an alternate nominee to be selected by the board
of directors, unless the stockholder executing such proxy card withholds
authority to vote for such nominee. The board of directors believes that all of
its 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 have provided the following
information.
Paul M. Bass, Jr., age 70, has served on our board of directors since 1997.
Mr. Bass also serves as a director of Keystone. From prior to 2001, Mr. Bass has
served as vice chairman of First Southwest Company, a privately owned investment
banking firm. He is also chairman of the board of trustees of the Southwestern
Medical Foundation, a foundation that supports and promotes The University of
Texas Southwestern Medical Center. Mr. Bass is a member of our audit committee
and chairman of our management development and compensation committee.
David A. Bowers, age 68, has served as our president and chief executive
officer since 2002, our vice chairman of the board since 2000 and on our board
of directors since 1993. Mr. Bowers has continuously served in various executive
officer positions for us or our predecessors since prior to 2001. Mr. Bowers has
been employed by us or our predecessors since 1960 in various sales, marketing
and executive positions, having been named our president of security products
and related businesses in 1979. Mr. Bowers is a trustee and chairman of the
board of Monmouth College, Monmouth, Illinois.
Norman S. Edelcup, age 70, has served on Valhi's or certain of its
predecessors' boards of directors since 1975. From 2001 to 2004, Mr. Edelcup has
served as senior vice president of Florida Savings Bancorp. Since 2003, he has
served as mayor of Sunny Isles Beach, Florida. He also serves as a trustee for
the Baron Funds, a mutual fund group, and a director of Florida Savings Bancorp.
Mr. Edelcup served as senior vice president of Item Processing of America, Inc.,
a processing service bureau, from 1999 to 2000 and as chairman of the board from
1989 to 1998. Mr. Edelcup is a certified public accountant and served as senior
vice president and chief financial officer of Avatar Holdings, Inc. (formerly
GAC Corporation), a real estate development firm, from 1976 to 1983; vice
chairman of the board, senior vice president and chief financial officer of
Keller Industries, Inc., a building products manufacturer, from 1968 to 1976;
and as a senior accountant with Arthur Andersen & Co., a public accounting firm,
from 1958 to 1962. He is chairman of both Valhi's audit committee and management
development and compensation committee.
Edward J. Hardin, age 63, has served on our board of directors since 1997.
Mr. Hardin has been a partner of the law firm of Rogers & Hardin LLP since its
formation in 1976.
Ann Manix, age 53, has served on our board of directors since 1998. Since
prior to 2001, Ms. Manix has served as a managing partner of Ducker Research
Corporation, a privately held industrial research firm. She is a member of our
audit committee and management development and compensation committee.
Glenn R. Simmons, age 78, has served as our chairman of the board since
2000 and on our board of directors since 1993. From October 2000 to December
2000, Mr. Simmons served as our chief executive officer. Mr. Simmons has been
vice chairman of the board of Valhi and Contran since prior to 2001. Mr. Simmons
also serves as chairman of the board of Keystone and as a director of Kronos
Worldwide, NL and TIMET. In 2004, Keystone filed a voluntary petition for
reorganization under federal bankruptcy laws and emerged from the bankruptcy
proceedings in August 2005. Mr. Simmons has been an executive officer or
director of various companies related to Contran since 1969. He is a brother of
Harold C. Simmons, the chairman of the board of Contran and Valhi.
Steven L. Watson, age 55, has served on our board of directors 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 2001. He has served as vice
chairman of the board of Kronos Worldwide since 2004, chief executive officer of
TIMET since January 2006 and vice chairman of the board of TIMET since November
2005. Mr. Watson also serves as a director of Keystone and NL. He 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 four meetings and took action by written
consent on five occasions in 2005. Each director participated in at least 80% of
such meetings and of the 2005 meetings of the committees on which he or she
served at the time. It is expected that each director will attend our annual
meetings of stockholders, which are held immediately before the annual meetings
of the board of directors. All members of the board of directors attended our
2005 annual stockholder meeting.
The board of directors has established and delegated authority to two
standing committees, which are described below. The board of directors is
expected to elect the members of the standing committees at the board of
directors annual meeting immediately following the annual stockholder 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.
Audit Committee. Our audit committee assists with the board of directors'
oversight responsibilities relating to our financial accounting and reporting
processes and auditing processes. The responsibilities of our audit committee
are more specifically set forth in the amended and restated audit committee
charter, a copy of which is attached as Exhibit A to this proxy statement and
also available under the corporate section of our website, www.compx.com.
Applying the requirements of the NYSE listing standards and SEC regulations, as
applicable, the board of directors has determined that:
o each member of our audit committee is independent, financially
literate and has no material relationship with us other than serving
as our director; and
o Mr. Keith R. Coogan is an "audit committee financial expert."
In determining that Mr. Bass, a member of our audit committee, has no
material relationship with us other than serving as our director, the board of
directors considered the following relationships:
o In 2005, Annette C. Simmons, the wife of Harold C. Simmons,
contributed shares of TIMET common stock to the Southwestern Medical
Foundation for the benefit of Parkland Memorial Hospital, of which
foundation Mr. Bass serves as the chairman of the board of trustees;
and
o Harold C. Simmons, Contran and its related entities or persons execute
trades on a regular basis with First Southwest Company, of which Mr.
Bass is the vice chairman of the board.
The board determined that these relationships were not material based on
representations from Mr. Bass that (i) he receives no compensation for serving
as chairman of the board of trustees of Southwestern Medical Foundation, (ii)
the aggregate brokerage commissions paid to First Southwest Company by Mr.
Simmons and Contran related entities or persons over each of the last three
years did not exceed $200,000 and represented less than 2% of the consolidated
gross revenues of First Southwest Company for each of those years and (iii) the
broker relationship is solely a business relationship that does not afford Mr.
Bass any special benefits.
No member of our audit committee serves on more than three public company
audit committees. For further information on the role of our audit committee,
see "Audit Committee Report." The current members of our audit committee are
Keith R. Coogan (chairman), Paul M. Bass, Jr. and Ann Manix. Our audit committee
held six meetings in 2005.
Management Development and Compensation Committee. The principal
responsibilities of our management development and compensation committee are:
o to recommend to the board of directors whether or not to approve any
proposed charge to us pursuant to an ISA with a related parent
company;
o to review, approve and administer certain matters regarding our
employee benefit plans or programs, including annual incentive
compensation awards;
o to review, approve, administer and grant awards under our equity
compensation plan; and
o to review and administer such other compensation matters as the board
of directors may direct from time to time.
As discussed above with respect to audit committee members, the board of
directors has determined that each member of our management development and
compensation committee is independent by applying the NYSE director independence
standards. For further information on the role of our management development and
compensation committee, see "Executive Compensation Report." The current members
of our management development and compensation committee are Paul M. Bass, Jr.
(chairman) and Ann Manix. Our management development and compensation committee
held two meetings in 2005.
EXECUTIVE OFFICERS
Set forth below is certain information relating to our executive officers.
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............ 78 Chairman of the Board
David A. Bowers............. 68 Vice Chairman of the Board, President and Chief Executive Officer
David J. Camozzi............ 50 Vice President
Darryl R. Halbert........... 41 Vice President, Chief Financial Officer and Controller
Scott C. James.............. 40 Vice President
David J. Camozzi has served as our vice president and our president of
CompX Precision Slides, one of our divisions, since 2004. From 2001 to 2004, Mr.
Camozzi was the chief operating officer of Slater Steel, Inc., a specialty steel
company with operations in Canada and the U.S. that filed for bankruptcy
protection in both Canada and the U.S. in 2003. From 2000 to 2001, Mr. Camozzi
was vice president, corporate development of Slater Steel, Inc. From 1999 to
2000, he was senior vice president and chief operating officer in North America
of Co-Steel, Inc., a steel manufacturer with operations in North America and the
United Kingdom.
Darryl R. Halbert has served as our chief financial officer since 2002 and
our vice president and controller since 2001. From 2000 to 2001, Mr. Halbert
served as chief operating officer, chief financial officer and secretary of
Image2Web, Inc., a subsidiary of Micrografx, Inc., a developer and marketer of
graphics software for business use.
Scott C. James has served as our vice president and our president of CompX
Security Products, one of our divisions, since 2002. Since 1992, Mr. James has
served in various sales, marketing and executive positions with our security
products operations.
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
our class A and class B common stock held by each individual, entity or group
known to us to own beneficially more than 5% of the outstanding shares of our
class A or class B common stock, each director, each director nominee, each
named executive officer and all of our directors and executive officers as a
group. See footnote (4) below for information concerning the relationships of
certain individuals and entities that may be deemed to own indirectly and
beneficially more than 5% of the outstanding shares of our class A or class B
common stock. All information is taken from or based upon ownership filings made
by such individuals or entities with the SEC or upon information provided by
such individuals or entities.
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)......... 56,900 (4) 1.1% -0- (4) -0- *
CompX Group, Inc. (3)...... 2,586,820 (4) 49.4% 10,000,000 (4) 100% 82.6%
TIMET Finance Management
Company (3).............. 483,600 (4) 9.2% -0- (4) -0- 3.2%
NL Industries, Inc......... 250,004 (4) 4.8% -0- (4) -0- 1.6%
Annette C. Simmons......... 20,000 (4) * -0- (4) -0- *
--------- ----------
3,397,324 (4) 64.9% 10,000,000 (4) 100% 87.9%
Dalton, Greiner, Hartman, Maher
& Co....................... 486,550 (5) 9.3% -0- -0- 3.2%
Royce & Associates, LLC....... 292,300 (6) 5.6% -0- -0- 1.9%
Paul M. Bass, Jr.............. 14,100 (4)(7) * -0- -0- *
David A. Bowers............... 80,000 (4)(7) 1.5% -0- -0- *
Keith R. Coogan............... 3,500 * -0- -0- *
Norman S. Edelcup............. 2,000 * -0- -0- *
Edward J. Hardin.............. 17,600 (7) * -0- -0- *
Ann Manix..................... 13,100 (7) * -0- -0- *
Glenn R. Simmons.............. 71,100 (4)(7)(8) 1.3% -0- -0- *
Steven L. Watson.............. 21,600 (4)(7) * -0- -0- *
David J. Camozzi.............. -0- -0- -0- -0- -0-
Darryl R. Halbert............. 3,000 (7) * -0- -0- *
Scott C. James................ 22,000 (7) * -0- -0- *
All of our directors, director
nominees and executive
officers as a group (11
persons) .................. 248,000 (4)(7)(8) 4.6% -0- -0- 1.6%
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the listed entities, individuals or 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 entity, individual or group assumes the exercise by such entity,
individual or group (exclusive of others) of stock options that such
entity, individual or group may exercise within 60 days subsequent to the
record date.
(2) The percentages are based on 5,234,280 shares of our class A common stock
outstanding as of the record date.
(3) The business address of CGI, NL and Harold C. and Annette C. Simmons is
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2697. The business address of TFMC is 300 Delaware Avenue, Suite 900,
Wilmington, Delaware 19801.
(4) NL and TFMC directly hold 82.4% and 17.6%, respectively, of the outstanding
shares of CGI common stock. TIMET directly holds 100% of the outstanding
shares of TFMC common stock. Tremont, Annette C. Simmons, the CMRT, Valhi
and Harold C. Simmons are the holders of approximately 33.5%, 12.7%, 10.2%,
3.8% and 2.6%, respectively, of the outstanding shares of TIMET common
stock. The ownership of Ms. Simmons includes 10,666,666 shares of TIMET
common stock that she has the right to acquire upon conversion of 1,600,000
shares of TIMET series A preferred stock that she directly holds. The
ownership of Valhi includes 98,000 shares of TIMET common stock that Valhi
has the right to acquire upon conversion of 14,700 shares of TIMET series A
preferred stock that Valhi directly holds. The percentage ownership of
TIMET common stock held by each of Ms. Simmons and Valhi assumes the full
conversion of only the shares of TIMET series A preferred stock she or
Valhi owns, respectively.
Valhi is the direct holder of 100% of the membership interests of Tremont.
Valhi and TFMC are the direct holders of approximately 83.1% and 0.5%,
respectively, of the outstanding shares of NL common stock.
Valhi holds indirectly through CGI, TFMC and NL approximately 87.4% of the
combined voting power of the class A or class B common stock (approximately
98.2% for the election of directors). In certain instances, shares of our
class B common stock are automatically convertible into shares of our class
A common stock.
VHC, the Foundation, the CDCT No. 2 and the CMRT are the direct holders of
approximately 91.6%, 0.9%, 0.4% and 0.1%, respectively, of the outstanding
common stock of Valhi. VGI, National and Contran are the direct holders of
87.4%, 10.3% and 2.3%, respectively, of the outstanding common stock of
VHC. National, NOA and Dixie Holding are the direct holders of
approximately 73.3%, 11.4% and 15.3%, respectively, of the outstanding VGI
common stock. Contran and NOA are the direct holders of approximately 85.7%
and 14.3%, respectively, of the outstanding National common stock. Contran
and Southwest are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding NOA common stock. 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's outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold
C. Simmons, of which Mr. Simmons is the sole trustee, or held by Mr.
Simmons or persons or other entities related to Mr. Simmons. As sole
trustee of these trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by these trusts. Mr.
Simmons, however, disclaims beneficial ownership of any Contran shares
these trusts hold.
The Foundation directly holds approximately 0.9% of the outstanding shares
of Valhi common stock. This foundation is a tax-exempt foundation organized
for charitable purposes. Harold C. Simmons is the chairman of the board of
this foundation.
The CDCT No. 2 directly holds approximately 0.4% of the outstanding shares
of Valhi common stock. U.S. Bank National Association serves as the 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.
The CMRT directly holds approximately 10.2% of the outstanding shares of
TIMET common stock and 0.1% of the outstanding shares of Valhi common
stock. Contran sponsors this trust to permit the collective investment by
master trusts that maintain assets of certain employee benefit plans
Contran and related entities adopt. Harold C. Simmons is the sole trustee
of this trust and a member of the investment committee for this trust.
Contran's board of directors selects the trustee and members of this
trust's investment committee. Paul M. Bass, Jr. is also a member of the
trust's investment committee for the CMRT. Glenn R. Simmons and Steven L.
Watson are members of Contran's board of directors and along with David A.
Bowers are participants in one or more of the employee benefit plans that
invest through this trust. Each of such persons disclaims beneficial
ownership of any of the shares this trust holds, except to the extent of
his individual vested beneficial interest, if any, in the assets this trust
holds.
Harold C. Simmons is the chairman of the board and chief executive officer
of NL and the chairman of the board of each of TIMET, Tremont, Valhi, VHC,
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, (a) Harold C. Simmons may be
deemed to control certain of such entities and (b) Mr. Simmons and certain
of such entities may be deemed to possess indirect beneficial ownership of
shares directly held by certain of such other entities. However, Mr.
Simmons disclaims beneficial ownership of the shares beneficially owned,
directly or indirectly, by any of such entities, except to the extent of
his vested beneficial interest, if any, in shares held by the CMRT and his
interest as a beneficiary of the CDCT No. 2. Mr. Harold Simmons disclaims
beneficial ownership of all shares of our common stock beneficially owned,
directly or indirectly, by CGI, TFMC or NL.
All of our directors or executive officers who are also directors or
executive officers of CGI, TFMC or NL or their parent companies disclaim
beneficial ownership of the shares of our common stock that such companies
directly or indirectly hold.
Annette C. Simmons is the wife of Harold C. Simmons. She is the direct
owner of 20,000 shares of our class A common stock, 119,475 shares of NL
common stock, 228,000 shares of TIMET common stock, 1,600,000 shares of
TIMET series A preferred stock and 43,400 shares of Valhi common stock. Mr.
Simmons may be deemed to share indirect beneficial ownership of such
shares. Mr. Simmons disclaims all such beneficial ownership.
The Annette Simmons Grandchildren's Trust, a trust of which Harold C.
Simmons and Annette C. Simmons are co-trustees and the beneficiaries of
which are the grandchildren of Annette C. Simmons, is the direct holder of
36,500 shares of Valhi common stock. Mr. Simmons, as co-trustee of this
trust, has the power to vote and direct the disposition of the shares of
Valhi common stock this trust directly holds. Mr. Simmons disclaims
beneficial ownership of any shares of Valhi common stock that this trust
holds.
Harold C. Simmons is the direct owner of 56,900 shares of our class A
common stock, 257,000 shares of NL common stock (including options
exercisable for 4,000 shares of NL common stock), 1,933,700 shares of TIMET
common stock and 3,383 shares of Valhi common stock.
NL and one of its subsidiaries directly hold 3,522,967 and 1,186,200 shares
of Valhi common stock, respectively. Since NL is a majority owned
subsidiary of Valhi, and pursuant to Delaware law, Valhi treats the shares
of Valhi common stock that NL and its subsidiary hold as treasury stock for
voting purposes. For the 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.
The business address of Contran, the CDCT No. 2, the CMRT, Dixie Holding,
the Foundation, National, NOA, TIMET, Tremont, Valhi, VGI and VHC 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.
(5) Based on Amendment No. 7 to Schedule 13G dated February 10, 2006 Dalton,
Greiner, Hartman, Maher & Co. filed with the SEC. Dalton, Greiner, Hartman,
Maher & Co. has sole voting power over 473,608 of these shares and sole
dispositive power over all of these shares. The address of Dalton, Greiner,
Hartman, Maher & Co. is 565 Fifth Avenue, Suite 2101, New York, New York
10017.
(6) Based on Amendment No. 3 to Schedule 13G dated January 17, 2006 Royce &
Associates, LLC filed with the SEC. The address of Royce & Associates, LLC
is 1414 Avenue of the Americas, New York, New York 10019.
(7) The shares of our 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 our stock
option plan that such person may exercise within 60 days subsequent to the
record date:
Shares of Our Class A Common
Stock Issuable Upon the
Exercise of Stock Options
Name of Beneficial Owner On or Before May 27, 2006
------------------------ -----------------------------
Paul M. Bass, Jr....................................................... 8,600
David A. Bowers........................................................ 71,000
Edward J. Hardin....................................................... 8,600
Ann Manix.............................................................. 7,600
Glenn R. Simmons....................................................... 55,600
Steven L. Watson....................................................... 15,600
Darryl R. Halbert...................................................... 2,000
Scott C. James......................................................... 22,000
(8) The shares of our class A common stock shown as beneficially owned by Glenn
R. Simmons include 500 shares his wife holds in her retirement account,
with respect to which shares he disclaims beneficial ownership.
We understand that Contran and related entities may consider acquiring or
disposing of shares of our 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
our common stock in the market, an assessment of our business and prospects,
financial and stock market conditions and other factors deemed relevant by such
entities. We may similarly consider acquisitions of shares of our common stock
and acquisitions or dispositions of securities issued by related entities.
Ownership of Related Companies. Some of our directors and executive
officers own equity securities of several companies related to us.
Ownership of NL, TIMET and Valhi. The following table and footnotes set
forth the beneficial ownership, as of the record date, of the shares of common
stock of NL, TIMET and Valhi held by each of our directors, each named executive
officer and all of our directors and executive officers 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.
NL Common Stock TIMET Common Stock Valhi Common Stock
------------------------ ----------------------- -----------------------
Amount and Percent Amount and Percent Amount and Percent
Nature of of Nature of of Nature of of
Beneficial Class Beneficial Class Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3) Ownership (1) (1)(4)
- ---------------------------- ------------------ -------- ------------------ ------- ------------------ --------
Paul M. Bass, Jr.......... -0- -0- 9,000 (5) * 10,000 (5) *
David A. Bowers........... 2,000 * -0- -0- -0- -0-
Keith R. Coogan........... -0- -0- -0- -0- -0- -0-
Norman S. Edelcup......... -0- -0- -0- -0- 36,000 (6) *
Edward J. Hardin.......... -0- -0- -0- -0- 4,000 *
Ann Manix................. 2,000 * -0- -0- -0- -0-
Glenn R. Simmons.......... 9,000 (5) * 22,000 (5) * 12,247 (5)(7) *
Steven L. Watson.......... 13,000 (5)(6) * 73,000 (5)(6) * 117,246 (5)(6) *
David J. Camozzi.......... -0- -0- -0- -0- -0- -0-
Darryl R. Halbert......... 500 * -0- -0- -0- -0-
Scott C. James............ -0- -0- -0- -0- -0- -0-
All of our directors,
director nominees and
executive officers as
a group (11 persons) .. 26,500 (5)(6) * 104,000 (5)(6) * 179,493 (5)(6)(7) *
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the individuals or 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 individual
or group assumes the exercise by such individual or group (exclusive of
others) of stock options that such individual or group may exercise within
60 days subsequent to the record date.
(2) The percentages are based on 48,563,034 shares of NL common stock
outstanding as of the record date.
(3) The percentages are based on 75,409,870 shares of TIMET common stock
outstanding as of the record date.
(4) The percentages are based on 115,778,278 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, 3,522,967
and 1,186,200 shares of Valhi common stock held by NL and a subsidiary of
NL, respectively, are treated as treasury stock for voting purposes and
excluded from the amount of Valhi common stock outstanding.
(5) See footnote (4) to the "Ownership of CompX" table for a description of
certain relationships among the individuals or group appearing in this
table. All of our directors or executive officers who are also directors or
executive officers of any of our parent companies disclaim beneficial
ownership of the shares of NL, TIMET or Valhi common stock that such
companies directly or indirectly own.
(6) The shares of NL, TIMET or Valhi 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 NL,
TIMET or Valhi stock option plans that such person may exercise within 60
days subsequent to the record date:
Shares of NL Shares of TIMET Shares of Valhi
Common Stock Common Stock Common Stock
Issuable Upon the Issuable Upon the Issuable Upon the
Exercise of Stock Exercise of Stock Exercise of Stock
Options On or Before Options on or Before Options on or Before
Name of Beneficial Owner May 27, 2006 May 27, 2006 May 27, 2006
------------------------ --------------------- -------------------- --------------------
Norman S. Edelcup........... -0- -0- 9,000
Steven L. Watson............ 4,000 30,000 100,000
(7) 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.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. Our directors who are not employees of us or our
subsidiaries are entitled to receive compensation for their services as
directors. Directors who received such compensation in 2005 were Paul M. Bass,
Jr., Keith R. Coogan, Edward J. Hardin, Ann Manix, Glenn R. Simmons and Steven
L. Watson.
In 2005, our nonemployee directors received an annual retainer of $20,000,
paid in quarterly installments, 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 our board of directors or its committees. The chairman of our audit
committee and any member of our audit committee whom the board identified as an
"audit committee financial expert" for purposes of the annual proxy statement
received an annual retainer of $10,000, paid in quarterly installments (provided
that if one person served in both capacities only one such retainer was paid),
and other members of our audit committee received an annual retainer of $5,000,
paid in quarterly installments. If one of our nonemployee directors dies while
serving on our board of directors, his or her designated beneficiary or estate
will be entitled to receive a death benefit equal to the annual retainer then in
effect. We reimburse our nonemployee directors for reasonable expenses incurred
in attending meetings and in the performance of other services rendered on
behalf of our board of directors or its committees.
On the day of each annual stockholder meeting, each of our nonemployee
directors receives a grant of shares of our class A common stock as determined
by the following formula based on the closing price of a share of our class A
common stock on the date of such meeting.
Range of Closing Price Per Shares of Our 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 $14.80 per share closing price of our class A common
stock on May 10, 2005, the date of our 2005 annual stockholder meeting, each
nonemployee director elected on that date received a grant of 1,000 shares of
our class A common stock.
Intercorporate Services Agreements. Contran has entered into an ISA with us
pursuant to which Contran provides the services of certain of our executive
officers, Glenn R. Simmons and Darryl R. Halbert, to us and our subsidiaries.
For a discussion of these ISAs, see "Certain Relationships and
Transactions--Intercorporate Services Agreements."
Summary of Cash and Certain Other Compensation of Executive Officers. The
summary compensation table below provides information concerning annual and
long-term compensation we and our subsidiaries paid or accrued for services
rendered to us and our subsidiaries during the past three years by our chief
executive officer and each of our three other executive officers who received
more than $100,000 in salary and bonus for 2005 or for whom CompX was charged in
excess of $100,000 for 2005 under our ISA with Contran.
SUMMARY COMPENSATION TABLE (1)
Annual Compensation
-----------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
------------------ ---- ------ ----- ------------ ------------
David A. Bowers................. 2005 $ 329,730 $ 330,000 $ -0- (2) $ 30,150 (3)
Vice Chairman of the Board, 2004 326,305 200,000 5,380 (2) 27,013 (3)
President and Chief 2003 296,646 175,000 5,165 (2) 19,024 (3)
Executive Officer
Scott C. James.................. 2005 209,811 210,000 5,388 (2) 30,150 (3)
Vice President 2004 206,659 150,000 5,265 (2) 27,013 (3)
2003 178,075 100,000 5,214 (2) 19,024 (3)
Darryl R. Halbert............... 2005 400,400 (4) -0- (4) -0- (4) -0- (4)
Vice President, Chief Financial 2004 312,700 (4) -0- (4) -0- (4) -0- (4)
Officer and Controller 2003 215,000 (4) -0- (4) -0- (4) -0- (4)
David J. Camozzi (5)............ 2005 209,837 (5) 107,393 (5) -0- 4,131 (5)(7)
Vice President 2004 59,231 (5) 19,249 (5) 38,283 (5)(6) 2,747 (5)(7)
- --------------------
(1) For the periods presented for each named executive officer, no stock
options or shares of restricted stock were granted nor payouts made
pursuant to long-term incentive plans. Therefore, the columns for such
compensation have been omitted.
(2) Represents club dues and income tax preparation fees we paid on behalf of
this named executive officer.
(3) All other compensation for the last three years for Messrs. Bowers and
James consisted of our matching contributions to certain of their accounts
under our 401(k) Plan and our contributions to certain of their accounts
under the CompX Capital Accumulation Pension Plan, a defined contribution
plan, as follows:
Employer's
Employer's Capital
401(k) Plan Accumulation
Matching Pension Plan
Named Executive Officer Year Contributions Contributions Total
----------------------- ---- ------------- ------------- -----
David A. Bowers........................... 2005 $ 11,721 $ 18,429 $ 30,150
2004 10,463 16,550 27,013
2003 8,426 10,598 19,024
Scott C. James............................ 2005 11,721 18,429 30,150
2004 10,463 16,550 27,013
2003 8,426 10,598 19,024
(4) Mr. Halbert is an employee of Contran and provides his executive officer
services to us pursuant to our ISA with Contran. The amounts shown in the
table as salary compensation for Mr. Halbert represent the portion of the
fees we paid to Contran pursuant to the ISA attributable to the services he
rendered to us.
(5) Mr. Camozzi became one of our executive officers on October 26, 2004. He is
employed by Waterloo. Waterloo pays Mr. Camozzi his base salary, cash
bonus, reimbursement expenses and contributions to his retirement plan in
Canadian dollars. We report these amounts in the table above in U.S.
dollars based on the average exchange rates for 2005 and 2004 of CN$1.2105
per US$1.00 and CN$1.2988 per US$1.00, respectively.
(6) Mr. Camozzi's other annual compensation consists of relocation costs he
incurred in 2004, for which Waterloo reimbursed him.
(7) These amounts represent Waterloo's contribution to Mr. Camozzi's account
under the Registered Pension Plan for Employees of Waterloo Furniture
Components Ltd., a defined contribution plan.
No Grants of Stock Options or Stock Appreciation Rights. Neither we nor any
of our parent or subsidiary corporations granted any stock options or stock
appreciation rights to our named executive officers during 2005.
Stock Option Exercises and Holdings. The following table provides
information with respect to the amount Darryl R. Halbert realized in 2005 upon
the exercise of certain of his stock options for our class A common stock and
the value of our named executive officers' unexercised stock options for our
class A common stock as of December 31, 2005. We have not granted any stock
appreciation rights.
AGGREGATE STOCK OPTION EXERCISES IN 2005 AND
DECEMBER 31, 2005 OPTION VALUES
Number of Shares
Shares Underlying Value of Unexercised
Acquired Unexercised Options at In-the-Money Options
on December 31, 2005 (#) at December 31, 2005 (#)
Exercise Value --------------------------- ---------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
David A. Bowers -0- $ -0- 71,000 6,000 $18,120 $18,120
Scott C. James -0- -0- 22,000 4,000 12,080 12,080
Darryl R. Halbert 6,000 36,900 (2) 2,000 2,000 6,040 6,040
David J. Camozzi -0- -0- -0- -0- -0- -0-
- --------------------
(1) Each aggregate value is based on the difference between the exercise price
of the individual stock options and the closing sale price per share of the
underlying class A common stock on December 31, 2005. Such closing sale
price was $16.02 per share.
(2) The value realized for this exercise is based on the difference between the
closing sale price per share of our underlying common stock on the day of
the exercise and the exercise price per share.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides summary information as of December 31, 2005
with respect to equity compensation plans under which our equity securities may
be issued to employees or nonemployees (such as directors, consultants,
advisers, vendors, customers, suppliers and lenders) in exchange for goods or
services.
Column (A) Column (B) Column (C)
-------------------------- ------------------------- ------------------------
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted-Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (Excluding
of Outstanding Options, Outstanding Options, Securites Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (A))
------------- ----------------------- -------------------- -----------------------
Equity compensation plans
approved by security
holders.................... 671,820 $18.38 470,000
Equity compensation plans
not approved by security
holders.................... -0- -0- -0-
Total...................... 671,820 $18.38 470,000
CORPORATE GOVERNANCE DOCUMENTS
Code of Business Conduct and Ethics. We have adopted a code of business
conduct and ethics that applies to all of our directors, officers and employees,
including our principal executive officer, principal financial officer,
principal accounting officer and controller. Only the board of directors may
amend the code. Only our audit committee or other committee of the board of
directors with specific delegated authority may grant a waiver of this code. We
will disclose amendments to, or waivers of, the code as required by law and the
applicable rules of the NYSE.
Corporate Governance Guidelines. We have adopted corporate governance
guidelines to assist the board of directors in exercising its responsibilities.
Among other things, the corporate governance guidelines provide for director
qualifications, for independence standards and responsibilities, for approval
procedures for ISAs and that our audit committee chairman presides at all
meetings of the non-management or independent directors.
Audit Committee Charter. We have adopted an amended and restated audit
committee charter under which our audit committee operates. Among other things,
our audit committee charter provides the purpose, authority, resources and
responsibilities of the committee.
A copy of each of these three documents, among others, is available on our
website at www.compx.com under the corporate section. A copy of the amended and
restated audit committee charter is also attached as Exhibit A to this proxy
statement. In addition, any person may obtain a copy of these three documents
without charge, by sending a written request to the attention of our 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 requires our executive
officers, directors and persons who own more than 10% of a registered class of
our equity securities to file reports of ownership with the SEC, the NYSE and
us. Based solely on the review of the copies of such forms and representations
by certain reporting persons, we believe that for 2005 our executive officers,
directors and 10% stockholders complied with all applicable filing requirements
under section 16(a) except that (1) each of our nonemployee directors filed six
days late a Form 4 reporting his or her annual grant of class A common stock on
May 10, 2005 due to an inadvertence by our staff and (2) after its formation in
August 2005 as a parent company of Valhi, VHC failed to file timely its Form 3
and five Forms 4 reporting eleven purchases of our class A common stock by NL,
which transactions were all timely reported on Forms 4 by our other parent
companies.
EXECUTIVE COMPENSATION REPORT
During 2005, our management development and compensation committee
administered certain matters regarding the compensation of our executive
officers.
CompX ISA
During 2005, we paid certain fees to Contran for services provided pursuant
to an ISA between Contran and us. Such services provided under this ISA included
the services of the following executive officers of ours:
Name Positions with CompX
---- --------------------
Glenn R. Simmons Chairman of the Board
Darryl R. Halbert Vice President, Chief Financial Officer and Controller
Contran annually determines the aggregate fee to charge us based on the
following:
o an estimate of the amount of time each Contran employee that performs
services for us and our subsidiaries will spend on such services over
the year; and
o Contran's cost related to such employee, which includes the employee's
base salary, incentive compensation and an overhead component that
takes into account other employment costs, including medical benefits,
unemployment and disability insurance and pension costs and other
costs of providing an office, equipment and supplies related to the
provision of such services.
The portion of the annual charge we pay under the ISA between us and
Contran for the services of any particular individual is capped at $1.0 million
in the aggregate to enhance our ability to deduct such charge for federal income
tax purposes. The amount of the fee we paid in 2005 under this ISA for a person
who provided services to us or our subsidiaries represents, in management's
view, the reasonable equivalent of "compensation" for such services. It is also
management's view that the proposed aggregate charge to us under this ISA is
fair to us and our stockholders and the cost for the services provided under the
ISA would be no less favorable to us than could otherwise be obtained from an
unrelated third party for comparable services. See "Certain Relationships and
Transactions--Intercorporate Services Agreements" for the aggregate amount we
paid to Contran in 2005 under this ISA. For our chief financial officer, the
portion of the annual charge we paid in 2005 to Contran under this ISA
attributable to his services is reported as his 2005 salary in the summary
compensation table in this proxy statement. The amounts charged under this ISA
are not dependent upon our financial performance.
For 2005, our management development and compensation committee reviewed
documentation and discussed with management Contran's ISA allocation process,
including how Contran determined the necessary personnel, the estimated number
of full time employees that would be required to provide the services and the
cost of such services under this ISA. The committee then recommended that our
board of directors approve the 2005 aggregate service charge for the proposed
Contran services to be rendered to us under the ISA after concluding that:
o the cost to employ the additional personnel necessary to perform the
quality of the services provided by Contran would exceed the proposed
2005 aggregate fee to be charged by Contran under this ISA; and
o the cost for such services would be no less favorable than could
otherwise be obtained from an unrelated third party for comparable
services.
Upon receiving the recommendation of our management development and compensation
committee that the ISA charge was fair and reasonable to us and our stockholders
and that it was in our best interests to continue receiving the services
presently provided by Contran, our independent directors, with our other
directors abstaining, approved the 2005 aggregate charge to us under this ISA.
In making these determinations, our management development and compensation
committee relied on their collective business experience and judgment.
Other Executive Officers
In 2005, our management development and compensation committee administered
certain matters regarding the compensation of David A. Bowers, David J. Camozzi
and Scott C. James, those of our executive officers that we or our subsidiaries
employ. For 2005, our cash compensation for these executive officers generally
consisted of two primary components, base salary and annual discretionary
incentive compensation awards. Through the use of these two components of
compensation, the 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 for the executive officers to
maximize annual operating performance and long-term stockholder value. In 2005,
the committee made no separate determinations regarding cash compensation to be
paid to our chairman of the board or chief financial officer since these persons
were employees of Contran.
Base Salaries. Annual base salaries for executive officers employed by us
or our subsidiaries have been established on a position-by-position basis. Our
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. He then makes recommendations on
salaries, other than his own, to the committee. The chairman of the board makes
recommendations on the chief executive officer's salary to the committee. The
committee reviews the recommendations regarding changes in salaries for
executive officers and may take such action, including modifications to the
recommendations, as it deems appropriate. The determinations of the 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 2005
salaries for the named executive officers employed by us or our subsidiaries are
disclosed in their salary column in the summary compensation table in this proxy
statement.
In December 2004, the committee approved 2005 base salary increases for the
chief executive officer and two other executive officers, David J. Camozzi and
Scott C. James. The committee based its actions regarding 2005 salaries
primarily upon the chairman of the board's recommendation regarding the chief
executive officer, the chief executive officer's recommendation regarding
Messrs. Camozzi and James and the committee members' collective business
experience and judgment. No specific survey or study was utilized to make salary
determinations. The chief executive officer's 2005 annual salary was not based
on any specific measure of our financial performance.
Annual Incentive Compensation. In February 2005, the committee determined
that the amount of any annual incentive compensation to be paid to our executive
officers employed by us or our subsidiaries 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 committee
awarded 2005 incentive compensation to certain of our executive officers based
on a discretionary evaluation of each such officer's performance, attitude and
potential. The committee based its actions regarding 2005 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 employed by us or our subsidiaries and the committee
members' collective business experience and judgment. 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 these executive officers. The
2005 discretionary bonuses for the named executive officers employed by us or
our subsidiaries are disclosed in the bonus column in the summary compensation
table in this proxy statement.
Common Stock Based Compensation
In 2005, our management development and compensation committee administered
matters regarding the common stock based compensation of our executive officers.
In 2005, management did not recommend any common stock based compensation, and
our management development and compensation committee did not grant any such
compensation to any executive officers other than annual stock grants to our
nonemployee directors, including our chairman of the board, for their services
as directors. Our management development and compensation committee does not
currently anticipate granting common stock based compensation to anyone in 2006
other than these annual grants of stock to our nonemployee directors. See
"Compensation of Directors and Executive Officers and Other Information --
Compensation of Directors."
Defined Contribution Plans
The committee also reviews and approves our discretionary annual
contributions to the CompX Capital Accumulation Pension Plan, a profit sharing
defined contribution plan, and the CompX Contributory Retirement Plan, a 401(k)
plan. Participants of these plans are employees of certain of our domestic
operations. Under the Capital Accumulation Pension Plan for the 2005 plan year,
the committee approved a contribution of 7.25% of 2005 earnings before taxes of
our National and Timberline divisions and similar contributions for other
participants, subject to certain limitations under the Capital Accumulation
Pension Plan and the U.S. Internal Revenue Code of 1986. Under our 401(k) plan
for the 2005 plan year, the committee approved matching contributions based on
each participant's business unit that ranged from 44% to 100% of the
participant's contribution, subject to certain limitations under the 401(k) plan
and the Internal Revenue Code. Certain of the named executive officers received
such contributions, which are disclosed in the all other compensation column in
the summary compensation table in this proxy statement. For the 2005 plan year,
the committee approved contributions to the Capital Accumulation Pension Plan
and the 401(k) Plan in an aggregate amount of approximately $1.3 million,
subject to certain limitations of the Internal Revenue Code and the respective
plans.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for non-performance based compensation over $1.0
million paid to the company's chief executive officer and four other most highly
compensated executive officers. It is our general policy to structure the
performance-based portion of the compensation of our executive officers in a
manner that enhances our ability to deduct fully such compensation.
The following individuals, in the capacities indicated, hereby submit the
foregoing report.
Paul M. Bass, Jr. Ann Manix
Chairman of our Management Development and Member of our Management Development and
Compensation Committee Compensation Committee
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties. As set forth under "Security
Ownership," Harold C. Simmons, through Contran, may be deemed to control us. We
and other entities that may be deemed to be controlled by or related to Mr.
Simmons sometimes engage in the following:
o 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
o 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
an equity interest in another related party.
We periodically consider, review and evaluate and understand that Contran
and related entities periodically consider, review and evaluate such
transactions. Depending upon the business, tax and other objectives then
relevant and restrictions under indentures and other agreements, it is possible
that we might be a party to one or more of such transactions in the future. In
connection with these activities, we may consider issuing additional equity
securities or incurring additional indebtedness. Our acquisition activities have
in the past and may in the future include participation in acquisition or
restructuring activities conducted by other companies that may be deemed to be
related to Harold C. Simmons. It is our policy to engage in transactions with
related parties on terms, in our opinion, no less favorable to us than could be
obtained from unrelated parties.
Certain directors or executive officers of Contran, Keystone, Kronos
Worldwide, NL, TIMET or Valhi also serve as our directors or executive officers.
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 us and our 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 Agreements. We and certain related companies have
entered into ISAs. Under the ISAs, employees of one company provide certain
services, including executive officer services, to the other company on a fee
basis. The services rendered under the ISAs may include executive, management,
financial, internal audit, accounting, tax, legal, insurance, risk management,
treasury, aviation, human resources, technical, consulting, administrative,
office, occupancy and other services as required from time to time in the
ordinary course of the recipient's business. The fees paid pursuant to the ISAs
are generally based upon an estimate of the time devoted by employees of the
provider of the services to the affairs of the recipient and the employer's cost
related to such employees, which includes the employees' cash compensation and
an overhead component that takes into account the employer's other costs related
to the employees. Each of the ISAs in their current form 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. Because of the large number of companies related to Contran and us, we
believe we benefit from cost savings and economies of scale gained by not having
certain management, financial and administrative staffs duplicated at each
entity, thus allowing certain individuals to provide services to multiple
companies but only be compensated by one entity. With respect to a publicly held
company that is a party to an ISA, the ISA and the related aggregate annual
charge is approved by the independent directors of the company after receiving a
recommendation from the company's management development and compensation
committee.
The services of Harold C. Simmons provided to us under our ISA with Contran
include consultation and advice to our chief executive officer and our other
senior management concerning major strategic corporate matters. Such matters may
include acquisitions or dispositions of certain assets (including investments)
or operations, strategic business plans, business reorganizations and
restructurings, financing and other capital raising initiatives, legal and
litigation strategies, tax planning strategies and other matters.
In 2005, we paid Contran fees of $2.6 million for its services under the
ISA between Contran and us, including $1.0 million for the services of Harold C.
Simmons. In 2006, we expect to pay Contran fees of $2.7 million for its services
under this ISA, including $1.0 million for the services of Harold C. Simmons. We
also pay director fees and expenses directly to Messrs. Glenn Simmons and Watson
for their services as our directors.
Loans between Related Parties. From time to time, loans and advances are
made between us and various related parties pursuant to term and demand notes.
These loans and advances are entered into principally for cash management
purposes. When we loan funds to related parties, the lender is generally able to
earn a higher rate of return on the loan than the lender would earn if the funds
were invested in other instruments. While certain of such loans may be of a
lesser credit quality than cash equivalent instruments otherwise available to
us, we believe that we have evaluated the credit risks involved, and that those
risks are reasonable and reflected in the terms of the applicable loans. When we
borrow from related parties, we are generally able to pay a lower rate of
interest than we would pay if we borrowed from unrelated parties.
During 2005, we did not borrow from, or lend to, unconsolidated related
parties. Accordingly, we received no interest income on loans to unconsolidated
related parties and paid no interest on loans from unconsolidated related
parties.
Insurance Matters. We and Contran participate in a combined risk management
program. Pursuant to the program, Contran and certain of its subsidiaries and
related entities, including us and certain of our subsidiaries and related
entities, 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 and EWI RE, Inc. provide for or broker these insurance
policies. Tall Pines is a captive insurance company wholly owned by Valhi, and
EWI RE, Inc. is a reinsurance brokerage and risk management firm wholly owned by
NL. Consistent with insurance industry practices, Tall Pines and EWI RE, Inc.
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 related companies, including
us, have entered into a loss sharing agreement under which any uninsured loss is
shared by those companies who have submitted claims under the relevant policy.
We believe 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.
During 2005, we paid premiums of approximately $1.3 million for policies
Tall Pines provided or EWI RE, Inc. brokered. This amount principally included
payments for reinsurance and insurance premiums paid to unrelated third parties,
but also included commissions paid to Tall Pines and EWI RE, Inc. Tall Pines
purchases reinsurance for substantially all of the risks it underwrites. In our
opinion, the amounts that we paid for these insurance policies and the
allocation among us and our related entities of relative insurance premiums are
reasonable and at least as favorable to those we or they could have obtained
through unrelated insurance companies or brokers. We expect that these
relationships with Tall Pines and EWI RE, Inc. will continue in 2006.
Tax Matters. We and our qualifying subsidiaries are members of the
consolidated U.S. federal tax return of which Contran is the parent company,
which we refer to as the "Contran Tax Group." As a member of the Contran Tax
Group and pursuant to certain tax sharing agreements, each of the members and
its qualifying subsidiaries compute provisions for U.S. income taxes on a
separate company basis using tax elections made by Contran. Pursuant to the tax
sharing agreements and using tax elections made by Contran, each of the parties
makes payments or receives payments in amounts it would have paid to or received
from the U.S. Internal Revenue Service had it not been a member of the Contran
Tax Group but instead had been a separate taxpayer. Refunds are generally
limited to amounts previously paid under the respective tax sharing agreement.
We and our qualifying subsidiaries are also a part of consolidated tax returns
filed by Contran in certain U.S. state jurisdictions. The terms of the
applicable tax sharing agreements also apply to state payments to these
jurisdictions.
Under applicable law, we, as well as every other member of the Contran Tax
Group, are each jointly and severally liable for the aggregate federal income
tax liability of Contran and the other companies included in the group for all
periods in which we are included in the group. NL has agreed, however, to
indemnify us for any liability for income taxes of the Contran Tax Group in
excess of our tax liability previously computed and paid by us in accordance
with the tax allocation policy.
Under certain circumstances, tax regulations could require Contran to treat
items differently than we would have treated them on a stand alone basis. In
such instances, accounting principles generally accepted in the United States of
America require us to conform to Contran's tax elections. In 2005, pursuant to
our tax sharing agreement with NL and Contran, we paid NL approximately $3.5
million in cash.
Simmons Family Matters. In addition to the services he provides under our
ISA with Contran as discussed under "--Intercorporate Services Agreements,"
certain family members of Harold C. Simmons also provide services to us and our
subsidiaries pursuant to this ISA. In 2005, Glenn R. Simmons, the brother of
Harold C. Simmons, and James C. Epstein, the son-in-law of Harold C. Simmons,
provided certain executive and risk management services, respectively, to us and
our subsidiaries pursuant to this ISA. The portion of the fees we and our
subsidiaries paid to Contran in 2005 pursuant to this ISA for the services of
each of Messrs. Glenn Simmons and Epstein was $35,300 and $17,500, respectively.
We and our subsidiaries expect to pay Contran similar amounts for these services
in 2006. Mr. Glenn Simmons also received additional aggregate compensation of
approximately $38,800 in cash and stock from us for his services as a director
of ours for 2005 and is expected to continue to receive similar compensation for
2006. In 2005, he also realized approximately $5,000 from the exercise of stock
options we had granted him.
Law Firm Relationship. Contran and its related entities, including us,
engaged and paid in 2005 to Rogers & Hardin, LLP, a law firm of which our
director Edward J. Hardin is a partner, in the aggregate approximately $455,000
in fees and expenses for legal services Rogers & Hardin LLP rendered to such
entities. The aggregate amount paid includes approximately $165,000 in fees and
expenses that we paid in 2005 to Rogers & Hardin, LLP for legal services
rendered to us. We presently expect, and understand that Contran and its other
affiliates presently expect, to continue their relationship with Rogers & Hardin
LLP in 2006.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on our class A common stock against the
cumulative total return of the Russell 2000 Index and an index of a
self-selected peer group of companies for the period of five fiscal years
commencing December 31, 2000 and ending December 31, 2005. The self-selected
peer group index is comprised of The Eastern Company, Harley-Davidson, Inc., HNI
Corporation (formerly Hon Industries, 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 dividends.
Comparison of Cumulative Return among CompX International Inc. Class A Common Stock,
the Russell 2000 Index and a Self-Selected Peer Group Index
[PERFORMANCE GRAPH OMITTED]
December 31,
-------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
CompX International Inc................. $100 $ 151 $ 102 $ 80 $ 208 $ 208
Russell 2000 Index...................... 100 102 81 120 142 148
Self-Selected Peer Group Index.......... 100 131 117 126 158 142
AUDIT COMMITTEE REPORT
Our audit committee of the board of directors is comprised of three
directors and operates under a written amended and restated charter adopted by
the board of directors. All members of our audit committee meet the independence
standards established by the board of directors and the NYSE and promulgated by
the SEC under the Sarbanes-Oxley Act of 2002. The amended and restated audit
committee charter is attached as Exhibit A to this statement and is also
available on our website at www.compx.com under the corporate governance
section.
Our management is responsible for, among other things, preparing its
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America, or "GAAP," establishing and
maintaining internal control over financial reporting (as defined in Securities
Exchange Act Rule 13a-15(f)) and evaluating the effectiveness of such internal
control over financial reporting. Our independent registered public accounting
firm is responsible for auditing our consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States) and for expressing an opinion on the conformity of the financial
statements with GAAP. Our audit committee assists the board of directors in
fulfilling its responsibility to oversee management's implementation of our
financial reporting process. In its oversight role, our audit committee reviewed
and discussed the audited financial statements with management and with PwC, our
independent registered public accounting firm for 2005. Our audit committee also
reviewed and discussed internal control over financial reporting with management
and with PwC.
Our audit committee met with PwC and discussed any issues deemed
significant by our independent registered public accounting firm, including the
required matters to be discussed by Statement of Auditing Standards No. 61,
Communication with Audit Committee, as amended. PwC has provided to our audit
committee written disclosures and the letter required by Independence Standards
Board No. 1, Independence Discussions with Audit Committees, and our audit
committee discussed with PwC that firm's independence. Our audit committee also
concluded that PwC's provision of non-audit services to us and our related
entities is compatible with PwC's independence.
Based upon the foregoing considerations, our audit committee recommended to
the board of directors that our audited financial statements be included in our
2005 Annual Report on Form 10-K for filing with the SEC.
Members of our audit committee of the board of directors respectfully
submit the foregoing report.
Keith R. Coogan Paul M. Bass, Jr. Ann Manix
Chairman of our Audit Committee Member of our Audit Committee Member of our Audit Committee
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM MATTERS
Independent Registered Public Accounting Firm. PwC served as our
independent registered public accounting firm for the year ended December 31,
2005. Our audit committee has appointed PwC to review our quarterly unaudited
consolidated financial statements to be included in our Quarterly Reports on
Form 10-Q for the first three quarters of 2006. We expect PwC will be considered
for appointment to audit our annual consolidated financial statements for the
year ending December 31, 2006. Representatives of PwC are not expected to attend
the annual meeting.
Fees Paid to PricewaterhouseCoopers LLP. The following table shows the
aggregate fees that our audit committee has authorized and PwC has billed or is
expected to bill to us for services rendered for 2004 and 2005. Additional audit
fees for 2005 may subsequently be authorized and paid to PwC, in which case the
amounts disclosed below for fees paid to PwC for 2005 would be adjusted to
reflect such additional payments in our proxy statement relating to next year's
annual stockholder meeting. In this regard, the audit fees shown below for 2004
have been adjusted from amounts disclosed in our proxy statement for last year's
annual stockholder meeting.
Type of Fees 2004 2005
------------ ---- ----
Audit Fees (1)....................... $ 896,337 $ 717,089
Audit-Related Fees (2)............... 71,961 6,050
Tax Fees (3)......................... 13,322 23,952
All Other Fees (4)................... 10,577 -0-
Total................................ $ 992,197 $ 747,091
- --------------------
(1) Fees for the following services:
(a) audits of consolidated year-end financial statements for each year and
audit of internal control over financial reporting based on the scope
required for our parent companies to report on their internal control
over financial reporting;
(b) reviews of the unaudited quarterly financial statements appearing in
Forms 10-Q for each of the first three quarters of each year;
(c) consents and assistance with registration statements filed with the
SEC;
(d) normally provided statutory or regulatory filings or engagements for
each year; and
(e) the estimated out-of-pocket costs PwC incurred in providing all of
such services for which PwC is reimbursed.
(2) Fees for assurance and related services reasonably related to the audit or
review of financial statements for each year. These services included
employee benefit plan audits, accounting consultations and attest services
concerning financial accounting and reporting standards and advice
concerning internal controls.
(3) Permitted fees for tax compliance, tax advice and tax planning services.
(4) Fees for all services not described in the other categories. For 2004, the
disclosed fees include fees for consultations relative to the disposition
of our Thomas Regout operations in Europe and research and development
claims.
Preapproval Policies and Procedures. For the purpose of maintaining the
independence of our independent registered public accounting firm, our audit
committee has adopted policies and procedures for the preapproval of audit and
permitted non-audit services the firm provides to us or any of our subsidiaries.
We may not engage the firm to render any audit or permitted non-audit service
unless the service is approved in advance by our audit committee pursuant to the
committee's amended and restated preapproval policies and procedures that the
committee approved on February 23, 2005. Pursuant to the policy:
o the committee must specifically preapprove, among other things, the
engagement of our independent registered public accounting firm for
audits and quarterly reviews of our financial statements, services
associated with certain regulatory filings, including the filing of
registration statements with the SEC, and services associated with
potential business acquisitions and dispositions involving us; and
o for certain categories of permitted non-audit services of our
independent registered public accounting firm, the committee may
preapprove limits on the aggregate fees in any calendar year without
specific approval of the service.
These permitted non-audit services include:
o audit services, such as certain consultations regarding accounting
treatments or interpretations and assistance in responding to certain
SEC comment letters;
o audit-related services, such as certain other consultations regarding
accounting treatments or interpretations, employee benefit plan
audits, due diligence and control reviews;
o tax services, such as tax compliance and consulting, transfer pricing,
customs and duties and expatriate tax services; and
o other permitted non-audit services, such as assistance with corporate
governance matters and filing documents in foreign jurisdictions not
involving the practice of law.
Pursuant to the policy, our audit committee has delegated preapproval
authority to the chairman of the committee or his designee to approve any fees
in excess of the annual preapproved limits for these categories of permitted
non-audit services provided by our independent registered public accounting
firm. The chairman must report any action taken pursuant to this delegated
authority at the next meeting of the committee.
For 2005, our audit committee preapproved all PwC's services provided to us
or any of our subsidiaries in compliance with the amended and restated
preapproval policies and procedures without the use of the SEC's de minimis
exception to such preapproval requirement.
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 2007 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at our annual stockholder meetings, consistent with rules adopted by the
SEC. We must receive such proposals not later than December 12, 2006 to be
considered for inclusion in the proxy statement and form of proxy card relating
to the annual meeting of stockholders in 2007. Our 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 our books, the number of
shares of our class A common stock the stockholder holds and any material
interest the stockholder has in the proposal.
The board of directors will consider the director nominee recommendations
of our stockholders. Our 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 stockholder
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 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, our management has recommended
director nominees to the board of directors. Because under the NYSE listing
standards we may be deemed to be a controlled company, the board of directors
believes that additional policies or procedures with regard to the consideration
of director candidates recommended by its stockholders are not appropriate.
For proposals or director nominations to be brought at the 2007 annual
meeting of stockholders but not included in the proxy statement for such
meeting, our bylaws require that the proposal or nomination must be delivered or
mailed to our principal executive offices in most cases no later than February
27, 2007. 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 and other interested parties who wish to communicate with the
board of directors or its non-management directors may do so through the
following procedures. Such communications not involving complaints or concerns
regarding accounting, internal accounting controls and auditing matters related
to us may be sent to the attention of our corporate secretary at CompX
International Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas 75240-2697. Provided that any such communication relates to our business
or affairs and is within the function of our board of directors or its
committees, and does not relate to insignificant or inappropriate matters, such
communications, or summaries of such communications, will be forwarded to the
chairman of our audit committee, who also serves as the presiding director of
our non-management and independent director meetings.
Complaints or concerns regarding accounting, internal accounting controls
and auditing matters, which may be made anonymously, should be sent to the
attention of our general counsel with a copy to our chief financial officer at
the same address as our corporate secretary. These complaints or concerns will
be forwarded to the chairman of our audit committee. We will keep these
complaints or concerns confidential and anonymous, to the extent feasible,
subject to applicable law. Information contained in such a complaint or concern
may be summarized, abstracted and aggregated for purposes of analysis and
investigation.
2005 ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K for the fiscal year ended December
31, 2005 is included as part of the annual report mailed to our stockholders
with this proxy statement and may also be accessed on our website at
www.compx.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 our communications, the stockholder should notify his or
her broker. Additionally, we will promptly deliver a separate copy of our 2005
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.
To obtain copies of our 2005 annual report or this proxy statement without
charge, please mail your request to the attention of 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 11, 2006
Appendix A
COMPX INTERNATIONAL INC.
AUDIT COMMITTEE CHARTER
AMENDED AND RESTATED AUGUST 5, 2005
----------------
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:
o the integrity of the corporation's financial statements and internal
control over financial reporting;
o the corporation's compliance with legal and regulatory requirements;
o the independent auditor's qualifications and independence; and
o the performance of the corporation's internal audit function and
independent auditor.
ARTICLE II.
RELATIONSHIP WITH THE CORPORATION, MANAGEMENT AND THE INDEPENDENT AUDITOR
Management is responsible for preparing the corporation's financial
statements and maintaining internal control over financial reporting. The
corporation's independent auditor is responsible for auditing the corporation's
financial statements and internal control over financial reporting. 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 or internal control over financial reporting.
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, employees, agents, counsel, experts, auditors or 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, and nothing in this charter will, or will be
deemed to, decrease or modify in any manner adverse to any member of the audit
committee such member's right to rely on such information, opinions, reports or
statements.
Nothing in this charter will, or will be deemed to, adversely affect in any
manner the rights of members of the committee to indemnification and advancement
of expenses under the corporation's certificate of incorporation or bylaws, or
under any contract, agreement, arrangement or understanding that may benefit
such member. In addition, notwithstanding any other provision of this charter,
no provision of this charter will, except to the extent required by applicable
law, rule or regulation, be construed to create any duty, liability or
obligation on the part of the committee or any of its members.
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.
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.
The audit committee may invite to its meetings any director, any member of
management of the corporation and any other persons it deems appropriate in
order to carry out its responsibilities. The audit committee may also exclude
from its meetings any persons it deems appropriate in order to carry out its
responsibilities.
ARTICLE V.
RESPONSIBILITIES
To fulfill its responsibilities, the audit committee shall perform the
following activities.
Financial Statements and Disclosures
o Review and discuss the corporation's annual audited financial
statements and quarterly unaudited 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" prior to the annual and quarterly
financial statements being filed in the corporation's Forms 10-K and
Forms 10-Q, as applicable.
o Review and discuss the corporation's internal control over financial
reporting with management and the independent auditor, including the
corporation's annual audited management report on internal control
over financial reporting, and the corporation's related disclosure
under "Disclosure Controls and Procedures."
o Ascertain from officers signing certifications whether there existed
any fraud or any significant deficiencies or material weaknesses in
the corporation's internal control over financial reporting.
o 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.
o 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.
o 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.
o Review significant accounting, reporting or auditing issues, including
recent professional and regulatory pronouncements or proposed
pronouncements, and understand their impact on the corporation's
financial statements and internal control over financial reporting.
Independent Auditor
o Appoint, compensate, retain and oversee (including the resolution of
disagreements between management and the independent auditor regarding
financial reporting or internal control over 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.
o Provide that the independent auditor report directly to the audit
committee.
o Annually review the qualifications, independence and performance of
the independent auditor, including an evaluation of the lead partner
o 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 audits
of the corporation's financial statements and internal control
over financial reporting;
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:
o the independent auditor's internal quality control
procedures;
o 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
o 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.
o 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.
o Set clear hiring policies for employees or former employees of the
independent auditor.
o 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
o Discuss periodically with management the corporation's policies
regarding risk assessment and risk management.
o Meet separately, periodically, with management, the internal auditors
(or other personnel responsible for the internal audit function) and
the independent auditor.
o 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.
o Review periodically the reports and activities of the internal audit
function and the coordination of the internal audit function with the
independent auditor.
o Conduct an annual evaluation of its own performance.
o Report regularly to the board of directors on its oversight
responsibilities set forth in Article I. The report may be made orally
by the audit committee chairman or any other member of the committee
designated by the committee chairman.
o Maintain minutes or other records of meetings and activities of the
audit committee.
o Review and reassess this charter periodically. Report to the board of
directors any suggested changes to this charter.
o Meet periodically with officers of the corporation responsible for
legal and regulatory compliance by the corporation. On at least an
annual basis, review with the corporation's tax director any tax
matters that could have a significant impact on the corporation's
financial statements.
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 AUGUST 5, 2005.
/s/ A. Andrew R. Louis
-------------------------------------
A. Andrew R. Louis, Secretary
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 16, 2006
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 2006
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 Tuesday, May 16,
2006, 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 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 applicable law, 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 Norman S. Edelcup [ ] [ ]
04 Edward J. Hardin [ ] [ ]
05 Ann Manix [ ] [ ]
06 Glenn R. Simmons [ ] [ ]
07 Steven L. Watson [ ] [ ]
B. Other Matters
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.
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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