SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CompX International Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[LOGO GOES HERE]
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
April 13, 2005
To our Stockholders:
You are cordially invited to attend the 2005 Annual Meeting of Stockholders
of CompX International Inc., which will be held on Tuesday, May 10, 2005, at
10:00 a.m., local time, at CompX's corporate offices at Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas. The matters to be acted upon at the
meeting are described in the attached Notice of Annual Meeting of Stockholders
and Proxy Statement.
Whether or not you plan to attend the meeting, please complete, date, sign
and return the enclosed proxy card or voting instruction form in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes.
Sincerely,
/s/ David A. Bowers
David A. Bowers
President and Chief Executive Officer
COMPX INTERNATIONAL INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 2005
To the Stockholders of CompX International Inc.:
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders (the
"Meeting") of CompX International Inc., a Delaware corporation ("CompX"), will
be held on Tuesday, May 10, 2005, at 10:00 a.m., local time, at CompX's
corporate offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas for the following purposes:
(1) To elect seven directors to serve until the 2006 Annual Meeting of
Stockholders; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The close of business on March 28, 2005 has been set as the record date
(the "Record Date") for the Meeting. Only holders of CompX's class A common
stock, par value $0.01 per share, and class B common stock, par value $0.01 per
share, at the close of business on the Record Date are entitled to notice of,
and to vote at, the Meeting. CompX's stock transfer books will not be closed
following the Record Date. A complete list of stockholders entitled to vote at
the Meeting will be available for examination during normal business hours by
any stockholder of CompX, for purposes related to the Meeting, for a period of
ten days prior to the Meeting at the place where CompX will hold the Meeting.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting, please complete, date and sign the accompanying proxy card
or voting instruction form and return it promptly in the enclosed envelope. If
you choose, you may still vote in person at the Meeting even though you
previously submitted your proxy.
By Order of the Board of Directors,
/s/ A. Andrew R. Louis
A. Andrew R. Louis, Secretary
Dallas, Texas
April 13, 2005
COMPX INTERNATIONAL INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement and the accompanying proxy card or voting instruction
form are being furnished in connection with the solicitation of proxies by and
on behalf of the board of directors (the "Board of Directors") of CompX
International Inc., a Delaware corporation ("CompX"), for use at the 2005 Annual
Meeting of Stockholders of CompX to be held on Tuesday, May 10, 2005 and at any
adjournment or postponement thereof (the "Meeting"). The accompanying Notice of
Annual Meeting of Stockholders (the "Notice") sets forth the time, place and
purposes of the Meeting. The Notice, this proxy statement, the accompanying
proxy card or voting instruction form and CompX's Annual Report to Stockholders,
which includes CompX's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, are first being mailed to the holders of CompX's class A
common stock, par value $0.01 per share ("Class A Common Stock"), and CompX's
class B common stock, par value $0.01 per share ("Class B Common Stock" and
collectively with the Class A Common Stock, the "Common Stock"), on or about
April 13, 2005. CompX's principal executive offices are located at Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
QUORUM, VOTING RIGHTS AND PROXY SOLICITATION
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Meeting was the close of
business on March 28, 2005 (the "Record Date"). Only holders of shares of Common
Stock as of the close of business on the Record Date are entitled to vote at the
Meeting. As of the Record Date, there were 5,193,780 shares of Class A Common
Stock and 10,000,000 shares of Class B Common Stock issued and outstanding. Each
share of Class A Common Stock entitles its holder to one vote on all matters to
be acted on at the Meeting. Each share of Class B Common Stock entitles its
holder to ten votes with respect to the election of directors and one vote on
all other matters to be acted on at the Meeting. The presence, in person or by
proxy, of the holders of a majority of the votes of Common Stock entitled to
vote at the Meeting, counted as a single class, is necessary to constitute a
quorum for the conduct of business at the Meeting. Under applicable rules of the
New York Stock Exchange (the "NYSE") and Securities and Exchange Commission (the
"SEC"), brokers or other nominees holding shares of record on behalf of a client
who is the actual beneficial owner of such shares are authorized to vote on
certain routine matters without receiving instructions from the beneficial owner
of the shares. If a broker/nominee who is entitled to vote on a routine matter
does not vote such shares, such shares are referred to herein as "broker/nominee
non-votes." Shares of Common Stock that are voted to abstain from any business
coming before the Meeting and broker/nominee non-votes will be counted as being
in attendance at the Meeting for purposes of determining whether a quorum is
present.
If a quorum is present, a plurality of the affirmative votes of the Class A
and Class B Common Stock, voting together as a single class, represented and
entitled to be voted at the Meeting is necessary to elect each director of
CompX. The accompanying proxy card or voting instruction form provides space for
a stockholder to withhold authority to vote for any of the nominees to the Board
of Directors. Neither shares as to which the authority to vote on the election
of directors has been withheld nor broker/nominee non-votes will be counted as
affirmative votes to elect director nominees to the Board of Directors. However,
since director nominees need only receive the vote of a plurality of the votes
represented and entitled to vote at the Meeting, a vote withheld from a
particular nominee will not affect the election of such nominee.
Except as applicable laws may otherwise provide, if a quorum is present,
the approval of any other matter that may properly come before the Meeting will
require the affirmative vote of a majority of the shares represented and
entitled to vote at the Meeting. Shares of Common Stock that are voted to
abstain from any other business coming before the Meeting and broker/nominee
non-votes will not be counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Meeting "FOR" the election of the director nominees to the Board of Directors
and, to the extent allowed by applicable law, in the discretion of the agents on
any other matter that may properly come before the Meeting.
Computershare Investor Services, L.L.C. ("Computershare"), the transfer
agent and registrar for the Class A and Class B Common Stock as of the Record
Date, has been appointed by the Board of Directors to receive proxies and
ballots, ascertain the number of shares represented, tabulate the vote and serve
as inspector of election for the Meeting.
Each holder of record of Common Stock executing and delivering the proxy
card enclosed with this proxy statement may revoke it at any time prior to the
voting at the Meeting by delivering to Computershare a written revocation of the
proxy, a duly executed proxy card bearing a later date or by voting in person at
the Meeting. Attendance by a stockholder at the Meeting will not in itself
constitute the revocation of such stockholder's proxy.
Employees participating in the CompX Contributory Retirement Plan, as
amended (the "CompX 401(k) Plan"), who are beneficial owners of Class A Common
Stock under such plan may use the enclosed voting instruction form to instruct
the plan trustee how to vote the shares held for such employees. The trustee
will, subject to the terms of the plan, vote in accordance with such
instructions.
The Board of Directors is making this proxy solicitation. CompX will pay
all expenses related to the solicitation, including charges for preparing,
printing, assembling and distributing all materials delivered to stockholders.
In addition to the solicitation by mail, directors, officers and regular
employees of CompX may solicit proxies by telephone or in person, for which such
persons will receive no additional compensation. CompX has retained Georgeson
Shareholder Communications, Inc. to aid in the distribution of this proxy
statement and related materials at an estimated cost of $1,000. Upon request,
CompX will reimburse banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries for their reasonable out-of-pocket expenses
incurred in distributing proxy materials and voting instructions to the
beneficial owners of Class A Common Stock that such entities hold of record.
CONTROLLED COMPANY
CompX Group, Inc. ("CGI") directly holds 82.8% of the outstanding shares of
Class A and B Common Stock combined. NL Industries, Inc. ("NL") directly holds
82.4% of the outstanding shares of CGI common stock. Valhi is the direct holder
of 83.1% of the outstanding shares of NL common stock, par value $0.125 per
share ("NL Common Stock"). Contran Corporation ("Contran") holds, directly or
through subsidiaries, 90.8% of the outstanding shares of Valhi common stock, par
value $0.01 per share ("Valhi Common Stock").
CGI has indicated its intention to have its shares of Common Stock
represented at the Meeting and voted "FOR" the election of each of the director
nominees to the Board of Directors. If CGI attends the Meeting in person or by
proxy and votes as indicated, the Meeting will have a quorum present and the
stockholders will elect all the nominees of the Board of Directors.
Because of the Common Stock ownership by CGI, CompX is considered a
controlled company under the listing standards of the NYSE. Pursuant to the
listing standards, a controlled company may choose not to have a majority of
independent directors, independent compensation, nominating or corporate
governance committees or charters for these committees. CompX has chosen not to
have a majority of independent directors or an independent nominating or
corporate governance committee. The Board of Directors believes that the full
Board of Directors best represents the interests of all of CompX's stockholders
and that it is appropriate for all matters that would be considered by a
nominating or corporate governance committee to be considered and acted upon by
the full Board of Directors. Applying the NYSE director independence standards,
the Board of Directors has determined that three of its directors are
independent and have no material relationship with CompX. While the members of
CompX's management development and compensation committee (the "MD&C Committee")
currently satisfy the independence requirements of the NYSE, CompX has chosen
not to satisfy all of the NYSE listing standards for a compensation committee.
See "Meetings and Committees of the Board of Directors" for more information on
the committees of the Board of Directors. See also "Stockholder Proposals and
Director Nominations for the 2006 Annual Meeting" for a description of CompX's
policies and procedures for stockholder nominations of directors.
-2-
ELECTION OF DIRECTORS
The bylaws of CompX provide that the Board of Directors shall consist of
one or more members as determined by the Board of Directors or the stockholders.
The Board of Directors has currently set the number of directors at seven. The
directors elected at the Meeting will hold office until the 2006 Annual Meeting
of Stockholders and until their successors are duly elected and qualified or
their earlier removal, resignation or death.
All of the nominees are currently directors of CompX whose terms will
expire at the Meeting. All of the nominees have agreed to serve if elected. If
any nominee is not available for election at the Meeting, all shares represented
by a proxy will be voted "FOR" an alternate nominee to be selected by the Board
of Directors, unless the stockholder executing such proxy withholds authority to
vote for such nominee. The Board of Directors believes that all of its nominees
will be available for election at the Meeting and will serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. The respective nominees for election as directors of
CompX for terms expiring at the 2006 Annual Meeting of Stockholders have
provided the following information.
Paul M. Bass, Jr., age 69, has been a director of CompX since 1997. Mr.
Bass also serves as a director of Keystone Consolidated Industries, Inc., a
steel fabricated wire products, industrial wire and carbon steel rod company
that is related to Contran ("Keystone"). From prior to 2000, Mr. Bass has served
as vice chairman of First Southwest Company, a privately owned investment
banking firm. He is also a director and member of the audit committee of MACC
Private Equities Inc., a business development company, and chairman of the board
of trustees of the Southwestern Medical Foundation, a foundation that supports
and promotes The University of Texas Southwestern Medical Center. Mr. Bass is a
member of CompX's audit committee and chairman of CompX's management development
and compensation committee (the "MD&C Committee").
David A. Bowers, age 67, has served as CompX's president and chief
executive officer since 2002. He has also served as CompX's vice chairman of the
board since 2000 and as a director of CompX since 1993. Mr. Bowers has
continuously served in various executive officer positions for CompX or its
predecessors since prior to 2000. Mr. Bowers has been employed by CompX and its
predecessors since 1960 in various sales, marketing and executive positions,
having been named president of CompX's security products and related businesses
in 1979. Mr. Bowers is a trustee and chairman of the board of Monmouth College,
Monmouth, Illinois.
Keith R. Coogan, age 52, has served as a director of CompX since 2002. Mr.
Coogan is chief executive officer of Software Spectrum, Inc., a global
business-to-business software services provider that is currently a wholly owned
subsidiary of Level 3 Communications, but from 1991 to 2002 was a publicly
traded corporation ("SSI"). From 1990 to 2002, he served in various other
executive officer positions for SSI, including vice president of finance and
operations and chief operating officer. He is also a director of Keystone and
Kronos Worldwide, Inc., an international manufacturer of titanium dioxide
pigments that is related to Valhi and NL ("Kronos Worldwide"). Mr. Coogan is the
chairman of each of CompX's and Keystone's audit committees and a member of
Kronos Worldwide's audit committee.
Edward J. Hardin, age 62, has served as a director of CompX since 1997. Mr.
Hardin has been a partner of the law firm of Rogers & Hardin LLP since its
formation in 1976.
Ann Manix, age 52, has served as a director of CompX since 1998. Since
prior to 2000, Ms. Manix has served as a managing partner of Ducker Research
Corporation, a privately held industrial research firm. She is a member of
CompX's audit committee and MD&C Committee.
-3-
Glenn R. Simmons, age 77, has served as chairman of the board of CompX
since 2000 and director of CompX since 1993. From October 2000 to December 2000,
Mr. Simmons served as chief executive officer of CompX. Mr. Simmons has been
vice chairman of the board of Valhi and Contran since prior to 2000. Mr. Simmons
also serves as chairman of the board of Keystone; as a director of NL, a
diversified conglomerate with principal investments in Kronos Worldwide and
CompX; as a director of Kronos Worldwide; and as a director of Titanium Metals
Corporation ("TIMET"), an integrated producer of titanium metals products that
is related to Valhi. In February 2004, Keystone filed a voluntary petition for
reorganization under federal bankruptcy laws. Mr. Simmons has been an executive
officer or director of various companies related to Contran since 1969. Mr.
Simmons is the brother of Harold C. Simmons, the chairman of the board of Valhi
and Contran.
Steven L. Watson, age 54, has served as a director of CompX since 2000. Mr.
Watson has been chief executive officer of Valhi since 2002 and president and a
director of Valhi and Contran since prior to 2000. He has served as vice
chairman of the board of Kronos Worldwide since October 2004. Mr. Watson also
serves as a director of Keystone, Kronos Worldwide, NL and TIMET. Mr. Watson has
served as an executive officer or director of various companies related to Valhi
and Contran since 1980.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings and took action by written
consent on three occasions in 2004. Each director participated in all of such
meetings and of the meetings of the committees on which he or she served at the
time. It is expected that each director will attend CompX's annual meetings of
stockholders, which are held immediately before the annual meetings of the Board
of Directors. All members of the Board of Directors attended CompX's 2004 annual
stockholder meeting.
The Board of Directors has established and delegated authority to
the following two standing committees.
AuditCommittee. The audit committee assists with the Board of
Directors' oversight responsibilities relating to the financial
accounting and reporting processes and auditing processes of CompX.
The responsibilities of the audit committee are more specifically set
forth in the audit committee charter, a copy of which is available
under the corporate section of CompX's website, www.compxnet.com.
Applying the requirements of the NYSE listing standards and SEC
regulations, as applicable, the Board of Directors has determined
that:
o each member of the audit committee is independent,
financially literate and has no material relationship with
CompX; and
o Mr. Keith R. Coogan is an "audit committee financial
expert."
No member of the audit committee serves on more than three public
company audit committees. For further information on the role of the
audit committee, see "Audit Committee Report." The current members of
the audit committee are Keith R. Coogan (chairman), Paul M. Bass, Jr.
and Ann Manix. The audit committee held seven meetings and took action
by written consent on two occasions in 2004.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve
certain matters involving executive compensation; to recommend to the
Board of Directors whether or not to approve any proposed charge to
CompX or its subsidiaries pursuant to an intercorporate services
agreement with a related party; to take action or to review and
approve certain matters regarding CompX's employee benefit plans or
programs; to administer and grant awards under the CompX International
Inc. 1997 Long-Term Incentive Plan (the "1997 Plan"); to approve
certain annual incentive compensation awards; and to review and
administer such other compensation matters as the Board of Directors
may direct from time to time. The Board of Directors has determined
that each member of the MD&C Committee is independent by applying the
NYSE director independence standards. For further information on the
role of the MD&C Committee, see "Executive Compensation Report." The
current members of the MD&C Committee are Paul M. Bass, Jr. (chairman)
and Ann Manix. The MD&C Committee held two meetings in 2004.
The Board of Directors is expected to elect the members of the standing
committees at the Board of Directors annual meeting immediately following the
Meeting. The Board of Directors has previously established, and from time to
time may establish, other committees to assist it in the discharge of its
responsibilities.
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EXECUTIVE OFFICERS
Set forth below is certain information relating to the executive officers
of CompX. Each executive officer serves at the pleasure of the Board of
Directors. Biographical information with respect to Glenn R. Simmons and David
A. Bowers is set forth under "Election of Directors--Nominees for Director."
Name Age Position(s)
---------------------------- --- -----------------------------------------------------------------
Glenn R. Simmons............ 77 Chairman of the Board
David A. Bowers............. 67 Vice Chairman of the Board, President and Chief Executive Officer
David J. Camozzi............ 49 Vice President
Darryl R. Halbert........... 40 Vice President, Chief Financial Officer and Controller
Scott C. James.............. 39 Vice President
David J. Camozzi has served as vice president of CompX since October 2004
and president of CompX Precision Slides, a unit of CompX, since September 2004.
From 2001 to 2004, Mr. Camozzi was the chief operating officer of Slater Steel,
Inc., a specialty steel company with operations in Canada and the U.S. that
filed for bankruptcy protection in both Canada and the U.S. in June 2003. From
2000 to 2001, Mr. Camozzi was vice president, corporate development of Slater
Steel. From 1999 to 2000, he was senior vice president and chief operating
officer in North America of Co-Steel, Inc., a steel manufacturer with operations
in North America and the United Kingdom.
Darryl R. Halbert has served as chief financial officer since 2002 and vice
president and controller of CompX since 2001. From 2000 to 2001, Mr. Halbert
served as chief operating officer, chief financial officer and secretary of
Image2Web, Inc., a subsidiary of Micrografx, Inc., a developer and marketer of
graphics software for business use.
Scott C. James has served as vice president of CompX and president of CompX
Security Products Inc., a wholly owned subsidiary of CompX, since 2002. Since
1992, Mr. James has served in various sales, marketing and executive positions
with CompX's security products operations.
-5-
SECURITY OWNERSHIP
Ownership of CompX. The following table and footnotes set forth as of the
Record Date the beneficial ownership, as defined by regulations of the SEC, of
Class A and Class B Common Stock held by each individual, entity or group known
to CompX to own beneficially more than 5% of the outstanding shares of Class A
or Class B Common Stock, each director, each executive officer named in the
summary compensation table in this proxy statement (a "named executive officer")
and all directors and executive officers as a group. See footnote (4) below for
information concerning the relationships of certain individuals and entities
that may be deemed to own indirectly and beneficially more than 5% of the
outstanding shares of Class A or Class B Common Stock. All information is taken
from or based upon ownership filings made by such individuals or entities with
the SEC or upon information provided by such individuals or entities.
CompX Class
A and Class
B Common
CompX Class A Common Stock CompX Class B Common Stock Stock
-------------------------------- ------------------------------ Combined
Amount and Nature of Percent Amount and Nature Percent of
Beneficial of Class of Beneficial Percent Class
Beneficial Owner Ownership (1) (1)(2) Ownership (1) of Class (1)(2)
------------------------------- ---------------------- -------- -------------------- -------- -----------
Harold C. Simmons (3)......... 40,700 (4) * -0- (4) -0- *
CompX Group, Inc. (3)...... 2,586,820 (4) 49.8% 10,000,000 (4) 100% 82.8%
TIMET Finance Management
Company (3).............. 336,700 (4) 6.5% -0- (4) -0- 2.2%
Annette C. Simmons......... 20,000 (4) * -0- (4) -0- *
--------- ---------- ----
2,984,220 (4) 57.5% 10,000,000 (4) 100% 85.5%
Dalton, Greiner, Hartman, Maher
& Co....................... 672,950 (5) 13.0% -0- -0- 4.4%
Royce & Associates, LLC....... 302,300 (6) 5.8% -0- -0- 2.0%
Paul M. Bass, Jr.............. 12,300 (4)(7) * -0- -0- *
David A. Bowers............... 74,000 (4)(7) 1.4% -0- -0- *
Keith R. Coogan............... 2,500 * -0- -0- *
Edward J. Hardin.............. 15,800 (7) * -0- -0- *
Ann Manix..................... 11,300 (7) * -0- -0- *
Glenn R. Simmons.............. 69,300 (4)(7)(8) 1.3% -0- -0- *
Steven L. Watson.............. 19,800 (4)(7) * -0- -0- *
Darryl R. Halbert............. 7,000 (7) * -0- -0- *
Scott C. James................ 19,080 (7) * -0- -0- *
All directors and executive
officers of CompX as a group
(10 persons) .............. 231,080 (4)(7)(8) 4.3% -0- -0- 1.5%
--------------------
* Less than 1%.
(1) Except as otherwise noted, the listed entities, individuals or group have
sole investment power and sole voting power as to all shares set forth
opposite their names. The number of shares and percentage of ownership for
each entity, individual or group assumes the exercise by such entity,
individual or group (exclusive of others) of stock options that such
entity, individual or group may exercise within 60 days subsequent to the
Record Date.
-6-
(2) The percentages are based on 5,193,780 shares of Class A Common Stock
outstanding as of the Record Date.
(3) The business address of CGI and Harold C. and Annette C. Simmons is Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697. The
business address of TIMET Finance Management Company ("TFMC") is 300
Delaware Avenue, Suite 900, Wilmington, Delaware 19801.
(4) NL and TFMC directly hold 82.4% and 17.6%, respectively, of the outstanding
shares of CGI common stock. TIMET directly holds 100% of the outstanding
shares of TFMC common stock. Tremont LLC ("Tremont"), Annette C. Simmons,
The Combined Master Retirement Trust (the "CMRT") and Valhi are the holders
of approximately 39.5%, 14.3%, 12.0% and 2.4% of the outstanding shares of
TIMET common stock, par value $0.01 per share ("TIMET Common Stock"). The
ownership of Ms. Simmons is based on the 1,600,000 shares of TIMET's 6 3/4%
Series A Convertible Preferred Stock, par value $0.01 per share (the "TIMET
Series A Preferred Stock"), that she directly owns, which are convertible
into 2,666,666 shares of TIMET Common Stock. The ownership of Valhi
includes 24,500 shares of TIMET Common Stock that Valhi has the right to
acquire upon conversion of 14,700 shares of TIMET Series A Preferred Stock
that Valhi directly holds. The percentage ownership of TIMET Common Stock
held by each of Ms. Simmons and Valhi assumes the full conversion of only
the shares of TIMET Series A Preferred Stock she or Valhi owns,
respectively.
Valhi is direct holder of 100% of the membership interests of Tremont.
Valhi and TFMC are the direct holders of approximately 83.1% and 0.5%,
respectively, of the outstanding shares of NL Common Stock.
Valhi holds indirectly through CGI and TFMC approximately 85.1% of the
combined voting power of the Common Stock (approximately 97.8% for the
election of directors). In certain instances, shares of Class B Common
Stock are automatically convertible into shares of Class A Common Stock.
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"), Contran,
the Harold Simmons Foundation, Inc. (the "Foundation"), the Contran
Deferred Compensation Trust No. 2 (the "CDCT No. 2") and the CMRT are the
direct holders of approximately 77.6%, 9.1%, 3.7%, 0.9%, 0.4% and 0.1%,
respectively, of the outstanding shares of Valhi Common Stock. National,
NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding") are the
direct holders of approximately 73.3%, 11.4% and 15.3%, respectively, of
the outstanding common stock of VGI. Contran and NOA are the direct holders
of approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the direct holder of 100%
of the outstanding common stock of Dixie Holding. Contran is the holder of
100% of the outstanding common stock of Dixie Rice and approximately 88.9%
of the outstanding common stock of Southwest.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold
C. Simmons (the "Trusts"), of which Mr. Simmons is the sole trustee, or
held by Mr. Simmons or persons or other entities related to Mr. Simmons. As
sole trustee of the Trusts, Mr. Simmons has the power to vote and direct
the disposition of the shares of Contran stock held by the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any Contran shares that
the Trusts hold.
The Foundation directly holds approximately 0.9% of the outstanding shares
of Valhi Common Stock. The Foundation is a tax-exempt foundation organized
for charitable purposes. Harold C. Simmons is the chairman of the board of
the Foundation.
The CDCT No. 2 directly holds approximately 0.4% of the outstanding shares
of Valhi Common Stock. U.S. Bank National Association serves as the trustee
of the CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable
"rabbi trust" to assist Contran in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons. If the CDCT No. 2 assets are
insufficient to satisfy such obligations, Contran must satisfy the balance
of such obligations. Pursuant to the terms of the CDCT No. 2, Contran
retains the power to vote the shares held by the CDCT No. 2, retains
dispositive power over such shares and may be deemed the indirect
beneficial owner of such shares.
-7-
The CMRT directly holds approximately 12.0% of the outstanding shares of
TIMET Common Stock and 0.1% of the outstanding shares of Valhi Common
Stock. Valhi established the CMRT to permit the collective investment by
master trusts that maintain assets of certain employee benefit plans Valhi
and related companies adopt. Harold C. Simmons is the sole trustee of the
CMRT and a member of the trust investment committee for the CMRT. Paul M.
Bass, Jr. is also a member of the trust investment committee for the CMRT.
Valhi's board of directors selects the trustee and members of the trust
investment committee for the CMRT. Harold C. Simmons, Glenn R. Simmons and
Steven L. Watson are members of Valhi's board of directors and along with
David A. Bowers are participants in one or more of the employee benefit
plans that invest through the CMRT. Each of such persons disclaims
beneficial ownership of any of the shares the CMRT holds, except to the
extent of his individual vested beneficial interest, if any, in the assets
the CMRT holds.
Harold C. Simmons is the chairman of the board and chief executive officer
of NL, the vice chairman of the board of TIMET and the chairman of the
board of each of CGI, Tremont, Valhi, VGI, National, NOA, Dixie Holding,
Dixie Rice, Southwest and Contran.
By virtue of the holding of the offices, the stock ownership and his
services as trustee, all as described above, (a) Harold C. Simmons may be
deemed to control certain of such entities, and (b) Mr. Simmons and certain
of such entities may be deemed to possess indirect beneficial ownership of
the shares of Common Stock that CGI and TFMC hold directly. Mr. Simmons,
however, disclaims beneficial ownership of the shares beneficially owned,
directly or indirectly, by any of such entities, except to the extent of
his vested beneficial interest, if any, in shares held by the CMRT and his
interest as a beneficiary of the CDCT No. 2. Mr. Harold Simmons disclaims
beneficial ownership of all shares of Common Stock that CGI or TFMC
directly holds.
Glenn R. Simmons and Steven L. Watson are directors and executive officers
of Valhi and Contran. Messrs. Glenn Simmons and Watson disclaim beneficial
ownership of any shares of Common Stock directly or indirectly held by
Contran, Valhi or any of their subsidiaries.
Annette C. Simmons is the wife of Harold C. Simmons. She is the direct
owner of 20,000 shares of Class A Common Stock, 69,475 shares of NL Common
Stock, 1,600,000 shares of TIMET Series A Preferred Stock and 43,400 shares
of Valhi Common Stock. Mr. Simmons may be deemed to share indirect
beneficial ownership of such shares. Mr. Simmons disclaims all such
beneficial ownership.
The Annette C. Simmons Grandchildren's Trust, a trust of which Harold C.
Simmons and Annette C. Simmons are co-trustees and the beneficiaries of
which are the grandchildren of Annette C. Simmons, is the direct holder of
40,000 shares of Valhi Common Stock (the "Grandchildren's Trust"). Mr.
Simmons, as co-trustee of the Grandchildren's Trust, has the power to vote
and direct the disposition of the shares Valhi Common Stock the
Grandchildren's Trust directly holds. Mr. Simmons disclaims beneficial
ownership of any shares of Valhi Common Stock that the Grandchildren's
Trust holds.
Harold C. Simmons is the direct owner of 40,700 shares of Class A Common
Stock, 30,800 shares of NL Common Stock (including options exercisable for
4,000 shares of NL Common Stock) and 3,383 shares of Valhi Common Stock.
NL and a subsidiary of NL directly hold 3,522,967 and 1,186,200 shares,
respectively, of Valhi Common Stock. Pursuant to Delaware law, Valhi treats
the shares of Valhi Common Stock that NL and NL's subsidiary directly hold
as treasury stock for voting purposes and for purposes of calculating the
percentage ownership of the outstanding shares of Valhi Common Stock as of
the Record Date in this proxy statement such shares are not deemed
outstanding.
-8-
The business address of CGI, NL, Tremont, Valhi, VGI, National, NOA, Dixie
Holding, the Foundation, the CMRT and Contran is Three Lincoln Centre, 5430
LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697. The business address of
Dixie Rice is 600 Pasquiere Street, Gueydan, Louisiana 70542. The business
address of Southwest is 402 Canal Street, Houma, Louisiana 70360. The
business address of TIMET is 1999 Broadway, Suite 4300, Denver, Colorado
80202.
(5) Based on Amendment No. 6 to Schedule 13G dated February 10, 2005 Dalton,
Greiner, Hartman, Maher & Co. ("Dalton Greiner") filed with the SEC. Dalton
Greiner has sole voting power over 652,208 of these shares and sole
dispositive power over all of these shares. The address of Dalton Greiner
is 565 Fifth Avenue, Suite 2101, New York, New York 10017.
(6) Based on Amendment No. 2 to Schedule 13G dated January 24, 2005 Royce &
Associates, LLC ("Royce") filed with the SEC. The address of Royce is 1414
Avenue of the Americas, New York, New York 10019.
(7) The shares of Class A Common Stock shown as beneficially owned by such
person include the following number of shares such person has the right to
acquire upon the exercise of stock options granted pursuant to the 1997
Plan that such person may exercise within 60 days subsequent to the Record
Date:
Shares of Class A Common Stock
Issuable Upon the Exercise of
Stock Options
Name of Beneficial Owner On or Before May 27, 2005
------------------------------------ -------------------------------
Paul M. Bass, Jr.................... 7,800
David A. Bowers..................... 65,000
Edward J. Hardin.................... 7,800
Ann Manix........................... 6,800
Glenn R. Simmons.................... 56,800
Steven L. Watson.................... 14,800
Darryl R. Halbert................... 6,000
Scott C. James...................... 18,000
(8) The shares of Class A Common Stock shown as beneficially owned by Glenn R.
Simmons include 500 shares his wife holds in her retirement account, with
respect to which he disclaims beneficial ownership.
CompX understands that Contran and related entities may consider acquiring
or disposing of shares of Common Stock through open-market or privately
negotiated transactions, depending upon future developments, including, but not
limited to, the availability and alternative uses of funds, the performance of
Class A Common Stock in the market, an assessment of the business of, and
prospects for, CompX, financial and stock market conditions and other factors
deemed relevant by such entities. CompX may similarly consider acquisitions of
shares of Class A Common Stock and acquisitions or dispositions of securities
issued by related entities.
-9-
Ownership of Related Companies. Certain CompX directors and executive
officers own equity securities of certain CompX related companies. The following
table and footnotes set forth the beneficial ownership, as of the Record Date,
of the shares of NL, TIMET and Valhi Common Stock held by each director, each
named executive officer and all directors and executive officers as a group. All
information is taken from or based upon ownership filings made by such persons
with the SEC or upon information provided by such persons.
NL Common Stock TIMET Common Stock Valhi Common Stock
---------------------------- --------------------------- ----------------------------
Amount and Percent Amount and Percent Amount and Percent
Nature of of Nature of of Nature of of
Beneficial Class Beneficial Class Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3) Ownership (1) (1)(4)
---------------------------- ------------------ -------- ------------------ ------- ------------------ --------
Paul M. Bass, Jr.......... -0- -0- 2,000 * 20,000 (7) *
David A. Bowers........... -0- -0- -0- -0- -0- -0-
Keith R. Coogan........... -0- -0- -0- -0- -0- -0-
Edward J. Hardin.......... -0- -0- -0- -0- 4,000 *
Ann Manix................. 2,000 * -0- -0- -0- -0-
Glenn R. Simmons.......... 8,000 (5)(8) * 7,500 (6)(8) * 18,247 (7)(9) *
Steven L. Watson.......... 12,000 (5)(8) * 17,750 (6)(8) * 117,246 (7)(8) *
Darryl R. Halbert......... -0- -0- -0- -0- -0- -0-
Scott C. James............ -0- -0- -0- -0- -0- -0-
All directors and
executive officers of
CompX as a group (10
persons) .............. 22,000(5)(8) * 27,250 (6)(8) * 159,493 (7)(8)(9) *
--------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals or group have sole
investment power and sole voting power as to all shares set forth opposite
their names. The number of shares and percentage of ownership for each
individual or group assumes the exercise by such individual or group
(exclusive of others) of stock options that such individual or group may
exercise within 60 days subsequent to the Record Date.
(2) The percentages are based on 48,547,134 shares of NL Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 15,988,350 shares of TIMET Common Stock
outstanding as of the Record Date.
(4) The percentages are based on 119,535,878 shares of Valhi Common Stock
outstanding as of the Record Date. For purposes of calculating the
outstanding shares of Valhi Common Stock as of the Record Date, 3,522,967
and 1,186,200 shares of Valhi Common Stock held by NL and a subsidiary of
NL, respectively, are treated as treasury stock for voting purposes and
excluded from the amount of Valhi Common Stock outstanding.
(5) See footnote (4) to the "Ownership of CompX" table for certain information
concerning the relationship of CompX to NL. Messrs. Glenn Simmons and
Watson disclaim beneficial ownership of all of the shares of NL Common
Stock that Valhi or TFMC directly hold.
(6) See footnote (4) to the "Ownership of CompX" table for certain information
concerning the relationship of CompX to TIMET. Messrs. Glenn Simmons and
Watson disclaim beneficial ownership of all of the shares of TIMET Common
Stock that Tremont, the CMRT and Valhi directly hold.
(7) See footnote (4) to the "Ownership of CompX" table for certain information
concerning the relationship of CompX to Valhi. Messrs. Bass, Glenn Simmons
and Watson disclaim beneficial ownership of all of the shares of Valhi
Common Stock that VGI, National, Contran, the Foundation, the CDCT No. 2
and the CMRT directly hold.
-10-
(8) The shares of NL Common Stock, TIMET Common Stock and Valhi Common Stock
shown as beneficially owned by such person include the following number of
shares such person has the right to acquire upon the exercise of stock
options granted pursuant to NL, TIMET or Valhi stock option plans that such
person may exercise within 60 days subsequent to the Record Date:
Shares of NL Shares of TIMET Shares of Valhi
Common Stock Issuable Common Stock Issuable Common Stock Issuable
Upon the Exercise of Upon the Exercise of Upon the Exercise of
Stock Options On or Stock Options On or Stock Options On or
Name of Beneficial Owner Before May 27, 2005 Before May 27, 2005 Before May 27, 2005
---------------------------- --------------------- --------------------- ---------------------
Glenn R. Simmons............ 2,000 5,000 -0-
Steven L. Watson............ 4,000 7,500 100,000
(9) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 800 shares his wife holds in her retirement account, with
respect to which shares he disclaims beneficial ownership.
-11-
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. Directors of CompX who are not employees of
CompX or its subsidiaries are entitled to receive compensation for their
services as directors. Directors who received such compensation in 2004 were
Paul M. Bass, Jr., Keith R. Coogan, Edward J. Hardin, Ann Manix, Glenn R.
Simmons and Steven L. Watson.
In 2004, nonemployee directors received an annual retainer of $20,000, paid
in quarterly installments, plus a fee of $1,000 per day for attendance at
meetings and at a daily rate ($125 per hour) for other services rendered on
behalf of the Board of Directors or its committees. For the first two quarters
of 2004, nonemployee directors also received an annual retainer of $2,000, paid
in quarterly installments, for each committee on which they served. Starting
with the third quarter of 2004, the Board of Directors increased the director
fees paid to members of the audit committee. The increase resulted in the
chairman of the audit committee and any member of the committee who CompX
identified as an "audit committee financial expert" for purposes of the annual
proxy statement receiving an annual retainer of $10,000, paid in quarterly
installments (provided that if one person served in both capacities only one
such retainer was paid), and other members of the audit committee receiving an
annual retainer of $5,000, paid in quarterly installments. If any nonemployee
director dies while serving on the Board of Directors, his or her designated
beneficiary or estate will be entitled to receive a death benefit equal to the
annual retainer then in effect. CompX reimburses its nonemployee directors for
reasonable expenses incurred in attending meetings and in the performance of
other services rendered on behalf of the Board of Directors or its committees.
On the day of each annual stockholder meeting, each nonemployee receives a
grant of shares of Class A Common Stock as determined by the following formula
based on the closing price of a share of Class A Common Stock on the date of
such meeting.
Range of Closing Price Per Shares of Common
Share on the Date of Grant Stock to Be Granted
-------------------------- -------------------
Under $5.00 2,000
$5.00 to $9.99 1,500
$10.00 to $20.00 1,000
Over $20.00 500
As a result of the $13.30 per share closing price of Class A Common Stock on May
19, 2004, the date of the 2004 annual stockholder meeting, each nonemployee
director elected on that date received a grant of 1,000 shares of Class A Common
Stock.
Intercorporate Services Agreements. Contran and certain of its
subsidiaries, including CompX, have entered into intercorporate services
agreements (collectively, the "ISAs") pursuant to which Contran, among other
things, provides the services of certain of the named executive officers to
certain of Contran's subsidiaries, including CompX. For a discussion of these
ISAs, see "Certain Relationships and Transactions--Intercorporate Services
Agreement."
-12-
Summary of Cash and Certain Other Compensation of Executive Officers. The
summary compensation table below provides information concerning annual and
long-term compensation paid or accrued by CompX and its subsidiaries for
services rendered to CompX and its subsidiaries during 2004, 2003 and 2002 by
CompX's chief executive officer and each of CompX's two other executive officers
whose total salary and bonus, or charge to CompX pursuant to an ISA between
CompX and Contran (the "Contran ISA") in 2004 exceeded $100,000.
SUMMARY COMPENSATION TABLE (1)
Annual Compensation (2)
Name and ---------------------------- All Other
Principal Position Year Salary Bonus Compensation
------------------------------------------------- ------ ------------- ------------- ------------
David A. Bowers.................................. 2004 $ 326,305 $ 200,000 $ 27,013 (3)
Vice Chairman of the Board, President and Chief 2003 296,646 175,000 19,024 (3)
Executive Officer 2002 258,750 80,000 21,281 (3)
Scott C. James................................... 2004 206,659 150,000 27,013 (3)
Vice President 2003 178,075 100,000 19,024 (3)
2002 151,175 60,000 21,187 (3)
Darryl R. Halbert (4)............................ 2004 312,700 (4) -0- (4) -0- (4)
Vice President, Chief Financial Officer and 2003 215,000 (4) -0- (4) -0- (4)
Controller 2002 136,930 60,000 5,335 (3)
--------------------
(1) For the periods presented for each named executive officer, no stock
options or shares of restricted stock were granted nor payouts made
pursuant to long-term incentive plans. Therefore, the columns for such
compensation have been omitted.
(2) Messrs. Bowers and James received an annual perquisite for club dues for
each of the years presented. Mr. Halbert received the same perquisite for
2002. In each case, the amount of the perquisite was less than the amount
required to be reported pursuant to SEC rules. Therefore, the column for
"other annual compensation," as defined by SEC rules, has been omitted.
(3) All other compensation for 2004, 2003 and 2002 for Messrs. Bowers, Halbert
and James consisted of CompX's matching contributions to certain of their
accounts under the CompX 401(k) Plan and CompX's contributions to certain
of their accounts under the CompX Capital Accumulation Pension Plan, a
defined contribution plan (the "CAP Plan"), as follows:
Employer's
CompX 401(k) Employer's
Plan Matching CAP Plan
Named Executive Officer Year Contributions Contributions Total
----------------------- ---- ---------------- --------------- ---------------
David A. Bowers........ 2004 $ 10,463 $ 16,550 $ 27,013
2003 8,426 10,598 19,024
2002 8,889 12,392 21,281
Scott C. James......... 2004 10,463 16,550 27,013
2003 8,426 10,598 19,024
2002 8,795 12,392 21,187
Darryl R. Halbert...... 2004 -0- (a) -0- (a) -0- (a)
2003 -0- (a) -0- (a) -0- (a)
2002 2,644 2,691 5,335
----------------
(a) See footnote (4) to this summary compensation table.
-13-
(4) Effective January 1, 2003, Mr. Halbert became an employee of Contran and
subsequently provided executive officer services to CompX pursuant to the
Contran ISA. For 2004 and 2003, the amounts shown in the table as salary
compensation for Mr. Halbert represents the portion of the fees CompX paid
to Contran pursuant to the Contran ISA attributable to the services he
rendered to CompX.
No Grants of Stock Options or Stock Appreciation Rights. Neither CompX nor
any of its parent or subsidiary corporations granted stock options or stock
appreciation rights ("SARs") to the named executive officers during 2004.
Stock Option Exercises and Holdings. The following table provides
information with respect to each of the named executive officers concerning the
aggregate amount the named executive officer realized in 2004 upon the exercise
of stock options for Class A Common Stock and the value of unexercised stock
options for Class A Common Stock such officer held as of December 31, 2004.
Neither CompX nor any of its parent or subsidiary corporations has granted any
SARs.
AGGREGATE STOCK OPTION EXERCISES IN 2004 AND
DECEMBER 31, 2004 OPTION VALUES
Number of Shares
Shares Underlying Value of Unexercised
Acquired Unexercised Options at In-the-Money Options
on December 31, 2004 (#) at December 31, 2004 (1)
Exercise Value --------------------------- ---------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- --------- ------------ -------------- ------------ --------------
David A. Bowers 18,000 $ 62,160 60,000 17,000 $ -0- $ 42,360
Scott C. James 12,000 38,290 16,800 9,200 -0- 28,240
Darryl R. Halbert -0- -0- 6,000 4,000 21,180 14,120
--------------------
(1) Each aggregate amount is based on the difference between the exercise price
of the individual stock options and the $16.53 per share closing sales
price of Class A Common Stock on December 31, 2004.
(2) The amount realized for each exercise is based on the difference between
the closing price per share of the underlying Class A Common Stock on the
date of exercise and the exercise price per share.
-14-
EQUITY COMPENSATION PLAN INFORMATION
The following table provides summary information as of December 31, 2004
with respect to equity compensation plans under which CompX's equity securities
may be issued to employees or nonemployees (such as directors, consultants,
advisers, vendors, customers, suppliers and lenders) in exchange for goods or
services.
Column (A) Column (B) Column (C)
-------------------------- ------------------------- -------------------------
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to be Weighted-Average Exercise Equity Compensation Plans
Issued Upon Exercise of Price of Outstanding (Excluding Securities
Outstanding Options, Options, Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (A))
--------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans
approved by security
holders.................... 561,840 $17.73 635,820
Equity compensation plans
not approved by security
holders.................... -0- -0- -0-
Total...................... 561,840 $17.73 635,820
CORPORATE GOVERNANCE DOCUMENTS
Code of Business Conduct and Ethics. CompX has adopted a code of business
conduct and ethics that applies to all of CompX's directors, officers and
employees, including CompX's principal executive officer, principal financial
officer, principal accounting officer and controller. Only the Board of
Directors may amend the code. Only CompX's audit committee or other committee of
the Board of Directors with specific delegated authority may grant a waiver of
the code. CompX will disclose amendments to, or waivers of, the code as required
by law and the applicable rules of the NYSE.
Corporate Governance Guidelines. CompX has adopted corporate governance
guidelines to assist the Board of Directors in exercising its responsibilities.
Among other things, the corporate governance guidelines provide for director
qualifications, independence standards and responsibilities, approval procedures
for ISAs and that the audit committee chairman preside at all meetings of the
independent directors.
Audit Committee Charter. CompX has adopted an audit committee charter under
which the audit committee operates. Among other things, the audit committee
charter provides the purpose, authority, resources and responsibilities of the
committee.
A copy of each of these three documents, among others, is available on
CompX's website at www.compxnet.com under the corporate section. In addition,
any person may obtain a copy of these three documents without charge, by sending
a written request to the attention of CompX's corporate secretary at CompX
International, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas 75240-2697.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires CompX's executive officers, directors and persons who
own more than 10% of a registered class of CompX's equity securities to file
reports of ownership with the SEC, the NYSE and CompX. Based solely on the
review of the copies of such forms and representations by certain reporting
persons, CompX believes that for 2004 its executive officers, directors and 10%
stockholders complied with all applicable filing requirements under section
16(a).
-15-
EXECUTIVE COMPENSATION REPORT
During 2004, CompX's independent directors and the MD&C Committee
administered matters regarding the compensation of CompX's executive officers.
Contran ISA
During 2004, CompX paid certain fees to Contran for services provided
pursuant to the Contran ISA, including the services of the following executive
officers of CompX:
Name Positions with CompX
------------------ -------------------------------------------------------
Glenn R. Simmons Chairman of the Board
Darryl R. Halbert Vice President, Chief Financial Officer and Controller
Contran annually determines the aggregate fee to charge CompX and its
subsidiaries based on (i) an estimate of the amount of time each Contran
employee that performs services for CompX and its subsidiaries will spend on
such services over the year and (ii) Contran's cost related to such employee,
which includes the employee's base salary, incentive compensation and an
overhead component that takes into account other employment costs, including
medical benefits, unemployment and disability insurance and pension costs and
other costs of providing an office, equipment and supplies related to the
provision of such services. The portion of the annual charge CompX pays under
the Contran ISA for the services of any particular individual is capped at $1.0
million to enhance CompX's ability to deduct such charge for federal income tax
purposes. The amount of the fee CompX paid in 2004 under the Contran ISA for a
person who provided services to CompX or its subsidiaries represents, in
management's view, the reasonable equivalent of "compensation" for such
services. It is also management's view that the proposed aggregate charge to
CompX under the Contran ISA is fair to CompX and its stockholders. See "Certain
Relationships and Related Transactions--Intercorporate Services Agreement" for
the aggregate amount CompX paid to Contran in 2004 under the Contran ISA. The
fee Contran charged CompX for the chief financial officer's services for 2004 is
reported in his 2004 salary column in the summary compensation table in this
proxy statement. The amount charged under the Contran ISA is not dependent upon
CompX's financial performance.
Based upon the independent directors' review of Contran's ISA allocation
process and documentation as to how Contran determines the necessary personnel,
the estimated number of full time employees that are required to provide
services and the cost of such services under the Contran ISA and their related
discussions with management, the independent directors agreed that such
aggregate 2004 charge from Contran to CompX under the Contran ISA was fair and
reasonable to CompX and it stockholders. In making such determination, the
independent directors relied on their collective business experience and
judgment.
Other Executive Officers
The MD&C Committee reviews and approves compensation policies and practices
related to David A. Bowers, David J. Camozzi and Scott C. James, executive
officers and employees of CompX or one of its subsidiaries. See "Meetings and
Committees of the Board of Directors - Management Development and Compensation
Committee." CompX's executive officer compensation system generally consists of
two primary components: salary and a discretionary incentive compensation award.
Through the use of the foregoing, the MD&C Committee seeks to achieve a balanced
compensation package that will attract and retain high quality key executives,
appropriately reflect each such executive officer's individual performance,
contributions, and general market value, and provide further incentives for the
executive officers to maximize annual operating performance and long-term
stockholder value. In 2004, the MD&C Committee made no separate determinations
regarding cash compensation to be paid to the chairman of the board or the chief
financial officer since these persons were employees of Contran.
-16-
Annual Salaries
Annual base salaries for executive officers employed by CompX have been
established on a position-by-position basis. The chief executive officer has the
responsibility to conduct annual internal reviews of executive officer salary
levels in order to rank salary, individual performance and job value to each
position. The chief executive officer then makes recommendations on salaries,
other than his own, to the MD&C Committee. The chairman of the board makes
recommendations on the chief executive officer's salary to the MD&C Committee.
The MD&C Committee reviews the recommendations regarding changes in salaries for
executive officers. The MD&C Committee may take such action, including
modifications to the recommendations, as it deems appropriate. The
determinations of the MD&C Committee may be based on a variety of factors,
including a subjective evaluation of past and potential future individual
performance and contributions and alternative career opportunities that might be
available to the executives. The MD&C Committee may also review compensation
data from companies employing executives in positions similar to those whose
salaries were being reviewed, as well as market conditions for executives in
general with similar skills, responsibilities, background and performance
levels, both inside and outside of CompX's businesses (such companies may
include companies contained in the peer group indexes plotted on the Performance
Graph following this report), and other companies with similar financial and
business characteristics as CompX.
In December 2003, the MD&C Committee approved 2004 base salary increases
for the chief executive officer and one other executive officer, Scott C. James.
The MD&C Committee based its actions regarding 2004 salaries primarily upon the
chairman of the board's recommendation regarding the chief executive officer,
the chief executive officer's recommendation regarding Mr. James and the MD&C
Committee members' collective business experience and judgment. In 2003, no
specific survey or study was utilized to make salary determinations. The chief
executive officer's 2004 annual salary was not based on any specific measure of
CompX's financial performance.
Annual Incentive Compensation
In February 2004, the MD&C Committee determined that the amount of any
annual incentive compensation to be paid to CompX's executive officers employed
by CompX would be awarded on a year-end discretionary evaluation of each such
officer's performance, attitude and potential, rather than achieved operating
income. Accordingly, the MD&C Committee awarded 2004 incentive compensation to
certain of CompX's executive officers based on a discretionary evaluation of
each such officer's performance, attitude and potential. The MD&C Committee
based its actions regarding 2004 incentive compensation primarily upon the
chairman of the board's recommendation regarding the chief executive officer,
the chief executive officer's recommendations regarding the other executive
officers employed by CompX and the MD&C Committee members' collective business
experience and judgment. No specific overall performance measures were utilized
and there is no specific relationship between overall performance measures and
an executive's incentive compensation. Additionally, there is no specific
weighing of factors considered in the determination of incentive compensation
paid to executive officers employed by CompX. The 2004 discretionary bonuses the
named executive officers employed by CompX received are disclosed in the bonus
column in the summary compensation table in this proxy statement.
Stock-Based Compensation
The MD&C administers matters regarding the stock-based compensation of
CompX's executive officers. With regard to stock-based compensation (e.g. stock
bonuses, stock options, restricted stock or stock appreciation rights, among
other types of stock-based compensation), the MD&C Committee determines whether
to grant stock-based compensation based upon the chairman of the board's
recommendation regarding the chief executive officer, the chief executive
officer's recommendations regarding the other executive officers and the MD&C
Committee members' collective business experience and judgment. In 2004,
however, management did not recommend any stock-based compensation and the MD&C
Committee did not grant any such compensation to any executive officers other
than annual stock grants to CompX's nonemployee directors, including the
chairman of the board, for their services as directors. The MD&C Committee does
not currently anticipate granting stock-based compensation to anyone other than
these annual grants of stock to CompX's nonemployee directors.
-17-
Defined Contribution Plans
The MD&C Committee also reviews and approves CompX's discretionary annual
contributions to the CAP Plan, a profit sharing defined contribution plan, and
the CompX 401(k) Plan. Participants of these plans are employees of certain of
CompX's domestic operations. Under the CAP Plan for the 2004 plan year, the MD&C
Committee approved a contribution of 7.25% of 2004 earnings before taxes of
CompX's National and Timberline divisions and similar contributions for other
participants, subject to certain limitations under the Cap Plan and the Internal
Revenue Code of 1986, as amended (the "Code"). Under the CompX 401(k) Plan for
the 2004 plan year, the MD&C Committee approved matching contributions based on
each participant's business unit that ranged from 37% to 100% of the
participant's contribution, subject to certain limitations under the CompX
401(k) Plan and the Code. Certain of the named executive officers received such
contributions, which are disclosed in the all other compensation column in the
summary compensation table in this proxy statement. For the 2004 plan year, the
MD&C committee approved contributions to the CAP Plan and the CompX 401(k) Plan
in an aggregate amount of approximately $1.2 million, subject to certain
limitations of the Code and the respective plans.
Deductibility of Compensation
Section 162(m) of the Code generally disallows a tax deduction to public
companies for non-performance based compensation over $1.0 million paid to the
company's chief executive officer and four other most highly compensated
executive officers. It is CompX's general policy to structure the
performance-based portion of the compensation of its executive officers in a
manner that enhances CompX's ability to deduct fully such compensation.
The following individuals, in the capacities indicated, hereby submit the
foregoing report.
Paul M. Bass, Jr. Ann Manix
Chairman of the MD&C Committee Member of the MD&C Committee
Keith R. Coogan
Independent Director
-18-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties. As set forth under "Security
Ownership," Harold C. Simmons, through Contran, may be deemed to control CompX.
CompX and other entities that may be deemed to be controlled by or affiliated
with Mr. Simmons sometimes engage in (a) intercorporate transactions such as
guarantees, management and expense sharing arrangements, shared fee
arrangements, tax sharing agreements, joint ventures, partnerships, loans,
options, advances of funds on open account and sales, leases and exchanges of
assets, including securities issued by both related and unrelated parties and
(b) common investment and acquisition strategies, business combinations,
reorganizations, recapitalizations, securities repurchases and purchases and
sales (and other acquisitions and dispositions) of subsidiaries, divisions or
other business units, which transactions have involved both related and
unrelated parties and have included transactions that resulted in the
acquisition by one related party of an equity interest in another related party.
CompX periodically considers, reviews and evaluates and understands that Contran
and related entities periodically consider, review and evaluate such
transactions. Depending upon the business, tax and other objectives then
relevant, it is possible that CompX might be a party to one or more of such
transactions in the future. In connection with these activities CompX may
consider issuing additional equity securities or incurring additional
indebtedness. CompX's acquisition activities may in the future include
participation in acquisition or restructuring activities conducted by other
companies that may be deemed to be controlled by Mr. Simmons. It is the policy
of CompX to engage in transactions with related parties on terms, in the opinion
of CompX, no less favorable to CompX than could be obtained from unrelated
parties.
Certain directors or executive officers of Contran, Keystone, Kronos
Worldwide, NL, TIMET or Valhi also serve as directors or executive officers of
CompX. Such relationships may lead to possible conflicts of interest. These
possible conflicts of interest may arise from the duties of loyalty owed by
persons acting as corporate fiduciaries to two or more companies under
circumstances in which such companies may have adverse interests. No specific
procedures are in place that govern the treatment of transactions among CompX
and its related entities, although such entities may implement specific
procedures as appropriate for particular transactions. In addition, under
applicable principles of law, in the absence of stockholder ratification or
approval by directors who may be deemed disinterested, transactions involving
contracts among companies under common control must be fair to all companies
involved. Furthermore, directors owe fiduciary duties of good faith and fair
dealing to all stockholders of the companies for which they serve.
Intercorporate Services Agreement. Under the ISAs, employees of one company
will provide certain services, including executive officer services, to the
other company on a fee basis. The services rendered under the ISAs may include
executive, management, financial, internal audit, accounting, tax, legal,
insurance, risk management, treasury, aviation, human resources, technical,
consulting, administrative, office, occupancy and other services as required
from time to time in the ordinary course of the recipient's business. The fees
paid pursuant to the ISAs are generally based upon an estimate of the time
devoted by employees of the provider of the services to the affairs of the
recipient and the employer's cost related to such employees, which includes the
employees' cash compensation and an overhead component that takes into account
other employment costs of the employees. Each of the ISAs in their current form
extends on a quarter-to-quarter basis, generally subject to the termination by
either party pursuant to a written notice delivered 30 days prior to the start
of the next quarter. Because of the large number of companies affiliated with
Contran and CompX, CompX believes it benefits from cost savings and economies of
scale gained by not having certain management, financial and administrative
staffs duplicated at each entity, thus allowing certain individuals to provide
services to multiple companies but only be compensated by one entity. With
respect to a publicly held company that is a party to an ISA, the ISA and the
related aggregate annual charge is reviewed and approved by the independent
directors of the company.
Effective January 1, 2004, CompX entered into the Contran ISA. The services
provided under the Contran ISA include the services of certain of CompX's
executive officers. In 2004, CompX paid Contran fees of $2.3 million for its
services under the Contran ISA. In 2005, CompX expects to pay Contran fees of
$2.6 million for its services under the Contran ISA. CompX also pays director
fees and expenses directly to Messrs. Glenn Simmons and Watson for their
services as directors of CompX.
-19-
Insurance Matters. Contran and CompX participate in a combined risk
management program. Pursuant to the program, Contran and certain of its
subsidiaries and affiliates, including CompX and certain of its subsidiaries and
affiliates, purchase certain of their insurance policies as a group, with the
costs of the jointly owned policies being apportioned among the participating
companies. Tall Pines Insurance Company, including Valmont Insurance Company
that merged into Tall Pines in December 2004 ("Tall Pines"), and EWI RE, Inc.
("EWI") provide for or broker these insurance policies. Tall Pines is a captive
insurance company wholly owned by Valhi, and EWI is a reinsurance brokerage and
risk management firm wholly owned by NL. A son-in-law of Harold C. Simmons
serves as EWI's chairman of the board and chief executive officer and is
compensated as an employee of EWI. Consistent with insurance industry practices,
Tall Pines and EWI receive commissions from insurance and reinsurance
underwriters for the policies that they provide or broker.
With respect to certain of such jointly owned insurance policies, it is
possible that unusually large losses incurred by one or more insureds during a
given policy period could leave the other participating companies without
adequate coverage under that policy for the balance of the policy period. As a
result, Contran and certain of its subsidiaries or affiliates, including CompX,
have entered into a loss sharing agreement under which any uninsured loss is
shared by those entities who have submitted claims under the relevant policy.
CompX believes the benefits in the form of reduced premiums and broader coverage
associated with the group coverage for such policies justify the risks
associated with the potential for any uninsured loss.
During 2004, Contran and its related parties paid premiums of approximately
$15.1 million for policies Tall Pines provided or EWI brokered, including
approximately $1.0 million CompX and its subsidiaries paid. These amounts
principally included payments for reinsurance and insurance premiums paid to
unrelated third parties, but also included commissions paid to Tall Pines and
EWI. In CompX's opinion, the amounts that CompX and its subsidiaries paid for
these insurance policies and the allocation among CompX and its affiliates of
relative insurance premiums are reasonable and at least as favorable to those
they could have obtained through unrelated insurance companies or brokers. CompX
expects that these relationships with Tall Pines and EWI will continue in 2005.
Tax Matters. Prior to October 1, 2004, CompX was a separate United States
federal income taxpayer and was not a member of Contran's consolidated United
States federal income tax group (the "Contran Tax Group"). Effective with the
formation of CGI on October 1, 2004, CompX and its qualifying subsidiaries
became members of the Contran Tax Group and CompX entered into a tax sharing
agreement with NL and Contran (the "Contran Tax Agreement"). The Contran Tax
Agreement provides that CompX and its qualifying subsidiaries compute provisions
for U.S. income taxes on a separate-company basis using tax elections made by
Contran. Pursuant to the Contran Tax Agreement and using tax elections made by
Contran, CompX makes payments or receives payments in amounts it would have paid
to or received from the U.S. Internal Revenue Service had it not been a member
of the Contran Tax Group but instead had been a separate taxpayer. Refunds are
generally limited to amounts previously paid under the Contran Tax Agreement.
CompX is also a part of consolidated tax returns filed by Contran in
certain United States state jurisdictions. For such consolidated state tax
returns, intercompany allocations of state tax provisions are computed on a
separate company basis using tax elections made by Contran. As a result, CompX
makes payments or receives payments in the amounts that would have been paid to
or received from the respective state tax authority had CompX not been a part of
the consolidated state tax return.
Under certain circumstances, tax regulations could require Contran to treat
items differently than CompX would have treated them on a stand alone basis. In
2004, pursuant to the Contran Tax Agreement and consolidated state tax returns,
CompX paid $2.1 million to NL and $0.2 million to Valcor, Inc., a wholly owned
subsidiary of Valhi.
Law Firm Relationship. Contran and its affiliates, including CompX, engaged
and paid in 2004 to Rogers & Hardin, LLP, a law firm of which CompX's director
Edward J. Hardin is a partner, in the aggregate approximately $500,000 in fees
and expenses for legal services Rogers & Hardin LLP rendered to such entities.
The aggregate amount paid includes approximately $500 in fees and expenses that
CompX paid in 2004 to Rogers & Hardin, LLP for legal services rendered to CompX.
CompX presently expects, and understands that Contran and its other affiliates
presently expect, to continue their relationship with Rogers & Hardin LLP in
2005.
-20-
PERFORMANCE GRAPH
Set forth below for the period commencing December 31, 1998 and ending
December 31, 2004 is a line graph comparing the yearly change in the cumulative
total stockholder return on Class A Common Stock against the cumulative total
return of the Russell 2000 Index, a new self-selected peer group of companies
index and the old self-selected peer group of companies index used in last
year's proxy statement. The new self-selected peer group index is comprised of
The Eastern Company, Harley-Davidson, Inc., HNI Corporation (formerly Hon
Industries, Inc.), Knape & Vogt Manufacturing Company, Leggett & Platt,
Incorporated and Steelcase Inc. The old self-selected peer group index is
comprised of Bush Industries, Inc., Herman Miller, Inc., HNI Corporation
(formerly Hon Industries, Inc.), Interface, Inc., Knape & Vogt Manufacturing
Company, Leggett & Platt, Incorporated and Steelcase Inc. CompX management
believes that the new peer group index reflects a better mix of competitors and
customers of CompX than the old peer group index. The old peer group index is
provided below for comparison purposes.
The graph shows the value at December 31 of each year assuming an original
investment of $100 and the reinvestment of cash dividends to stockholders.
Comparison of Cumulative Return among CompX International Inc. Class A
Common Stock, the Russell 2000 Index, a New Self-Selected Peer Group Index and
the Old Self-Selected Peer Group Index
[PERFORMANCE GRAPH GOES HERE]
December 31,
----------------------------------------------
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
CompX International Inc................. $100 $ 50 $ 76 $ 51 $ 40 $105
Russell 2000 Index...................... 100 97 99 79 116 138
New Self-Selected Peer Group Index...... 100 114 150 134 144 181
Old Self-Selected Peer Group Index...... 100 106 113 105 126 151
-21-
AUDIT COMMITTEE REPORT
The audit committee of the Board of Directors is comprised of three
directors and operates under a written charter adopted by the Board of
Directors. All members of the audit committee meet the independence standards
established by the Board of Directors and the NYSE and promulgated by the SEC
under the Sarbanes-Oxley Act of 2002. The audit committee charter is available
on CompX's website at www.compxnet.com under the corporate section.
CompX's management is responsible for, among other things, preparing
CompX's consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). CompX's
independent auditor is responsible for auditing CompX's consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and for expressing an opinion on the conformity
of CompX's financial statements with GAAP. The audit committee assists the Board
of Directors in fulfilling its responsibility to oversee management's
implementation of CompX's financial reporting process. In its oversight role,
the audit committee reviewed and discussed the audited financial statements with
management and with PricewaterhouseCoopers LLP ("PwC"), CompX's independent
auditor for 2004.
The audit committee met with PwC and discussed any issues deemed
significant by the independent auditor, including the required matters to be
discussed by Statement of Auditing Standards No. 61, Communication with Audit
Committee, as amended. PwC has provided to the audit committee written
disclosures and the letter required by Independence Standards Board No. 1,
Independence Discussions with Audit Committees, and the audit committee
discussed with PwC that firm's independence. The audit committee also concluded
that PwC's provision of non-audit services to CompX and its affiliates is
compatible with PwC's independence.
Based upon the foregoing considerations, the audit committee recommended to
the Board of Directors that CompX's audited financial statements be included in
its Annual Report on Form 10-K for 2004.
Members of the audit committee of the Board of Directors respectfully
submit the foregoing report.
Keith R. Coogan Ann Manix
Chairman of the Audit Committee Member of the Audit Committee
Paul M. Bass, Jr.
Member of the Audit Committee
-22-
INDEPENDENT AUDITOR MATTERS
Independent Auditor. PwC served as CompX's independent auditor for the year
ended December 31, 2004. CompX's audit committee has appointed PwC to review
CompX's quarterly unaudited consolidated financial statements to be included in
its Quarterly Reports on Form 10-Q for the first three quarters of 2005. CompX
expects PwC will be considered for appointment to audit CompX's annual
consolidated financial statements for the year ending December 31, 2005.
Representatives of PwC are not expected to attend the Meeting.
Fees Paid to PwC. The following table shows the aggregate fees PwC has
billed or is expected to bill to CompX and its subsidiaries for services
rendered for 2003 and 2004.
Type of Fees 2003 2004
------------------------------------- ----------- -----------
Audit Fees (1)....................... $ 447,251 $ 898,179
Audit-Related Fees (2)............... 62,644 62,860
Tax Fees (3)......................... 44,900 22,881
All Other Fees (4)................... 25,810 11,334
----------- -----------
Total................................ $ 580,605 $ 995,254
=========== ===========
--------------------
(1) Fees for the following services:
(a) audits of consolidated year-end financial statements for each year and
audit of internal control over financial reporting for 2004;
(b) reviews of the unaudited quarterly financial statements appearing in
CompX's Forms 10-Q for each of the first three quarters of each year;
(c) normally provided statutory or regulatory filings or engagements for
each year; and
(d) the estimated out-of-pocket costs PwC incurred in providing all of
such services for which CompX reimburses PwC.
(2) Fees for employee benefit plan audits.
(3) Permitted fees for tax compliance, tax advice and tax planning services.
(4) Fees for all services not described in the other categories. For 2003, the
disclosed fees include fees for an annual software license and maintenance
and an agreed upon procedures report for the Dutch government related to an
employee severance plan. For 2004, the disclosed fees include fees for
consultations relative to the disposition of CompX's Thomas Regout
operations in Europe and research and development claims.
Preapproval Policies and Procedures. On February 23, 2005, the audit
committee adopted an amended and restated preapproval policy, a copy of which is
attached as Appendix A to this proxy statement, with respect to preapproving
engagements of PwC to perform audit or nonaudit services on behalf of CompX or
any of its subsidiaries. As of May 6, 2003, the audit committee became
responsible for preapproving every engagement of PwC to perform audit or
nonaudit services on behalf of CompX or any of its subsidiaries. Since May 6,
2003, 10% of the all other fees paid to PwC in 2003 were for services for which
the de minimus exception, as defined in Section 202 of the Sarbanes-Oxley Act of
2002, applied. For 2004, the audit committee preapproved the engagement of PwC
for all services rendered to CompX or its subsidiaries for such year.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their reasonable
judgment.
-23-
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2006 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at CompX's annual stockholder meetings, consistent with rules adopted by
the SEC. CompX must receive such proposals not later than December 13, 2005 to
be considered for inclusion in the proxy statement and form of proxy card
relating to the Annual Meeting of Stockholders in 2006. CompX's bylaws require
that the proposal must set forth a brief description of the proposal, the name
and address of the proposing stockholder as they appear on CompX's books, the
number of shares of Common Stock the stockholder holds and any material interest
the stockholder has in the proposal.
The Board of Directors will consider the director nominee recommendations
of CompX stockholders. CompX's bylaws require that a nomination set forth the
name and address of the nominating stockholder, a representation that the
stockholder will be a stockholder of record entitled to vote at the annual
stockholder meeting and intends to appear in person or by proxy at the meeting
to nominate the nominee, a description of all arrangements or understandings
between the stockholder and the nominee (or other persons pursuant to which the
nomination is to be made), such other information regarding the nominee as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the SEC and the consent of the nominee to serve as a CompX director if
elected.
The Board of Directors has no specific minimum qualifications for director
candidates. The Board of Directors will consider a potential director nominee's
ability to satisfy the need, if any, for any required expertise on the Board of
Directors or one of its committees. Historically, CompX management has
recommended director nominees to the Board of Directors. Because under the NYSE
listing standards CompX may be deemed to be a controlled company, the Board of
Directors believes that any additional policies or procedures with regard to the
consideration of director candidates recommended by its stockholders are not
appropriate.
For proposals or director nominations to be brought at the 2006 Annual
Meeting of Stockholders but not included in the proxy statement for such
meeting, CompX's bylaws require that the proposal or nomination must be
delivered or mailed to the principal executive offices of CompX no later than
February 27, 2006. Proposals and nominations should be addressed to the
attention of: Corporate Secretary, CompX International Inc., Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders who wish to communicate with the Board of Directors may do so
through the following procedures. Stockholder communications not involving
complaints or concerns regarding accounting, internal accounting controls and
auditing matters related to CompX ("Accounting Complaints or Concerns") may be
sent to the attention of CompX's corporate secretary at CompX International
Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2697. Stockholder communications that relate to matters that are within
the scope of the responsibilities of the Board of Directors and its committees,
or summaries of such communications, will be forwarded to the chairman of the
audit committee.
Accounting Complaints or Concerns, which may be made anonymously, should be
sent to the attention of CompX's general counsel with a copy to CompX's chief
financial officer at the same address as the corporate secretary. Accounting
Complaints or Concerns will be forwarded to the chairman of the audit committee.
CompX will keep Accounting Complaints or Concerns confidential and anonymous, to
the extent feasible, subject to applicable law. Information contained in an
Accounting Complaint or Concern may be summarized, abstracted and aggregated for
purposes of analysis and investigation.
2004 ANNUAL REPORT ON FORM 10-K
A copy of CompX's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, as filed with the SEC, is included as part of the annual
report mailed to CompX's stockholders with this proxy statement. This Annual
Report on Form 10-K may also be accessed on CompX's website at www.compxnet.com.
-24-
ADDITIONAL COPIES
Pursuant to an SEC rule concerning the delivery of annual reports and proxy
statements, a single set of these documents may be sent to any household at
which two or more stockholders reside if they appear to be members of the same
family. Each stockholder continues to receive a separate proxy card. This
procedure, referred to as householding, reduces the volume of duplicate
information stockholders receive and reduces mailing and printing expenses. A
number of brokerage firms have instituted householding. Certain beneficial
stockholders who share a single address may have received a notice that only one
annual report and proxy statement would be sent to that address unless a
stockholder at that address gave contrary instructions. If, at any time, a
stockholder who holds shares through a broker no longer wishes to participate in
householding and would prefer to receive a separate proxy statement and related
materials, or if such stockholder currently receives multiple copies of the
proxy statement and related materials at his or her address and would like to
request householding of CompX communications, the stockholder should notify his
or her broker. Additionally, CompX will promptly deliver a separate copy of
CompX's 2004 annual report or this proxy statement to any stockholder at a
shared address to which a single copy of such documents was delivered, upon the
written or oral request of the stockholder.
To obtain copies of CompX's 2004 annual report or this proxy statement
without charge, please mail your request to the attention of A. Andrew R. Louis,
Corporate Secretary, at CompX International Inc., Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697, or call him at 972.233.1700.
COMPX INTERNATIONAL INC.
Dallas, Texas
April 13, 2005
-25-
Appendix A
COMPX INTERNATIONAL INC.
AUDIT COMMITTEE PREAPPROVAL POLICY
AMENDED AND RESTATED AS OF FEBRUARY 23, 2005
----------------
Section 1. -- Statement of Principles
The Audit Committee is required, subject to any de-minimus exceptions
permitted by applicable law or regulation, to preapprove the audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such services do not impair the auditors' independence.
This Policy applies to services provided by the accounting firm that serves
CompX International Inc. and its subsidiaries (the "Company") as its primary
independent auditor, and any international affiliates thereof.
Unless a type of service to be provided by the independent auditor is
subject to preapproval under Sections 3 or 4 of this Policy, it will require
specific preapproval by the Audit Committee under Section 2 of this Policy. In
addition, any proposed services subject to preapproval under Section 3 of this
Policy that exceeds the applicable preapproved fee level will also require
preapproval under either Section 2 or Section 4 of this Policy. Notwithstanding
the foregoing, the preapproval requirements under this Policy are waived with
respect to the provision of permitted non-Audit Services to the extent allowed
by applicable law or regulation.
Section 2. -- Specific Preapproval
Subject to Sections 4 and 5 of this Policy, the following describes the
Audit and Audit-related services to be provided by the independent auditor that
must have the specific preapproval of the Audit Committee before the independent
auditor can be engaged:
o Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
o Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q;
o Services associated with registration statements filed by the Company
with the Securities and Exchange Commission ("SEC"), including
responding to SEC comment letters and providing comfort letters;
o Statutory audits or annual audits of the annual financial statements
of subsidiaries of the Company;
o Quarterly review procedures of the interim financial statements of
subsidiaries of the Company;
o Services associated with potential business acquisitions/dispositions
involving the Company;
o Any other services provided to the Company not specifically described
above or in Section 3 of this Policy; and
o Any material changes in terms, conditions or fees with respect to the
foregoing resulting from changes in audit scope, Company structure or
other applicable matters.
Section 3. -- Other Categories of Preapproval
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements and that are traditionally performed by the independent
auditor. The Audit Committee believes that the provision of all of the services
described below does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence.
A-1
Subject to Section 5 of this Policy, the following Audit, Audit-related,
Tax and All Other services to be provided by the independent auditor will have
the preapproval of the Audit Committee, subject to the limitation that the
aggregate fees for such services provided by the independent auditor in any
calendar year may not exceed the limits established by the Audit Committee. The
Audit Committee will periodically revise the list of pre-approved services and
the fee limitation based on subsequent determinations as it deems appropriate.
o Audit Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies; and
o Assistance with responding to SEC comment letters received by the
Company other than in connection with a registration statement
filed with the SEC.
o Audit-related Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies (note, under SEC rules, some
consultations may be "audit" rather than "audit-related").
o Financial statement audits of employee benefit plans of the
Company;
o Agreed-upon or expanded audit procedures related to the Company's
accounting records required to respond to or comply with
financial, accounting, legal, regulatory or contractual reporting
requirements; and
o Internal control reviews and assistance with internal control
reporting requirements of the Company (to the extent permitted by
applicable rule or regulation).
o Tax Services:
o Consultations with the Company's management as to the tax
treatment of transactions or events and/or the actual or
potential tax impact of final or proposed laws, rules and
regulations in U.S. federal, state and local and international
jurisdictions;
o Consultations with the Company's management related to compliance
with existing or proposed tax laws, rules and regulations in U.S.
federal, state and local and international jurisdictions;
o Assistance in the preparation of and review of the Company's U.S.
federal, state and local and international income, franchise and
other tax returns;
o Assistance with tax inquiries, audits and appeals of the Company
before the U.S. Internal Revenue Service and similar state, local
and international agencies;
o Consultations with the Company's management regarding domestic
and international statutory, regulatory or administrative tax
developments;
o Transfer pricing and cost segregation studies of the Company; and
o Expatriate tax assistance and compliance for the Company and its
employees.
o Other Services:
o Assistance with corporate governance matters (including
preparation of board minutes and resolutions) and assistance with
the preparation and filing of documents (such as paperwork to
register new companies or to de-register existing companies)
involving the Company with non-U.S. governmental and regulatory
agencies, provided, however, that the non-U.S. jurisdiction in
which such services are provided does not require that the
individual providing such service be licensed, admitted or
otherwise qualified to practice law.
Any services provided by the independent auditor under this Section of the
Policy shall be reported to the full Audit Committee by an officer of the
Company at the first meeting of the Audit Committee held subsequent to the
engagement of the independent auditor to provide such services. Such report
shall include detailed back-up documentation provided by the independent auditor
regarding the services provided.
A-2
Section 4. -- Delegation
Subject to Section 5 of this Policy, the Audit Committee has delegated
preapproval authority to the Audit Committee Chairman or his/her designee for
(i) any proposed services described in Section 3 of this Policy to the extent
that the aggregate fees for such services provided by the independent auditor
during the then-current calendar year has exceeded the limits established by the
Audit Committee or (ii) any other proposed services that are not described in
Section 3 of this Policy that the Audit Committee Chairman or his/her designee
determines to be appropriate or necessary. The Chairman or his/her designee
shall report any pre-approval decisions under this Section 4 of the Policy to
the full Audit Committee at the first meeting of the Audit Committee held
subsequent to such pre-approval decision. The Audit Committee does not delegate
its responsibilities to pre-approve services performed by the independent
auditor to management.
Section 5. -- Prohibited Non-Audit Services
The following is a list of non-audit services for which the independent
auditor is prohibited from providing to the Company under the terms of the SEC's
rules on auditor independence, or otherwise:
o Bookkeeping or other services related to the accounting records or
financial statements of the Company;
o Financial information systems design and implementation;
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
o Actuarial services;
o Internal audit outsourcing services;
o Management functions;
o Human resources;
o Broker, dealer, investment adviser or investment banking services;
o Any service for which no fee would be charged unless a specified
finding or result is obtained, or in which the amount of the fee is
otherwise dependent upon the finding or result of such service (other
than any such fee which is fixed by a court of competent authority or
other public authorities and not dependent on a finding or result);
o Any tax service involving (i) a listed transaction within the meaning
of 26 C.F.R. ss. 1.6011.1-4(b)(2) or (ii) a confidential transaction
within the meaning of 26 C.F.R. ss. 1.6011.1-4(b)(3), or that would be
a confidential transaction within the meaning of 26 C.F.R. ss.
1.6011.1-4(b)(3) if the fee for the transaction were equal to or more
than the minimum fee described in 26 C.F.R. ss. 1.6011.1-4(b)(3);
o Legal services to the extent that the jurisdiction in which such
services are provided requires that the individual providing such
service be licensed, admitted or otherwise qualified to practice law;
and
o Expert services unrelated to the audit.
Section 6. -- Procedures
Applications to provide services that require preapproval by the Audit
Committee under Section 2 of this Policy, or that require preapproval of the
Chairman of the Audit Committee or his/her designee under Section 4 of this
Policy, must be made by an auditor in writing. Such an application, which shall
include detailed back-up documentation provided by the independent auditor
regarding the services provided, shall be submitted to the Audit Committee or
the Chairman of the Audit Committee, as applicable, for final resolution.
A-3
Section 7. -- Engagement Letters
Engagement of the independent auditor under this Policy to provide the
following services must be evidenced pursuant to a written engagement letter
with the independent auditor that must at least be signed by the Chairman of the
Audit Committee or his/her designee:
o Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
o Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q; and
o Any engagement for which applicable professional standards of the
independent auditor require an engagement letter.
Any other engagement of the independent auditor under this Policy may be
evidenced pursuant to a written engagement letter with the independent auditor,
as may be required by the Audit Committee, the Chairman of the Audit Committee
or his/her designee, the independent auditor or an officer of the Company. Any
such engagement letter may, but is not required to, be signed by the Chairman of
the Audit Committee or his/her designee.
A-4
COMPX INTERNATIONAL INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
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Proxy - CompX International Inc.
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMPX INTERNATIONAL INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 10, 2005
The undersigned hereby appoints David A. Bowers, Darryl R. Halbert and A. Andrew
R. Louis, and each of them, proxy and attorney-in-fact for the undersigned, with
full power of substitution, to vote on behalf of the undersigned at the 2005
Annual Meeting of Stockholders (the "Meeting") of CompX International Inc., a
Delaware corporation ("CompX"), to be held at CompX's corporate offices at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Tuesday, May 10,
2005, at 10:00 a.m. (local time), and at any adjournment or postponement of the
Meeting, all of the shares of class A and class B common stock, par value $0.01
per share, of CompX standing in the name of the undersigned or that the
undersigned may be entitled to vote on the proposals set forth, and in the
manner directed, on this proxy card.
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE COMPX PROXY STATEMENT THAT
ACCOMPANIED THIS PROXY CARD.
The proxies, if this card is properly executed, will vote in the manner directed
on this card. If no direction is made, the proxies will vote "FOR" all nominees
named on the reverse side of this card for election as directors and, to the
extent allowed by applicable law, in the discretion of the proxies as to all
other matters that may properly come before the Meeting and any adjournment or
postponement thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE SIDE.
CompX International Inc.
[Name]
[Address]
[ ] Mark this box with an X if you have made changes to your name or address
details above.
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Annual Meeting Proxy Card
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A. Election of Directors
1. The board of directors recommends a vote FOR the listed nominees.
For Withhold
01 Paul M. Bass, Jr. [ ] [ ]
02 David A. Bowers [ ] [ ]
03 Keith R. Coogan [ ] [ ]
04 Edward J. Hardin [ ] [ ]
05 Ann Manix [ ] [ ]
06 Glenn R. Simmons [ ] [ ]
07 Steven L. Watson [ ] [ ]
B. Other Matters
The board of directors recommends a vote FOR the following proposal.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment or
postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. Authorized Signatures - Sign Here - This section must be completed for
your instructions to be executed.
NOTE: Please sign exactly as the name that appears on this card. Joint owners
should each sign. When signing other than in an individual capacity,
please fully describe such capacity. Each signatory hereby revokes all
proxies heretofore given to vote at said Meeting and any adjournment or
postponement thereof.
Signature 1 - Signature 2 - Date (mm/dd/yyyy)
Please keep signature Please keep signature
within box within box
[ ] [ ] [ ][ ]/[ ][ ]/[ ][ ][ ][ ]
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