CompX(CIX) - 2024 Q3 - Quarterly Report

Financial Performance - Operating income for Q3 2024 was $3.3 million, down from$6.6 million in Q3 2023, primarily due to lower sales and gross margin in both Security Products and Marine Components[38]. - Net sales decreased by $6.7 million in Q3 2024 compared to Q3 2023, mainly due to lower Security Products sales to a government security customer[41]. - Gross margin as a percentage of sales decreased to 28.1$12.1 million, down from $18.0 million in the same period of 2023, primarily due to lower Marine Components sales[38]. - Security Products net sales fell by 15$5.0 million decrease in sales to the government security market[50]. - Marine Components net sales decreased by 21% in Q3 2024 compared to Q3 2023, primarily due to $1.3 million lower sales to the towboat market[52]. - For the first nine months of 2024, Marine Components net sales decreased by 32$8.7 million lower sales to the towboat market[52]. - The company expects lower Marine Components net sales for the full year of 2024 due to decreased demand in the towboat market, influenced by higher interest rates and broader market weakness[57]. Cost and Expenses - Cost of sales as a percentage of sales increased by 3.2% in Q3 2024 compared to Q3 2023, leading to a decline in gross margin[43]. - Operating costs and expenses for Q3 2024 were comparable to Q3 2023, but increased by $0.6 million for the first nine months of 2024 due to higher employee salaries and benefits[44]. - Operating income margin for Security Products decreased to 17.1$3.8 million in the first nine months of 2024 compared to the same period in 2023, primarily due to changes in inventories and receivables[60]. - Capital expenditures for 2024 are expected to be approximately $2.1 million to meet existing customer demand and maintain facilities[69]. - The board of directors increased the regular quarterly dividend from$0.25 to $0.30 per share starting in Q1 2024, with total dividends paid in the first nine months of 2024 amounting to$11.1 million[65]. Market Risks and Challenges - The company anticipates potential risks including changes in raw material costs and competition from low-cost manufacturing sources[35]. - The company expects challenges in Security Products sales for the remainder of the year due to the non-recurrence of a significant pilot project with a government security customer[57]. - The company is exposed to market risk from changes in interest rates and raw material prices[74]. - There have been no material changes in market risks since the filing of the 2023 Annual Report[74]. - The company refers to Part I, Item 7A of the 2023 Annual Report for detailed market risk disclosures[74]. - Note 9 of the Condensed Consolidated Financial Statements provides additional information on market risks[74]. Interest Income - Interest income increased by $0.2 million in Q3 2024 and$0.8 million for the first nine months of 2024, driven by higher average interest rates[46]. Sales Performance Metrics - The average days sales outstanding for Marine Components increased to 37 days as of September 30, 2024, compared to 31 days at December 31, 2023[62].