CompX(CIX) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents CompX International Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with notes on organization, segments, and policies Condensed Consolidated Balance Sheets | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (Jun 30, 2025 vs Dec 31, 2024) (in thousands) | | :------------------------ | :-------------------------- | :-------------------------- | :------------------------------------ | | Cash and cash equivalents | $60,782 | $56,215 | -$4,567 | | Accounts receivable, net | $14,113 | $16,914 | +$2,801 | | Inventories, net | $28,366 | $32,901 | +$4,535 | | Total current assets | $105,296 | $107,596 | +$2,300 | | Total assets | $163,044 | $164,768 | +$1,724 | | Total current liabilities | $15,775 | $14,367 | -$1,408 | | Total stockholders' equity | $146,145 | $149,453 | +$3,308 | Condensed Consolidated Statements of Income and Comprehensive Income | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $35,887 | $40,366 | +12.5% | $73,858 | $80,638 | +9.2% | | Cost of sales | $24,722 | $27,476 | +11.1% | $53,026 | $55,585 | +4.8% | | Gross margin | $11,165 | $12,890 | +15.5% | $20,832 | $25,053 | +20.3% | | Operating income | $5,081 | $6,320 | +24.4% | $8,796 | $12,189 | +38.6% | | Net income | $4,844 | $5,453 | +12.6% | $8,598 | $10,584 | +23.1% | | Basic and diluted net income per common share | $.39 | $.44 | +12.8% | $.70 | $.86 | +22.9% | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $146.1 million at December 31, 2024, to $149.5 million at June 30, 2025[17] - Net income for the six months ended June 30, 2025, was $10.6 million[17] - Cash dividends of $0.60 per share were paid for the six months ended June 30, 2025, totaling $7.4 million[17] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net cash provided by operating activities | $11,499 | $4,591 | -$6,908 | | Net cash provided by (used in) investing activities | $24,670 | -$1,765 | -$26,435 | | Dividends paid (financing activities) | -$7,390 | -$7,393 | -$3 | | Net change in cash and cash equivalents | $28,779 | -$4,567 | -$33,346 | | Cash and cash equivalents at end of period | $70,172 | $56,215 | -$13,957 | Notes to Condensed Consolidated Financial Statements - CompX International Inc. (CIX) is approximately 87% owned by NL Industries, Inc. (NL), indirectly controlled by Lisa K. Simmons and the Family Trust[21] - A special cash dividend of $1.00 per share on Class A common stock was declared on August 5, 2025, payable on August 27, 2025[23] - The company operates in two segments: Security Products and Marine Components, with performance evaluated based on segment operating income[25] Segment Net Sales | Segment | 3 Months Ended Jun 30, 2024 Net Sales (in thousands) | 3 Months Ended Jun 30, 2025 Net Sales (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 Net Sales (in thousands) | 6 Months Ended Jun 30, 2025 Net Sales (in thousands) | YoY Change (6 Months) (%) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Security Products | $28,213 | $30,683 | +8.8% | $58,100 | $60,913 | +4.8% | | Marine Components | $7,674 | $9,683 | +26.2% | $15,758 | $19,725 | +25.2% | | Total Net Sales | $35,887 | $40,366 | +12.5% | $73,858 | $80,638 | +9.2% | Segment Operating Income | Segment | 3 Months Ended Jun 30, 2024 Operating Income (in thousands) | 3 Months Ended Jun 30, 2025 Operating Income (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 Operating Income (in thousands) | 6 Months Ended Jun 30, 2025 Operating Income (in thousands) | YoY Change (6 Months) (%) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Security Products | $5,442 | $5,768 | +6.0% | $10,892 | $11,289 | +3.6% | | Marine Components | $1,387 | $2,394 | +72.6% | $1,421 | $4,635 | +226.2% | | Total Operating Income | $5,081 | $6,320 | +24.4% | $8,796 | $12,189 | +38.6% | Accounts Receivable by Segment | Segment | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :---------------- | :-------------------------- | :-------------------------- | :----- | | Security Products | $12,149 | $12,933 | +$784 | | Marine Components | $2,034 | $4,051 | +$2,017 | | Total | $14,113 | $16,914 | +$2,801 | Inventory by Type | Inventory Type | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :--------------- | :-------------------------- | :-------------------------- | :----- | | Raw materials | $5,652 | $5,773 | +$121 | | Work-in-process | $17,638 | $22,213 | +$4,575 | | Finished goods | $5,076 | $4,915 | -$161 | | Total | $28,366 | $32,901 | +$4,535 | - Total accounts payable and accrued liabilities decreased from $15.0 million at December 31, 2024, to $13.4 million at June 30, 2025, primarily due to a decrease in employee benefits[30] - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, with no expected material impact on the company's tax provision[31] - The company is involved in various claims and disputes, but their disposition is not expected to have a material adverse effect on financial statements, operations, or liquidity[32] - The company has an unsecured revolving demand promissory note with Valhi, Inc. for up to $25 million, with an outstanding principal balance of $8.9 million at June 30, 2025[34] - New accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU No. 2024-03 (Reporting Comprehensive Income), effective for 2025 and 2027 Annual Reports respectively, are being evaluated for disclosure requirements[35][36] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results, covering performance drivers, segment results, outlook, liquidity, capital resources, and forward-looking statements Business Overview - CompX International Inc. is a leading manufacturer of engineered components, operating through Security Products and Marine Components segments[38] - The Security Products segment manufactures mechanical and electrical cabinet locks for postal, recreational transportation, office furniture, cabinetry, tool storage, and healthcare applications[38] - The Marine Components segment produces wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs, and related hardware for recreational marine and other industries[38] General (Forward-Looking Statements & Risks) - The report contains forward-looking statements involving substantial risks and uncertainties that could cause actual future results to differ materially from expectations[39] - Key risk factors include future supply and demand, changes in raw material and operating costs, price and product competition, new product development, litigation, intellectual property, environmental matters, tax audits, government regulations, global economic and political conditions, and operating interruptions[39] Operating Income Overview - Operating income increased to $6.3 million in Q2 2025 (from $5.1 million in Q2 2024) and to $12.2 million for H1 2025 (from $8.8 million in H1 2024)[42] - The increase in operating income was primarily due to higher sales and gross margin in both the Security Products and Marine Components segments[42] Results of Operations (Consolidated) - Net sales increased by $4.5 million in Q2 2025 and $6.8 million in H1 2025, driven by higher sales in government security (Security Products) and government and towboat markets (Marine Components)[44] - Cost of sales as a percentage of sales improved by 0.8% in Q2 2025 and 2.9% in H1 2025, increasing gross margin percentage, primarily due to higher Marine Components gross margin[47] - Operating costs and expenses increased by $0.5 million in Q2 2025 and $0.8 million in H1 2025, mainly due to higher employee-related costs, but decreased as a percentage of net sales due to higher sales coverage[48] - Interest income decreased by $0.4 million in Q2 2025 and $0.8 million in H1 2025, primarily due to lower average interest rates and decreased cash balances[50] Segment Results Security Products Segment | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $28,213 | $30,683 | +9% | $58,100 | $60,913 | +5% | | Gross margin | $8,952 | $9,554 | +7% | $17,724 | $18,552 | +5% | | Operating income | $5,442 | $5,768 | +6% | $10,892 | $11,289 | +4% | | Gross margin % | 31.7% | 31.1% | -0.6 pp | 30.5% | 30.5% | 0.0 pp | | Operating income margin % | 19.3% | 18.8% | -0.5 pp | 18.7% | 18.5% | -0.2 pp | - The increase in Q2 2025 sales was primarily driven by $3.3 million higher sales to the government security market and $0.5 million to the healthcare market, partially offset by declines in transportation, tool storage, and distributors[53] - Gross margin and operating income percentages decreased slightly in Q2 2025 due to higher employee-related costs, despite increased fixed cost coverage from higher sales[55] Marine Components Segment | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $7,674 | $9,683 | +26% | $15,758 | $19,725 | +25% | | Gross margin | $2,213 | $3,336 | +51% | $3,108 | $6,501 | +109% | | Operating income | $1,387 | $2,394 | +73% | $1,421 | $4,635 | +226% | | Gross margin % | 28.8% | 34.5% | +5.7 pp | 19.7% | 33.0% | +13.3 pp | | Operating income margin % | 18.1% | 24.7% | +6.6 pp | 9.0% | 23.5% | +14.5 pp | - The increase in Q2 2025 sales was primarily due to $1.3 million higher sales to the government market and $0.6 million to the towboat market[56] - Gross margin percentage increased due to increased coverage of fixed costs from higher sales and a more favorable customer and product mix[57] Outlook - Sales for the first half of 2025 reflect continued robust demand across both segments, surpassing prior year sales[58] - Security Products net sales are expected to improve in 2025 due to government security and healthcare markets, but gross margin and operating income percentages will be challenged by higher raw material costs and tariff-related surcharges[59] - Marine Components net sales are expected to increase in 2025, predominantly due to higher sales to the government and industrial markets, leading to improved gross margins and operating income percentages[59] - Raw material price increases and tariff-related surcharges on electronic components from Asia continued through H1 2025, with the company working to increase selling prices to offset these costs[58][59][61] Liquidity and Capital Resources - Net cash provided by operating activities decreased by $6.9 million for H1 2025 compared to H1 2024, primarily due to a $10.7 million increase in net cash used by changes in inventories, receivables, prepaids, payables, and non-tax accruals[64][67] - Days Sales Outstanding (DSO) increased from 33 days (Dec 31, 2024) to 38 days (Jun 30, 2025), and Days in Inventory (DII) increased from 94 days (Dec 31, 2024) to 109 days (Jun 30, 2025)[65][66] - Capital expenditures were $2.2 million in H1 2025, up from $0.7 million in H1 2024, with no proceeds from marketable securities maturities in H1 2025 compared to $24.0 million in H1 2024[69][70] - The company paid aggregate quarterly dividends of $0.60 per share in H1 2025 and H1 2024, and a special dividend of $1.00 per share was declared in August 2025[71] - Management believes cash from operations, cash on hand, and external financing will be sufficient to meet liquidity needs for the next 12 months and five years, with expected capital expenditures of approximately $3.4 million for 2025[74][75] Commitments and Contingencies - The company is subject to certain commitments and contingencies, as described in its 2024 Annual Report and Note 7 to the Condensed Consolidated Financial Statements[77] Recent Accounting Pronouncements - Refer to Note 10 to the Condensed Consolidated Financial Statements for information on recent accounting pronouncements[79] Critical Accounting Policies - There have been no changes in the company's critical accounting policies during the first six months of 2025[80] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks from interest rate and raw material price changes, noting no material changes since the 2024 Annual Report - The company is exposed to market risk from changes in interest rates and raw material prices[81] - There have been no material changes in these market risks since the 2024 Annual Report[81] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and internal control over financial reporting, confirming effectiveness and no material changes during Q2 2025 Evaluation of Disclosure Controls and Procedures - Management, with CEO and CFO participation, concluded the company's disclosure controls and procedures were effective as of June 30, 2025[82] Internal Control Over Financial Reporting - There have been no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2025[84] Part II. Other Information Item 1. Legal Proceedings This section refers to previous disclosures on legal proceedings, indicating no new material information for this quarterly filing - Refer to Note 7 to the Condensed Consolidated Financial Statements and the 2024 Annual Report for descriptions of certain legal proceedings[87] Item 1A. Risk Factors This section directs readers to the company's 2024 Annual Report for a comprehensive discussion of business risk factors - Reference is made to the 2024 Annual Report for a discussion of risk factors related to the company's businesses[88] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including various certifications and Inline XBRL documents - The exhibits include Certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[89]