-----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, OVUouYUhXawZSRfG4Z4oyn6Z+z5X7mFhnBEXIw6UTnxrbmyYf0jaaDR7522dhieE Hf1oUzhJeRn4Ldqsa50umg== 0001047469-98-030388.txt : 19980812 0001047469-98-030388.hdr.sgml : 19980812 ACCESSION NUMBER: 0001047469-98-030388 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 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: 98682346 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 June 30, 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 August 10, 1998 there were outstanding 9,054,204 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 June 30, 1998 (Unaudited) and December 31, 1997 3 Condensed Consolidated Statements of Income (Unaudited) Three Months Ended June 30, 1998 and 4 Six Months Ended June 30, 1998 and 1997 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION: Item 4. Submission of Matter to a Vote of Securities Holders 10 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11
2 COASTCAST CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) JUNE 30, DECEMBER 31, 1998 1997 -------------- -------------- A S S E T S Current assets: Cash and cash equivalents $ 34,737,000 $ 28,187,000 Trade accounts receivable, net of allowance for doubtful accounts of $600,000 at June 30, 1998 and $500,000 at December 31, 1997, respectively 14,937,000 12,893,000 Inventories (Note 2) 17,349,000 21,208,000 Prepaid expenses and other current assets 4,029,000 2,930,000 Deferred income taxes 1,597,000 1,597,000 -------------- -------------- Total current assets 72,649,000 66,815,000 Property, plant and equipment, net 24,001,000 19,079,000 Other assets 5,404,000 4,131,000 -------------- -------------- $ 102,054,000 $ 90,025,000 -------------- -------------- -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,389,000 $ 4,986,000 Accrued liabilities 5,587,000 5,034,000 -------------- -------------- Total current liabilities 9,976,000 10,020,000 Deferred compensation 2,338,000 1,614,000 -------------- -------------- Total liabilities 12,314,000 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; 9,054,204 and 8,849,005 shares issued and outstanding as of June 30, 1998 and December 31, 1997, respectively 42,560,000 39,233,000 Retained earnings 47,180,000 39,158,000 -------------- -------------- Total shareholders' equity 89,740,000 78,391,000 -------------- -------------- $ 102,054,000 $ 90,025,000 -------------- -------------- -------------- --------------
See accompanying notes to condensed consolidated financial statements. 3 COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
---------------------------- FOR THE THREE MONTHS ENDED JUNE 30, ---------------------------- 1998 1997 -------------- ----------- Sales $ 43,588,000 $ 39,938,000 Cost of sales 34,008,000 31,956,000 -------------- ----------- Gross profit 9,580,000 7,982,000 Selling, general and administrative expenses 3,105,000 3,278,000 -------------- ----------- Income from operations 6,475,000 4,704,000 Other income, net 428,000 203,000 -------------- ----------- Income before income taxes 6,903,000 4,907,000 Provision for income taxes 2,899,000 2,091,000 -------------- ----------- Net income $ 4,004,000 $ 2,816,000 -------------- ----------- -------------- ----------- NET INCOME PER SHARE (Note 3) Net income per share - basic $ 0.44 $ 0.32 -------------- ----------- -------------- ----------- Weighted average shares outstanding 9,019,682 8,794,334 -------------- ----------- -------------- ----------- Net income per share - diluted $ 0.42 $ 0.32 -------------- ----------- -------------- ----------- Weighted average shares outstanding - diluted 9,437,014 8,882,380 -------------- ----------- -------------- -----------
See accompanying notes to condensed consolidated financial statements. 4 COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
----------------------------- FOR THE SIX MONTHS ENDED JUNE 30, ------------------------------ 1998 1997 --------------- ------------- Sales $ 88,909,000 $ 68,939,000 Cost of sales 69,680,000 56,932,000 --------------- ------------- Gross profit 19,229,000 12,007,000 Selling, general and administrative expenses 6,182,000 5,462,000 --------------- ------------- Income from operations 13,047,000 6,545,000 Other income, net 784,000 375,000 --------------- ------------- Income before income taxes 13,831,000 6,920,000 Provision for income taxes 5,809,000 2,906,000 --------------- ------------- Net income $ 8,022,000 $ 4,014,000 --------------- ------------- --------------- ------------- NET INCOME PER SHARE (Note 3) Net income per share - basic $ 0.90 $ 0.46 --------------- ------------- --------------- ------------- Weighted average shares outstanding 8,956,572 8,789,286 --------------- ------------- --------------- ------------- Net income per share - diluted $ 0.86 $ 0.45 --------------- ------------- --------------- ------------- Weighted average shares outstanding - diluted 9,335,671 8,919,098 --------------- ------------- --------------- -------------
See accompanying notes to condensed consolidated financial statements. 5 COASTCAST CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30 ------------------------- 1998 1997 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,022,000 $ 4,014,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,541,000 1,411,000 Loss on disposal of machinery and equipment 1,000 45,000 Deferred compensation 724,000 629,000 Deferred income taxes 29,000 22,000 Non-employee director compensatory stock options 135,000 134,000 Changes in operating assets and liabilities: Trade accounts receivable (2,044,000) (6,138,000) Inventories 3,859,000 (5,043,000) Prepaid expenses and other current assets (1,130,000) 3,428,000 Income taxes payable (552,000) 603,000 Accounts payable and accrued liabilities 509,000 1,720,000 ------------ ------------ Net cash provided by operating activities 11,094,000 825,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (6,485,000) (1,124,000) Proceeds from disposal of machinery and equipment 22,000 8,000 Other assets (1,273,000) (62,000) ------------ ------------ Net cash used in investing activities (7,736,000) (1,178,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon exercise of options net of related tax benefit 3,192,000 206,000 ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,550,000 (147,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,187,000 14,060,000 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34,737,000 $ 13,913,000 ------------ ------------ ------------ ------------
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 June 30, 1998, the related condensed consolidated statements of income for the three and six months and cash flows for the six months ended June 30, 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 June 30, 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 periods ended June 30, 1998 are not necessarily indicative of the results for the full year. 2. INVENTORIES Inventories consisted of the following:
June 30, December 31, 1998 1997 ------------ ----------- Raw materials and supplies $6,349,000 $7,578,000 Tooling 448,000 540,000 Work-in-process 8,374,000 12,375,000 Finished goods 2,178,000 715,000 ------------ ----------- $17,349,000 $21,208,000 ------------ ----------- ------------ -----------
7 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). 8 COASTCAST CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales increased 9.3% and 29.0% to $43.6 million and $88.9 million for the three months and six months ended June 30, 1998, respectively, from $39.9 million and $68.9 million for the three months and six months ended June 30, 1997, respectively. The increase was primarily due to increased sales volume in steel and titanium iron clubheads. Gross profit increased 20.0% and 60.0% to $9.6 million and $19.2 million for the three months and six months ended June 30, 1998, respectively, from $8.0 million and $12.0 million for the three months and six months ended June 30, 1997. Gross profit margins increased to 22.0% and 21.6% for the three months and six months ended June 30, 1998 respectively, from 20.0% and 17.4% for the comparable prior year periods, due principally to increased production volume. Selling, general and administrative expense decreased $0.2 million, or 6.1%, to $3.1 million for the three months ended June 30, 1998, from $3.3 million for the comparable prior year period. The decrease was due primarily to decreased payroll and related expenses. Selling, general and administrative expense increased $0.7 million, or 12.7%, to $6.2 million for the six months ended June 30, 1998 from $5.5 million for the comparable prior year period. The increase was due primarily to increased payroll and related expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents position at June 30, 1998 was $34.7 million compared to $28.2 million on December 31, 1997, an increase of $6.5 million. Net cash provided by operating activities was $11.1 million for the six months ended June 30, 1998. The net cash provided by operating activities consisted of net income of $8.0 million, a decrease in inventories of $3.9 million, depreciation and amortization of $1.5 million, and an increase in deferred compensation of $0.7 million, partially offset by an increase in trade accounts receivable of $2.0 million and an increase in prepaid expenses and other current assets of $1.1 million. Net cash used in investing activities of $7.7 million consisted mainly of $6.5 million of net capital expenditures and an increase in cash value of life insurance of $1.0 million for the six months ended June 30, 1998. Net cash provided by financing activities of $3.2 million consisted mainly 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 the foreseeable future. 9 COASTCAST CORPORATION PART II. OTHER INFORMATION Item 4. Submission of Matter to a Vote of Securities Holders The Company held its annual meeting of shareholders on June 22, 1998. With respect to proposals to amend the Employee Stock Option Plan and the Non-Employee Director Stock Option Plan, the meeting was adjourned until July 8, 1998. The following matters were voted on and approved by the shareholders. 1. Election of Directors to hold office until the 1999 Annual Meeting:
Votes For Votes Withheld ---------- -------------- Hans H. Buehler 6,717,580 1,282,779 George L. Graziadio 6,712,608 1,287,751 Edwin A. Levy 6,715,720 1,284,639 Vernon R. Loucks, Jr. 7,714,120 286,239 Lee E. Mikles 6,842,620 1,157,739 Richard W. Mora 7,705,120 295,239 Paul A. Novelly 6,714,608 1,285,751
2. Amendment of the Company's 1996 Amended and Restated Employee Stock Option Plan: holders of 3,305,095 shares voted for such amendment, holders of 2,895,323 shares voted against such amendment, and holders of 52,602 shares abstained from voting on such amendment. The Board of Directors of the Company, after additional consideration including the large number of shares that were voted against the proposal, has rescinded the amendment. No options have been or will be granted under the rescinded amendment to the plan. Any future amendment of the plan by the Board of Directors which would authorize grants of additional options to officers and directors of the Company will be subject to shareholder approval. 3. Amendment of the Company's 1995 Amended and Restated Non-Employee Director Stock Option Plan: holders of 3,102,738 shares voted for such amendment, holders of 3,095,818 shares voted against such amendment, and holders of 54,464 shares abstained from voting on such amendment. The Board of Directors of the Company, after additional consideration including the large number of shares that were voted against the proposal, has rescinded the amendment. No options have been or will be granted under the rescinded amendment to the plan. Any future amendment of the plan by the Board of Directors which would authorize grants of additional options to officers and directors of the Company will be subject to shareholder approval. 4. Ratification of Deloitte & Touche llp as the Company's independent auditors: holders of 7,945,448 shares voted for such ratification, holders of 18,689 shares voted against such ratification and holders of 36,222 shares abstained from voting on such ratification. 10 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 99.1 Pages 10-12 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 11 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 August 10, 1998 By /s/ Robert C. Bruning --------------- --------------------------------------- Dated Robert C. Bruning Chief Financial Officer (Duly Authorized and Principal Financial Officer) 12
EX-11 2 EXHIBIT 11 COASTCAST CORPORATION COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------- ------------------------ 1998 1997 1998 1997 ----------- ---------- ---------- ----------- Common stock outstanding at beginning of period 8,959,050 8,794,334 8,849,005 8,777,890 Exercise of options 95,154 - 205,199 16,444 ----------- ---------- ---------- ----------- Common stock outstanding at end of period 9,054,204 8,794,334 9,054,204 8,794,334 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Weighted average shares outstanding, for computation of basic earnings per share 9,019,682 8,794,334 8,956,572 8,789,286 Dilutive effect of stock options after application of treasury stock method 417,332 88,046 379,099 129,812 ----------- ---------- ---------- ----------- Total diluted weighted average shares outstanding, For computation of diluted earnings per share 9,437,014 8,882,380 9,335,671 8,919,098 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Net income 4,004,000 2,816,000 8,022,000 4,014,000 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Net income per common share - basic $ .44 $ .32 $ .90 $ .46 ----------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- Net income per share and common equivalent per share - diluted $ .42 $ .32 $ .86 $ .45 ----------- ---------- ---------- ----------- ----------- ---------- ---------- -----------
Exhibit 11 13
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1,000 6-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 34,737 0 15,537 600 17,349 72,649 42,069 18,068 102,054 9,976 0 0 0 42,560 47,180 102,054 88,909 88,909 69,680 69,680 6,182 0 0 13,831 5,809 8,022 0 0 0 8,022 .90 .86
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