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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

Commission file number 1-12676

COASTCAST CORPORATION
(Exact name of registrant as specified in its charter)

CALIFORNIA (State or other jurisdiction of incorporation or organization)	95-3454926 (I.R.S. Employer Identification No.)
3025 EAST VICTORIA STREET, RANCHO DOMINGUEZ, CA (Address of principal executive offices)	90221 (Zip Code)

Registrant's telephone number, including area code: (310) 638-0595

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

At October 29, 2001 there were outstanding 7,635,042 shares of common stock, no par value.

COASTCAST CORPORATION
INDEX

		Page Number
PART I. FINANCIAL INFORMATION:
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2001 (Unaudited) and         December 31, 2000	3
	Condensed Consolidated Statements of Income (Unaudited)         Three Months Ended September 30, 2001 and 2000	4
	Nine Months Ended September 30, 2001 and 2000	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended         September 30, 2001 and 2000 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8
PART II. OTHER INFORMATION:
Item 5.	Other Information	9
Item 6.	Exhibits and Reports on Form 8-K	9

2

COASTCAST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

			September 30, 2001			December 31, 2000
			(Unaudited)
A S S E T S
Current assets:
	Cash and cash equivalents		$	9,262,000		$	52,168,000
	Trade accounts receivable, net of allowance for doubtful accounts of $200,000 at September 30, 2001 and December 31, 2000			11,910,000			7,298,000
	Inventories (Note 2)			12,077,000			9,538,000
	Prepaid expenses and other current assets			2,346,000			3,530,000
	Deferred income taxes			915,000			889,000
		Total current assets		36,510,000			73,423,000
Property, plant and equipment, net				21,085,000			23,434,000
Other assets				2,172,000			2,493,000
			$	59,767,000		$	99,350,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	4,144,000		$	3,769,000
	Dividend payable			—			38,209,000
	Accrued liabilities			3,672,000			3,805,000
		Total current liabilities		7,816,000			45,783,000
Deferred compensation				1,030,000			828,000
		Total liabilities		8,846,000			46,611,000
Commitments and contingencies
Shareholders' equity:
	Series A Preferred stock, no par value, 200,000 shares authorized, none issued and outstanding			—			—
	Preferred stock, no par value, 1,800,000 shares authorized, none issued and outstanding			—			—
	Common stock, no par value, 20,000,000 shares authorized; 7,635,042 and 7,641,769 shares issued and outstanding as of September 30, 2001 and December 31, 2000, respectively			26,034,000			25,847,000
Retained earnings				24,924,000			26,892,000
Accumulated other comprehensive income (loss)				(37,000	)		—
		Total shareholders' equity		50,921,000			52,739,000
			$	59,767,000		$	99,350,000

See accompanying notes to condensed consolidated financial statements.

3

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	For the Three Months Ended September 30,
	2001		2000
Sales	$	31,197,000	$	32,539,000
Cost of sales		27,942,000		29,149,000
Gross profit		3,255,000		3,390,000
Selling, general and administrative expenses		1,654,000		1,388,000
Income from operations		1,601,000		2,002,000
Other income, net		112,000		749,000
Income before income taxes		1,713,000		2,751,000
Provision for income taxes		525,000		1,155,000
Net income	$	1,188,000	$	1,596,000
NET INCOME PER SHARE (Note 3)
Net income per share—basic	$	0.16	$	0.21
Weighted average shares outstanding		7,661,335		7,579,377
Net income per share—diluted	$	0.16	$	0.21
Weighted average shares outstanding—diluted		7,661,383		7,728,275

See accompanying notes to condensed consolidated financial statements.

4

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	For the Nine Months Ended September 30,
	2001		2000
Sales	$	90,684,000	$	116,474,000
Cost of sales		85,266,000		97,765,000
Gross profit		5,418,000		18,709,000
Selling, general and administrative expenses		5,318,000		5,647,000
Income from operations		100,000		13,062,000
Other income, net		341,000		1,816,000
Income before income taxes		441,000		14,878,000
Provision for income taxes		242,000		6,198,000
Net income	$	199,000	$	8,680,000
NET INCOME PER SHARE (Note 3)
Net income per share—basic	$	0.03	$	1.13
Weighted average shares outstanding		7,670,411		7,662,427
Net income per share—diluted	$	0.03	$	1.11
Weighted average shares outstanding—diluted		7,680,793		7,847,597

See accompanying notes to condensed consolidated financial statements.

5

COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

					For the Nine Months Ended September 30,
					2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	199,000		$	8,680,000
	Adjustments to reconcile net income to net cash provided by
		(used in) operating activities:
		Depreciation and amortization				3,313,000			3,289,000
		Goodwill amortization				231,000			21,000
		Loss on disposal of machinery and equipment				241,000			16,000
		Deferred compensation				202,000			215,000
		Deferred income taxes				(63,000	)		85,000
		Changes in operating assets and liabilities:
			Trade accounts receivable			(4,612,000	)		(781,000	)
			Inventories			(2,539,000	)		1,955,000
			Prepaid expenses and other current assets			1,184,000			(605,000	)
			Accounts payable and accrued liabilities			242,000			1,045,000
				Net cash (used in) provided by operating activities		(1,602,000	)		13,920,000
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property, plant and equipment					(2,234,000	)		(2,829,000	)
	Proceeds from disposal of machinery and equipment					1,029,000			12,000
	Other assets					90,000			(163,000	)
				Net cash used in investing activities		(1,115,000	)		(2,980,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of common stock upon exercise of
		options, including related tax benefit				410,000			548,000
	Dividends paid					(40,376,000	)		—
	Repurchase of common stock					(223,000	)		(5,543,000	)
				Net cash used in financing activities		(40,189,000	)		(4,995,000	)
	NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(42,906,000	)		5,945,000
	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					52,168,000			42,740,000
	CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	9,262,000		$	48,685,000

See accompanying notes to condensed consolidated financial statements.

6

COASTCAST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.  BASIS OF PRESENTATION

The condensed consolidated balance sheet as of September 30, 2001, and the related condensed consolidated statements of income for the three and nine months and cash flows for the nine months ended September 30, 2001 and 2000 have been prepared by Coastcast Corporation (the "Company") without audit. In the opinion of management, all adjustments (consisting only of normal recurring accruals) have been made which are necessary to present fairly the financial position, results of operations and cash flows of the Company at September 30, 2001 and for the periods then ended.

Although the Company believes that the disclosure in the condensed consolidated financial statements is adequate for a fair presentation thereof, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The December 31, 2000 audited statements were included in the Company's annual report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 2000. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto contained in that annual report.

The results of operations for the periods ended September 30, 2001 are not necessarily indicative of the results for the full year.

2.  INVENTORIES

Inventories consisted of the following:

	September 30, 2001		December 31, 2000
Raw materials and supplies	$	4,878,000	$	3,854,000
Tooling		301,000		268,000
Work-in-process		6,005,000		5,038,000
Finished goods		893,000		378,000
	$	12,077,000	$	9,538,000

3.  EARNINGS PER SHARE

Basic net income per share is based on the weighted average number of shares of common stock outstanding. Diluted net income per share is based on the weighted average number of shares of common stock outstanding and dilutive potential common equivalent shares from stock options (using the treasury stock method).

7

COAST CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales decreased 4.0% and 22.1% to $31.2 million and $90.7 million for the three months and nine months ended September 30, 2001, respectively, from $32.5 million and $116.5 million for the three months and nine months ended September 30, 2000, respectively. The slight decrease in sales in the quarter was due to a decrease in medical and other specialty product sales. The decrease in sales for the nine months ended September 30, 2001 was mainly due to decreased sales of irons and steel metal woods partially offset by an increase in titanium metal wood sales.

Gross profit decreased 2.9% and 71.1% to $3.3 million and $5.4 million for the three months and nine months ended September 30, 2001, respectively, from $3.4 million and $18.7 million for the three months and nine months ended September 30, 2000, respectively. Gross profit margins were flat at 10.4% for both the three months ended September 30, 2001 and September 30, 2000. Gross profit margins decreased to 6.0% for the nine months ended September 30, 2001 versus 16.1% for the nine months ended September 30, 2000 primarily due to a decrease in steel golf clubhead sales and the high scrap rates in the titanium manufacturing operations during the first half of 2001.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents position at September 30, 2001 was $9.3 million compared to $52.2 million on December 31, 2000, a decrease of $42.9 million. Net cash used in operating activities was $1.6 million for the nine months ended September 30, 2001. The net cash used in operating activities consisted of an increase in accounts receivables and inventories of $7.2 million partially offset by net income of $.2 million, depreciation and amortization of $3.3 million and a decrease in prepaid expenses and other current assets of $1.2 million. Net cash used by investing activities of $1.1 million consisted mainly of capital expenditures of $2.2 million partially offset by proceeds from disposal of fixed assets of $1.0 million. Net cash used by financing activities of $40.2 million consisted of dividends paid of $40.4 million and the repurchase of company common stock of $.2 million offset by $0.4 million in proceeds from the issuance of common stock upon exercise of stock options, including related tax benefit.

The Company maintains an unsecured revolving line of credit which allows the Company to borrow up to $5 million and which had no outstanding balance at September 30, 2001. This line of credit, which expires on May 30, 2002, bears interest at the bank's prime rate or LIBOR plus 2%.

In December 1999, the Board of Directors authorized the repurchase of an additional one million shares of Coastcast common stock from time to time in the open market or negotiated transactions. For the nine months ended September 30, 2001, the Company purchased 41,000 shares at a cost of $.2 million dollars, with 747,842 shares remaining to be purchased under the December 1999 authorization.

The Company has no long-term debt. The Company believes that its current cash position, anticipated working capital generated from future operations and the ability to borrow should be adequate to meet its financing requirements for the foreseeable future.

FORWARD LOOKING INFORMATION

Except for the historical information, other statements in this report are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially, including, but not limited to, industry conditions, economic conditions, competitive factors and pricing pressures, shifts in market demand and trends, and the costs of product development and production as well as other risks detailed in the Company's Securities and Exchange Commission filings.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

8

COASTCAST CORPORATION

PART II.  OTHER INFORMATION

Item 5.  Other Information

1.

The following business risks, as disclosed in Part II, Item 5 "Market for Registrant's Common Equity and Related Stockholder Matters" on Form 10-K for the fiscal year ended December 31, 2000, are hereby incorporated by reference as though set forth fully herein:

Customer concentration
Competition
New products
New materials and processes
Manufacturing cost variations
Dependence on manufacturing plants in Mexico
Hazardous waste
Dependence on discretionary consumer spending
Seasonality; fluctuations in operating results
Reliance on key personnel
Shares eligible for future sale
Fluctuations in Callaway Golf Company shares
Adverse effect of increased energy costs
Shareholder rights plan could discourage acquisition proposals.

Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits:
3.1.1	Articles of Incorporation of the Company, as amended(1)
3.1.2	Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on December 6, 1993(1)
3.2	Bylaws of the Company, as amended April 19, 2001(2)
11	Statement re: computation of per share earnings
99.1	Pages 11-13 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 (incorporated by reference to such Form 10-K filed with the Commission)

(1)

Incorporated by reference to the exhibits to the Registration Statement on Form S-1 (Registration No. 33-71294) filed on November 17, 1993, Amendment No. 2 filed on December 1, 1993, and Amendment No. 3 filed on December 9, 1993

(2)

Incorporated by reference to the exhibits to Form 10-Q for the fiscal quarter ended June 30, 2001.

(b)

Reports on Form 8-K:

None

9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	COASTCAST CORPORATION
Dated  October 29, 2001	By	/s/  NORMAN FUJITAKI Norman Fujitaki Chief Financial Officer (Duly Authorized and Principal Financial Officer)

10

QuickLinks

FORM 10-Q
COASTCAST CORPORATION INDEX
COASTCAST CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
COASTCAST CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES