CompX(CIX) - 2025 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements present the company's financial position as of March 31, 2025, and December 31, 2024, and its results of operations and cash flows for the three months ended March 31, 2025, and 2024. Total assets slightly decreased to $162.2 million. For Q1 2025, the company reported a 6% increase in net sales to $40.3 million and a 36.7% increase in net income to $5.1 million compared to Q1 2024. Cash from operations was negative, a reversal from the prior year, primarily due to changes in working capital Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $162.2 million, a slight decrease from $163.0 million at year-end 2024. The change was driven by a $4.7 million decrease in cash and cash equivalents, partially offset by a $3.9 million increase in accounts receivable. Total stockholders' equity increased to $147.6 million from $146.1 million Condensed Consolidated Balance Sheets (In thousands) | | December 31, 2024 | March 31, 2025 (unaudited) | | :--- | :--- | :--- | | Total current assets | $105,296 | $104,954 | | Cash and cash equivalents | $60,782 | $56,128 | | Accounts receivable, net | $14,113 | $18,030 | | Inventories, net | $28,366 | $29,158 | | Net property and equipment | $24,026 | $23,552 | | Total assets | $163,044 | $162,206 | | Total current liabilities | $15,775 | $13,604 | | Total stockholders' equity | $146,145 | $147,581 | | Total liabilities and stockholders' equity | $163,044 | $162,206 | Condensed Consolidated Statements of Income and Comprehensive Income For the first quarter of 2025, net sales increased by 6.1% to $40.3 million compared to $38.0 million in the same period of 2024. Gross margin improved significantly to 30.2% from 25.5%, leading to a 58.0% increase in operating income to $5.9 million. Net income rose 36.7% to $5.1 million, with diluted EPS increasing to $0.42 from $0.31 Q1 2025 vs Q1 2024 Income Statement (In thousands, except per share data) | | Three months ended March 31, 2024 | Three months ended March 31, 2025 | | :--- | :--- | :--- | | Net sales | $37,971 | $40,272 | | Gross margin | $9,667 | $12,163 | | Operating income | $3,715 | $5,869 | | Net income | $3,754 | $5,131 | | Basic and diluted net income per common share | $0.31 | $0.42 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $146.1 million at the end of 2024 to $147.6 million at the end of Q1 2025. The increase was driven by $5.1 million in net income, partially offset by $3.7 million in cash dividends paid at a rate of $0.30 per share - During Q1 2025, the company generated net income of $5.131 million and paid cash dividends of $3.695 million ($0.30 per share)[17] Condensed Consolidated Statements of Cash Flows For Q1 2025, net cash used in operating activities was $0.1 million, a significant decrease from $1.7 million provided in Q1 2024, mainly due to changes in working capital. Net cash used in investing activities was $0.8 million. After paying $3.7 million in dividends, the cash balance decreased by $4.7 million during the quarter to $56.1 million Q1 2025 vs Q1 2024 Cash Flows (In thousands) | | Three months ended March 31, 2024 | Three months ended March 31, 2025 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,672 | $(137) | | Net cash provided by (used in) investing activities | $12,495 | $(822) | | Dividends paid | $(3,694) | $(3,695) | | Cash and cash equivalents - net change | $10,473 | $(4,654) | | Balance at end of period | $51,866 | $56,128 | Notes to Condensed Consolidated Financial Statements The notes detail the company's ownership structure, with NL Industries holding an 87% stake. Segment data reveals that the Marine Components segment was the primary driver of growth in Q1 2025, with a 24% sales increase and a dramatic rise in operating income from $34 thousand to $2.2 million. Security Products sales were nearly flat. The company also has a $9.3 million note receivable from its affiliate, Valhi, Inc - As of March 31, 2025, the company was approximately 87% owned by NL Industries, Inc[22] Segment Performance - Q1 2025 vs Q1 2024 (In thousands) | Segment | Metric | Q1 2024 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | :--- | | Security Products | Net Sales | $29,887 | $30,230 | +1.1% | | | Operating Income | $5,450 | $5,521 | +1.3% | | Marine Components | Net Sales | $8,084 | $10,042 | +24.2% | | | Operating Income | $34 | $2,241 | +6,491% | - The company has an outstanding note receivable of $9.3 million from its affiliate Valhi, Inc as of March 31, 2025[36] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong Q1 2025 performance, with operating income rising to $5.9 million from $3.7 million year-over-year, primarily to higher sales and significantly improved gross margins in the Marine Components segment. The company expects modest sales improvement for Security Products and continued growth for Marine Components in 2025, though it remains cautious about raw material price increases and tariffs. Liquidity remains strong with $56.1 million in cash, despite a net cash use from operations in Q1 - The increase in operating income in Q1 2025 to $5.9 million from $3.7 million in Q1 2024 is primarily due to higher Marine Components sales and gross margin[43] - The company expects Security Products net sales to improve modestly in 2025 and Marine Components net sales to increase, driven by government and industrial markets[57] - The company is monitoring raw material price increases and tariffs, believing it can increase selling prices to recoup costs, though the extent of recovery is uncertain[56][58] Results of Operations In Q1 2025, net sales rose by $2.3 million (6%) year-over-year, driven by higher sales in both the Marine Components and Security Products segments. Gross margin as a percentage of sales increased from 25.5% to 30.2%, primarily due to improved performance at Marine Components. Operating expenses increased by $0.3 million due to higher employee salaries and benefits Overall Operations - Q1 2025 vs Q1 2024 | Metric | Q1 2024 | Q1 2025 | | :--- | :--- | :--- | | Net Sales | $37,971 | $40,272 | | Gross Margin % | 25.5% | 30.2% | | Operating Income | $3,715 | $5,869 | | Operating Income % | 9.8% | 14.6% | - The increase in net sales was due to higher Marine Components sales (to towboat and government markets) and, to a lesser extent, higher Security Products sales (to the government security market)[45] Segment Results The Marine Components segment was the standout performer in Q1 2025, with a 24% increase in net sales and operating income surging to $2.2 million from just $34 thousand in Q1 2024. This was driven by higher sales to the towboat and government markets and improved cost absorption. The Security Products segment saw a modest 1% sales increase, with higher government sales offsetting declines in other OEM markets - Security Products net sales increased 1% in Q1 2025, with gross margin and operating income percentages remaining comparable to Q1 2024[53] - Marine Components net sales increased 24% in Q1 2025, driven by a $1.7 million increase in sales to the towboat market and $1.2 million to the government market. Gross margin percentage increased significantly due to lower cost inventory and better fixed cost coverage[54] Outlook The company anticipates modest sales growth for Security Products in 2025 with slightly improved margins. For Marine Components, sales are expected to increase for the full year, driven by government and industrial markets, although Q1 results were boosted by a one-time stocking event at a towboat OEM. Management is actively monitoring raw material price increases and tariffs, which began in late 2024 and continued into Q1 2025 - A one-time stocking event at a towboat OEM customer boosted Marine Components sales in Q1; demand from this market is expected to be consistent with 2024 for the rest of the year[57] - Raw material price increases experienced since Q3 2024 have continued through Q1 2025, and the company is seeing surcharges related to tariffs[56] Liquidity and Capital Resources The company's primary liquidity source is cash from operations, which was a net use of $0.1 million in Q1 2025, a decrease of $1.8 million from the prior year due to working capital changes. The company ended the quarter with $56.1 million in cash. Capital expenditures for 2025 are projected to be approximately $3.4 million. A regular quarterly dividend of $0.30 per share was paid - Net cash from operating activities decreased by $1.8 million YoY, primarily due to a $5.1 million negative change in working capital (inventories, receivables, payables)[61][62] - The company ended Q1 2025 with $56.1 million in cash and cash equivalents, all held in the U.S[72] - Projected capital expenditures for 2025 are approximately $3.4 million. The board declared a regular quarterly dividend of $0.30 per share in Q1 2025[67][73] Quantitative and Qualitative Disclosure About Market Risk The company states that there have been no material changes in its exposure to market risks, such as changes in interest rates and raw material prices, since the filing of its 2024 Annual Report - The company is exposed to market risk from changes in interest rates and raw material prices, but there have been no material changes in these risks since the 2024 Annual Report[77] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. Additionally, no changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - The President and CEO, along with the Executive VP and CFO, concluded that the company's disclosure controls and procedures are effective as of March 31, 2025[78] - There were no changes in internal control over financial reporting during Q1 2025 that have materially affected or are likely to materially affect these controls[81] Part II. OTHER INFORMATION Legal Proceedings The company refers to Note 7 of the Condensed Consolidated Financial Statements and its 2024 Annual Report for information on legal proceedings. Note 7 indicates that management does not expect current claims and disputes to have a material adverse effect on its financial statements - For information on legal proceedings, the report refers to Note 7 of the financial statements and the 2024 Annual Report[83] - Based on Note 7, management believes the disposition of all claims and disputes should not have a material adverse effect on the company's financial condition[32] Risk Factors The report directs readers to the 2024 Annual Report for a comprehensive discussion of risk factors related to the company's businesses. No new or updated risk factors are presented in this quarterly report - The report references the 2024 Annual Report for a discussion of risk factors related to the business[84] Exhibits This section lists the exhibits filed with the Form 10-Q, which include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and Inline XBRL data files (Exhibit 101 series) - Filed exhibits include officer certifications and Inline XBRL documents[85]