-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKynhsGSJR1Mz/3ChHPoLplBKQjFWbbYRIcd+n00o/2My5C7GZeizo+YOmYl3/Wq /8cbTmHuYSVzCTBUZbgSvA== 0001047469-98-018244.txt : 19980506 0001047469-98-018244.hdr.sgml : 19980506 ACCESSION NUMBER: 0001047469-98-018244 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980505 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COASTCAST CORP CENTRAL INDEX KEY: 0000914479 STANDARD INDUSTRIAL CLASSIFICATION: NONFERROUS FOUNDRIES (CASTINGS) [3360] IRS NUMBER: 953454926 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12676 FILM NUMBER: 98610670 BUSINESS ADDRESS: STREET 1: 3025 E VICTORIA ST CITY: RANCHO DOMINGUEZ STATE: CA ZIP: 90221 BUSINESS PHONE: 3106380595 MAIL ADDRESS: STREET 1: 3025 EAST VICTORIA ST CITY: RANCHO DOMINIQUEZ STATE: CA ZIP: 90221 10-Q 1 10-Q 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 March 31, 1998 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 95-3454926 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3025 EAST VICTORIA STREET, RANCHO DOMINGUEZ, CA 90221 (Address of principal executive offices) (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 April 30, 1998 there were outstanding 9,003,598 shares of common stock, no par value. 1 COASTCAST CORPORATION INDEX ----- Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1998 (Unaudited) and December 31, 1997 3 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1998 and 1997 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION: Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 2 COASTCAST CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) MARCH 31, DECEMBER 31, ASSETS 1998 1997 ----------- ------------ Current assets: Cash and cash equivalents $ 30,585,000 $ 28,187,000 Accounts receivable, net of allowance for doubtful accounts of $500,000 at March, 1998 and December 31, 1997 17,985,000 12,893,000 Inventories (Note 2) 20,419,000 21,208,000 Prepaid expenses and other current assets 3,602,000 2,930,000 Deferred income taxes 1,597,000 1,597,000 ------------ ------------ Total current assets 74,188,000 66,815,000 Property, plant and equipment, net 20,729,000 19,079,000 Other assets 4,314,000 4,131,000 ------------ ------------ Total assets $ 99,231,000 $ 90,025,000 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,626,000 $ 4,986,000 Accrued liabilities 7,562,000 5,034,000 ------------ ------------ Total current liabilities 13,188,000 10,020,000 Deferred compensation 1,978,000 1,614,000 ------------ ------------ Total liabilities 15,166,000 11,634,000 Commitments and contingencies Shareholders' equity: Preferred stock, no par value, 2,000,000 shares authorized, none issued and outstanding - - Common stock, no par value, 20,000,000 shares authorized; 8,959,050 and 8,849,005 shares issued and outstanding as of March 31, 1998 and December 31, 1997, respectively 40,889,000 39,233,000 Retained earnings 43,176 000 39,158,000 ------------ ------------ Total shareholders' equity 84,065,000 78,391,000 ------------ ------------ Total liabilities and shareholders' equity $99,231,000 $90,025,000 ------------ ------------ ------------ ------------
See notes to condensed consolidated financial statements. 3 COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------- 1998 1997 ------------ ----------- Sales $45,321,000 $29,001,000 Cost of sales 35,672,000 24,976,000 ------------ ----------- Gross profit 9,649,000 4,025,000 Selling, general and administrative expenses 3,077,000 2,184,000 ------------ ----------- Income from operations 6,572,000 1,841,000 Other income, net 356,000 172,000 ------------ ----------- Income before income taxes 6,928,000 2,013,000 Provision for income taxes 2,910,000 815,000 ------------ ----------- Net income $ 4,018,000 $ 1,198,000 ------------ ----------- ------------ ----------- NET INCOME PER SHARE (Note 3) Net income per share - basic $ 0.45 $ 0.14 ------------ ----------- ------------ ----------- Weighted average shares outstanding 8,892,760 8,784,181 ------------ ----------- ------------ ----------- Net income per share - diluted $ 0.44 $ 0.13 ------------ ----------- ------------ ----------- Weighted average shares outstanding - diluted 9,230,982 8,971,031 ------------ ----------- ------------ -----------
See accompanying notes to condensed consolidated financial statements. 4 COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, -------------------------------- 1998 1997 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,018,000 $ 1,198,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 760,000 703,000 Loss on disposal of machinery and equipment 4,000 49,000 Deferred compensation 364,000 303,000 Deferred income taxes 5,000 9,000 Non-employee director compensatory stock options 67,000 67,000 Changes in operating assets and liabilities: Trade accounts receivable (5,092,000) (987,000) Inventories 789,000 (8,240,000) Prepaid expenses and other current assets (677,000) 1,202,000 Income taxes payable 1,831,000 - Accounts payable and accrued liabilities 1,337,000 (108,000) --------------- --------------- Net cash provided by operating activities 3,406,000 (5,804,000) --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (2,432,000) (539,000) Proceeds from disposal of machinery and equipment 18,000 7,000 Other assets (183,000) (35,000) --------------- --------------- Net cash used in investing activities (2,597,000) (567,000) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon exercise of options net of related tax benefit 1,589,000 206,000 --------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,398,000 (6,165,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,187,000 14,060,000 --------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,585,000 $ 7,895,000 --------------- --------------- --------------- ---------------
See accompanying notes to condensed consolidated financial statements. 5 COASTCAST CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The condensed consolidated balance sheet as of March 31, 1998, the related condensed consolidated statements of income and cash flows for the three months ended March 31, 1998 and 1997 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 March 31, 1998, 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 generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The December 31, 1997 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, 1997. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto contained in that annual report. Certain reclassifications were made to 1997 balances to conform to the 1998 presentation. The results of operations for the period ended March 31, 1998, are not necessarily indicative of the results for the full year. 2. INVENTORIES Inventories consisted of the following:
MARCH 31, DECEMBER 31, 1998 1997 -------------- --------------- Raw materials and supplies $ 6,405,000 $ 7,578,000 Tooling 511,000 540,000 Work-in-process 12,896,000 12,375,000 Finished goods 607,000 715,000 -------------- -------------- $ 20,419,000 $ 21,208,000 -------------- -------------- -------------- --------------
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). 6 COASTCAST CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three months ended March 31, 1998 compared with three months ended March 31, 1997: Sales increased $16.3 million, or 56.2%, to $45.3 million for the three months ended March 31, 1998 from $29.0 million for the three months ended March 31, 1997. The increase was primarily due to increased sales volume in titanium iron clubheads and titanium metal wood clubheads. Gross profit increased $5.6 million, or 140%, to $9.6 million for 1998 from $4.0 million for 1997. Gross profit margins increased to 21.3% for 1998 from 13.9%, due principally to increased production volume and improved product mix. Selling, general and administrative expense increased $0.9 million, or 40.9%, to $3.1 million in 1998 from $2.2 million in 1997. The increase was due primarily to increased payroll and related expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents position at March 31, 1998 was $30.6 million compared to $28.2 million on December 31, 1997, an increase of $2.4 million. Net cash provided by operating activities was $3.4 million for the three months ended March 31, 1998. The operating activities net cash was primarily provided by net income of $4.0 million. Net cash used in investing activities of $2.6 million consisted mainly of $2.4 million of net capital expenditures for the three months ended March 31, 1998. Net cash provided by financing activities of $1.6 million consisted of proceeds from exercise of stock options. The Company has no long term debt. The Company believes that its current cash position, working capital generated from future operations and the ability to borrow should be adequate to meet its financing requirements for current operations and the foreseeable future. 7 COASTCAST CORPORATION PART II. OTHER INFORMATION Item 5. Other Information 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, 1997, 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 polishing and finishing plant 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. 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 (1) (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 11 Statement re: computation of per share earnings 99 Pages 11-13 of Registrant's annual report on Form 10-K for the year ended December 31, 1997 (incorporated by reference to such Form 10-K filed with the Commission) (b) Reports on Form 8-K: None 8 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 May 4, 1998 By /s/ Robert C. Bruning - ----------- ---------------------------- Dated Robert C. Bruning Chief Financial Officer (Duly Authorized and Principal Financial Officer) 9 EX-11 2 EXHIBIT 11 EXHIBIT 11 COASTCAST CORPORATION COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, ----------------------------------- 1998 1997 ---------------- ---------------- Common stock outstanding at beginning of period 8,849,005 8,777,890 Exercise of options 110,045 16,444 ---------------- ---------------- Common stock outstanding at end of period 8,959,050 8,794,334 ---------------- ---------------- ---------------- ---------------- Weighted average shares outstanding, for computation of basic EPS 8,892,761 8,784,181 Dilutive effect of stock options after application of treasury stock method 338,221 186,850 ---------------- ---------------- Total diluted weighted average shares outstanding, for computation of diluted earnings per share 9,230,982 8,971,031 ---------------- ---------------- ---------------- ---------------- Net income $ 4,018,000 $ 1,198,000 ---------------- ---------------- ---------------- ---------------- Net income per common share - basic $ 0.45 $ 0.14 ---------------- ---------------- ---------------- ---------------- Net income per common and common equivalent share $ 0.44 $ 0.13 - diluted ---------------- ---------------- ---------------- ----------------
EX-27 3 EXHIBIT 27
5 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 30,585 0 18,485 500 20,419 74,188 38,056 17,327 99,231 13,188 0 0 0 40,889 43,176 99,231 45,321 45,321 35,672 35,672 3,077 0 0 6,928 2,910 4,018 0 0 0 4,018 .45 .44
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