COMPX INTERNATIONAL INC

Previous wording

Operating income in the second quarter of 2026 was $8.9 million compared to $6.3 million in the same period of 2025. Operating income for the first six months of 2026 was $16.0 million compared to $12.2 million for the comparable prior year period. Our operating income increased in the second quarter and for the first six months of 2026 due to higher sales and gross margins, predominantly at the Security Products segment and, to a lesser extent, at the Marine Components segment.

Current wording

Operating income in the third quarter of 2026 was $6.4 million compared to $4.8 million in the same period of 2025. Operating income for the first nine months of 2026 was $22.4 million compared to $17.0 million for the comparable prior year period. Our operating income increased in the third quarter and for the first nine months of 2026 due to higher sales and gross margin at Security Products and Marine Components.

Previous wording

*Cost of sales and gross margin.*Cost of sales as a percentage of net sales improved by 3.7% and 3.1% in the second quarter and first six months of 2026, respectively, compared to the same periods in 2025. As a result, gross margin as a percentage of sales increased over the same periods. The improvement in gross margin percentage for the second quarter and first six months of 2026 was primarily due to a higher gross margin percentage at Security Products. In addition, improved gross margin performance at Marine Components contributed favorably to the increase in the second-quarter comparative period. See segment discussion below.

Current wording

*Cost of sales and gross margin.*Cost of sales as a percentage of net sales improved by 2.0% and 2.7% in the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. As a result, gross margin as a percentage of sales increased over the same periods. The improvement in gross margin percentage for the third quarter was due to higher gross margin percentages at both Security Products and Marine Components, while the improvement for the first nine months of 2026 was primarily due to the improvement in gross margin percentage at Security Products. See segment discussion below.

Previous wording

Operating costs and expenses. Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales, administrative costs relating to business unit and corporate management activities, and gains and losses on property and equipment. Operating costs and expenses for the second quarter and first six months of 2026 were comparable to the same periods in 2025. Operating costs and expenses as a percentage of net sales decreased in the second quarter and first six months of 2026 due to higher coverage of operating costs and expenses as a result of higher sales.

Current wording

Operating costs and expenses. Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales, administrative costs relating to business unit and corporate management activities, and gains and losses on property and equipment. Operating costs and expenses for the third quarter and first nine months of 2026 increased $.4 million and $.3 million, respectively, compared to the same periods in 2025 primarily due to higher employee related costs, including salaries, benefits and travel expenses. Operating costs and expenses as a percentage of net sales decreased in the third quarter and first nine months of 2026 due to higher coverage of operating costs and expenses as a result of higher sales, partially offset by higher operating costs as noted above.

Previous wording

Operating income. As a percentage of net sales, operating income for the second quarter and the first six months of 2026 increased compared to the same period of 2025 and was primarily impacted by the factors impacting sales, cost of sales, gross margin and operating costs and expenses. See segment discussion below.

Current wording

Operating income. As a percentage of net sales, operating income for the third quarter and the first nine months of 2026 increased compared to the same periods of 2025 and was primarily impacted by the factors impacting sales, cost of sales, gross margin and operating costs and expenses. See segment discussion below.

Previous wording

*Interest income.*Interest income decreased $.2 million and $.4 million in the second quarter and first six months of 2026, respectively, compared to the same periods in 2025 primarily due to lower average interest rates and decreased cash balances.

Current wording

*Interest income.*Interest income decreased $.1 million in the third quarter of 2026 compared to the same period in 2025 primarily due to lower average interest rates. Interest income decreased $.5 million in the first nine months of 2026 compared to the same period in 2025 primarily due to lower average interest rates and decreased cash balances.

Previous wording

Security Products. Security Products net sales increased 9% in the second quarter of 2026 compared to the same period in 2025 primarily due to $.9 million higher sales to the healthcare market, $.7 million higher sales to the transportation market, $.5 million higher sales to distributors and $.4 million higher sales to the tool storage market. Security Products net sales increased 4% in the first six months of 2026 compared to the same period in 2025 primarily due to $.8 million higher sales to the transportation market, $.7 million higher sales to the tool storage market, $.6 million higher sales to the healthcare market and $.4 million higher sales to distributors. Sales to the government security market in the second quarter and in the first six months of 2026 were comparable to the same periods in 2025.

Current wording

Security Products. Security Products net sales increased 5% in the third quarter of 2026 compared to the same period in 2025 primarily due to $1.4 million higher sales to the healthcare market and $.6 million higher sales to the tool storage market, partially offset by $.8 million lower sales to the government security market. Security Products net sales increased 4% in the first nine months of 2026 compared to the same period in 2025 primarily due to $2.0 million higher sales to the healthcare market, $1.3 million higher sales to the tool storage market, $1.1 million higher sales to the transportation market and $.6 million higher sales to distributors, partially offset by $1.1 million lower sales to the government security market.

Previous wording

Gross margin as a percentage of net sales increased in the second quarter and first six months of 2026 compared to the same periods in 2025 primarily due to a more favorable customer and product mix and lower cost of sales driven by lower employer-related medical expenses and the one-time recovery of prior-period import costs recognized during the second quarter of 2026. Operating income margin increased for both periods, primarily due to the improvement in gross margin and increased coverage of operating costs and expenses on higher sales.

Current wording

Gross margin as a percentage of net sales for the third quarter of 2026 increased compared to the same period in 2025 due to lower cost inventory produced during the second quarter of 2026 and sold in the third quarter of 2026 and increased coverage of fixed costs as a result of higher sales. Operating income margin increased in the third quarter of 2026 primarily due to the factors impacting gross margin. Gross margin as a percentage of net sales for the first nine months of 2026 increased compared to the same period in 2025 primarily due to a more favorable customer and product mix and lower cost of sales driven by lower employer-related medical expenses and the one-time recovery of prior-period import costs recognized during the second quarter of 2026. Operating income margin increased for the first nine months of 2026 primarily due to the improvement in gross margin discussed above and increased coverage of operating costs and expenses on higher sales.

Previous wording

Marine Components. Marine Components net sales increased 6% in both the second quarter and first six months of 2026 compared to the same periods in 2025. The increase in second quarter sales was primarily due to $1.6 million higher sales to the industrial market, partially offset by $1.0 million lower sales to the government market. The increase in sales for the first six months of 2026 was primarily due to $3.5 million higher sales to the industrial market, partially offset by $1.5 million lower sales to the towboat market and $1.0 million lower sales to the government market. Towboat market sales in the first quarter of 2025 benefited from a one-time customer stocking event that did not repeat in 2026.

Current wording

Marine Components. Marine Components net sales increased 27% in the third quarter of 2026 compared to the same period in 2025. The increase in third quarter sales was primarily due to $1.1 million higher sales to the towboat market and $.9 million higher sales to the industrial market. Marine Components net sales increased 13% in the first nine months of 2026 compared to the same period in 2025. The increase in sales for the first nine months of 2026 was primarily due to $4.4 million higher sales to the industrial market and $.5 million higher sales to the engine builder market, partially offset by $.7 million lower sales to the government market and $.5 million lower sales to each of the towboat and the center console markets. Towboat market sales in the first quarter of 2025 benefited from a one-time customer stocking

Previous wording

Gross margin as a percentage of net sales increased in the second quarter of 2026 compared to the same period in 2025 primarily due to a more favorable customer and product mix, partially offset by higher cost of sales, including increased maintenance and supply costs. Operating income margin increased in the second quarter of 2026 primarily due to the factors impacting gross margin. Gross margin as a percentage of net sales for the first six months of 2026 was

Current wording

Gross margin as a percentage of net sales increased in the third quarter of 2026 compared to the same period in 2025 primarily due to increased coverage of fixed costs on higher sales, partially offset by a less favorable customer and product mix. Operating income margin increased in the third quarter of 2026 primarily due to the factors impacting gross margin and increased coverage of operating costs and expenses on higher sales. Gross margin as a percentage of net sales for the first nine months of 2026 was comparable to the same period in 2025 as increased coverage of fixed costs on higher sales were largely offset by a less favorable customer and product mix. Operating income margin increased for the first nine months of 2026 primarily due to increased coverage of operating costs and expenses on higher sales.

Previous wording

Outlook. Our results for the first six months of 2026 reflected higher sales and favorable customer and product mix for both the Security Products and Marine Components segments. We expect these trends to continue through the remainder of 2026, and we currently expect net sales for the full year of 2026 to exceed 2025 levels. Within Security Products, we expect demand from several end markets, including healthcare, transportation and tool storage, to remain strong in the second half of 2026. Within Marine Components, we expect increased demand will continue to be driven by industrial market demand, particularly aeroderivative demand, while recreational marine and towboat-related demand is expected to remain relatively consistent with 2025 levels (excluding the impact of the one-time stocking event noted above). Based on our first-half operating performance, we currently expect full-year gross margin and operating income margins to exceed 2025 levels, although margins during the second half of 2026 may be challenged by the factors discussed below. Future operating results will continue to be influenced by product and customer mix, raw material costs and overall demand levels in the markets we serve.

Current wording

Outlook. Our results for the first nine months of 2026 reflected higher sales and improved profitability in both the Security Products and Marine Components segments. Demand remained strong in several key Security Products end markets, including healthcare, tool storage, and transportation. Marine Components continued to benefit primarily from industrial market demand as well as increased towboat demand in the third quarter. We expect these favorable trends to continue throughout the remainder of 2026 and expect net sales, gross margin and operating income for the full year 2026 to exceed 2025 levels. At Security Products, we expect healthcare demand to remain strong, while government security sales are expected to remain slightly below prior year levels. At Marine Components, we expect demand to remain driven primarily by the industrial market, while towboat market sales are expected to remain relatively consistent with prior year levels.

Previous wording

We manufacture substantially all of our products in the U.S. and source a substantial majority of our raw materials from U.S. suppliers. We also source certain components, primarily electronic components, from suppliers in Asia, including China. Beginning in the second quarter of 2025 and continuing through the second quarter of 2026, we experienced cost increases for certain imported raw materials, primarily electronic components, including increases in tariffs and shipping costs. In addition, inflationary pressures have increased costs for certain domestically-sourced raw materials. Where possible, we increase selling prices to recover these higher raw material costs, although the extent to which we can fully recover such costs will depend on a variety of factors including the ultimate tariff rate, duration of tariffs, and our customers’ ability to substitute alternative products. Accordingly, we continue to closely monitor raw material costs, including zinc, brass, aluminum, steel and energy, as well as current and anticipated customer demand levels, to ensure our production capacity and inventory levels remain aligned with market conditions.

Current wording

We manufacture substantially all of our products in the United States and source a substantial majority of our raw materials from U.S. suppliers. We also source certain components, primarily electronic components, from suppliers in Asia, including China. Tariff-related costs and inflationary pressures affecting certain raw materials remain elevated relative to historical levels. In addition, we have recently experienced difficulties or delays in sourcing certain electronic components, in some cases resulting in increased costs (including higher inbound freight costs) to minimize shipping delays. Where appropriate, we continue to adjust selling prices to offset higher costs, although our ability to fully recover these costs depends on competitive conditions, customer demand, tariff levels and the availability of alternative sources. We continue to monitor potential changes in tariff policies and their impact on raw material costs, sourcing decisions and customer demand. Accordingly, we continue to closely monitor raw material costs, including zinc, brass, aluminum, steel and energy, as well as customer demand levels, to ensure our production capacity and inventory levels remain aligned with market conditions.

Previous wording

Our expectations for our operations and the markets we serve are based on a number of factors outside our control. Currently, our supply chains are stable and transportation and logistical delays are minimal. We have experienced global and domestic supply chain challenges in the past. Any future impacts on our operations will depend on, among other things, disruption to our operations or our suppliers’ operations, the effect of tariffs, and the impact of broader economic conditions, consumer confidence, and geopolitical events affecting demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Current wording

Our expectations for our operations and the markets we serve are based on a number of factors outside our control. Currently, our supply chains are generally stable and transportation and logistical delays are minimal. We have experienced global and domestic supply chain challenges in the past. Any future impacts on our operations will depend on, among other things, disruption to our operations or our suppliers’ operations, the effect of tariffs, and the impact of broader economic conditions, consumer confidence, and geopolitical events affecting demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Previous wording

Our net cash provided by operating activities for the first six months of 2026 increased by $1.5 million as compared to the first six months of 2025. The increase in net cash provided is primarily due to the net effects of:

Current wording

Our net cash provided by operating activities for the first nine months of 2026 increased by $4.5 million as compared to the first nine months of 2025. The increase in net cash provided is primarily due to the net effects of:

Previous wording

Changes in working capital can have a significant effect on cash flows from operating activities. As shown below, our average days sales outstanding increased from December 31, 2025 to June 30, 2026, with changes varying by segment, primarily as a result of differences in the timing of sales and collections relative to the quarter-end, including differences

Current wording

Changes in working capital can have a significant effect on cash flows from operating activities. As shown below, our average days sales outstanding increased from December 31, 2025 to September 30, 2026, with changes varying by segment, primarily as a result of differences in the timing of sales and collections relative to the quarter-end, including differences arising from the fiscal month-end close occurring before calendar month-end, when certain large customers typically remit payments. For comparative purposes, we have provided December 31, 2024 and September 30, 2025 numbers below.

Previous wording

As shown below, our average number of days in inventory decreased from December 31, 2025 to June 30, 2026 due to a reduction in days in inventory at Security Products, driven by higher sales volumes in the second quarter of 2026 compared to the fourth quarter of 2025. This improvement was partially offset by an increase in days in inventory at Marine Components, primarily due to higher work-in-process inventory balances resulting from delays in certain raw material shipments, as well as the timing of customer order fulfillment. For comparative purposes, we have provided December 31, 2024 and June 30, 2025 numbers below.

Current wording

As shown below, our average number of days in inventory decreased from December 31, 2025 to September 30, 2026 due to a reduction in days in inventory at both Security Products and Marine Components, driven by higher sales volumes in the third quarter of 2026 compared to the fourth quarter of 2025. For comparative purposes, we have provided December 31, 2024 and September 30, 2025 numbers below.

Previous wording

*Investing activities.*Our capital expenditures were $1.5 million and $2.2 million in the first six months of 2026 and 2025, respectively. During the first six months of 2026, Valhi repaid a net $1.2 million under the promissory note ($7.6 million of gross borrowings and $8.8 million of gross repayments). During the first six months of 2025, Valhi repaid a net $.4 million under the promissory note ($6.0 million of gross borrowings and $6.4 million of gross repayments). See Note 10 to our Condensed Consolidated Financial Statements.

Current wording

*Investing activities.*Our capital expenditures were $3.1 million in each of the first nine months of 2026 and 2025. During the first nine months of 2026, Valhi repaid a net $2.1 million under the promissory note ($12.3 million of gross borrowings and $14.4 million of gross repayments). During the first nine months of 2025, Valhi repaid a net $1.2 million under the promissory note ($10.7 million of gross borrowings and $11.9 million of gross repayments). See Note 10 to our Condensed Consolidated Financial Statements.

Previous wording

*Financing activities.*Financing activities consisted only of cash dividends. During each of the first six months of 2026 and 2025, we paid aggregate quarterly dividends to CompX stockholders of $.60 per share. The declaration and payment of future dividends and the amount thereof, if any, is discretionary and is dependent upon our results of operations, financial condition, cash requirements for our businesses, contractual requirements and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which we might pay.

Current wording

*Financing activities.*Financing activities consisted only of cash dividends. During each of the first nine months of 2026 and 2025, we paid aggregate quarterly dividends to CompX stockholders of $.90 per share. Additionally, in August 2025 our board of directors declared a special dividend on our Class A common stock of $1.00 per share ($12.3 million). The declaration and payment of future dividends and the amount thereof, if any, is discretionary and is dependent upon our results of operations, financial condition, cash requirements for our businesses, contractual requirements and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which we might pay.

Previous wording

All of our $52.4 million aggregate cash and cash equivalents at June 30, 2026 were held in the U.S.

Current wording

All of our $57.3 million aggregate cash and cash equivalents at September 30, 2026 were held in the U.S.

Previous wording

Capital expenditures. Firm purchase commitments for capital projects in process at June 30, 2026 totaled $1.1 million. We expect our capital expenditures for 2026 will be approximately $5.5 million primarily to increase capacity through investments in manufacturing equipment, including new technologies and increased automation and for improvements to our manufacturing facilities.

Current wording

Capital expenditures. Firm purchase commitments for capital projects in process at September 30, 2026 totaled $1.0 million. We expect our capital expenditures for 2026 will be approximately $5.2 million primarily to increase capacity through investments in manufacturing equipment, including new technologies and increased automation and for improvements to our manufacturing facilities.

Previous wording

There have been no changes in the first six months of 2026 with respect to our critical accounting policies presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report.

Current wording

There have been no changes in the first nine months of 2026 with respect to our critical accounting policies presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report.