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What changed in COMPX INTERNATIONAL INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of COMPX INTERNATIONAL INC's 2023 and 2024 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 2024 report.

+149 added−139 removedSource: 10-K (2025-03-05) vs 10-K (2024-02-28)

Top changes in COMPX INTERNATIONAL INC's 2024 10-K

149 paragraphs added · 139 removed · 120 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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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.
Biggest changeSecurities and Exchange Commission (the “SEC”) and include, but are not limited to, the following: ● Future supply and demand for our products; ● Changes in our raw material and other operating costs (such as zinc, brass, aluminum, steel and energy costs) or the implementation of tariffs on imported raw materials 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 new product development and the development of new product features; ● Pending or possible future litigation (such as litigation related to our use of certain permitted chemicals in our production process) or other actions; ● 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, 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); ● The introduction of new, or changes in existing, tariffs, trade barriers or trade disputes (including tariffs imposed by the U.S. government on imports from China and Mexico); ● 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.
ITEM 1. BUSINESS General CompX International Inc. (NYSE American: CIX), incorporated in Delaware in 1993, is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.
ITEM 1. BUSINESS General CompX International Inc. (NYSE American: CIX), incorporated in Delaware in 1993, is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other industries.
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.
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 2024.
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 (towboats) 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.
Should one or more of these risks materialize or if the consequences worsen, or if the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
Should one or more of these risks materialize (or the consequences of such development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
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.
Total material costs, including purchased components, represented approximately 46% of our cost of sales in 2024. 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.
We also make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all related amendments, available free of charge through our website at www.compxinternational.com as soon as reasonably practical after they have been filed with the SEC. We also provide to anyone, without charge, copies of the documents upon written request.
We also make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto available free of charge through our website at www.compxinternational.com as soon as reasonably practical after they have been filed with the SEC. We also provide to anyone, without charge, copies of such documents upon written request.
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 - ​
Information contained on our website is not a part of this Annual Report. 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 - ​
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.
Based on current economic conditions, we expect the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be relatively stable, although governmental actions such as tariffs may impact markets. When purchased on the spot market, each of these raw materials may be subject to sudden and unanticipated price increases.
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.
We sell to a diverse customer base with only one customer representing 10% or more of our sales in 2024 (United States Postal Service representing 21%). Our largest ten customers accounted for approximately 47% of our sales in 2024. Competition The markets in which we participate are highly competitive.
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.
We are also a leading manufacturer of wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls and trim tabs and related hardware and accessories for the recreational marine and various other industries. Our products are principally designed for use in medium to high-end product applications where design, quality and durability are valued by our customers.
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.
Patents generally have a term of 20 years, and our patents have remaining terms ranging from 1 to 16 years at December 31, 2024.
We furnish our stockholders with annual reports containing audited financial statements. In addition, we file annual, quarterly and current reports; proxy and information statements and other information with the SEC.
In addition, we file annual, quarterly and current reports, proxy and information statements and other information with the SEC.
Our operations also are subject to federal, state and local laws and regulations relating to worker health and safety. We believe we are in substantial compliance with all such laws and regulations. To date, the costs of maintaining compliance with such laws and regulations have not significantly impacted our results.
Our operations also are subject to federal, state and local laws and regulations relating to worker health and safety. We believe we are in substantial compliance with all such laws and regulations.
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.
To date, the costs of maintaining compliance with such laws and regulations have not significantly impacted our results; 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 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.
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. 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 define lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. We had three lost time incidents in 2022, and one in each of 2023 and 2024.
In addition, we operate extensive scrap metal recycling programs to reduce landfill waste. Our operations are subject to federal, state and local laws and regulations relating to the use, storage, handling, generation, transportation, treatment, emission, discharge, disposal, remediation of and exposure to hazardous and non-hazardous substances, materials and wastes.
Our operations are subject to federal, state and local laws and regulations relating to the use, storage, handling, generation, transportation, treatment, emission, discharge, disposal, remediation of and exposure to hazardous and non-hazardous substances, materials and wastes, some of which are becoming stricter over time.
Connelly serves as trustee, he is required to vote the shares of Contran voting stock held in such trusts in the same manner as Ms. Simmons. Such voting rights of Ms. Simmons last through April 22, 2030 and are personal to Ms. Simmons.
Connelly and their children) who are required to vote their shares of Contran voting stock in the same manner as Ms. Simmons. Such voting rights are personal to Ms. Simmons and last through April 22, 2030. The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”), which was established for the benefit of Ms.
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.
All manufacturing facilities have detailed, site-specific emergency response procedures we believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication. 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.
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.
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. In addition, we operate extensive scrap metal recycling programs to reduce landfill waste.
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.
Prices for aluminum and stainless steel, which are the primary raw materials used for the manufacture of marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because we took advantage of volume purchase opportunities during the year.
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 conduct our business in ways intended to provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve these results.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted.
Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted.
We promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. Website and Available Information Our fiscal year end is always the Sunday closest to December 31, and our operations are reported on a 52 or 53-week fiscal year.
Website and Available Information Our fiscal year end is always the Sunday closest to December 31, and our operations are reported on a 52 or 53-week fiscal year. For presentation purposes, annual information in this Form 10-K is presented as ended on December 31.
Statements in this Annual Report that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information. In some cases, you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends.
In some cases, you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct.
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.
In most cases, commodity raw materials we purchase include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation, and energy. Processing and conversion costs are not expected to decrease and may negate the benefit of softening commodity prices on our purchases.
(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.
At December 31, 2024, 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 91% of Valhi’s outstanding common stock.
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.
The actual date of our fiscal years ended December 31, 2022, 2023 and 2024 are January 1, 2023, December 31, 2023, and December 29, 2024, respectively. Each of the years ending December 31, 2022, 2023, and 2024 consisted of 52 weeks. We furnish our stockholders with annual reports containing audited financial statements.
Simmons and the Family Trust may be deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi, NL and us. Our corporate offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240. Our telephone number is (972) 448-1400. We maintain a website at www.compxinternational.com .
Our corporate offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240. Our telephone number is (972) 448-1400. We maintain a website at www.compxinternational.com . Unless otherwise indicated, references in this report to “we,” “us,” or “our” refer to CompX International Inc. and its subsidiaries taken as a whole.
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.
Simmons and her late sister and their children and for which a third-party financial institution serves as trustee. Consequently, at December 31, 2024, Ms. Simmons and the Family Trust may be deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi, NL and us.
We believe our labor relations are good. Health and Safety – Protecting the health and safety of our workforce, our customers, our business partners and the natural environment is one of our core values.
Health and Safety – Protecting the health and safety of our workforce, our customers, our business partners and the natural environment is one of our core values. 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.
Unless otherwise indicated, references in this report to “we,” “us,” or “our” refer to CompX International Inc. and its subsidiaries taken as a whole. Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Annual Report that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information.
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.
As discussed in Note 1 to our Consolidated Financial Statements, a majority of Contran’s outstanding voting stock is held directly by Lisa K. Simmons, and by family stockholders (Thomas C. Connelly (the husband of Ms. Simmons’ late sister), a family-owned entity and various family trusts established for the benefit of Ms. Simmons, Mr.
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, we have adopted an insider trading policy that applies to both employees and non-employee directors. Regulatory and Environmental Matters We have a history of incorporating environmental management and compliance in our operations and decision making. We operate three manufacturing facilities and our production processes requiring waste-water discharge are consolidated at our Mauldin, South Carolina facility.
Removed
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.
Added
Our raw material prices were generally stable through the first half of 2024, although beginning in the latter half of the third quarter we began to experience moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in 2024, but we were successful in making strategic spot buys to keep our costs consistent with 2023.
Added
We promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. As of December 31, 2024, we employed 510 people, all in the United States. We believe our labor relations are good.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeShould 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.
Biggest changeIncreases in our supply costs 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.
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.
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. ● Consolidation of our competitors or customers in any of the markets in which we compete may result in reduced demand for our products. ● 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.
If we cannot or do not license the infringed technology on reasonable pricing terms or at all, or substitute similar technology from another source, our business could be adversely impacted. Climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
If we cannot or do not license the infringed technology on reasonable pricing terms or at all, or substitute similar technology from another source, our business could be adversely impacted. - 9 - ​ Climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
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.
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.
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.
In addition, litigation can be costly, and the costs associated with defending litigation matters could potentially have a material adverse effect on our results of operations. Failure to protect our intellectual property rights or claims by others that we infringe their intellectual property rights could substantially harm our business.
Added
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.
Added
In addition, the imposition of new tariffs or increases in existing tariffs by the U.S. government on imports from China, Mexico or other countries from which we import raw materials and other components could increase our supply costs.
Added
Legal, Compliance and Regulatory Risk Factors We may be subject to litigation, the disposition of which could have a material adverse effect on our results of operations. The nature of our operations exposes us to possible litigation claims, including disputes with customers and suppliers and matters relating to, among other things, product liability, intellectual property, employment and environmental claims.
Added
It is possible that judgments could be rendered against us in these or other types of cases for which we could be uninsured or not covered by indemnity, or which may be beyond the amounts that we currently have reserved or anticipate incurring for such matters.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo date, such risks have not materially affected us, including our business strategy, results of operations or financial condition. While we have not experienced any breaches, we have encountered occasional attempts, albeit of minor significance, targeting our data and systems, including instances of malware and computer virus infiltration. Thus far all such incidents have been minor.
Biggest changeWe also conduct post-incident reviews to identify lessons learned and implement continuous improvements. ​ We face a number of cybersecurity risks. To date, such risks have not materially affected us, including our business strategy, results of operations or financial condition.
For more information about the cybersecurity risks we face, see the risk factor entitled “Technology failures or cybersecurity breaches could have a material adverse effect on our operations.” in Item 1A- Risk Factors. ​
For more information about the cybersecurity risks we face, see the risk factor entitled “Technology failures or cybersecurity breaches could have a material adverse effect on our operations.” in Item 1A- Risk Factors. ​ - 11 - ​
ITEM 1C. CYBERSECURITY We recognize the importance of assessing, identifying and managing material risks associated with cybersecurity threats. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws. Our cybersecurity programs are built on operations and compliance foundations.
ITEM 1C. CYBERSECURITY We recognize the importance of proactively assessing, identifying and managing material risks associated with cybersecurity threats. These risks include, among other things: operational disruptions, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws. Our cybersecurity programs are built on both operational and compliance foundations.
All employees are required to complete cybersecurity training at least once a year and have access to more frequent cybersecurity training through online updates. We also require employees in certain roles to complete additional role-based, specialized cybersecurity training. We have a Cybersecurity Incident Disclosure and Controls Committee (CIDAC) which is central to the response and evaluation of cybersecurity incidents.
All employees are required to complete cybersecurity training at least once a year and have access to more frequent cybersecurity training through periodic updates. Employees in certain roles also receive additional role-based, specialized cybersecurity training. We have a Cybersecurity Incident Disclosure and Controls Committee (CIDAC) which is central to the response and evaluation of cybersecurity incidents.
Our full board retains oversight of cybersecurity because of its importance to us and visibility with our customers. ​ In the event of an incident, we intend to follow our detailed incident response playbook, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying functional areas (such as legal), senior leadership and the board, as appropriate. ​ We face a number of cybersecurity risks.
Our full board retains oversight of cybersecurity because of its importance to us and visibility with our customers. ​ In the event of an incident, we follow a structured incident response playbook, which outlines clear and defined steps to be followed from incident detection to mitigation, recovery and notification, including notifying functional areas (such as legal), senior leadership and the board, as appropriate.
Our CIDAC is comprised of our director of IT, the Contran chief information officer (who provides services to us under our intercorporate services agreement with Contran), and senior executives including our chief executive officer, chief financial officer and general counsel. Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation.
Our CIDAC is comprised of our director of IT and senior executives including our chief executive officer, chief financial officer and general counsel, and our executive vice president who is also the Contran chief information officer. Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation.
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 . Our cybersecurity program is integrated within our overall risk management processes.
The operational component focuses on continuous detection, - 10 - ​ prevention, measurement, analysis and response to cybersecurity alerts and incidents, and on emerging threats. The compliance component 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.
External resources and advisors are incorporated as needed. Our board of directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
As needed, we collaborate with external cybersecurity experts and legal advisors to help ensure a robust response strategy. Our board of directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
The IT team is responsible for categorizing cybersecurity incidents, with incidents evaluated to be high or critical security risks brought to our CIDAC for review and evaluation. Incidents are evaluated to determine materiality as well as operational and business impact. Our CIDAC performs simulations and tabletop exercises at a management level to evaluate our readiness and response to cybersecurity incidents.
The IT team is responsible for categorizing cybersecurity incidents, and those deemed high-risk or critical are escalated to the CIDAC for review and response coordination. Incidents are evaluated to determine materiality and for operational, financial and reputational impact. Our CIDAC performs simulations and tabletop exercises at a management level to evaluate our readiness and response to cybersecurity incidents.
Our cybersecurity program is led by our director of information technology (IT), who is responsible for our overall information security strategy, policy, security engineering, operations and cyber threat detection and response. Our director of IT has extensive information technology and program management experience and leads a team that has many years of experience with our organization.
Our cybersecurity program is fully integrated into our enterprise-wide risk management framework. Our cybersecurity program is led by our director of information technology (IT), who is responsible for developing and executing our overall information security strategy, policy, security engineering, operations and cyber threat detection and response.
Senior leadership, including our chief executive officer and chief financial officer, regularly briefs the board of directors on our cybersecurity and information security posture, and our board of directors is apprised of cybersecurity incidents deemed to have a high or critical business impact, even if immaterial to us.
Senior leadership, including our chief executive officer and chief financial officer, provides regular updates to the board of directors on our cybersecurity posture, emerging threats and our risk mitigation efforts. Our board of directors is apprised of cybersecurity incidents deemed to have significant business impact, even if they are not material to us.
Third parties also play a role in our cybersecurity. We engage third-party services to conduct evaluations of our security controls through penetration testing, consulting on best practices and to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls.
We engage reputable third-party security firms for consultation on industry best practices and regulatory standards and to conduct routine evaluations of our cybersecurity, such as through penetration testing and security audits; these evaluations include testing both the design and operational effectiveness of security controls.
Our information technology team reviews enterprise risk management level cybersecurity risks annually. - 10 - ​ We continually enhance our security structure with the ultimate goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur.
We continually enhance our cyber defense strategy with the ultimate goal of preventing cybersecurity incidents to the extent feasible, while simultaneously bolstering our system resilience in an effort to minimize the business impact should an incident occur. Third parties also play a role in our cybersecurity.
Our director of IT reports to our vice president in charge of coordinating operational activities within our business segments. Our cybersecurity risks are also reviewed and tested annually through third party assessments and internal and external information technology audits.
Our cybersecurity risks are also reviewed and tested annually through third party assessments and internal and external information technology audits. Our information technology team reviews cybersecurity risks at least annually, integrating findings into strategic risk assessments.
Added
Our director of IT has extensive information technology and program management experience and leads a team that has many years of experience with our organization. Our director of IT reports to our vice president in charge of coordinating operational activities within our business segments.
Added
While we have not experienced any major breaches, we actively monitor and mitigate cyber threats, including phishing attempts, malware and targeted attacks. Thus far all such incidents have been minor, isolated and promptly contained.

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. - 11 - ​
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved, from time to time, in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our business. See Note 11 to our Consolidated Financial Statements.
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved, from time to time, in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our business. In addition to the information included below, see Note 11 to our Consolidated Financial Statements.
Removed
We currently believe the disposition of all claims and disputes, individually or in the aggregate, should not have a material adverse effect on our consolidated financial condition, results of operations or liquidity.
Added
In 2024, we were served with four lawsuits by public water companies in South Carolina that seek recovery of future costs to remove perfluoroalkyl and polyfluoroalkyl substances (known as “PFAS”) from their water supplies. The lawsuits have been consolidated with other PFAS cases before a single judge in Spartanburg, South Carolina and were subsequently removed to federal court.
Added
The defendants in the lawsuits include the manufacturers of PFAS products, as well as companies that allegedly used PFAS-containing products in their manufacturing operations.
Added
The four lawsuits naming CompX allege that CompX was one of many companies that used products containing PFAS in its manufacturing operations, and that such operations have collectively impacted drinking water supplies used by the water companies. The plaintiffs do not allege that CompX has failed to comply with, or has violated, any environmental regulation, permit or statute.
Added
The plaintiffs instead assert claims under common law theories of negligence, nuisance, trespass, failure to warn, and unfair trade practices. We intend to deny liability and will defend vigorously against all claims.

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, 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.
Biggest changeThe graph shows the value at December 31 of each year assuming an original investment of $100 at December 31, 2019 and assumes the reinvestment of our dividends in shares of our stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2019 2020 2021 2022 2023 2024 CompX International Inc. ​ $ 100 ​ $ 100 ​ $ 165 ​ $ 152 ​ $ 218 ​ $ 250 Russell 2000 Index ​ 100 ​ 120 ​ 138 ​ 110 ​ 128 ​ 143 Peer Group ​ 100 ​ 124 ​ 110 ​ 74 ​ 88 ​ 124 ​ ​ 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.
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.
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, 2019 through December 31, 2024.
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 .
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 28, 2025, there were approximately 17 holders of record of CompX Class A common stock. Performance Graph .
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.
Equity compensation plan information. We have a share based incentive compensation plan, which was approved by our stockholders, pursuant to which an aggregate of 200,000 shares of our Class A common stock can be - 13 - ​ awarded to non-employee members of our board of directors.
Removed
See Note 9 to the Consolidated Financial Statements. - 13 - ​
Added
At December 31, 2024, 119,650 shares are available for future award under this plan. See Note 9 to the Consolidated Financial Statements.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeGross 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. - 16 - ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2022 2023 2024 2022-23 2023-24 ​ ​ (In millions) ​ ​ ​ ​ Marine Components: ​ ​ ​ ​ Net sales ​ $ 52.1 ​ $ 40.1 ​ $ 30.7 (23) % (23) % Cost of sales ​ 38.7 ​ 29.3 ​ 24.1 (24) (18) ​ Gross margin ​ 13.4 ​ 10.8 ​ 6.6 (19) (39) ​ Operating costs and expenses ​ 3.8 ​ 3.6 ​ 3.3 (5) (8) ​ Operating income ​ $ 9.6 ​ $ 7.2 ​ $ 3.3 (25) (54) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 25.6 % 27.0 % 21.6 % ​ ​ ​ ​ Operating income margin ​ 18.4 ​ 18.0 ​ 10.8 ​ ​ Marine Components.
Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as gains and losses on sales of property and equipment.
Operating Costs and Expenses . Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as gains and losses on sales of property and equipment.
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.
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 in 2023 of $7.8 million, ● A $.5 million decrease in cash paid for taxes in 2023 due to the relative timing of tax payments, and ● 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.
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.
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, 2023 to December 31, 2024 and is primarily impacted by the timing of sales and collections in the last month of the year.
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.
In 2024, 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.
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.
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, 2024, all relating to our Security Products reporting unit, which corresponds to our Security Products operating segment.
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.
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.
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.
Capital expenditures were $3.7 million in 2022, $1.1 million in 2023 and $1.4 million in 2024. Our 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.
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.
We have in the past 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 effect of tariffs and 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.
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.
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. Our effective income tax rate was 24% in each of 2022, 2023 and 2024.
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.
Beginning in the latter half of 2022 and continuing through 2024, 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.
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.
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 46% of our cost of sales in 2024, with commodity-related raw materials representing approximately 13% of our cost of sales.
We did not evaluate any long-lived assets for impairment during 2023 because no such impairment indicators were present.
We did not evaluate any long-lived assets for impairment during 2024 because no such impairment indicators were present.
Through our Security Products segment we manufacture mechanical and electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications.
Through our Security Products segment we manufacture mechanical and electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other industries.
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 timing and amount - 21 - ​ for purchase obligations are based on the contractual payment amount and the contractual payment date for those commitments. See Note 11 to our Consolidated Financial Statements for legal proceedings and other commitments. Recent accounting pronouncements See Note 13 to our Consolidated Financial Statements.
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.
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 $17.0 million in 2024 and $25.4 million in each of 2023 and 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.
Additionally, we have purchase obligations of $19.8 million ($19.3 million payable in 2025 and $.5 million payable in 2026/2027) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2024.
Future Cash Requirements We believe cash generated from operations together with cash on hand will be sufficient to meet our liquidity needs for working capital, capital expenditures, debt service and dividends (if declared) for the next twelve months and our long term obligations for the next five years.
See Note 9 to our Consolidated Financial Statements. Future Cash Requirements We believe cash generated from operations together with cash on hand will be sufficient to meet our liquidity needs for working capital, capital expenditures, debt service and dividends (if declared) for the next twelve months and our long term obligations for the next five years.
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).
See Notes 8 and 11 to our Consolidated Financial Statements. We currently expect our effective income tax rate for 2025 to be comparable to our effective income tax rate for 2024. Segment Results The key performance indicator for our segments is operating income (see discussion below).
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.
See Notes 1 and 6 to our Consolidated Financial Statements. ● Long-lived assets – The net book value of our property and equipment totaled $24.0 million at December 31, 2024. We assess property and equipment for impairment only when circumstances indicate an impairment may exist.
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.
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 net sales increased over the same period primarily due to the factors affecting cost of sales. See segment results discussion below.
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.
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. Outlook.
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.
To the extent that actual operating results or other developments differ materially from our expectations, our liquidity could be adversely affected. All of our $60.8 million aggregate cash and cash equivalents at December 31, 2024 were held in the U.S.
A tabular reconciliation of our actual tax provision to the U.S. federal statutory income tax rate of 21% is included in Note 8 to the Consolidated Financial Statements.
See Notes 3 and 10 to our Consolidated Financial Statements. Income tax expense. A tabular reconciliation of our actual tax provision to the U.S. federal statutory income tax rate of 21% is included in Note 8 to the Consolidated Financial Statements.
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 .
For comparative purposes, we have provided 2022 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days in Inventory: ​ 2022 ​ 2023 ​ 2024 Security Products ​ 101 Days 77 Days 85 Days Marine Components ​ 95 Days 175 Days 130 Days Consolidated CompX ​ 99 Days 95 Days 94 Days Investing activities .
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.
For additional information regarding our segments refer to Note 2 to our Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2022 2023 2024 2022-23 2023-24 ​ ​ (In millions) ​ ​ ​ ​ Security Products: ​ ​ ​ ​ Net sales ​ $ 114.5 ​ $ 121.2 ​ $ 115.2 6 % (5) % Cost of sales ​ 79.1 ​ 82.8 ​ 80.5 5 (3) ​ Gross margin ​ 35.4 ​ 38.4 ​ 34.7 8 (10) ​ Operating costs and expenses ​ 12.7 ​ 13.5 ​ 13.9 6 3 ​ Operating income ​ $ 22.7 ​ $ 24.9 ​ $ 20.8 10 (16) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 31.0 % 31.7 % 30.1 % ​ ​ Operating income margin ​ 19.9 ​ 20.6 ​ 18.1 ​ ​ Security Products.
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.
See segment results discussion below. 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. See segment results discussion below. Cost of Sales and Gross Margin.
The $6.4 million increase in cash provided by operating activities was primarily the net result of: ● A $4.9 million increase in operating income in 2022, ● A lower amount of net cash used by relative changes in inventories, receivables, payables and non-tax accruals of $3.9 million, ● A $3.1 million increase in cash paid for taxes in 2022 due to higher operating income, and ● A $.7 million increase in interest received in 2022 due to higher interest rates and increased investment balances, partially offset by lower average loan balances on our loan to an affiliate.
The $2.9 million decrease in cash provided by operating activities was primarily the net result of: ● A $8.4 million decrease in operating income in 2024, ● A higher amount of net cash provided by relative changes in inventories, receivables, payables and non-tax accruals in 2024 of $3.0 million, - 19 - ​ ● A $1.8 million increase in interest received in 2024 due to higher interest rates and increased investment balances, partially offset by lower average loan balances on our loan to an affiliate, ● A $1.1 million decrease in cash paid for taxes in 2024 due to decreased earnings and the relative timing of payments, and ● A $.3 million decrease in depreciation and amortization.
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.
The decrease in operating income in 2024 compared to 2023 is due to lower sales and gross margin at both Security Products and Marine Components. 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. See results of operations discussion below.
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.
Regular quarterly dividends paid totaled $12.4 million and $12.3 million ($1.00 per share, or $.25 per share per quarter) in 2022 and 2023, respectively, and $14.8 million ($1.20 per share, or $.30 per share per quarter) in 2024.
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).
Under the promissory note, Valhi repaid a net $5.5 million in 2022 ($24.3 million of gross borrowings and $29.8 million of gross repayments), repaid a net $2.6 million in 2023 ($27.9 million of gross borrowings and $30.5 million of gross repayments) and repaid a net $1.3 million in 2024 ($25.0 million of gross borrowings and $26.3 million of gross repayments).
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.
Results of Operations - 2024 Compared to 2023 and 2023 Compared to 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2022 2023 2024 2022-23 2023-24 ​ ​ (In millions) ​ ​ ​ ​ Net sales ​ $ 166.6 ​ $ 161.3 ​ $ 145.9 (3) % (10) % Cost of sales ​ 117.8 ​ 112.1 ​ 104.6 (5) (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ 48.8 ​ 49.2 ​ 41.3 1 (16) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating costs and expenses ​ 23.4 ​ 23.8 ​ 24.3 2 2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ $ 25.4 ​ $ 25.4 ​ $ 17.0 — (33) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent of net sales: ​ ​ ​ ​ Cost of sales ​ 70.7 % 69.5 % 71.7 % ​ ​ ​ Gross margin ​ 29.3 ​ 30.5 ​ 28.3 ​ Operating costs and expenses ​ 14.0 ​ 14.7 ​ 16.7 ​ Operating income ​ 15.3 ​ 15.8 ​ 11.7 ​ ​ Net Sales.
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.
On March 5, 2025 our board of directors declared a first quarter 2025 dividend of $.30 per share, to be paid on March 25, 2025 to CompX stockholders of record as of March 17, 2025.
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.
Based on current economic conditions, we expect the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be relatively stable, although governmental actions such as tariffs may impact markets. - 15 - ​ 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.
In addition, our board of directors declared a special dividend on our Class A common stock which totaled $21.5 million ($1.75 per share) that we paid on August 30, 2022.
In addition, our board of directors declared special dividends on our Class A common stock which totaled $21.5 million ($1.75 per share) paid in August 2022 and $24.6 million ($2.00 per share) paid in August 2024.
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.
Operating income margin decreased for 2024 compared to 2023 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales and increased operating costs and expenses, including higher employee salaries and benefit costs of $.5 million, primarily in the first half of the year.
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.
Operating costs and expenses increased $.5 million in 2024 compared to 2023 predominantly due to higher employee salary and benefit costs at Security Products. As a percentage of net sales, operating costs and expenses increased in 2024 compared to 2023 primarily due to increased operating costs and expenses and decreased coverage of operating cost and expenses due to lower sales.
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.
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.
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.
We expect our capital expenditures for 2025 will be approximately $3.2 million primarily to meet our expected customer demand and those required to properly maintain our facilities and technology infrastructure.
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 Item 1 - “Business- Raw Materials.” Interest Income. Interest income increased in 2024 compared to 2023 and increased in 2023 compared to 2022. The increase for both comparative periods is primarily due to higher interest rates and higher average investment balances, somewhat offset by lower average loan balances on our loan to an affiliate.
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.
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 2022, we acquired 78,900 shares of our Class A common stock (8,900 shares from affiliates and 70,000 shares in a single market transaction) for an aggregate purchase price of $1.7 million.
Changes in assets and liabilities result primarily from the timing of production, sales and purchases. Such changes in assets and liabilities generally tend to even out over time. However, year-to-year relative changes in assets and liabilities can significantly affect the comparability of cash flows from operating activities.
Such changes in assets and liabilities generally tend to even out over time. However, year-to-year relative changes in assets and liabilities can significantly affect the comparability of cash flows from operating activities. Cash provided by operating activities was $22.9 million in 2024 compared to $25.8 million in 2023.
Relative to prior year, sales were $3.8 million higher to the government security market, $1.8 million higher to the office furniture market, $1.5 million higher to distributors, $1.0 million higher to the tool storage market and $.9 million higher to the gas station security market.
Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the healthcare market and $.7 million higher sales to the tool storage market.
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 .
Cost of sales decreased in 2024 compared to 2023 primarily due to the effects of lower sales at both Security Products and Marine Components partially offset by higher production costs across both business segments. As a result, cost of sales as a percentage of net sales increased over the same period.
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.
For comparative purposes, we have provided 2022 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, Days Sales Outstanding: ​ 2022 ​ 2023 ​ 2024 Security Products ​ 45 Days 37 Days 36 Days Marine Components ​ 30 Days 31 Days 23 Days Consolidated CompX ​ 41 Days 36 Days 33 Days ​ As shown below, our average number of days in inventory at December 31, 2024 was comparable to December 31, 2023 as the increase at Security Products was offset by the decline at Marine Components.
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.
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, 2026. Loans made to Valhi at any time under the agreement are at our discretion.
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.
Prices for aluminum and stainless steel, the primary raw materials used for the manufacture of marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because we took advantage of volume purchase opportunities during the year.
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 .
Operating income margins were primarily impacted by the factors affecting net sales, cost of sales, gross margin and operating costs discussed above. See segment results discussion below. General .
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 the full year of 2023, sales were $7.6 million lower to the towboat market (primarily to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the engine builder market and distributors, partially offset by $1.4 million higher sales to the government market.
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.
Operating income as a percentage of net sales decreased in 2024 compared to 2023 due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses on lower sales, partially offset by reduced operating costs and expenses, including lower employee related expenses of $.2 million.
Days in inventory for Marine Components increased due to lower sales and increased inventory balances as a result of prior orders of certain raw materials with longer lead times discussed in Outlook above.
The average number of days in inventory for Marine Components declined from December 31, 2023 to December 31, 2024 due to elevated inventory balances at December 31, 2023 as a result of prior orders of certain raw materials with longer lead times delivered in the fourth quarter of 2023.
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.
As a percentage of net 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. See segment results discussion below. Operating Income. As a percentage of net sales, operating income decreased in 2024 compared to 2023 and increased in 2023 compared to 2022.
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.
In most cases, commodity raw materials we purchase include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation and energy. Processing and conversion costs are not expected to decrease and may negate the benefit of softening commodity prices on our purchases.
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.
Gross margin as a percentage of net sales for 2024 decreased as compared to 2023 primarily due to lower sales, a less favorable customer and product mix, higher employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the latter half of the year and decreased coverage of fixed costs due to lower sales.
We expect Marine Components net sales in 2024 to also be lower as compared to 2023 because we believe demand in the towboat market will further decline, and expected increases in sales to the industrial and center console boat markets will not fully offset reduced towboat demand.
We expect Marine Components net sales to increase in 2025 due to higher expected sales to the government and industrial markets. We believe the recreational marine market has stabilized, and we expect Marine Components sales to the towboat market in 2025 will be comparable to 2024.
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.
Excluding these sales in 2023, Security Products sales would have increased in 2024 as compared to 2023 due to increased sales across a variety of markets, particularly increased sales of mechanical locks to the government security market.
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.
In 2025, we will continue to monitor current and anticipated near-term customer demand levels to ensure our production capabilities and inventories are aligned accordingly. Our expectations for our operations and the markets we serve are based on a number of factors outside our control. Currently, our supply chains are stable and transportation and logistical delays are minimal.
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.
Net sales de creased $15.4 million in 2024 compared to 2023 primarily due to lower Marine Components sales to the towboat market and lower Security Products sales to the government security market as a result - 14 - ​ of sales related to a pilot project that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024.
Removed
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.
Added
Gross margin as a percentage of net sales decreased in 2024 compared to 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales. See segment results discussion below.
Removed
Security Products net sales increased 9% to $114.5 million in 2022 compared to $105.1 million in 2021 due to increased sales across a variety of markets.
Added
See segment results discussion below. 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.
Removed
Gross margin as a percentage of net sales for 2022 decreased as compared to 2021 primarily due to higher cost of sales, most significantly in the third and fourth quarters of 2022, as price increases and surcharges did not fully offset higher cost inventory sold in the latter half of the year.
Added
Our raw material prices were generally stable through the first half of 2024, although beginning in the latter half of the third quarter we began to experience moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in 2024, but we were successful in making strategic spot buys to keep our costs consistent with 2023.
Removed
Gross margin as a percentage of sales increased slightly in 2022 compared to 2021 with increased sales due to price increases and surcharges more than offsetting higher production costs, as well as increased coverage of cost of sales from higher sales.
Added
Security Products net sales decreased 5% to $115.2 million in 2024 compared to $121.2 million in 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024.
Removed
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.
Added
Marine Components net sales decreased 23% in 2024 as compared to 2023 primarily due to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to the government market.
Removed
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.
Added
Gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production volumes.
Removed
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.
Added
As noted above, in the second half of 2023 Security Products had significant sales related to a pilot project for a government security customer.
Removed
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.
Added
At Marine Components, the decline in sales to the towboat market as a result of the contraction in the recreational marine industry that began in the second quarter of 2023 continued through the third quarter of 2024.
Removed
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.
Added
Marine Components net sales increased in the fourth quarter of 2024 compared to the fourth quarter of 2023 as a result of stabilizing demand in the towboat market as well as increased sales to the government market.
Removed
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.
Added
Raw material prices remained relatively stable through the first half of the year; however, beginning in the third quarter of 2024 we experienced price increases in certain commodity raw materials, primarily brass and electronic components at Security Products.
Removed
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.
Added
We expect Security Products net sales in 2025 to improve modestly over 2024, and we expect gross margin and operating income percentages in 2025 to be slightly above 2024 due to pricing improvements on the Security Products - 17 - ​ product mix.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed3 unchanged
Biggest changeAt 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.
Biggest changeWe 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.
The 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.
The outstanding principal amount of the note receivable from affiliate of $9.3 million at December 31, 2024 bears interest at prime plus 1.0% (8.5% at December 31, 2024). We received interest income of $1.0 million from the note during 2024. Raw materials.

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