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What changed in COMPX INTERNATIONAL INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COMPX INTERNATIONAL INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+130 added−124 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in COMPX INTERNATIONAL INC's 2023 10-K

130 paragraphs added · 124 removed · 106 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

31 edited+3 added−2 removed32 unchanged
Biggest changeSecurities and Exchange Commission (the “SEC”) and include, but are not limited to, the following: ● Future demand for our products, ● Changes in our raw material and other operating costs (such as zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs, ● Price and product competition from low-cost manufacturing sources (such as China), ● The impact of pricing and production decisions, ● Customer and competitor strategies including substitute products, ● Uncertainties associated with the development of new products and product features, - 2 - ​ ​ ● Future litigation, ● Our ability to protect or defend our intellectual property rights, ● Potential difficulties in integrating future acquisitions, ● Decisions to sell operating assets other than in the ordinary course of business, ● Environmental matters (such as those requiring emission and discharge standards for existing and new facilities), ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform, ● Government laws and regulations and possible changes therein including new environmental health and safety or other regulations, ● General global economic and political conditions that disrupt or introduce instability into our supply chain, impact our customers’ level of demand or our customers’ perception regarding demand or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises such as COVID-19), ● Operating interruptions (including, but not limited to labor disputes, hazardous chemical leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, cyber-attacks and public health crises such as COVID-19); and ● Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts.
Biggest changeSecurities and Exchange Commission (the “SEC”) and include, but are not limited to, the following: ● Future demand for our products, ● Changes in our raw material and other operating costs (such as zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs, ● Price and product competition from low-cost manufacturing sources (such as China), ● The impact of pricing and production decisions, ● Customer and competitor strategies including substitute products, - 2 - ​ ​ ● Uncertainties associated with the development of new products and product features, ● Future litigation, ● Our ability to protect or defend our intellectual property rights, ● Potential difficulties in integrating future acquisitions, ● Decisions to sell operating assets other than in the ordinary course of business, ● Environmental matters (such as those requiring emission and discharge standards for existing and new facilities), ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform, ● Government laws and regulations and possible changes therein including new environmental, health, safety, sustainability or other regulations, ● General global economic and political conditions that disrupt our supply chain, reduce demand or perceived demand for component products or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises), ● Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises), ● Technology related disruptions (including, but not limited to, cyber attacks; software implementation, upgrades or improvements; technology processing failures; or other events) related to our technology infrastructure that could impact our ability to continue operations, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders; and ● Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts.
Simmons and various family trusts established for the benefit of Ms. Simmons, Thomas C. Connelly (the husband of Ms. Simmons’ late sister) and their children and for which Ms. Simmons or Mr. Connelly, as applicable, serve as trustee (collectively, the “Other Trusts”). With respect to the Other Trusts for which Mr.
Simmons, Thomas C. Connelly (the husband of Ms. Simmons’ late sister), and various family trusts established for the benefit of Ms. Simmons, Mr. Connelly and their children and for which Ms. Simmons or Mr. Connelly, as applicable, serve as trustee (collectively, the “Other Trusts”). With respect to the Other Trusts for which Mr.
Marine Components . Our Marine Components segment manufactures and distributes wake enhancement systems, stainless steel exhaust components, gauges, throttle controls, trim tabs and related hardware and accessories primarily for ski/wakeboard boats (tow boats) and performance boats. Our Marine Components segment has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois which is shared with Security Products.
Our Marine Components segment manufactures and distributes wake enhancement systems, stainless steel exhaust components, gauges, throttle controls, trim tabs and related hardware and accessories primarily for ski/wakeboard boats (tow boats) and performance boats. Our Marine Components segment has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois which is shared with Security Products.
We monitor conditions that could lead to a safety incident and keep track of injuries through reporting systems in accordance with laws in the jurisdictions in which we operate. We track this data to assess the quality of our safety performance. We use lost time incidents as a key measure of worker safety.
We monitor conditions that could lead to a safety incident and keep track of injuries through reporting systems in accordance with laws in the jurisdictions in which we operate. We track this data to assess the quality of our safety performance, and we use lost time incidents as a key measure of worker safety.
Our major trademarks and brand names in addition to CompX ® include: ​ ​ ​ ​ ​ Security Products Security Products Marine Components CompX ® Security Products™ ​ Lockview ® ​ CompX Marine ® National Cabinet Lock ® ​ System 64 ® ​ Custom Marine ® Fort Lock ® ​ SlamCAM ® ​ Livorsi ® Marine Timberline ® Lock ​ RegulatoR ® ​ Livorsi II ® Marine Chicago Lock ® ​ CompXpress ® ​ CMI Industrial ® STOCK LOCKS ® ​ GEM ® ​ Custom Marine ® Stainless Exhaust KeSet ® ​ Turbine™ ​ The #1 Choice in Performance Boating ® TuBar ® ​ NARC iD ® ​ Mega Rim ® StealthLock ® ​ NARC ® ​ Race Rim ® ACE ® ​ ecoForce ® ​ Vantage View ® ACE ® II ​ Pearl ® ​ GEN-X ® CompX eLock ® ​ ​ ​ ​ ​ Sales, Marketing and Distribution A majority of our component sales are direct to large OEM customers through our factory-based sales and marketing professionals supported by engineers working in concert with field salespeople and independent manufacturer’s representatives.
Our major trademarks and brand names in addition to CompX ® include: ​ ​ ​ ​ ​ Security Products Security Products Marine Components CompX ® Security Products™ ​ Lockview ® ​ CompX Marine ® National Cabinet Lock ® ​ System 64 ® ​ Custom Marine ® Fort Lock ® ​ SlamCAM ® ​ Livorsi ® Marine Timberline ® Lock ​ RegulatoR ® ​ Livorsi II ® Marine Chicago Lock ® ​ CompXpress ® ​ CMI Industrial ® STOCK LOCKS ® ​ GEM ® ​ Custom Marine ® Stainless Exhaust KeSet ® ​ Turbine™ ​ The #1 Choice in Performance Boating ® TuBar ® ​ NARC iD ® ​ Mega Rim ® StealthLock ® ​ NARC ® ​ Race Rim ® ACE ® ​ ecoForce ® ​ Vantage View ® ACE ® II ​ Pearl ® ​ GEN-X ® CompX eLock ® ​ ​ ​ ​ ​ Sales, Marketing and Distribution A majority of our component sales are direct to large OEM customers through our factory-based sales and marketing professionals supported by engineers working in concert with field salespeople and independent manufacturer’s - 5 - ​ representatives.
We currently do not anticipate any significant costs or expenses relating to such matters; however, it is possible future laws and regulations may require us to incur significant additional expenditures. Human Capital Resources Employees – Our operating results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent.
We currently do not anticipate any significant costs or expenses relating to such matters; however, it is possible future laws and regulations may require us to incur significant additional expenditures. - 6 - ​ Human Capital Resources Employees – Our operating results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent.
In the event we are unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets in which we compete. Consequently, overall operating margins can be affected by commodity-related raw material cost pressures.
In the event we are unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets in which we compete. Consequently, overall operating margins can be negatively affected by commodity-related raw material cost pressures.
Our Security Products segment competes against a number of domestic and foreign manufacturers. Our Marine Components segment competes with small domestic manufacturers and is minimally affected by foreign competitors. - 5 - ​ Environmental, Social and Governance (“ESG”) We seek to operate our business in line with sound ESG principles that include corporate governance, social responsibility, sustainability and cybersecurity.
Our Security Products segment competes against a number of domestic and foreign manufacturers. Our Marine Components segment competes with small domestic manufacturers and is minimally affected by foreign competitors. Environmental, Social and Governance (“ESG”) We seek to operate our business in line with sound ESG principles that include corporate governance, social responsibility, sustainability and cybersecurity.
Information contained on our website is not a part of this Annual Report. We are an electronic filer. The SEC maintains an internet website at www.sec .gov that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC.
Information contained on our website is not a part of this Annual Report. We are an electronic filer. The SEC maintains an internet website at www.sec .gov that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. - 7 - ​
We expect - 6 - ​ our manufacturing facilities to produce our products safely and in compliance with local regulations, policies, standards and practices intended to protect the environment and people, and we have established policies designed to promote such compliance. We require our employees to comply with such requirements.
We expect our manufacturing facilities to produce our products safely and in compliance with local regulations, policies, standards and practices intended to protect the environment and our people, and we have established policies designed to promote compliance. We require our employees to comply with such requirements.
These products include: ● disc tumbler locks which provide moderate security and generally represent the lowest cost lock we produce; - 3 - ​ ● pin tumbler locking mechanisms which are more costly to produce and are used in applications requiring higher levels of security, including KeSet ® and System 64 ® (which each allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure), TuBar ® and Turbine ™ ; and ● our innovative CompX eLock ® and StealthLock ® electronic locks which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe, radio frequency or other keypad credential.
These products include: ● disc tumbler locks which provide moderate security and generally represent the lowest cost lock we produce; ● pin tumbler locks which are more costly to produce and are used in applications requiring higher levels of security, including KeSet ® and System 64 ® (which each allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure), TuBar ® and Turbine ™ ; and ● our innovative CompX eLock ® and StealthLock ® electronic locks which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe, radio frequency or other keypad credential.
We are also a leading manufacturer of wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls and trim tabs for the recreational marine industry. Our products are principally designed for use in medium to high-end product applications where design, quality and durability are valued by our customers. At December 31, 2022, NL Industries, Inc.
We are also a leading manufacturer of wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls and trim tabs for the recreational marine industry. Our products are principally designed for use in medium to high-end product applications where design, quality and durability are valued by our customers. At December 31, 2023, NL Industries, Inc.
(NYSE: NL) owns approximately 87% of our outstanding common stock, Valhi, Inc. (NYSE: VHI) owns approximately 83% of NL’s outstanding common stock and a subsidiary of Contran Corporation owns approximately 92% of Valhi’s outstanding common stock. As discussed in Note 1 to our Consolidated Financial Statements, a majority of Contran’s outstanding voting stock is held directly by Lisa K.
(NYSE: NL) owns approximately 87% of our outstanding common stock, Valhi, Inc. (NYSE: VHI) owns approximately 83% of NL’s outstanding common stock and a subsidiary of Contran Corporation owns approximately 91% of Valhi’s outstanding common stock. As discussed in Note 1 to our Consolidated Financial Statements, a majority of Contran’s outstanding voting stock is held directly by Lisa K.
The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and her late sister and their children and for which a third-party financial institution serves as trustee. Consequently, at December 31, 2022, Ms.
The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and her late sister and their children and for which a third-party financial institution serves as trustee. Consequently, at December 31, 2023, Ms.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to the Consolidated Financial Statements. Manufacturing, Operations and Products Security Products .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to the Consolidated Financial Statements. - 3 - ​ Manufacturing, Operations and Products Security Products .
We operate three low-emission manufacturing facilities and our production processes requiring waste-water discharge are consolidated at our Mauldin, South Carolina facility. This facility has received a ReWa Gold Award multiple years for its exemplary performance from Renewable Water Resources, an organization which sets regulatory and water policies for the Mauldin facility’s geographic region.
We operate three low-emission manufacturing facilities and our production processes requiring waste-water discharge are consolidated at our Mauldin, South Carolina facility. This facility has received a ReWa Compliance Excellence Award multiple years for its exemplary performance from Renewable Water Resources, an organization which sets regulatory and water policies for the Mauldin facility’s geographic region.
We are committed to maintaining a strong safety culture where all workers meet or exceed required industry performance standards and continuously seek to improve occupational and process safety performance. We are conducting our business in ways that provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve such results.
We are committed to maintaining a strong safety culture where all workers meet or exceed required industry performance standards, and we continuously seek to improve occupational and process safety performance. We conduct our business in ways that provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve these results.
We define lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. We had lost time incidents of nil in 2020, one in 2021 and three in 2022. Diversity and Inclusion – We recognize that everyone deserves respect and equal treatment.
We define lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. We had one lost time incident in 2021, three in 2022 and one in 2023. Diversity and Inclusion – We recognize that everyone deserves respect and equal treatment.
We periodically update our board of directors on our cyber-related risks and cybersecurity programs. In an effort to align our non-employee directors’ financial interests with those of our stockholders, our Board established share ownership guidelines for our non-management directors. Regulatory and Environmental Matters We have a history of incorporating environmental management and compliance in our operations and decision making.
In an effort to align our non-employee directors’ financial interests with those of our stockholders, our board of directors established share ownership guidelines for our non-management directors. Regulatory and Environmental Matters We have a history of incorporating environmental management and compliance in our operations and decision making.
In addition to salaries, these programs can include annual bonuses, defined contribution plans with employer matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance. As of December 31, 2022, we employed 609 people, all in the United States.
In addition to salaries, these programs can include annual bonuses, a defined contribution plan with employer matching, a profit sharing plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs and tuition assistance. As of December 31, 2023, we employed 555 people, all in the United States.
Patents generally have a term of 20 years, and our patents have remaining terms ranging from 1 year to 18 years at December 31, 2022.
Patents generally have a term of 20 years, and our patents have remaining terms ranging from less than 1 year to 17 years at December 31, 2023.
For presentation purposes, annual information in this Form 10-K is presented as ended on December 31. The actual date of our fiscal years ended December 31, 2020, 2021 and 2022 are January 3, 2021, January 2, 2022, and January 1, 2023, respectively. Our fiscal year ending December 31, 2020 was a 53-week year.
For presentation purposes, annual information in this Form 10-K is presented as ended on December 31. The actual date of our fiscal years ended December 31, 2021, 2022 and 2023 are January 2, 2022, January 1, 2023, and December 31, 2023, respectively. Each of the years ending December 31, 2021, 2022, and 2023 consisted of 52 weeks.
For information regarding our three principal manufacturing facilities, see “Item 2 – Properties.” Raw Materials Our primary raw materials are: ● Security Products - zinc and brass (for the manufacture of locking mechanisms). ● Marine Components - stainless steel (for the manufacture of exhaust headers and pipes and wake enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components.
For information regarding our three principal manufacturing facilities, see “Item 2 – Properties.” Raw Materials Our primary raw materials are: ● Security Products - zinc and brass (for the manufacture of locking mechanisms). ● Marine Components - stainless steel (for the manufacture of exhaust headers and pipes and wake enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components. - 4 - ​ These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for approximately 13% of our total cost of sales for 2023.
We sell to a diverse customer base with only two customers representing 10% or more of our sales in 2022 (United States Postal Service representing 14% and Malibu Boats, LLC representing 12%). Our largest ten customers accounted for approximately 52% of our sales in 2022. Competition The markets in which we participate are highly competitive.
We sell to a diverse customer base with only one customer representing 10% or more of our sales in 2023 (United States Postal Service representing 24% of which 11% related to a pilot project). Our largest ten customers accounted for approximately 52% of our sales in 2023. Competition The markets in which we participate are highly competitive.
All manufacturing facilities have detailed, site-specific emergency response procedures that we believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication. At a corporate level, we engage in periodic reviews of our cybersecurity programs, including cybersecurity risk and threats.
All manufacturing facilities have detailed, site-specific emergency response procedures that we believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication.
When purchased on the spot market, - 4 - ​ each of these raw materials may be subject to sudden and unanticipated price increases. When possible, we seek to mitigate the impact of fluctuations in these raw material costs on our margins through improvements in production efficiencies or other operating cost reductions.
When possible, we seek to mitigate the impact of fluctuations in these raw material costs on our margins through improvements in production efficiencies or other operating cost reductions.
A substantial portion of our Security Products’ sales consist of products with specialized adaptations to an individual customer’s specifications, some of which are listed above. We also have a standardized product line suitable for many customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer distributors via our STOCK LOCKS ® distribution program.
We also have a standardized product line suitable for many customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer (“OEM”) distributors via our STOCK LOCKS ® distribution program. Marine Components .
Prices began to stabilize in the latter half of 2022, although at elevated levels. The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022.
Prices for aluminum and stainless steel, the primary raw material used for the manufacture of marine components, including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs, experienced significant volatility during 2021 and 2022 but were more stable in 2023.
We occasionally enter into short-term commodity-related raw material supply arrangements to mitigate the impact of future price increases in commodity-related raw materials, including zinc, brass and stainless steel. These arrangements generally provide for stated unit prices based upon specified purchase volumes, which help us to stabilize our commodity-related raw material costs to a certain extent.
Total material costs, including purchased components, represented approximately 48% of our cost of sales in 2023. We occasionally enter into short-term commodity-related raw material supply arrangements to mitigate the impact of future price increases in commodity-related raw materials, including zinc, brass, aluminum and stainless steel.
Based on current economic conditions, we expect the prices for zinc, brass, stainless steel and other manufacturing materials in 2023 to be relatively stable, although at the elevated levels we experienced in the second half of 2022.
Based on current economic conditions, we expect the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2024 to be relatively stable. When purchased on the spot market, each of these raw materials may be subject to sudden and unanticipated price increases.
At other times we may make spot market buys of larger quantities of raw materials to take advantage of favorable pricing or volume-based discounts. Prices for the primary commodity-related raw materials used in the manufacture of our locking mechanisms, primarily zinc and brass, generally increased throughout 2021 and the first half of 2022.
After increasing in 2021 and the first half of 2022, prices for the primary commodity-related raw materials used in the manufacture of our locking mechanisms, primarily zinc and brass, generally began to stabilize in the latter half of 2022 and into 2023 and generally began to soften in the latter half of 2023.
Removed
These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for approximately 17% of our total cost of sales for 2022. Total material costs, including purchased components, represented approximately 47% of our cost of sales in 2022.
Added
A substantial portion of our Security Products’ sales consist of products with specialized adaptations to an individual customer’s specifications, some of which are listed above.
Removed
Our cybersecurity programs are built on operations and compliance foundations. Operations focus on continuous detection, prevention, measurement, analysis, and response to cybersecurity alerts and incidents and on emerging threats. Compliance establishes oversight of our cybersecurity programs by creating risk-based controls to protect the integrity, confidentiality, accessibility, and availability of company data stored, processed, or transferred.
Added
These arrangements generally provide for stated unit prices based upon specified purchase volumes, which help us to stabilize our commodity-related raw material costs to a certain extent. At other times we may make spot market buys of larger quantities of raw materials to take advantage of favorable pricing or volume-based discounts.
Added
Although raw commodity costs declined during 2023 from elevated levels experienced in 2021 and 2022, in most cases materials we purchase also include processing and conversion costs such as alloying, extrusion and rolling, which continue to be elevated due to costs of labor, transportation and energy.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the laws of certain countries do not protect intellectual property rights to the same extent as the laws of the United States. Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third party use, which could adversely affect our competitive position.
Biggest changeTherefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third party use, which could adversely affect our competitive position. Third parties may claim that we or our customers are infringing upon their intellectual property rights.
The occurrence of any of these factors could result in reduced earnings or operating losses. - 7 - ​ ● Competitors may be able to drive down prices for our products beyond our ability to adjust costs because their costs are lower than ours, especially products sourced from Asia. ● Competitors’ financial, technological and other resources may be greater than our resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. ● A reduction of our market share with one or more of our key customers, or a reduction in one or more of our key customers’ market share for their end-use products, may reduce demand for our products. ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our products. ● We may not be able to sustain a cost structure that enables us to be competitive. ● Customers may no longer value our product design, quality or durability over the lower cost products of our competitors.
The occurrence of any of these factors could result in reduced earnings or operating losses. ● Competitors may be able to drive down prices for our products beyond our ability to adjust costs because their costs are lower than ours, especially products sourced from Asia. ● Competitors’ financial, technological and other resources may be greater than our resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. ● A reduction of our market share with one or more of our key customers, or a reduction in one or more of our key customers’ market share for their end-use products, may reduce demand for our products. ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our products. ● We may not be able to sustain a cost structure that enables us to be competitive. ● Customers may no longer value our product design, quality or durability over the lower cost products of our competitors.
Due to the increase in global cybersecurity incidents it has become increasingly - 9 - ​ difficult to obtain insurance coverage on reasonable pricing terms to mitigate some risks associated with technology failures or cybersecurity breaches, and we are experiencing such difficulties in obtaining insurance coverage.
Due to the increase in global cybersecurity incidents it has become increasingly difficult to obtain insurance coverage on reasonable pricing terms to mitigate some risks associated with technology failures or cybersecurity breaches, and we are experiencing such difficulties in obtaining insurance coverage.
If such increased costs of production were to materialize, we may be unable to pass price increases on to our customers to compensate for increased production costs, which may decrease our liquidity, operating income and results of operations.
If such increased costs of production were to materialize, we may be unable to pass price increases - 9 - ​ on to our customers to compensate for increased production costs, which may decrease our liquidity, operating income and results of operations.
We rely on information technology systems to manage, process and analyze data, as well as to facilitate the manufacture and distribution of our products to and from our plants. We receive, process and ship orders, manage the billing of and collections from our customers, and manage the accounting for and payment to our vendors.
We rely on information technology systems to manage, process and analyze data, as well as to facilitate the manufacture and distribution of our products to and from our facilities. We receive, process and ship orders, manage the billing of and collections from our customers, and manage the accounting for and payment to our vendors.
Global economic and political conditions, including natural disasters, terrorist acts, global conflicts and public health crises such as pandemics, could prevent our vendors from being able to supply these components.
Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions, global conflicts and public health crises such as pandemics, could prevent our vendors from being able to supply these components.
While we will continue to emphasize the introduction of innovative new product features that target customer-specific opportunities, we do not know if any new product features we introduce will achieve the same degree of success that we have achieved with our existing products.
While we will continue to emphasize the introduction of innovative new product features that target customer-specific opportunities, we do not know if any new product features we introduce will achieve the same degree of success that we have achieved with our existing products. At times we work with new and existing customers on specific product innovations.
Others may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Further, we do not know if any of our pending trademark or patent applications will be approved. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights.
Third parties may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Further, we do not know if any of our pending trademark or patent applications will be approved.
Should our vendors not be able to meet their supply obligations or should we be otherwise unable to obtain necessary raw materials or components, we may incur higher supply costs or may be required to reduce production levels, either of which may decrease our liquidity or negatively impact our financial condition or results of operations as we may be unable to offset the higher costs with increases in our selling prices or reductions in other operating costs. - 8 - ​ Legal, Compliance and Regulatory Risk Factors Failure to protect our intellectual property rights or claims by others that we infringe their intellectual property rights could substantially harm our business.
Should our vendors not be able to meet their supply obligations or should we be otherwise unable to obtain necessary raw materials or components, we may incur higher supply costs or may be required to reduce production levels, either of which may decrease our liquidity or negatively impact our financial condition or results of operations as we may be unable to offset the higher costs with increases in our selling prices or reductions in other operating costs.
Third parties may claim that we or our customers are infringing upon their intellectual property rights. Even if we believe that such claims are without merit, they can be time-consuming and costly to defend and distract our management’s and technical staff’s attention and resources.
Even if we believe that such claims are without merit, they can be time-consuming and costly to defend and distract our management’s and technical staff’s attention and resources.
As we attempt to introduce new product features in the future, we do not know if we will be able to increase production volumes without encountering these or other problems, which might negatively impact our financial condition or results of operations. Higher costs or limited availability of our raw materials could negatively impact our financial results.
If a customer were to ultimately reject or abandon custom product innovation efforts, we may not be able to recover our development costs. - 8 - ​ Higher costs or limited availability of our raw materials could negatively impact our financial results.
Removed
Introduction of new product features typically requires us to increase production volume on a timely basis while maintaining product quality. Manufacturers often encounter difficulties in increasing production volumes, including delays, quality control problems and shortages of qualified personnel or raw materials.
Added
Sometimes we have a cost sharing arrangement for development efforts although we may also fully bear the development costs.
Added
Legal, Compliance and Regulatory Risk Factors Failure to protect our intellectual property rights or claims by others that we infringe their intellectual property rights could substantially harm our business.
Added
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights. In addition, the laws of certain countries do not protect intellectual property rights to the same extent as the laws of the United States.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth the location, size and business operating segment for each of our principal operating facilities. ​ ​ ​ ​ ​ ​ ​ ​ Business ​ Size Facility Name ​ Segment ​ Location ​ (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 ​ SP – Security Products business segment MC – Marine Components business segment (1) ISO-9001 registered facilities We believe all of our facilities are well maintained and satisfactory for their intended purposes.
Biggest changeThe following table sets forth the location, size and business operating segment for each of our principal operating facilities. ​ ​ ​ ​ ​ ​ ​ ​ Business ​ Size Facility Name ​ Segment ​ Location ​ (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 ​ SP – Security Products business segment MC – Marine Components business segment (1) ISO-9001 registered facilities We believe all of our facilities are well maintained and satisfactory for their intended purposes. - 11 - ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph shows the value at December 31 of each year assuming an original investment of $100 at December 31, 2017 and reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2017 2018 2019 2020 2021 2022 CompX International Inc. ​ $ 100 ​ $ 104 ​ $ 113 ​ $ 114 ​ $ 187 ​ $ 172 Russell 2000 Index ​ 100 ​ 89 ​ 112 ​ 134 ​ 154 ​ 122 Peer Group ​ 100 ​ 81 ​ 87 ​ 108 ​ 96 ​ 65 ​ ​ The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act.
Biggest changeThe graph shows the value at December 31 of each year assuming an original investment of $100 at December 31, 2018 and reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2018 2019 2020 2021 2022 2023 CompX International Inc. ​ $ 100 ​ $ 109 ​ $ 110 ​ $ 180 ​ $ 166 ​ $ 238 Russell 2000 Index ​ 100 ​ 126 ​ 151 ​ 173 ​ 138 ​ 161 Peer Group ​ 100 ​ 108 ​ 134 ​ 119 ​ 80 ​ 96 ​ ​ The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends. Our Class A common stock is listed and traded on the NYSE American (symbol: CIX). As of February 21, 2023, there were approximately 16 holders of record of CompX Class A common stock. Performance Graph .
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends. Our Class A common stock is listed and traded on the NYSE American (symbol: CIX). As of February 21, 2024, there were approximately 16 holders of record of CompX Class A common stock. Performance Graph .
Set forth below is a line graph comparing the yearly change in our cumulative total stockholder returns 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 from December 31, 2017 through December 31, 2022.
Set forth below is a line graph comparing the yearly change in our cumulative total stockholder returns 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 from December 31, 2018 through December 31, 2023.
Equity compensation plan information. We have a share based incentive compensation plan, approved by our stockholders, pursuant to which an aggregate of 200,000 shares of our Class A common stock can be awarded to non-employee members of our board of directors. At December 31, 2022, 131,050 shares are available for award under this plan.
Equity compensation plan information. We have a share based incentive compensation plan, approved by our stockholders, pursuant to which an aggregate of 200,000 shares of our Class A common stock can be awarded to non-employee members of our board of directors. At December 31, 2023, 124,450 shares are available for award under this plan.
See Note 9 to the Consolidated Financial Statements. - 11 - ​ ​ ​
See Note 9 to the Consolidated Financial Statements. - 13 - ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating income margin increased for 2021 compared to 2020 primarily due to increased coverage of operating costs and expenses on higher sales, partially offset by the higher production costs impacting gross margin and increased sales and administrative-related salary and benefit costs of $.7 million. - 14 - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ ​ (In millions) ​ ​ ​ ​ Marine Components: ​ ​ ​ ​ Net sales ​ $ 26.6 ​ $ 35.7 ​ $ 52.1 34 % 46 % Cost of sales ​ 19.6 ​ 26.6 ​ 38.7 36 45 ​ Gross margin ​ 7.0 ​ 9.1 ​ 13.4 29 47 ​ Operating costs and expenses ​ 2.9 ​ 3.5 ​ 3.8 18 9 ​ Operating income ​ $ 4.1 ​ $ 5.6 ​ $ 9.6 37 71 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 26.4 % 25.4 % 25.6 % ​ ​ ​ ​ Operating income margin ​ 15.3 ​ 15.7 ​ 18.4 ​ ​ Marine Components.
Biggest changeOperating income margin decreased for 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased operating costs and expenses, resulting from higher salaries and employment related costs, partially offset by increased coverage of operating costs and expenses from higher sales. - 16 - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ ​ (In millions) ​ ​ ​ ​ Marine Components: ​ ​ ​ ​ Net sales ​ $ 35.7 ​ $ 52.1 ​ $ 40.1 46 % (23) % Cost of sales ​ 26.6 ​ 38.7 ​ 29.3 45 (24) ​ Gross margin ​ 9.1 ​ 13.4 ​ 10.8 47 (19) ​ Operating costs and expenses ​ 3.5 ​ 3.8 ​ 3.6 9 (5) ​ Operating income ​ $ 5.6 ​ $ 9.6 ​ $ 7.2 71 (25) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 25.4 % 25.6 % 27.0 % ​ ​ ​ ​ Operating income margin ​ 15.7 ​ 18.4 ​ 18.0 ​ ​ Marine Components.
Our determination is based upon, among other things, our estimates of the amount of future net cash flows to be generated by the long-lived asset (Level 3 inputs) and our estimates of the current fair value of the asset. - 16 - ​ Significant judgment is required in estimating such cash flows.
Our determination is based upon, among other things, our estimates of the amount of future net cash flows to be generated by the long-lived asset (Level 3 inputs) and our estimates of the current fair value of the asset. Significant judgment is required in estimating such cash flows.
The - 18 - ​ amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which we might pay. During 2021, we acquired 75,000 shares of our Class A common stock in market transactions for $1.3 million.
The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which we might pay. During 2021, we acquired 75,000 shares of our Class A common stock in market transactions for $1.3 million.
Operating costs and expenses increased in 2022 compared to 2021 predominantly due to higher salary and employment related costs which increased by $.7 million. As a percentage of sales, operating costs and expenses decreased in 2022 compared to 2021 primarily due to the effect of higher sales.
Operating costs and expenses increased in 2022 compared to 2021 predominantly due to higher salary and employment related costs which increased by $.7 million. As a percentage of sales, operating costs and expenses decreased in 2022 compared to 2021 primarily due to the effect of higher sales. Operating Income.
Operating income as a percentage of net sales increased in 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales.
Operating income as a percentage of net sales increased in 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales. Outlook.
We have entered into an unsecured revolving demand promissory note with Valhi under which, as amended, we have agreed to loan Valhi up to $25 million. Our loan to Valhi, as amended, bears interest at prime rate plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2024.
We have entered into an unsecured revolving demand promissory note with Valhi under which, as amended, we have agreed to loan Valhi up to $25 million. Our loan to Valhi, as amended, bears interest at prime rate plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2025.
In 2022, we used the qualitative assessment for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as we concluded it is more-likely- than-not the fair value of the Security Products reporting unit exceeded its carrying amount.
In 2023, we used the qualitative assessment for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as we concluded it is more-likely-than-not the fair value of the Security Products reporting unit exceeded its carrying amount.
Consolidated cash flows Operating activities. Trends in cash flows from operating activities, excluding changes in assets and liabilities, for the last three years have generally been similar to the trends in our earnings. Depreciation and amortization were comparable in each of 2022, 2021 and 2020. See Note 1 to our Consolidated Financial Statements.
Consolidated cash flows Operating activities. Trends in cash flows from operating activities, excluding changes in assets and liabilities, for the last three years have generally been similar to the trends in our earnings. Depreciation and amortization were comparable in each of 2023, 2022 and 2021. See Note 1 to our Consolidated Financial Statements.
We have discussed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board of Directors. ● Goodwill – Our goodwill totaled $23.7 million at December 31, 2022, all relating to our Security Products reporting unit, which corresponds to our Security Products operating segment.
We have discussed the development, selection and disclosure of our critical accounting estimates with the audit committee of our board of directors. ● Goodwill – Our goodwill totaled $23.7 million at December 31, 2023, all relating to our Security Products reporting unit, which corresponds to our Security Products operating segment.
Cost of sales increased in 2022 compared to 2021 primarily due to the effects of the higher sales, as well as increased production costs at both Security Products and Marine Components. Gross margin as a percentage of sales decreased over the same period primarily due to the decrease in the Security Products gross margin percentage.
Cost of sales increased in 2022 compared to 2021 primarily due to the effects of the higher sales, as well as increased production costs at both Security Products and Marine Components. Gross margin as a percentage of sales decreased over the same period primarily due to the decrease in the Security Products gross margin percentage. Operating Costs and Expenses .
As a percentage of net sales, operating income increased in 2022 compared to 2021 and increased in 2021 compared to 2020. Operating margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and operating costs discussed above. General .
As a percentage of net sales, operating income increased in 2023 compared to 2022 and increased in 2022 compared to 2021. Operating margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and operating costs discussed above. General .
We believe the most critical accounting policies and estimates involving significant judgments and estimates primarily relate to the considerations in the impairment assessments for goodwill and certain long-lived assets.
We believe the most critical accounting policies and estimates involving significant judgment primarily relate to the considerations in the impairment assessments for goodwill and certain long-lived assets.
We did not evaluate any long-lived assets for impairment during 2022 because no such impairment indicators were present.
We did not evaluate any long-lived assets for impairment during 2023 because no such impairment indicators were present.
To the extent that actual operating results or other developments differ materially from our expectations, our liquidity could be adversely affected. All of our $59.9 million aggregate cash, cash equivalents and marketable securities at December 31, 2022 were held in the U.S.
To the extent that actual operating results or other developments differ materially from our expectations, our liquidity could be adversely affected. All of our $76.7 million aggregate cash, cash equivalents and marketable securities at December 31, 2023 were held in the U.S.
See Notes 1 and 6 to our Consolidated Financial Statements. ● Long-lived assets – The net book value of our property and equipment totaled $28.7 million at December 31, 2022. We assess property and equipment for impairment only when circumstances indicate an impairment may exist.
See Notes 1 and 6 to our Consolidated Financial Statements. ● Long-lived assets – The net book value of our property and equipment totaled $25.9 million at December 31, 2023. We assess property and equipment for impairment only when circumstances indicate an impairment may exist.
We also manufacture wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through our Marine Components segment. Operating Income Overview We reported operating income of $25.4 million in 2022 compared to operating income of $20.5 million in 2021 and $11.8 million in 2020.
We also manufacture wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through our Marine Components segment. Operating Income Overview We reported operating income of $25.4 million in each of 2023 and 2022 and $20.5 million in 2021.
For comparative purposes, we have provided 2020 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days in Inventory: ​ 2020 ​ 2021 ​ 2022 Security Products ​ 75 Days 95 Days 101 Days Marine Components ​ 75 Days 97 Days 95 Days Consolidated CompX ​ 75 Days 96 Days 99 Days Investing activities .
For comparative purposes, we have provided 2021 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days in Inventory: ​ 2021 ​ 2022 ​ 2023 Security Products ​ 95 Days 101 Days 77 Days Marine Components ​ 97 Days 95 Days 175 Days Consolidated CompX ​ 96 Days 99 Days 95 Days Investing activities .
The materials used in our products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass and stainless steel. Total material costs represented approximately 47% of our cost of sales in 2022, with commodity-related raw materials representing approximately 17% of our cost of sales.
The materials used in our products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel. Total material costs represented approximately 48% of our cost of sales in 2023, with commodity-related raw materials representing approximately 13% of our cost of sales.
See Note 2 to our Consolidated Financial Statements. We expect our capital expenditures for 2023 will be approximately $3.0 million primarily to meet our expected customer demand and those required to properly maintain our facilities and technology infrastructure. Capital spending for 2023 is expected to be funded through cash on hand and cash generated from operations.
We expect our capital expenditures for 2024 will be approximately $3.0 million primarily to meet our expected customer demand and those required to properly maintain our facilities and technology infrastructure. Capital spending for 2024 is expected to be funded through cash on hand and cash generated from operations.
Results of Operations - 2022 Compared to 2021 and 2021 Compared to 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ ​ (In millions) ​ ​ ​ ​ Net sales ​ $ 114.5 ​ $ 140.8 ​ $ 166.6 23 % 18 % Cost of sales ​ 81.7 ​ 98.1 ​ 117.8 20 20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 32.8 ​ 42.7 ​ 48.8 30 14 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating costs and expenses ​ 21.0 ​ 22.2 ​ 23.4 6 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 11.8 ​ $ 20.5 ​ $ 25.4 74 24 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent of net sales: ​ ​ ​ ​ Cost of sales ​ 71.3 % 69.7 % 70.7 % ​ ​ ​ Gross margin ​ 28.7 ​ 30.3 ​ 29.3 ​ Operating costs and expenses ​ 18.4 ​ 15.8 ​ 14.0 ​ Operating income ​ 10.3 ​ 14.6 ​ 15.3 ​ ​ Net Sales.
Results of Operations - 2023 Compared to 2022 and 2022 Compared to 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ ​ (In millions) ​ ​ ​ ​ Net sales ​ $ 140.8 ​ $ 166.6 ​ $ 161.3 18 % (3) % Cost of sales ​ 98.1 ​ 117.8 ​ 112.1 20 (5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 42.7 ​ 48.8 ​ 49.2 14 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating costs and expenses ​ 22.2 ​ 23.4 ​ 23.8 5 2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 20.5 ​ $ 25.4 ​ $ 25.4 24 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent of net sales: ​ ​ ​ ​ Cost of sales ​ 69.7 % 70.7 % 69.5 % ​ ​ ​ Gross margin ​ 30.3 ​ 29.3 ​ 30.5 ​ Operating costs and expenses ​ 15.8 ​ 14.0 ​ 14.7 ​ Operating income ​ 14.6 ​ 15.3 ​ 15.8 ​ ​ Net Sales.
For additional information regarding our segments refer to Note 2 to our Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ ​ (In millions) ​ ​ ​ ​ Security Products: ​ ​ ​ ​ Net sales ​ $ 87.9 ​ $ 105.1 ​ $ 114.5 20 % 9 % Cost of sales ​ 62.1 ​ 71.5 ​ 79.1 15 11 ​ Gross margin ​ 25.8 ​ 33.6 ​ 35.4 30 5 ​ Operating costs and expenses ​ 10.9 ​ 12.0 ​ 12.7 11 5 ​ Operating income ​ $ 14.9 ​ $ 21.6 ​ $ 22.7 45 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 29.4 % 32.0 % 31.0 % ​ ​ Operating income margin ​ 17.0 ​ 20.6 ​ 19.9 ​ ​ Security Products.
For additional information regarding our segments refer to Note 2 to our Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ ​ (In millions) ​ ​ ​ ​ Security Products: ​ ​ ​ ​ Net sales ​ $ 105.1 ​ $ 114.5 ​ $ 121.2 9 % 6 % Cost of sales ​ 71.5 ​ 79.1 ​ 82.8 11 5 ​ Gross margin ​ 33.6 ​ 35.4 ​ 38.4 5 8 ​ Operating costs and expenses ​ 12.0 ​ 12.7 ​ 13.5 5 6 ​ Operating income ​ $ 21.6 ​ $ 22.7 ​ $ 24.9 5 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 32.0 % 31.0 % 31.7 % ​ ​ Operating income margin ​ 20.6 ​ 19.9 ​ 20.6 ​ ​ Security Products.
Additionally, we have purchase obligations of $17.7 million ($16.3 million payable in 2023 and $1.4 million payable in 2024) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2022.
Additionally, we have purchase obligations of $18.3 million ($17.5 million payable in 2024 and $.8 million payable in 2025/2026) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2023.
Evaluations of possible impairment utilizing the quantitative impairment test require us to estimate, among other factors: forecasts of future operating results, revenue growth, operating margin, tax rates, capital expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values, and fair values of our reporting units and assets.
However, future events and circumstances could result in materially different findings which could result in the recognition of a material goodwill impairment. - 18 - ​ Evaluations of possible impairment utilizing the quantitative impairment test require us to estimate, among other factors: forecasts of future operating results, revenue growth, operating margin, tax rates, capital expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values, and fair values of our reporting units and assets.
Regular quarterly dividends paid totaled $5.0 million ($.40 per share, or $.10 per share per quarter) in 2020, $9.9 million ($.80 per share, or $.20 per share per quarter) in 2021, and $12.4 million ($1.00 per share, or $.25 per share per quarter) in 2022.
Regular quarterly dividends paid totaled $9.9 million ($.80 per share, or $.20 per share per quarter) in 2021, and $12.4 million and $12.3 million ($1.00 per share, or $.25 per share per quarter) in 2022 and 2023, respectively.
As a member of the group of companies consolidated for U.S. federal income tax purposes with Contran, the parent of our consolidated U.S. federal - 13 - ​ income tax group, we compute our provision for income taxes on a separate company basis, using the tax elections made by Contran.
As a member of the group of companies consolidated for U.S. federal income tax purposes with Contran, the parent of our consolidated U.S. federal income tax group, we compute our provision for income taxes on a separate company basis, using the tax elections made by Contran. - 15 - ​ Our effective income tax rate was 24% in each of 2021, 2022 and 2023.
Prices for the primary commodity-related raw materials used in the manufacture of our locking mechanisms, primarily zinc and brass, generally increased throughout 2021 and the first half of 2022. Prices began to stabilize in the latter half of 2022, although at elevated levels.
After increasing in 2021 and the first half of 2022, prices for the primary commodity-related raw materials used in the manufacture of our locking mechanisms, primarily zinc and brass, generally began to stabilize in the latter half of 2022 and into 2023 and generally began to soften in the latter half of 2023.
Operating income margin decreased for 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased operating costs and expenses, resulting from higher salaries and employment related costs, partially offset by increased coverage of operating costs and expenses from higher sales.
Operating income margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs and expenses, including higher employee salaries and benefit costs of $.6 million.
The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022.
Prices for aluminum and stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs experienced significant volatility during 2021 and 2022 but were more stable in 2023.
Marine Components net sales increased 46% in 2022 as compared to 2021. Relative to prior year, sales were $11.5 million higher to the towboat market (primarily to original equipment boat manufacturers), $2.1 million higher to the engine builder market, and $2.0 million higher to the industrial market.
Relative to prior year, sales were $11.5 million higher to the towboat market (primarily to original equipment boat manufacturers), $2.1 million higher to the engine builder market, and $2.0 million higher to the industrial market.
Based on current economic conditions, we expect the prices for zinc, brass, stainless steel and other manufacturing materials in 2023 to be relatively stable, although at the elevated levels we experienced in the second half of 2022. We occasionally enter into short-term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs.
Based on current economic conditions, we expect the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2024 to be relatively stable. We occasionally enter into short-term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs. See Item 1 - “Business- Raw Materials.” Interest Income.
Events and circumstances considered in our impairment evaluations, such as historical profits and stability of the markets served, are consistent with factors utilized with our internal projections and operating plan. However, future events and circumstances could result in materially different findings which could result in the recognition of a material goodwill impairment.
Events and circumstances considered in our impairment evaluations, such as historical profits and stability of the markets served, are consistent with factors utilized with our internal projections and operating plan.
Under the promissory note, Valhi borrowed a net $1.4 million in 2020 ($34.8 million of gross borrowings and $33.4 million of gross repayments), repaid a net $10.8 million in 2021 ($29.8 million of gross borrowings and $40.6 million of gross repayments) and repaid a net $5.5 million in 2022 ($24.3 million of gross borrowings and $29.8 million of gross repayments).
Under the promissory note, Valhi repaid a net $10.8 million in 2021 - 20 - ​ ($29.8 million of gross borrowings and $40.6 million of gross repayments), repaid a net $5.5 million in 2022 ($24.3 million of gross borrowings and $29.8 million of gross repayments) and repaid a net $2.6 million in 2023 ($27.9 million of gross borrowings and $30.5 million of gross repayments).
Operating costs and expenses increased in 2021 compared to 2020 predominantly due to higher salary and benefit costs which increased by $.9 million. As a percentage of sales, operating costs and expenses decreased in 2021 compared to 2020 primarily due to the effect of higher sales. Operating Income.
Operating costs and expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at Security Products which increased by $.6 million. As a percentage of sales, operating costs and expenses increased in 2023 compared to 2022 primarily due to the effect of the increased operating costs and expenses on lower sales.
On March 1, 2023 our board of directors declared a first quarter 2023 dividend of $.25 per share, to be paid on March 21, 2023 to CompX stockholders of record as of March 13, 2023.
On February 28, 2024 our board of directors declared a first quarter 2024 dividend of $.30 per share, to be paid on March 19, 2024 to CompX stockholders of record as of March 11, 2024.
The timing and amount for purchase obligations are based on the contractual payment amount and the contractual payment date for those commitments. Recent accounting pronouncements None.
The timing and amount - 21 - ​ for purchase obligations are based on the contractual payment amount and the contractual payment date for those commitments. Recent accounting pronouncements See Note 13 to our Consolidated Financial Statements.
The $5.0 million decrease in cash provided by operating activities was primarily the net result of: ● A higher amount of net cash used by relative changes in inventories, receivables, payables and non-tax accruals of $11.3 million, ● A $8.7 million increase in operating income in 2021, ● A $1.4 million increase in cash paid for taxes in 2021 due to higher operating income, and ● A $1.0 million decrease in interest received in 2021 due to lower average loan balances on our loan to an affiliate and the relative timing of interest received. - 17 - ​ Relative changes in working capital can have a significant effect on cash flows from operating activities.
The $8.9 million increase in cash provided by operating activities was primarily the result of: ● A higher amount of net cash provided by relative changes in inventories, receivables, payables and non-tax accruals of $7.8 million, ● A $.5 million decrease in cash paid for taxes in 2023 due to the relative timing of tax payments, and - 19 - ​ ● A $.5 million increase in interest received in 2023 due to higher interest rates and increased investment balances, partially offset by lower average loan balances on our loan to an affiliate.
Operating income as a percentage of net sales increased slightly in 2021 compared to 2020 due to increased coverage of operating costs and expenses from higher sales, partially offset by the factors impacting gross margin. Outlook.
Operating income as a percentage of net sales decreased slightly in 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales. Marine Components net sales increased 46% in 2022 as compared to 2021.
As noted above, there continue to be some global and domestic supply chain challenges and any future impacts on our operations will depend on, among other things, any future disruption in our operations or our suppliers’ operations, the impact of economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted. ​ - 15 - ​ Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements.
We have experienced global and domestic supply chain challenges, and any future impacts on our operations will depend on, among other things, any future disruption in our operations or our suppliers’ operations, the impact of economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Cost of sales increased in 2021 compared to 2020 primarily due to the effects of the higher sales, as well as increased production costs at both Security Products and Marine Components.
Cost of sales decreased in 2023 compared to 2022 primarily due to the effects of lower production costs at both Security Products and Marine Components as well as lower Marine Components sales. Gross margin as a percentage of sales increased over the same period primarily due to the factors affecting cost of sales.
For comparative purposes, we have provided 2020 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days Sales Outstanding: ​ 2020 ​ 2021 ​ 2022 Security Products ​ 35 Days 46 Days 45 Days Marine Components ​ 24 Days 30 Days 30 Days Consolidated CompX ​ 33 Days 42 Days 41 Days ​ As shown below, our average number of days in inventory increased from December 31, 2021 to December 31, 2022 due to increased inventories of certain components and raw materials that had longer lead times or for which we have experienced availability issues and from the timing of sales relative to the end of the fourth quarter, primarily at Security Products.
For comparative purposes, we have provided 2021 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days Sales Outstanding: ​ 2021 ​ 2022 ​ 2023 Security Products ​ 46 Days 45 Days 37 Days Marine Components ​ 30 Days 30 Days 31 Days Consolidated CompX ​ 42 Days 41 Days 36 Days ​ As shown below, our average number of days in inventory decreased from December 31, 2022 to December 31, 2023 primarily due to the decrease at Security Products due to the fulfillment and shipping of a significant order during the fourth quarter of 2023.
As shown below, the total average days sales outstanding was generally consistent from December 31, 2021 to December 31, 2022 and is primarily impacted by the timing of sales and collections in the last month of the year.
Relative changes in working capital can have a significant effect on cash flows from operating activities. As shown below, the total average days sales outstanding decreased from December 31, 2022 to December 31, 2023 and is primarily impacted by the timing of sales and collections in the last month of the year.
Our expectations for our operations and the markets we serve are based on a number of factors outside our control.
We expect inventory balances to be in alignment with current demand by mid-year 2024. Our expectations for our operations and the markets we serve are based on a number of factors outside our control.
Interest income in 2021 decreased compared to 2020 primarily due to lower average loan balances on our loan to an affiliate. See Notes 3 and 10 to our Consolidated Financial Statements. Provision for income taxes.
Interest income increased in 2023 compared to 2022 and increased in 2022 compared to 2021. The increase for both comparative periods is primarily due to higher interest rates and increased investment balances, partially offset by lower average loan balances on our loan to an affiliate. See Notes 3 and 10 to our Consolidated Financial Statements. Income tax expense.
See Note 10 to our Consolidated Financial Statements. During 2022 we purchased marketable debt securities totaling $33.0 million. See Note 3 to our Consolidated Financial Statements. Financing activities.
See Note 10 to our Consolidated Financial Statements. During 2022, we had gross purchases of U.S. treasury marketable securities aggregating $33.0 million. During 2023, we had gross purchases of U.S. treasury marketable securities aggregating $36.3 million and received gross proceeds totaling $36.0 million related to U.S. treasury bill maturities. See Note 3 to our Consolidated Financial Statements. Financing activities.
Our effective income tax rate was 24% in each of 2020, 2021 and 2022. See Notes 8 and 11 to our Consolidated Financial Statements. We currently expect our effective income tax rate for 2023 to be comparable to our effective income tax rate for 2022.
See Notes 8 and 11 to our Consolidated Financial Statements. We currently expect our effective income tax rate for 2024 to be comparable to our effective income tax rate for 2023. Segment Results The key performance indicator for our segments is the level of their operating income (see discussion below).
Gross margin as a percentage of sales decreased in 2021 compared to 2020 as increased coverage of fixed costs from higher sales were more than offset by higher production costs including raw materials costs (primarily stainless steel), higher shipping costs, and increased labor costs resulting from higher overtime costs and increased headcount.
Gross margin as a percentage of sales increased in 2023 compared to 2022 primarily due to lower raw material costs (primarily stainless steel and aluminum), lower supplies costs driven by lower volume, lower shipping costs and lower labor costs from reduced employee overtime due to lower sales volumes, partially offset by decreased coverage of fixed costs as a result of lower sales.
Gross margin as a percentage of net sales for 2021 increased as compared to 2020 due to increased coverage of fixed costs from higher sales, partially offset by higher production costs including increased raw materials costs across a variety of commodities and component inputs, higher shipping costs, and increased labor costs primarily due to higher overtime costs and increased headcount.
Gross margin as a percentage of net sales for 2023 increased as compared to 2022 primarily due to lower production costs (including lower material, overtime and shipping costs) and increased coverage of fixed costs on higher sales, primarily in the fourth quarter.
Our 2021 capital expenditures increased above pre-pandemic levels as we accelerated the timeline for certain projects designed to increase capacity and improve our capabilities in response to strong customer demand. Beginning in the latter half of 2022, we limited investments primarily to those expenditures required to meet our existing customer demand and to properly maintain our facilities and technology infrastructure.
Beginning in the latter half of 2022 through 2023, we limited investments primarily to those expenditures required to meet our existing customer demand and to properly maintain our facilities and technology infrastructure. See Note 2 to our Consolidated Financial Statements.
Cash provided by operating activities was $10.5 million in 2021 compared to $15.5 million in 2020.
Cash provided by operating activities was $25.8 million in 2023 compared to $16.9 million in 2022.
Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results may differ from initial estimates.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.
While we expect Marine Components net sales to remain strong during the first quarter, we expect net sales will decline as compared to 2022 as marine market demand is being challenged by higher interest rates and several original equipment boat manufacturers, including certain of our customers, have publicly announced reduced production schedules in 2023 compared to 2022.
The recreational marine industry faces strong headwinds due to higher interest rates and broader market weakness. Several original equipment boat manufacturers, including certain of our customers, have publicly announced reductions to production schedules for 2024.
Net sales increased approximately $25.8 million in 2022 compared to 2021 due to higher Marine Component sales primarily to the towboat market and, to a lesser extent, higher Security Products sales across a variety of markets. - 12 - ​ Net sales increased approximately $26.3 million in 2021 compared to 2020 primarily due to higher sales at both of our segments, particularly in the second quarter of 2021, as many of our customers were temporarily closed or reduced production during the second quarter of 2020 due to government ordered closures or reduced demand resulting from the COVID-19 pandemic.
Net sales in creased $25.8 million in 2022 compared to 2021 due to higher Marine Components sales primarily to the towboat market and, to a lesser extent, higher Security Products sales across a variety of markets. - 14 - ​ Cost of Sales and Gross Margin.
The increase in operating income in 2022 over 2021 is primarily due to higher Marine Components sales and to a lesser extent higher Security Products sales. Our operating income was negatively impacted by the COVID-19 pandemic in 2020, primarily in the second and third quarters, which significantly impacts operating income comparisons for the comparative periods.
Operating income in 2023 was comparable to 2022 as lower Marine Components sales were offset by higher Security Products sales and higher gross margin percentages across both segments. The increase in operating income in 2022 over 2021 is primarily due to higher Marine Components sales and to a lesser extent higher Security Products sales. See results of operations discussion below.
Our Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) which requires us to make estimates, judgments, and assumptions we believe are reasonable based on our historical experience, contract terms, observations of known trends in our company and the industry as a whole and information available from other outside sources.
Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements. Our Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP.
Capital expenditures were $1.7 million in 2020, $4.1 million in 2021 and $3.7 million in 2022. As a result of the COVID-19 pandemic, we limited 2020 expenditures to those required to meet our expected customer demand and those required to properly maintain our facilities and technology infrastructure.
Capital expenditures were $4.1 million in 2021, $3.7 million in 2022 and $1.1 million in 2023. Our 2021 and 2022 capital expenditures were higher as we accelerated the timeline for certain projects designed to increase capacity and improve our capabilities in response to strong customer demand.
Removed
Beginning in the third quarter of 2020 and continuing through 2021, our sales volumes generally improved at both our business segments and the increase in operating income in 2021 over 2020 primarily resulted from the higher sales volumes. See results of operations discussion below.
Added
Net sales de creased $5.3 million in 2023 compared to 2022 due to lower Marine Components sales primarily to the towboat market, partially offset by higher Security Products sales largely in the fourth quarter of 2023.
Removed
Beginning in the third quarter of 2020 and continuing through 2021, Marine Components sales exceeded pre-pandemic levels.
Added
Although raw commodity costs declined during 2023 from elevated levels experienced in 2021 and 2022, in most cases materials we purchase also include processing and conversion costs such as alloying, extrusion and rolling which continue to be elevated due to costs of labor, transportation and energy.
Removed
Security Products sales generally improved since third quarter of 2020 but did not recover to pre-pandemic levels until the second quarter of 2021 when sales improved in markets that had been slower to recover from the COVID-19 pandemic, particularly sales to distributors and the office furniture market. Cost of Sales and Gross Margin.
Added
Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily due to higher sales related to a pilot project for a government security customer.
Removed
Gross margin as a percentage of sales increased over the same period due to the increase in the Security Products gross margin percentage partially offset by the decrease in the Marine Components gross margin percentage. Operating Costs and Expenses .
Added
Relative to prior year, sales were $8.3 million higher to the government security market and $1.5 million higher to distributors, partially offset by $1.7 million lower sales to the office furniture market and $.7 million lower sales to the gas station security market.
Removed
See Item 1 - “Business- Raw Materials.” Interest Income. Interest income in 2022 increased compared to 2021 primarily due to higher interest rates and increased investment balances, partially offset by lower average loan balances on our loan to an affiliate.
Added
Marine Components net sales decreased 23% in 2023 as compared to 2022. Relative to prior year, sales were $12.8 million lower to the towboat market (primarily to original equipment boat manufacturers) and $2.0 million lower to the engine builder market, partially offset by $1.2 million higher industrial sales and $.8 million higher sales to the center console boat market.
Removed
Segment Results The key performance indicator for our segments is the level of their operating income (see discussion below).
Added
In 2023, Security Products achieved record sales as a result of increased sales to the government security market, including a pilot project to a government security customer. Absent this project, Security Products sales would have declined compared to the prior year due to sluggish demand in many of the other markets Security Products serves.
Removed
Security Products net sales increased 20% to $105.1 million in 2021 compared to $87.9 million in 2020 when it experienced reduced demand across a variety of markets due to COVID-19. Compared to 2020, sales were $7.2 million higher to the government security market, $4.9 million higher to the transportation market, and $2.0 million higher to distribution customers.
Added
At Marine Components, the strong demand experienced in 2021 and 2022 carried into the first quarter of 2023 when the towboat market began experiencing softening demand that accelerated as the year progressed.
Removed
Marine Components net sales increased 34% in 2021 as compared to 2020 primarily due to increased sales of $7.2 million to several original equipment boat manufactures in the towboat market.
Added
Labor markets have become favorable in each of the regions we operate, and material prices have either stabilized or, in the case of certain commodity raw materials, started to decline slightly. Our supply chains are stable and transportation and logistical delays are minimal.
Removed
While we continued to experience strong demand at both our segments during the fourth quarter of 2022, the order rate and backlog at both segments began to soften late in the fourth quarter.
Added
We have adjusted our labor force and production rates at our facilities to reflect the stability of our raw material supplies and near-term demand levels.
Removed
We operated our manufacturing facilities at elevated production rates throughout 2022 in line with the strong demand and we continue to monitor demand levels and will adjust production rates accordingly.
Added
We expect Security Products sales in 2024 will be lower than 2023 as the sluggishness we observed across a variety of the markets Security Products served during 2023 will continue with customers expressing uncertainty regarding sustained consumer demand.
Removed
While labor markets continue to be competitive in each of the regions in which we operate and labor costs continue to rise, we have been able to achieve and maintain more balanced staffing levels aligned with current and forecasted demand, particularly at our Marine Components segment.
Added
We do not currently have additional orders with regard to the 2023 pilot project, and we have no knowledge of any future orders. After implementing aggressive price increases over the last several years to maintain operating margins, we believe our customers will accept only modest price increases in the current environment.
Removed
We continue to face shortages related to certain electronic components; however, our supply chains are generally stable and recently transportation and logistical delays have been minimal.
Added
Overall, we expect Security Products gross margin will be comparable in 2024, although we expect operating income as a percentage of sales to decline due to our limited pricing power along with reduced coverage of selling, general and administrative costs as a result of lower expected sales.
Removed
We expect gross margins at Security Products will continue to be challenged during 2023 as higher cost inventory continues to work its way through cost of sales and anticipated reduced demand may limit our ability to implement further price increases.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed2 unchanged
Biggest changeThe outstanding principal amount of the note receivable from affiliate of $13.2 million at December 31, 2022 bears interest at prime plus 1.0% (8.5% at December 31, 2022). We received interest income of $1.0 million from the note during 2022.
Biggest changeThe outstanding principal amount of the note receivable from affiliate of $10.6 million at December 31, 2023 bears interest at prime plus 1.0% (9.5% at December 31, 2023). We received interest income of $1.2 million from the note during 2023.
We do not engage in commodity raw material hedging programs. - 19 - ​
We do not engage in commodity raw material hedging programs.
At December 31, 2022 we have $33.1 million invested in marketable debt securities at an average interest rate of approximately 3%. Raw materials. We will occasionally enter into short term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity-related raw material costs.
At December 31, 2023 we have $35.4 million invested in marketable debt securities at an average interest rate of approximately 4.7%. Raw materials. We will occasionally enter into short term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity-related raw material costs.

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