COMPX INTERNATIONAL INC - Quarter Report: 2008 March (Form 10-Q)

For the quarter ended March 31, 2008

Commission file number 1-13905

COMPX INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

Delaware		57-0981653
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification No.)
5430 LBJ Freeway, Suite 1700, Three Lincoln Centre, Dallas, Texas		75240-2697
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code		(972) 448-1400

Part I.FINANCIAL INFORMATION	Page
Item 1.  Financial Statements.
Condensed Consolidated Balance Sheets - December 31, 2007 -  March 31, 2008 (unaudited)	3
Condensed Consolidated Statements of Income - Three months ended March 31, 2007 and 2008 (unaudited)	5
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2007 and 2008 (unaudited)	6
Condensed Consolidated Statement of Stockholders' Equity and Comprehensive Income - Three months ended March 31, 2008 (unaudited)	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 3.  Quantitative and Qualitative Disclosure About Market Risk.	18
Item 4.  Controls and Procedures.	18
Part II.OTHER INFORMATION
Item 1A.  Risk Factors.	20
Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds; Share Repurchases.	20
Item 6.  Exhibits.	20
Items 1, 3, 4 and 5 of Part II are omitted because there is no information to report.

ASSETS		December 31,  2007				March 31,  2008
						(unaudited)
Current assets:
Cash and cash equivalents		$	18,399			$	18,147
Accounts receivable, less allowance for doubtful accounts of $682 and $648			20,447				19,170
Receivables from affiliates			223				-
Refundable income taxes			68				34
Inventories			24,277				25,052
Prepaid expenses and other current assets			1,324				1,249
Deferred income taxes			2,123				2,124
Current portion of note receivable			1,306				1,306
Total current assets			68,167				67,082
Other assets:
Goodwill			40,784				41,214
Other intangible assets			2,569				2,434
Note receivable			261				261
Assets held for sale			3,117				2,817
Other			666				748
Total other assets			47,397				47,474
Property and equipment:
Land			11,612				12,102
Buildings			38,990				39,317
Equipment			124,238				122,360
Construction in progress			2,659				3,159
			177,499				176,938
Less accumulated depreciation			105,348				105,211
Net property and equipment			72,151				71,727
Total assets		$	187,715			$	186,283

LIABILITIES AND STOCKHOLDERS' EQUITY		December 31,  2007				March 31,  2008
						(unaudited)
Current liabilities:
Current maturities of note payable to affiliate		$	250			$	500
Accounts payable and accrued liabilities			17,652				15,200
Interest payable to affiliate			559				701
Income taxes payable to affiliates			282				696
Income taxes			170				313
Total current liabilities			18,913				17,410
Noncurrent liabilities:
Note payable to affiliate			49,730				49,480
Deferred income taxes			14,969				14,787
Other			-				16
Total noncurrent liabilities			64,699				64,283
Stockholders' equity:
Preferred stock			-				-
Class A common stock			25				24
Class B common stock			100				100
Additional paid-in capital			55,824				55,329
Retained earnings			37,080				37,081
Accumulated other comprehensive income			11,074				12,056
Total stockholders' equity			104,103				104,590
Total liabilities and stockholders’ equity		$	187,715			$	186,283

		Three months ended  March 31,
		2007				2008
		(unaudited)
Net sales		$	43,551			$	40,520
Cost of goods sold			31,429				30,578
Gross margin			12,122				9,942
Selling, general and administrative expense			6,667				6,404
Other operating expense, net			19				7
Operating income			5,436				3,531
Other non-operating income, net			302				116
Interest expense			(54	)			(762	)
Income before income taxes			5,684				2,885
Provision for income taxes			2,666				1,324
Net income		$	3,018				1,561
Basic and diluted earnings per common share		$	.20			$	.13
Cash dividends per share		$	.125			$	.125
Shares used in the calculation of basic and diluted earnings per share			15,280				12,446

		Three months ended  March 31,
		2007				2008
		(unaudited)
Cash flows from operating activities:
Net income		$	3,018			$	1,561
Depreciation and amortization			2,730				2,344
Deferred income taxes			906				27
Other, net			165				101
Change in assets and liabilities:
Accounts receivable, net			(794	)			1,173
Inventories, net			(2,083	)			(1,000	)
Accounts payable and accrued liabilities			(590	)			(2,553	)
Accounts with affiliates			961				637
Income taxes			21				160
Other, net			(298	)			(11	)
Net cash provided by operating activities			4,036				2,439
Cash flows from investing activities:
Capital expenditures			(855	)			(1,434	)
Proceeds on disposal of asset held for sale			-				250
Other, net			12				34
Net cash used in investing activities			(843	)			(1,150	)
Cash flows from financing activities:
Dividends			(1,909	)			(1,560	)
Treasury stock acquired			-				(496	)
Issuance of common stock and other, net			79				-
Net cash used in financing activities			(1,830	)			(2,056	)
Cash and cash equivalents – net change from:
Operating, investing and financing activities			1,363				(767	)
Currency translation			(108	)			515
Cash and cash equivalents at beginning of period			29,688				18,399
Cash and cash equivalents at end of period		$	30,943			$	18,147
Supplemental disclosures – cash paid for:
Interest		$	6			$	571
Income taxes			770				679
Non-cash investing and financing activity -
Accrual for capital expenditures		$	-			$	211

		Common Stock								Additional paid-in				Retained				Accumulated other comprehensive income-currency				Treasury				Total stockholders'				Comprehensive
		Class A				Class B				capital				earnings				translation				stock				equity				income
Balance at December 31, 2007		$	25			$	100			$	55,824			$	37,080			$	11,074			$	-			$	104,103
Net income			-				-				-				1,561				-				-				1,561			$	1,561
Other comprehensive income, net			-				-				-				-				982				-				982				982
Treasury Stock:
Acquired			-				-				-				-				-				(496	)			(496	)			-
Retired			(1	)			-				(495	)											496				-				-
Cash dividends			-				-				-				(1,560	)			-				-				(1,560	)			-
Balance at March 31, 2008		$	24			$	100			$	55,329			$	37,081			$	12,056			$	-			$	104,590
Comprehensive income																														$	2,543

 

 

		Three months ended  March 31,
		2007				2008
		(In thousands)
Net sales:
Security Products		$	19,778			$	19,076
Furniture Components			19,435				17,753
Marine Components			4,338				3,691
Total net sales		$	43,551			$	40,520
Operating income (loss):
Security Products		$	4,110			$	3,239
Furniture Components			2,261				1,426
Marine Components			396				103
Corporate operating expenses			(1,331	)			(1,237	)
Total operating income			5,436				3,531
Other non-operating income, net			302				116
Interest expense			(54	)			(762	)
Income before income taxes		$	5,684			$	2,885

		December 31,  2007				March 31,  2008
		(In thousands)
Raw materials		$	6,341			$	7,633
Work in process			9,783				8,848
Finished products			8,153				8,571
Total		$	24,277			$	25,052

		December 31,  2007				March 31,  2008
		(In thousands)
Accounts payable		$	7,139			$	6,848
Accrued liabilities:
Employee benefits			7,196				5,242
Customer tooling			736				601
Taxes other than on income			572				487
Insurance			502				538
Professional			252				192
Reserve for uncertain tax positions			237				237
Other			1,018				1,055
Total		$	17,652			$	15,200

 

 

		Three months ended  March 31,
		2007				2008
		(In thousands)
Expected tax expense, at the U.S. federal statutory income tax rate of 35%		$	1,989			$	1,010
Non–U.S. tax rates			(63	)			(54	)
Incremental U.S. tax on earnings of foreign subsidiaries			612				278
State income taxes and other, net			128				90
Total		$	2,666			$	1,324

 

		Three months ended  March 31,
		2007				%				2008				%
		(Dollars in thousands)
Net sales		$	43,551				100.0	%		$	40,520				100.0	%
Cost of goods sold			31,429				72.2				30,578				75.5
Gross margin			12,122				27.8				9,942				24.5
Operating costs and expenses			6,686				15.4				6,411				15.8
Operating income		$	5,436				12.5	%		$	3,531				8.7	%

 

 

 

 

 

		Three months ended  March 31,								%
		2007				2008				Change
		(In thousands)
Net sales:
Security Products		$	19,778			$	19,076				(4%)
Furniture Components			19,435				17,753				(9%)
Marine Components			4,338				3,691				(15%)
Total net sales		$	43,551			$	40,520				(7%)
Gross margin:
Security Products		$	6,535			$	5,542				(15%)
Furniture Components			4,292				3,434				(20%)
Marine Components			1,295				966				(25%)
Total gross margin		$	12,122			$	9,942				(18%)
Operating income (loss):
Security Products		$	4,110			$	3,239				(21%)
Furniture Components			2,261				1,426				(37%)
Marine Components			396				103				(74%)
Corporate operating expenses			(1,331	)			(1,237	)			(7%)
Total operating income		$	5,436			$	3,531				(35%)

 

 

 

 

 

 

 

·	Future supply and demand for our products,

·	Changes in our raw material and other operating costs (such as steel and energy costs),

·	General global economic and political conditions,  (such as changes in the level of gross domestic product in various regions of the world),

·	Demand for office furniture,

·	Service industry employment levels,

·	Demand for high performance marine components,

·	The possibility of labor disruptions,

·	Competitive products and prices, including increased competition from low-cost manufacturing sources (such as China),

·	Substitute products,

·	Customer and competitor strategies,

·	Costs and expenses associated with compliance with certain requirements of the Sarbanes-Oxley Act of 2002 relating to the evaluation of our internal control over financial reporting,

·	The introduction of trade barriers,

·	The impact of pricing and production decisions,

·	Fluctuations in the value of the U.S. dollar relative to other currencies (such as the Canadian dollar and New Taiwan dollar),

·	Potential difficulties in integrating completed or future acquisitions,

·	Decisions to sell operating assets other than in the ordinary course of business,

·	Uncertainties associated with new product development,

·	Environmental matters (such as those requiring emission and discharge standards for existing and new facilities),

·	Our ability to comply with covenants contained in our revolving bank credit facility,

·	The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters,

·	The impact of current or future government regulations,

·	Possible future litigation,

·	Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts,

·	Operating interruptions (including, but not limited to labor disputes, leaks, natural disasters, fires, explosions, unscheduled, or unplanned downtime and transportation interruptions); and

·	Government laws and regulations and possible changes therein.

 

 

 

 

 

·	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets,

·	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

·	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our Condensed Consolidated Financial Statements.

 

 

Part II.   OTHER INFORMATION

 

ITEM 1A.

Risk Factors.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds; Share Repurchases.

Period		Total number of shares purchased				Average price paid per share, including commissions				Total number of shares purchased as part of a publicly-announced plan				Maximum number of shares that may yet be purchased under the publicly-announced plan at end of period
January 1, 2008 to January 31, 2008			29,700			$	9.62				29,700				774,700
February 1, 2008 to February 29, 2008			18,000			$	9.42				18,000				756,700
March 1, 2008 to March 31, 2008			5,000			$	8.04				5,000				751,700
			52,700								52,700