SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) |
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/x/ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2001 |
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OR |
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/ / |
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.) |
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3025 EAST VICTORIA STREET, RANCHO DOMINGUEZ, CA |
90221 |
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| (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 May 4, 2001 there were outstanding 7,676,042 shares of common stock, no par value.
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PART I. FINANCIAL INFORMATION: |
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Item 1. Financial Statements |
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Condensed Consolidated Balance Sheets as of March 31, 2001 (Unaudited) and December 31, 2000 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000 (Unaudited) |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk |
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PART II. OTHER INFORMATION: |
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Item 5. Other Information |
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Item 6. Exhibits and Reports on Form 8-K |
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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(Unaudited) March 31, 2001 |
December 31, 2000 |
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| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,899,000 | $ | 52,168,000 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $200,000 at March 31, 2001 and December 31, 2000 | 10,604,000 | 7,298,000 | ||||||
| Inventories (Note 2) | 11,330,000 | 9,538,000 | ||||||
| Prepaid expenses and other current assets | 2,979,000 | 3,530,000 | ||||||
| Deferred income taxes | 908,000 | 889,000 | ||||||
| Total current assets | 35,720,000 | 73,423,000 | ||||||
| Property, plant and equipment, net | 23,527,000 | 23,434,000 | ||||||
| Other assets | 2,232,000 | 2,493,000 | ||||||
| Total assets | $ | 61,479,000 | $ | 99,350,000 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
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| Current liabilities: | ||||||||
| Accounts payable | $ | 4,334,000 | $ | 3,769,000 | ||||
| Dividend payable | — | 38,209,000 | ||||||
| Accrued liabilities | 3,947,000 | 3,805,000 | ||||||
| Total current liabilities | 8,281,000 | 45,783,000 | ||||||
| Deferred compensation | 903,000 | 828,000 | ||||||
| Total liabilities | 9,184,000 | 46,611,000 | ||||||
Commitments and contingencies |
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| 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; 7,676,042 and 7,641,769 shares issued and outstanding as of March 31, 2001 and December 31, 2000, respectively | 26,257,000 | 25,847,000 | ||||||
| Retained earnings | 26,064,000 | 26,892,000 | ||||||
| Accumulated other comprehensive loss | (26,000 | ) | — | |||||
| Total shareholders' equity | 52,295,000 | 52,739,000 | ||||||
| Total liabilities and shareholders' equity | $ | 61,479,000 | $ | 99,350,000 | ||||
See accompanying notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the Three Months Ended March 31, |
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2001 |
2000 |
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Sales |
$ |
27,303,000 |
$ |
37,230,000 |
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| Cost of sales | 26,776,000 | 30,749,000 | ||||
| Gross profit | 527,000 | 6,481,000 | ||||
| Selling, general and administrative expenses | 1,844,000 | 1,935,000 | ||||
| (Loss) income from operations | (1,317,000 | ) | 4,546,000 | |||
| Other income, net | 185,000 | 529,000 | ||||
| (Loss) income before income taxes | (1,132,000 | ) | 5,075,000 | |||
| (Benefit) provision for income taxes | (475,000 | ) | 2,123,000 | |||
| Net (loss) income | $ | (657,000 | ) | $ | 2,952,000 | |
NET (LOSS) INCOME PER SHARE (Note 3) |
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| Net (loss) income per share — basic | $ | (0.09 | ) | $ | 0.38 | |
| Weighted average shares outstanding | 7,673,996 | 7,701,571 | ||||
Net (loss) income per share — diluted |
$ |
(0.09 |
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$ |
0.38 |
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| Weighted average shares outstanding — diluted | 7,689,285 | 7,845,839 | ||||
See accompanying notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the Three Months Ended March 31, |
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2001 |
2000 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
| Net (loss) income | $ | (657,000 | ) | $ | 2,952,000 | |||||
| Adjustments to reconcile net (loss) income to net cash (used in) operating activities: | ||||||||||
| Depreciation and amortization | 1,142,000 | 1,082,000 | ||||||||
| Goodwill amortization | 231,000 | 7,000 | ||||||||
| Loss on disposal of machinery and equipment | 1,000 | 2,000 | ||||||||
| Deferred compensation | 75,000 | 72,000 | ||||||||
| Deferred income taxes | (45,000 | ) | 37,000 | |||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (3,306,000 | ) | (6,335,000 | ) | ||||||
| Inventories | (1,792,000 | ) | (4,801,000 | ) | ||||||
| Prepaid expenses and other current assets | 551,000 | 527,000 | ||||||||
| Income taxes payable | — | 1,451,000 | ||||||||
| Accounts payable and accrued liabilities | 707,000 | 1,379,000 | ||||||||
| Net cash used in operating activities | (3,093,000 | ) | (3,627,000 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchase of property, plant and equipment | (1,236,000 | ) | (1,041,000 | ) | ||||||
| Proceeds from disposal of machinery and equipment | — | 6,000 | ||||||||
| Other assets | 30,000 | (121,000 | ) | |||||||
| Net cash used in investing activities | (1,206,000 | ) | (1,156,000 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from issuance of common stock upon exercise of options net of related tax benefit | 410,000 | — | ||||||||
| Dividend paid | (38,380,000 | ) | — | |||||||
| Net cash used in financing activities | (37,970,000 | ) | — | |||||||
NET (DECREASE) IN CASH AND CASH EQUIVALENTS |
(42,269,000 |
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(4,783,000 |
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| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 52,168,000 | 42,740,000 | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 9,899,000 | $ | 37,957,000 | ||||||
See accompanying notes to condensed consolidated financial statements.
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COASTCAST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim condensed consolidated balance sheet as of March 31, 2001, and the related condensed consolidated statements of operations and cash flows for the three months ended March 31, 2001 and 2000 have been prepared by Coastcast Corporation (the "Company") and are unaudited. 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, 2001, and for the period then ended.
Although the Company believes that the disclosure in the interim 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.
Certain reclassifications were made to 2000 balances to conform to the 2001 presentation.
The results of operations for the period ended March 31, 2001, are not necessarily indicative of the results for the full year.
2. INVENTORIES
Inventories consisted of the following:
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March 31, 2001 |
December 31, 2000 |
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| Raw materials and supplies | $ | 3,831,000 | $ | 3,854,000 | ||
| Tooling | 384,000 | 268,000 | ||||
| Work-in-process | 6,571,000 | 5,038,000 | ||||
| Finished goods | 544,000 | 378,000 | ||||
| $ | 11,330,000 | $ | 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).
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Three months ended March 31, 2001 compared with three months ended March 31, 2000:
Sales decreased $9.9 million, or 26.6%, to $27.3 million for the three months ended March 31, 2001 from $37.2 million for the three months ended March 31, 2000. The decrease was mostly due to an almost 50% drop in steel golf clubhead sales.
Gross profit decreased $6.0 million, or 92.3%, to $.5 million for 2001 from $6.5 million for 2000. Gross profit margins decreased to 1.9% in 2001 from 17.4% in 2000. The decrease in gross profit margin was primarily due to the decrease in steel golf clubhead sales and the continuing high scrap rates in the titanium manufacturing operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents position at March 31, 2001 was $9.9 million compared to $52.2 million on December 31, 2000, a decrease of $42.3 million. Net cash used by operating activities was $3.1 million for the three months ended March 31, 2001. Net cash used in operating activities was primarily due to a $5.1 million increase in receivables and inventories and the net loss of $.7 million partially offset by depreciation and amortization of $1.4 million, an increase in payables and accrued liabilities of $.7 million and a decrease in prepaid expenses and other current assets of $.6 million. Net cash used in investing activities of $1.2 million consisted mainly of net capital expenditures for the three months ended March 31, 2001. Net cash used in financing activities of $38.0 million consisted of cash dividends paid of $38.4 million offset by proceeds from stock option exercises net of related tax benefit of $.4 million.
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 March 31, 2001. This line of credit, which expires on May 31, 2001, 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 three months ended March 31, 2001, no shares were repurchased under this authorization. As of March 31, 2001, there are 788,842 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, the working capital generated by future operations and the ability to borrow should be adequate to meet its financing requirements for current operations and the foreseeable future.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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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 |
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| 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 share values | |
| Adverse effect of increased energy costs | |
| Shareholders rights plan could discourage acquisition proposals. |
Item 6. Exhibits and Reports on Form 8-K
(a) |
Exhibits: |
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3.1.1 |
Articles of Incorporation of the Company, as amended (1) |
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3.1.2 |
Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on December 6, 1993 (1) |
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3.2 |
Bylaws of the Company (1) |
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(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 |
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Statement re: computation of per share earnings |
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Pages 11-13 of Registrant's annual report on Form 10-K for the year ended December 31, 2000 (incorporated by reference to such Form 10-K filed with the Commission) |
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(b) |
Reports on Form 8-K: |
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None |
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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 |
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Dated May 4, 2001 |
By: |
/s/ NORMAN FUJITAKI Norman Fujitaki Chief Financial Officer (Duly Authorized and Principal Financial Officer) |
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