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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

(Mark One)

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
|- | ---------------------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2001

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
|- | ----------------------------------------------------------------------------------------------------------

Commission file number 1-12676

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

California(State or other jurisdiction of
incorporation or organization)

95-3454926(IRS Employer Identification No.)3025 East Victoria Street
Rancho Dominguez, California(Address of principal executive offices)

90221(zip code)


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

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Securities
registered pursuant to Section 12(b) of the Act:

Title of Each ClassRights to Purchase Series A Preferred Stock, no par value
Common Stock, no par value

Name of Each Exchange
on Which RegisteredNew York Stock Exchange
New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None.

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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

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [    ]

Aggregate
market value of the Registrant's voting stock held by non-affiliates, based upon the closing price of said stock on the New York Stock Exchange on March 21,
2002 ($4.50 per share): $29,512,000.

As
of March 21, 2002, 7,635,042 shares of the Common Stock, no par value, of the Registrant were outstanding.

Documents Incorporated by Reference:

Portions of the Proxy Statement relating to the Annual Meeting of Shareholders to be held June 5, 2002, are incorporated by reference into Part III
of this Report.

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COASTCAST CORPORATION    ANNUAL REPORT ON FORM 10-K  for the fiscal year ended December 31, 2001

|         |  |                                                                                       |  | Page
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I   |  |                                                                                       |  |     
|Item 1.  |  | Business                                                                              |  | 3   
|Item 2.  |  | Properties                                                                            |  | 7   
|Item 3.  |  | Legal Proceedings                                                                     |  | 8   
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 8   
|         |  |                                                                                       |  |     
|PART II  |  |                                                                                       |  |     
|Item 5.  |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 10  
|Item 6   |  | Selected Financial Data                                                               |  | 13  
|Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 14  
|Item 7a. |  | Quantitative and Qualitative Market Risk                                              |  | 17  
|Item 8   |  | Financial Statements and Supplementary Data                                           |  | 17  
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 17  
|         |  |                                                                                       |  |     
|PART III |  |                                                                                       |  |     
|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  | 18  
|Item 11. |  | Executive Compensation                                                                |  | 18  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 18  
|Item 13. |  | Certain Relationships and Related Transactions                                        |  | 18  
|         |  |                                                                                       |  |     
|PART IV  |  |                                                                                       |  |     
|Item 14. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 19  

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PART I

Item 1. Business.

General

Coastcast Corporation was incorporated in California and commenced operations in 1980. Since the beginning, the principal business of the Company has been the
manufacture of investment-cast metal golf clubheads for high-quality, premium-priced metal woods, irons and putters. Until 1995, almost all of the clubheads manufactured by the
Company were made of stainless steel. The Company developed the capability of manufacturing and began shipping titanium clubheads at the end of 1995 shortly after oversized titanium drivers became
popular. The average sale price and margin of titanium clubheads are typically much higher than the average sale price and gross margin of stainless steel clubheads. Titanium clubheads accounted for
approximately 57% and 45% of the Company's total sales in 2001 and 2000, respectively.

The
Company also manufactures a variety of investment-cast orthopedic implants and surgical tools (used principally in replacement joints, such as hips and knees, as well as
in heart and spinal implants). Those products accounted for 9.7% and 9.3% of the Company's total sales in 2001 and 2000, respectively.

In
December 2001, the Company ceased the operations of its subsidiary, California Precision Aluminum Castings, Inc. ("CPAC"), which manufactured aluminum turbocharger
compressor wheels for automotive applications. The Company acquired CPAC in 1999, while it was still in the development stage, began shipment of products in 2000, but was not able to generate
sufficient sales to make CPAC a profitable operation. CPAC's sales for 2001 represented less than 1% of the Company's total sales.

After
many years of profitable operations, the Company incurred a substantial loss in 2001. A combination of factors contributed to the loss, including lower sales, lower margins on
clubheads for steel irons, high titanium clubhead scrap rates in the first half of the year, charges resulting from the cessation of operations of CPAC, and charges for the abandonment of one of the
Company's four facilities in Mexicali. Lower sales resulted partly from loss of market share for production of steel clubheads to lower-priced Chinese competitors. Lower margins on steel irons
resulted principally from pricing pressure from Chinese competitors with lower labor cost. See "CompetitionGolf" below.

The
Company is taking action to improve manufacturing performance and reduce costs in an effort to return to profitability on lower revenue. The Company is working on improvements in its
manufacturing processes to increase efficiency, reduce workforce, inventory, and costs, and shorten manufacturing lead times. Plans are being made to consolidate manufacturing operations into less
space in fewer locations. These improvements and cost-cutting measures will result in substantial non-recurring consolidation charges in 2002 and possibly into 2003 but are
expected to reduce some ongoing costs in future periods.

Golf Products

The Company's golf products are generally used in golf clubs targeted at the high end of the market. These clubs must satisfy the requirements of highly-skilled
amateur and professional golfers, including touring professionals. As such, golf clubs which incorporate clubheads manufactured by the Company are sometimes referred to in the industry as
"pro-line" golf clubs.

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The
Company's clubheads are included in a variety of leading metal woods, irons and putters, some of which are listed below:

|CALLAWAYBig Bertha HawkEye VFT Titanium Metal Woods
Big Bertha Steelhead Plus Metal Woods
Big Bertha Steelhead III Metal Woods
HawkEye VFT Irons
Big Bertha Irons
X14 Steelhead Irons
Odyssey Dual Force Blade Putters
Odyssey DF Rossie Mallet PuttersCLEVELANDRTG Wedges
588 Wedges
691 Wedges
485 WedgesCOBRACXI Irons |  | TITLEIST975J Pro-Titanium Metal Woods
975F Metal Woods
Pro Trajectory Metal Woods
DCI 990 & 990B Irons
DCI 981 & 981 SL Irons
DCI 762 Irons
Vokey WedgesPINGTiSi Tec Drivers
ISI Titanium Drivers
I3 Steel Metal Woods
I3 Oversize Irons
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Golf Product Customers

For over twenty years, the Company has supplied investment-cast clubheads for metal woods, irons and putters to many of the top golf companies which
produce high-quality, premium-priced golf clubs. Most golf club companies source the three principal components of a golf clubthe clubhead, shaft, and gripfrom
independent suppliers which manufacture these components based on the golf club companies' designs and specifications. The Company currently is a major supplier of stainless steel and titanium
clubheads to Callaway Golf Company, which is the producer of the Big Bertha line of steel and titanium metal woods and irons and Odyssey putters. In addition, the Company is a supplier of
investment-cast steel and titanium clubheads for companies which market the Titleist, Cleveland, Cobra and Ping brands of golf clubs.

Substantially
all of the clubheads manufactured by the Company are used in high-quality, premium-priced golf clubs. The Company believes that a majority of the clubheads
manufactured by it are incorporated in clubs sold in North America, although a substantial portion of the Company's clubheads are incorporated in clubs sold in parts of Asia, Europe and other parts of
the world. Historically, a limited number of golf club companies have held a very substantial portion of the total market share for high-quality, premium-priced golf clubs. Currently, some
of the more popular high-quality, premium-priced clubs are Callaway metal woods and irons; Titleist metal woods, irons and putters; TaylorMade metal woods and irons; Ping metal woods,
irons and putters; and Cleveland metal woods, irons and wedges. Several of these golf clubheads are marketed by customers of the Company. Callaway accounted for 50%, 50% and 47% of the Company's total
sales in 2001, 2000 and 1999, respectively. Fortune Brands (formerly American Brands, owner of Titleist and Cobra) accounted for 33%, 26% and 25% of the Company's total sales in 2001, 2000 and 1999,
respectively. Taylor Made accounted for 12% of the Company's total sales in 1999.

ManufacturingGolf

Investment-Casting Process.Investment-casting is a highly specialized method of making metal products. It has become the
principal method for the manufacture of golf clubheads. Previously, woods

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were made of wood and irons were produced by forging and machining. Greater flexibility in the shape and weight distribution of clubheads is possible with the investment-casting process.
Investment-casting facilitates perimeter weighting and the use of modern alloys. It also enhances manufacturing precision and uniformity. The enhanced precision inherent in investment-casting is
particularly important in the manufacture of metal woods which can involve a significant number of separate manufacturing steps.

The
basic steps of investment-casting, in its simplest form, are as follows:



Metal Alloys.Most clubheads manufactured by the Company are made of titanium or stainless steel alloys. Titanium clubheads
have similar tensile strength as stainless steel with approximately one-half the weight of steel. Therefore, a larger oversized clubhead can be manufactured using titanium without
increasing clubhead weight. The Company's Gardena facility is devoted to titanium operations.

Polishing and Finishing.The Company conducts golf clubhead polishing and finishing operations in its facilities in Mexicali,
Mexico. In addition, beginning in the last quarter of fiscal year 2000, steel iron clubheads were finished in the Company's Tijuana, Mexico facility. Finishing of the head for an iron or putter can
require numerous separate steps and finishing of a head for a metal wood can involve many more separate steps. Most of the clubheads and substantially all of the metal woods manufactured by the
Company are finished by it to customer specifications, although some of such clubheadsprincipally ironsare delivered to customers in an unfinished state. The Company, to
assist its customers, at times also polishes and finishes limited quantities of investment-cast clubheads manufactured by other companies.

Quality Control.The Company's success as a supplier of golf clubheads to leading manufacturers of high-quality
golf clubs is dependent on effective quality-control measures. The Company attempts to monitor every aspect of the engineering and manufacturing process to assure the quality of the clubheads
manufactured by the Company. Particular attention is paid to the quality of raw materials (principally wax, ceramic and metal alloys), gating techniques employed in channeling the flow of molten metal
in the ceramic shell in the casting process, and rigorous inspection standards to assure compliance with the customers' product specifications throughout the manufacturing process.

Regulations.The Company uses hazardous substances and generates hazardous waste in the ordinary course of its business. The
Company is subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, discharge and disposal of hazardous materials. Although the
Company has not to date incurred any material liabilities under environmental laws and regulations and believes that its operations are in substantial compliance with applicable laws and regulations,
environmental liabilities could arise in the future that may adversely affect the Company's business.

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CompetitionGolf

The Company operates in a highly competitive environment. A limited number of companies, including Coastcast, have a very substantial portion of the total market
share for the production of stainless steel and titanium clubheads for high-quality, premium-priced golf clubs. For many years, the Company recognized several companies based in the United
States as it principal competitors. That has changed in the last year or two. The Company now recognizes several companies in China as its most formidable competitors. Included among the companies
which Coastcast recognizes as its principal competitors are Worldmark Services Ltd. (formerly Fu-Sheng Industrial Co. Ltd.), O-ta Precision Casting
Co. Ltd., Advanced Group International Co. Ltd., Dynamic Precision Casting Mfg. Co. Ltd., and Beijing International Aeronautical Materials in China and Sturm Ruger, Inc.
and Hitchner Manufacturing Co., Inc. in the United States and Mexico.

Although
the Company does not compete solely on price, that has become an increasingly important factor. The Company believes that its decline in sales which began in 2001 is
attributable partly to a loss of market share to lower-priced Chinese competitors which have significantly lower labor costs than the Company and other competitors in the United States and Mexico.

The
Company is taking action to improve manufacturing performance and reduce costs in an effort to compete more effectively with Chinese manufacturers. The Company is working on
improvements in its manufacturing processes to reduce costs and shorten manufacturing lead times. The Company also intends to consolidate manufacturing operations into less space in fewer locations in
order to reduce costs.

While
the Company does not expect to be able to lower its costs to the levels of its Chinese competitors on lower-margin clubheads for steel irons, the Company hopes that a combination
of prices which are closer to its competitors' prices and shorter manufacturing lead times will stem market share loss and enable the Company to operate profitably on lower sales.

The
Company also competes against golf club companies that internally produce clubheads for their clubs. The Company believes that one of the larger golf club companies,
Ping Inc., which produces its own brand of clubs, manufactures substantially all of the investment-cast steel iron clubheads for use in its own clubs. However, during the calendar
year 2001, Ping Inc. purchased steel irons and metal woods and titanium drivers from the Company. The Company believes that Ping produces clubheads for its own use only and does not currently
compete with the Company for the business of other golf club companies.

The
Company also faces potential competition from those golf club companies that currently purchase golf clubheads from outside suppliers but may, in the future, manufacture clubheads
internally. If the Company's current customers begin manufacturing clubheads internally, the Company's sales would be adversely affected. The Company believes that as long as component suppliers, such
as the Company and its competitors, provide high-quality component golf club parts at competitive prices and reliably, it is unlikely that many golf club companies will commence their own
manufacturing.

The
Company experiences indirect competition from golf club companies that produce golf clubs with clubheads that are not investment-cast. For example, some clubheads for
woods are made of forged faces and fabricated bodies or of wood alone, some clubheads for irons are forged, some clubheads for putters are machined, and some clubheads are made of graphite or other
composites. The Company believes that the investment-cast, metal clubhead has a greater share of the market for clubheads for high-quality, premium priced golf clubs than these
alternate types of clubheads. In particular, the metal wood has surpassed the wooden wood as the most popular wood and the investment-cast iron has surpassed the forged iron as the most
popular type of iron. Graphite and other

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composite clubheads have been available for several years, but to date have not become nearly as popular as investment-cast clubheads.

Orthopedic Implants and Specialty Products

The Company also manufactures non golf products, principally including orthopedic implants and surgical tools (used principally in replacement joints, such as
hips and knees, as well as in heart and spinal implants). Sales of these products accounted for 9.7% and 9.3% of total sales of the Company in 2001 and 2000, respectively.

Other
non golf products have included titanium and other alloy specialty products, automotive titanium products and automotive aluminum turbocharger compressor wheels (manufacture of
which was discontinued in December 2001). None of these products accounted for 10% or more of the total sales of the Company in 2001 or 2000.

The
Company is endeavoring to expand its titanium and other alloy investment casting business to potential customers in other commercial and industrial businesses outside of the golf
business. At this stage, the Company cannot predict which product opportunities will result in profitable sales, and whether volumes will be significant.

The
Company believes that its principal investment casting competitors in the production of these non golf products are Precision Castparts Corporation, Sturm Ruger, Inc., and PED
Manufacturing.

Employees

As of December 31, 2001, the Company and its subsidiaries employed 3,070 persons on a full-time basis. Of these employees, 1,635 and 975 were
employed by Coastcast Corporation, S.A. and Coastcast Tijuana S. de R. L. de C. V., respectively, the Mexican subsidiaries of the Company. The Company considers its employee relations to be good.

The
production and maintenance employees in the Gardena, California facility are represented by the United Steelworkers of America. There were 120 such employees as of
December 31, 2001. The collective bargaining agreement for such employees was effective May 12, 2000, and will expire on June 11, 2003.

Item 2. Properties.

The Company's principal executive offices and one of two steel investment casting manufacturing facilities are located in a 120,000 square foot leased facility in
Rancho Dominguez, California, a suburb of Los Angeles. Approximately 19,000 square feet of this facility was allocated to the Company's aluminum compressor wheels business which ceased operations in
December 2001. The lease expires in October 2003 and the Company has a five-year extension option.

The
Company owns a complex of plants in Gardena, California (which is approximately five miles from the Rancho Dominguez facilities), comprising an aggregate of approximately 110,000
square feet of buildings on 3.75 acres of land. These facilities are principally used for manufacturing titanium golf clubheads and tooling. In addition, the Company owns a parking lot located across
from these facilities consisting of 1.9 acres of land. In October 1994, the Company purchased 1.77 acres of land contiguous to its Gardena facility. In April 1996, the Company purchased
another 1.76 acres of land next to the land purchased in October 1994. This land is currently leased to other companies for storage.

The
majority of clubhead polishing and finishing operations are conducted in facilities leased by the Company's subsidiary in Mexicali, Mexico under four lease agreements, comprising an
aggregate of approximately 142,000 square feet. Three of the leases expire in December 2003, and the other lease expires in June 2006. All four leases have a five-year
extension option. During the fourth quarter of

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2001, the Company abandoned one of its four facilities (approximately 31,000 square feet) and recognized an expense for the total lease obligation, net of estimated sublet income.

Almost
all of the Company's steel golf clubhead casting operations and a substantial portion of the steel iron clubhead finishing operations are conducted in a 186,000 square foot leased
facility in Tijuana, Mexico. The lease expires in April 2008 and the Company has two five-year extension options. Also, the Company has exercised its option to lease approximately
2.5 acres of land adjacent to the facility pursuant to a lease which expires in May 2003.

Plans
are being made to consolidate the Company's manufacturing operations into fewer plants in fewer locations in an effort to reduce costs. See "BusinessGeneral" and
"BusinessCompetitionGolf."

Item 3. Legal Proceedings.

The Company is a party to legal actions arising in the ordinary course of business, none of which, individually or in the aggregate, in the opinion of management,
after consultation with counsel, will have a material adverse effect on the business or financial condition of the Company.

Item 4. Submission of Matters to a Vote of Security Holders.

Not Applicable.

Executive Officers of the Registrant

The executive officers of the Company are as follows:

|Name                   |  | Age |  | Position                                         
|---------------------- |  | --- |  | -------------------------------------------------
|Hans H. Buehler        |  | 69  |  | Chairman of the Board and Chief Executive Officer
|Fernando J. Diaz       |  | 41  |  | Senior Vice President, Mexico Operations         
|Norman Fujitaki        |  | 47  |  | Chief Financial Officer and Secretary            
|Richard W. Gainer      |  | 54  |  | Vice President, Titanium Casting                 
|Ramon F. Ibarra        |  | 49  |  | Vice President, Manufacturing                    
|Bryan Rolfe            |  | 49  |  | Vice President, Sales and Business Development   
|Roberto Roman          |  | 59  |  | Vice President, Human Resources                  
|Todd L. Smith          |  | 38  |  | Executive Vice President, Operations             
|Kathleen H. Wainwright |  | 37  |  | Senior Vice President, Sales                     

Mr. Buehler
is one of the founders of the Company and has been Chairman of the Board since the Company's inception in 1980. Prior to founding the Company, he was President of the
Rex Precision Products Division of Alco Standard Corporation, a competitor of the Company that was acquired by the Company in 1987. Mr. Buehler has more than 40 years of experience in
the investment-casting business, including more than 30 years of experience in the manufacture of golf clubheads.

Mr. Diaz
joined the Company in March 2001 as the General ManagerMexicali facility. Mr. Diaz was promoted to Senior Vice PresidentMexico
Operations in January 2002. From 1995 to February 2001, Mr. Diaz worked in various management positions for a subsidiary of Robertshaw Controls Corp. in Mexicali, Mexico,
culminating as the plant manager from 1997 to February 2001.

Mr. Fujitaki
joined the Company in 1994. He has served as Chief Financial Officer since April 1999. From 1994 to March 1999, he served as Corporate Controller. He
previously was employed for eight years by Neutrogena Corporation, a manufacturer and marketer of skin and hair care products, for which he served as Corporate Controller from September 1988.

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Mr. Gainer
joined the Company in 1990. In June 2001, he was promoted to Vice PresidentTitanium Casting. From 1999 to May 2001, he was the Chief
Engineer, Mexicali facility. From 1997 to 1999, he was the Director of Corporate Quality and Engineering. Prior to 1997, he served in various managerial capacities relating to quality.
Mr. Gainer has over 30 years of experience in the foundry business.

Mr. Ibarra
joined the Company in 1981. Since 1989, he has served as Vice President, Manufacturing of the Company. Prior to such time, he served as the production manager for the
Company with respect to all phases of its business and as the plant manager at the facility located in Rancho Dominguez, California.

Mr. Rolfe
joined the Company in July 1998. From 1997 to June 1998, he was a consultant and President of Slotline Golf Company. From 1995 to 1997, he was the
President and Chief Operating Officer of Cleveland Golf Company. Mr. Rolfe worked 20 years at Salomon North America in a variety of management positions, including Director of Operations
and Finance from 1991 to 1995.

Mr. Roman
joined the Company in 1986. In July 1999, he was promoted to Vice PresidentHuman Resources. Prior to this time, he served the Company in various
management capacities in the human resource area. Mr. Roman has over 30 years of human resources experience.

Mr. Smith
joined the Company in 1981. In February 2000, he was promoted to Executive Vice PresidentOperations. From July 1999 to January 2000, he
was the Vice PresidentOperations. Prior to this time, he served the Company in various management capacities in both the manufacturing and administrative areas. Mr. Smith is the
son of Hans H. Buehler.

Ms. Wainwright
joined the Company in 1988. In February 2000, she was promoted to Senior Vice PresidentSales. From November 1996 to January 2000,
she served as Vice President, Sales. Prior to that time, she served the Company in various capacities, including plant manager at the Company's former facility located in Wallingford, Connecticut.

Each
officer serves at the pleasure of the Board of Directors of the Company.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Principal Market and Prices

The common stock of the Company is listed on the New York Stock Exchange under the symbol PAR. The following table sets forth the high and low sales prices per
share for the common stock of the Company as reported by the New York Stock Exchange.

|Fiscal Year    |  | High |       | Low
|-------------- |  | ---- | ----- | ---
|2001           |  |      |       |    
|First Quarter  |  | $    | 17.63 |    
|Second Quarter |  |      | 10.95 |    
|Third Quarter  |  |      | 8.00  |    
|Fourth Quarter |  |      | 6.90  |    
|2000           |  |      |       |    
|First Quarter  |  |      | 17.13 |    
|Second Quarter |  |      | 20.44 |    
|Third Quarter  |  |      | 18.19 |    
|Fourth Quarter |  |      | 18.44 |    

The
approximate number of record holders of common stock of the Company as of March 21, 2002 was 127.

Dividends

On October 27, 2000, the Board of Directors of the Company declared an extraordinary dividend of $5.00 per share to shareholders of record on
December 19, 2000, and paid a total of $38.2 million to such shareholders on January 9, 2001. On April 27, 2001, the Board of Directors declared a cash dividend of $0.26
per share of common stock, paid on May 25, 2001 to shareholders of record as of May 4, 2001. No other cash dividends were declared for the year ended December 31, 2001. The amount
of future dividends, if any, will depend upon the Company's financial position, results of operations and the needs of the business.

Stock Repurchase

In December 1999, the Board of Directors authorized the repurchase of up to one million shares of Coastcast common stock from time to time in the open
market or negotiated transactions. The Company has repurchased a total of 252,158 shares pursuant to this authorization, including 41,000 shares which were purchased in 2001 at a cost of
$.2 million.

Business Risks

Customer Concentration.The Company's sales have been and very likely will continue to be concentrated among a very small
number of customers. Sales to two customers accounted for 83% and 76% of sales during the years ended December 31, 2001 and 2000, respectively. Sales to the Company's top customer, Callaway
Golf Company, accounted for 50% of sales for each of the years ended December 31, 2001 and 2000.

The
Company has no long-term contracts with, and, in almost all cases, is not the exclusive supplier to, any of its customers, which the Company believes is typical industry
practice. Although the Company is now a principal supplier of steel and titanium clubheads to Callaway, there are other actual or potential sources of supply to Callaway and the level of future orders
is not known at this

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time. In the event Callaway increases purchases from other suppliers, the Company could be adversely affected. Although the Company believes that its relationships with its customers are good, the
loss of a significant customer or a substantial decrease in the sales of golf clubs by a significant customer could have a material adverse effect on the Company's business.

Competition.The Company operates in a highly competitive market and competition from Chinese manufacturers of
investment-cast golf clubheads has become increasingly intense in the last year. All of the Company's products are manufactured according to customers' designs and specifications.
Accordingly, the Company competes against other independent domestic and foreign manufacturers which have the capability to manufacture investment-cast clubheads. The Company also
experiences indirect competition from golf club companies that manufacture their own clubheads or make golf clubs with clubheads that are not investment-cast or are made of materials the
Company is not currently capable of producing. Potential competition also exists from those golf club companies that currently purchase clubheads from the Company but may, in the future, manufacture
clubheads internally. The Company believes that it competes principally on the basis of price and its ability to produce consistently high-quality golf clubheads in quantities sufficient
to its customer needs in a timely manner. Some of the Company's current and potential competitors may have greater resources than the Company. The Company's Chinese competitors are able to offer lower
prices to customers than the Company because of their lower labor costs.

New Products.The Company's historical success has been attributable, in part, to its ability to supply clubheads for
companies whose new products rapidly attained a significant portion of the market for high-quality, premium-priced golf clubs. In the future, the Company's success will depend upon its
continued ability to manufacture golf clubheads for such companies. There are no assurances, however, of the Company's ability to do so. If a golf club having a head not manufactured by the Company
gains significant market share from customers of the Company, the Company's business would be adversely affected.

New Materials and Processes.The Company's future success is also dependent on continuing popularity of
investment-cast clubheads. A significant loss of market share to golf clubs with heads made by other processes would have a material adverse impact on the Company's business. Similarly,
the Company's
future success is also dependent on continuing popularity of clubheads made of titanium or stainless steel alloys or other metal alloys which the Company is capable of casting.

Manufacturing Cost Variations.Consistent manufacture of high-quality products requires constant care in the
manufacture and maintenance of tooling, monitoring of raw materials, and inspection for compliance with product specifications throughout the manufacturing process. Investment-casting is labor
intensive, and numerous steps are required to produce a finished product. Variations in manufacturing costs and yields occur from time to time, especially with new products during the "learning curve"
phase of production and products which are more difficult to manufacture such as titanium or oversized metal wood and iron golf clubheads. The length and extent of these variations are difficult to
predict.

Dependence on Manufacturing Plants in Mexico.A substantial portion of the golf clubheads manufactured by the Company,
including clubheads cast by the Tijuana plant, and some clubheads produced by other clubhead manufacturers, are polished and finished by the Company in its Mexicali facilities. The polishing and
finishing processes used by the Company are highly labor intensive. The Company manufactures in Tijuana and Mexicali, Mexico pursuant to the "maquiladora" duty-free program established by
the Mexican and U.S. governments. Such program enables the Company to take advantage of generally lower costs in Mexico, without paying duty on inventory shipped into or out of Mexico or paying
certain Mexican taxes. The Company pays certain expenses of the Mexico facilities in Mexican currency and thus is subject to fluctuations in currency value. The Company does not have any exchange rate
hedging arrangements to protect against fluctuations in currency value. The

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Company is also subject to other customary risks of doing business outside the United States. There can be no assurance that the Mexican government will continue the "maquiladora" program or that the
Company will continue to be able to take advantage of the benefits of the program. The loss of these benefits could have an adverse effect on the Company's business. The Company believes that the
North American Free Trade Agreement has not had any adverse effect on its Mexican operations.

Hazardous Waste.In the ordinary course of its manufacturing process, the Company uses hazardous substances and generates
hazardous waste. The Company has no material liabilities as of December 31, 2001 under environmental laws and regulations, and believes that its operations are in substantial compliance with
applicable laws and regulations. Nevertheless, no assurance can be given that the Company will not encounter environmental problems or incur environmental liabilities in the future which could
adversely affect its business.

Dependence on Discretionary Consumer Spending.Sales of golf equipment are dependent on discretionary spending by consumers,
which may be adversely affected by general economic conditions. A decrease in consumer spending on premium-priced golf clubs could have an adverse effect on the Company's business.

Seasonality; Fluctuations in Operating Results.The Company's customers have historically built inventory in anticipation of
purchases by golfers in the spring and summer, the principal selling season for golf equipment. The Company's operating results have been impacted by seasonal demand for golf clubs, which generally
results in higher sales during the six month period that include the second and third quarters. The timing of large new product orders from customers and fluctuations in demand due to a sudden
increase or decrease in popularity of specific golf clubs have contributed to quarterly or other periodic fluctuations. No assurance can be given, however, that these factors will mitigate the impact
of seasonality in the future.

Reliance on Key Personnel.The success of the Company is dependent upon its senior management, and their ability to attract
and retain qualified personnel. The Company does not have any non-competition agreements with any of its employees. There is no assurance that the Company will be able to retain its
existing senior management personnel or be able to attract additional qualified personnel. In February 2001, the Company's Chairman and Chief Executive Officer had successful heart valve
replacement surgery. The Chairman and Chief Executive Officer has now returned full time to his responsibilities with the Company.

Shares Eligible for Future Sale.Sales of substantial amounts of common stock of the Company in the public market or the
perception that such sales could occur may adversely affect prevailing market prices of such common stock.

Fluctuations in Callaway Golf Company Shares.The Company's common stock value has from time to time fluctuated somewhat in
relation to the share value of the Callaway Golf Company. The prevailing market price of the Company's common stock could be adversely impacted by a substantial fluctuation in the market price of
Callaway common stock.

Adverse Effect of Increased Energy Costs.The Company has two facilities located in Southern California which have in the
past experienced increased energy costs in electricity and natural gas. Depending on the severity of these increased costs, the length of time the increased costs persist and the ability of the
Company to pass along these increased cost to its customers, the profits of the Company may be adversely impacted.

Shareholder Rights Plan Could Discourage Acquisition Proposals.The Company's shareholder rights plan could make it more
difficult for a third party to acquire the Company, even if doing so would be beneficial to the Company's shareholders. The shareholders rights plan is intended to encourage potential acquirers to
negotiate with the Company and allow the Company's board of directors the

12

---

opportunity to consider alternative proposals in the interest of maximizing shareholder value. However, such provisions may also discourage acquisition proposals or delay or prevent a change in
control, which could harm the price for the Company's common stock.

Item 6. Selected Financial Data.

The following selected consolidated financial data should be read in conjunction with the Company's consolidated financial statements and related notes included
elsewhere herein.

|                                                   |                                          | Years Ended December 31,
|-------------------------------------------------- | ---------------------------------------- | ------------------------
|
|
|Consolidated Statement of Income Data:             |                                          |                         
|                                                   | Sales                                    |                         
|                                                   | Gross profit                             |                         
|                                                   | (Loss) income from operations            |                         
|(Loss) Income from Continuing Operations Data:     |                                          |                         
|                                                   | (Loss) income before income taxes        |                         
|                                                   | (Benefit) provision for income taxes     |                         
|                                                   | (Loss) income from continuing operations |                         
|(Loss) Income from Continuing Operations Per Share |                                          |                         
|                                                   | Basic                                    |                         
|                                                   |                                          |                         
|(Loss) Income from Continuing Operations Per Share |                                          |                         
|                                                   | Diluted                                  |                         
|                                                   |                                          |                         
|Dividend Per Share                                 |                                          | $                       
|                                                   |                                          |                         
|Weighted Average Shares Outstanding
Basic         |                                          |                         
|                                                   |                                          |                         
|Weighted Average Shares Outstanding
Diluted       |                                          |                         
|                                                   |                                          |                         

|                                 |                       | As of December 31,
|-------------------------------- | --------------------- | ------------------
|
|
|Consolidated Balance Sheet Data: |                       |                   
|                                 | Working capital       |                   
|                                 | Total assets          |                   
|                                 | Long-term liabilities |                   
|                                 | Shareholders' equity  |                   

13

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

The following table sets forth for the periods indicated operating results expressed in thousands of dollars and as a percentage of sales.

|                                                             |  | Years Ended December 31,
|------------------------------------------------------------ |  | ------------------------
|
|
|Sales                                                        |  | $                       
|Cost of sales                                                |  |                         
|Gross profit                                                 |  |                         
|Selling, general and administrative                          |  |                         
|(Loss) income from continuing operations                     |  |                         
|Other income, net                                            |  |                         
|(Loss) income from continuing operations before income taxes |  |                         

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Sales decreased $25.9 million, or 18%, to $115.5 million for 2001 from $141.4 million for 2000. The decrease in sales was mainly due to a 40%
decrease in sales of steel clubheads. The Company believes that this decrease in sales of steel clubheads resulted partly from loss of market share to Chinese competitors which are able to offer lower
prices because of their lower labor costs. Titanium clubhead sales represented 57% and 45% of total sales for 2001 and 2000, respectively. Sales to Callaway Golf Company represented 50% of total sales
for both 2001 and 2000. There is no assurance that sales to Callaway will represent similar percentages of total sales in the future.

Gross
profit decreased $15.4 million, or 83%, to $3.2 million for 2001 from $18.6 million for 2000. The gross profit margin decreased to 3% in 2001 from 13% in 2000.
The decrease in gross margin was mainly due to the decrease in sales of steel clubheads and increased costs, and high titanium clubhead scrap rates in the first half of 2001. In addition, gross
margins were impacted by costs associated with the cessation of the aluminum turbocharger compressor wheels operation, and the abandonment of one of our four facilities in Mexicali, Mexico.

Non-operating
income decreased $2.3 million, to $0.4 million for 2001 from $2.7 million in 2000. The decrease was due to lower cash and cash equivalent
balances, coupled with lower interest rates, in 2001 compared to 2000.

The
effective tax rate for 2001 was 28.2% compared to 40.3% for 2000. The decrease in effective tax rate was mainly due to non-deductible expenses for Mexico and
non-deductible goodwill amortization in the U.S.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Sales increased $21.0 million, or 17%, to $141.4 million for 2000 from $120.4 million for 1999. The increase in sales was mainly due to an
18% increase in sales volume of clubheads. Titanium clubhead sales represented 45% and 42% of total sales for 2000 and 1999, respectively. Sales to Callaway Golf Company, represented 50% of total
sales for 2000 compared to 47% in 1999.

Gross
profit decreased $3.2 million, or 15%, to $18.6 million for 2000 from $21.8 million for 1999. The gross profit margin decreased to 13% in 2000 from 18% in
1999. The decrease in gross margin was mainly due to a significant decrease in sales of steel clubheads during the last half of 2000 and

14

---

increased costs. In addition, gross margins were impacted by new product start up problems and high scrap rates during the fourth quarter of 2000.

Selling,
general and administrative expense decreased by $.7 million, or 9%, to $6.7 million for 2000 from $7.4 million for 1999. The decrease in selling, general
and administrative expense was partially due to a decrease in bad debt expense.

Subsequent Event

The Company has announced that it is in the early stages of planning to consolidate manufacturing operations into less space in fewer locations with the
expectation of not limiting production capacity. The Company believes that this consolidation will improve manufacturing performance and cut costs but will result in substantial
non-recurring consolidation charges during 2002 and possibly into 2003.

Critical Accounting Policies

The consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the
accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgements of certain amounts included in the
financial statements, giving due consideration to materiality. The Company does not believe there is a great likelihood that materially different amounts would be reported related to the accounting
policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could
differ from those estimates.

Revenue
recognitionThe Company recognizes revenue when the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have
been rendered, the price is fixed or determinable, and collectibility is reasonably assured. Generally, these criteria are met at the time products are shipped.

InventoriesThe
Company values inventories at the lower of cost (determined on a first-in, first-out basis) or market.

Income
taxesThe Company's income tax policy records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts
reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carryforwards, using presently enacted tax rates.

Liquidity and Capital Resources

The Company's cash and cash equivalents position at December 31, 2001 was $13.2 million compared to $52.2 million on December 31,
2000, a decrease of $39.0 million. Net cash provided by operating activities was $3.8 million for the year ended December 31, 2001. Depreciation and amortization of
$4.3 million,
and a decrease in prepaid expenses and other current assets of $1.2 million, were partially offset by a net loss of $2.3 million. Cash used in investing activities of $2.6 million
consists primarily of $3.6 million of capital expenditures partially offset by proceeds from sale of fixed assets of $1.1 million. Net cash used in financing activities of
$40.2 million consists of cash dividends paid of $40.4 million, repurchase of common stock of $.2 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 December 31, 2001.
This line of credit, which expires on May 31, 2002, bears interest at the bank's prime rate or LIBOR plus 2%.

15

---

On
October 27, 2000, the Board of Directors of the Company declared an extraordinary dividend of $5.00 per share to shareholders of record on December 19, 2000, and paid a
total of $38.2 million to such shareholders on January 9, 2001. On April 27, 2001, the Board of Directors declared a cash dividend of $0.26 per share of common stock, paid on
May 25, 2001 to shareholders of record as of May 4, 2001. No other cash dividends were declared for the year ended December 31, 2001. The amount of future dividends, if any, will
depend upon the Company's financial position, results of operations and the needs of the business.

The
Company has operating lease commitments and other contractual commitments for purchases of raw materials and capital equipment arising in the ordinary course of business (see
Note 9). As of December 31, 2001, the total operating lease commitments are $6.5 million: 2002$1.7 million, 2003$1.6 million, 2004 and
2005$.8 million, 2006$.7 million, and 2007 and thereafter$.9 million. As of December 31, 2001, the Company has
non-cancelable commitments to purchase raw materials totaling $2.6 million and capital equipment of $0.7 million.

In
December 1999, the Board of Directors authorized the repurchase of up to one million shares of Coastcast common stock from time to time in the open market or negotiated
transactions. The Company has repurchased a total of 252,158 shares pursuant to this authorization, including 41,000 shares which were purchased in 2001 at a cost of $.2 million.

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.

Quarterly Information and Seasonality

Set forth below is certain unaudited quarterly financial information. The Company believes that all other necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present fairly, and in accordance with accounting principles generally accepted in the United States of America, the selected
quarterly information when read in conjunction with the consolidated financial statements included elsewhere herein.

|                                    |  | Year Ended December 31, 2001 |        | Year Ended December 31, 2000 |  
|----------------------------------- |  | ---------------------------- | ------ | ---------------------------- | -
|
|
|Sales                               |  | $                            | 27,303 |                              | $
|Gross profit (loss)                 |  |                              | 527    |                              |  
|(Loss) income before taxes          |  |                              | (1,132 | )                            |  
|(Benefit) provision for             |  |                              |        |                              |  
|income taxes                        |  |                              | (475   | )                            |  
|Net (loss) income                   |  |                              | (657   | )                            |  
|Net (loss) income per shareBasic   |  |                              | (.09   | )                            |  
|Net (loss) income per shareDiluted |  |                              | (.09   | )                            |  

The Company's customers have historically built inventory in anticipation of purchases by golfers in the spring and summer, the principal selling
season for golf equipment. The Company's operating results have been impacted by seasonal demand for golf clubs, which generally results in higher sales during the six month period that include the
second and third quarters. The timing of large new product orders from customers and fluctuations in demand due to a sudden increase or decrease in popularity of specific golf clubs have contributed
to quarterly or other periodic fluctuations. No assurances can be given, however, that these factors will mitigate the impact of seasonality.

16

---

Backlog

As of December 31, 2001, the Company had a backlog of approximately $15.1 million as compared to a backlog of approximately $23.1 million as
of December 31, 2000. The Company believes that its current backlog is scheduled to be shipped in the ensuing four months. Although many of the Company's customers release purchase orders
months prior to the requested delivery date, these orders are generally cancelable without penalty provided that no production has commenced. If production has commenced, an order is cancelable upon
payment of the cost of production. Historically, the Company's backlog generally has been the highest in the second and third quarters due principally to seasonal factors. Backlog is not necessarily
indicative of future operating results.

Forward Looking Information

This report and other reports of the Company contain or may contain certain forward-looking statements and information that are based on beliefs of, and
information currently available to, the Company's management as well as estimates and assumptions made by the Company's management. When used, the words "anticipate," "believe," "estimate," "expect,"
"future," "intend," "plan" and similar expressions as they relate to the Company or the Company's management, are used to identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, competitive factors and
pricing pressures, shifts in market demand, the performance and needs of the industries served by the Company, the costs of product development and other risks and uncertainties, including, in
addition to any uncertainties specifically identified in the text surrounding such statements, uncertainties with respect to changes or developments in social, economic, business, industry, market,
legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's stockholders, customers, suppliers, business partners, competitors,
and legislative, regulatory, judicial and other governmental authorities and officials. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may vary significantly from those anticipated, believed, estimated, expected, intended or planned.

Item 7a. Quantitative and Qualitative Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

The information, other than quarterly information, required by this item is incorporated herein by reference to the consolidated financial statements and
supplementary data listed in Item 14 of Part IV of this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

17

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PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by this Item with respect to directors is incorporated herein by reference to the information contained under the caption "Nomination and
Election of Directors" in the Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 5, 2002, which will be filed with the Securities and Exchange Commission no later
than 120 days after the close of the year ended December 31, 2001. Information with respect to executive officers is included in Part I of this Report. The information required by
this Item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the information contained under the caption "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" in the Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 5, 2002, which will be filed with the
Securities and Exchange Commission no later than 120 days after the close of the year ended December 31, 2001.

Item 11. Executive Compensation.

The information required by this Item is incorporated herein by reference to the information contained under the caption "Executive Compensation and Other
Information" in the Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 5, 2002, which will be filed with the Securities and Exchange Commission no later than
120 days after the close of the year ended December 31, 2001.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is incorporated herein by reference to the information contained under the captions "Voting Securities and Principal
Shareholders" and "Stock Ownership of Management" in the Proxy Statement relating to the Annual Meeting of Shareholders to be held on
June 5, 2002, which will be filed with the Securities and Exchange Commission no later than 120 days after the close of the year ended December 31, 2001.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is incorporated herein by reference to the information contained under the caption "Certain Transactions" in the Proxy
Statement relating to the Annual Meeting of Shareholders to be held on June 5, 2002, which will be filed with the Securities and Exchange Commission no later than 120 days after the
close of the year ended December 31, 2001.

18

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PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.

(a)(1)    List of Financial Statements

The consolidated financial statements listed in the accompanying Index to Financial Statements and Schedules are filed as part of this Report.

(a)(2)    List of Financial Statement Schedule

The financial statement schedule listed in the accompanying Index to Financial Statements and Schedule are filed as part of this Report.

(a)(3)    List of Exhibits

The exhibits listed in the accompanying Index to Exhibits are filed as part of this Report.

(b)  Reports on Form 8-K

None.

19

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

|Dated: March 21, 2002 |  | COASTCAST CORPORATION
|--------------------- |  | ---------------------
|                      |  | By:                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated on March 21, 2002.

|Signature                         |  | Title                                                                             
|--------------------------------- |  | ----------------------------------------------------------------------------------
|                                  |  |                                                                                   
|/s/HANS H. BUEHLERHans H. Buehler |  | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)   
|/s/NORMAN FUJITAKINorman Fujitaki |  | Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)
|/s/ROBERT H. GOONRobert H. Goon   |  | Director                                                                          
|/s/EDWIN A. LEVYEdwin A. Levy     |  | Director                                                                          
|/s/GARY V. MELONIGary V. Meloni   |  | Director                                                                          
|/s/LEE E. MIKLESLee E. Mikles     |  | Director                                                                          
|/s/PAUL A. NOVELLYPaul A. Novelly |  | Director                                                                          
|/s/LUANN G. SMITHLuann G. Smith   |  | Director                                                                          

20

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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

|Consolidated Financial Statements                                                                    |  | Page Number
|---------------------------------------------------------------------------------------------------- |  | -----------
|                                                                                                     |  |            
|Independent Auditors' Report                                                                         |  | 22         
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                         |  | 23         
|Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999           |  | 24         
|Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 |  | 25         
|Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999           |  | 26         
|Notes to Consolidated Financial Statements                                                           |  | 27         
|Schedules                                                                                            |  |            
|Independent Auditors' Report                                                                         |  | 38         
|Schedule IIValuation and Qualifying Accounts for the years ended December 31, 2001, 2000 and 1999   |  | 39         

21

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INDEPENDENT AUDITORS' REPORT

To
the Board of Directors
Coastcast Corporation:

We
have audited the accompanying consolidated balance sheets of Coastcast Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Coastcast Corporation and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

/s/
DELOITTE & TOUCHE LLP

Los
Angeles, California
February 7, 2002

22

---



COASTCAST CORPORATION    CONSOLIDATED BALANCE SHEETS

|                                            |                                                                                                                                                                | December 31,              
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------
|
|ASSETS                                      |                                                                                                                                                                |                           
|Current assets:                             |                                                                                                                                                                |                           
|                                            | Cash and cash equivalents                                                                                                                                      |                           
|                                            | Trade accounts receivable, net of allowance for doubtful accounts of $200,000 at December 31, 2001 and 2000 (Note 12)                                          |                           
|                                            | Inventories (Note 2)                                                                                                                                           |                           
|                                            | Prepaid income taxes                                                                                                                                           |                           
|                                            | Prepaid expenses and other current assets                                                                                                                      |                           
|                                            | Deferred income taxes (Note 7)                                                                                                                                 |                           
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | Total current assets      
|Property, plant and equipment, net (Note 3) |                                                                                                                                                                |                           
|Deferred income taxes (Note 7)              |                                                                                                                                                                |                           
|Investments                                 |                                                                                                                                                                |                           
|Other assets, net                           |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | $                         
|                                            |                                                                                                                                                                |                           
|LIABILITIES AND SHAREHOLDERS' EQUITY        |                                                                                                                                                                |                           
|Current liabilities:                        |                                                                                                                                                                |                           
|                                            | Accounts payable                                                                                                                                               |                           
|                                            | Dividend payable                                                                                                                                               |                           
|                                            | Accrued liabilities (Note 5)                                                                                                                                   |                           
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | Total current liabilities 
|Deferred compensation (Note 6)              |                                                                                                                                                                |                           
|Pension liability (Note 6)                  |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | Total liabilities         
|Commitments and contingencies (Notes 9)     |                                                                                                                                                                |                           
|Shareholders' equity (Notes 8 and 10):      |                                                                                                                                                                |                           
|                                            | 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 December 31, 2001 and 2000, respectively |                           
|                                            | Retained earnings                                                                                                                                              |                           
|                                            | Accumulated other comprehensive loss                                                                                                                           |                           
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | Total shareholders' equity
|                                            |                                                                                                                                                                |                           
|                                            |                                                                                                                                                                | $                         
|                                            |                                                                                                                                                                |                           

See
accompanying notes to consolidated financial statements.

23

---

COASTCAST CORPORATION    CONSOLIDATED STATEMENTS OF OPERATIONS

|                                              |  | Years Ended December 31,
|--------------------------------------------- |  | ------------------------
|
|Sales (Note 12)                               |  | $                       
|Cost of sales                                 |  |                         
|                                              |  |                         
|Gross profit                                  |  |                         
|Selling, general and administrative           |  |                         
|                                              |  |                         
|(Loss) income from operations                 |  |                         
|Other income, net                             |  |                         
|                                              |  |                         
|(Loss) income before income taxes             |  |                         
|(Benefit) provision for income taxes (Note 7) |  |                         
|                                              |  |                         
|Net (loss) income                             |  | $                       
|                                              |  |                         
|NET (LOSS) INCOME PER SHARE (Note 11)         |  |                         
|Net (loss) income per sharebasic             |  | $                       
|                                              |  |                         
|Weighted average shares outstanding           |  |                         
|                                              |  |                         
|Net (loss) income per sharediluted           |  | $                       
|                                              |  |                         
|Diluted weighted average shares outstanding   |  |                         
|                                              |  |                         

See
accompanying notes to consolidated financial statements.

24

---



COASTCAST CORPORATION        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY        Years Ended December 31, 2001, 2000 and 1999

|                             |                                                                                                                    | Common Stock |          |   |            |            |   |            |             |   |         
|---------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------ | -------- | - | ---------- | ---------- | - | ---------- | ----------- | - | --------
|
|
|BALANCE AT JANUARY 1, 1999   |                                                                                                                    | 7,989,404    |          | $ | 30,309,000 |            | $ | 46,833,000 |             |   |        
|                             | Stock options exercised, including related income tax benefit (Note 10)                                            |              | 4,667    |   |            | 48,000     |   |            |             |   |         
|                             | Repurchase of common stock                                                                                         |              | (292,500 | ) |            | (3,393,000 | ) |            |             |   |         
|                             | Unrealized loss on investments, net of income tax benefit of $19,000                                               |              |          |   |            |            |   |            |             |   |         
|                             | Net income                                                                                                         |              |          |   |            |            |   |            | 9,519,000   |   |         
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         
|BALANCE AT DECEMBER 31, 1999 |                                                                                                                    | 7,701,571    |          |   | 26,964,000 |            |   | 56,352,000 |             |   | (26,000 
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         
|                             | Stock options exercised, including related income tax benefit (Note 10)                                            |              | 315,856  |   |            | 4,426,000  |   |            |             |   |         
|                             | Repurchase of common stock                                                                                         |              | (375,658 | ) |            | (5,543,000 | ) |            |             |   |         
|                             | Unrealized gain on investments, net of income tax expense of $19,000                                               |              |          |   |            |            |   |            |             |   |         
|                             | Cash dividend declared                                                                                             |              |          |   |            |            |   |            | (38,209,000 | ) |         
|                             | Net income                                                                                                         |              |          |   |            |            |   |            | 8,749,000   |   |         
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         
|BALANCE AT DECEMBER 31, 2000 |                                                                                                                    | 7,641,769    |          |   | 25,847,000 |            |   | 26,892,000 |             |   |        
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         
|                             | Stock options exercised, including related income tax benefit (Note 10)                                            |              | 34,273   |   |            | 443,000    |   |            |             |   |         
|                             | Repurchase of common stock                                                                                         |              | (41,000  | ) |            | (223,000   | ) |            |             |   |         
|                             | Unrealized gain on investments, net of income tax expense of $1,000                                                |              |          |   |            |            |   |            |             |   |         
|                             | Excess of additional pension liability over unrecognized prior service cost, net of income tax benefit of $176,000 |              |          |   |            |            |   |            |             |   |         
|                             | Cash dividend declared                                                                                             |              |          |   |            |            |   |            | (2,167,000  | ) |         
|                             | Net loss                                                                                                           |              |          |   |            |            |   |            | (2,290,000  | ) |         
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         
|BALANCE AT DECEMBER 31, 2001 |                                                                                                                    | 7,635,042    |          | $ | 26,067,000 |            | $ | 22,435,000 |             | $ | (247,000
|                             |                                                                                                                    |              |          |   |            |            |   |            |             |   |         

See accompanying notes to consolidated financial statements.

25

---

COASTCAST CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                                          | Years Ended December 31,                     |                                          
|------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------- | -----------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                          |                                              |                                          
|                                      | Net (loss) income                                                                        |                                              | $                                        
|                                      | Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                                              |                                          
|                                      |                                                                                          | Depreciation and amortization                |                                          
|                                      |                                                                                          | Goodwill amortization and impairment         |                                          
|                                      |                                                                                          | Loss on disposal of machinery and equipment  |                                          
|                                      |                                                                                          | (Gain) loss on investments                   |                                          
|                                      |                                                                                          | Deferred compensation                        |                                          
|                                      |                                                                                          | Pension liability                            |                                          
|                                      |                                                                                          | Deferred income taxes                        |                                          
|                                      |                                                                                          | Changes in operating assets and liabilities: |                                          
|                                      |                                                                                          |                                              | Trade accounts receivable                
|                                      |                                                                                          |                                              | Inventories                              
|                                      |                                                                                          |                                              | Prepaid expenses and other current assets
|                                      |                                                                                          |                                              | Accounts payable and accrued liabilities 
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                          |                                              |                                          
|                                      | Purchase of property, plant and equipment                                                |                                              |                                          
|                                      | Proceeds from disposal of machinery and equipment                                        |                                              |                                          
|                                      | Surrender of life insurance policies                                                     |                                              |                                          
|                                      | Purchase of investments                                                                  |                                              |                                          
|                                      | Sales/maturities of investments                                                          |                                              |                                          
|                                      | Purchase of business, net of cash acquired                                               |                                              |                                          
|                                      | Other assets                                                                             |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                                                          |                                              |                                          
|                                      | Proceeds from issuance of common stock upon exercise of options                          |                                              |                                          
|                                      | Dividends paid                                                                           |                                              |                                          
|                                      | Repurchase of common stock                                                               |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      | NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     |                                              |                                          
|                                      | CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           |                                              |                                          
|                                      |                                                                                          |                                              |                                          
|                                      | CASH AND CASH EQUIVALENTS AT END OF YEAR                                                 |                                              | $                                        
|                                      |                                                                                          |                                              |                                          
|                                      | SUPPLEMENTAL CASH FLOW INFORMATION:                                                      |                                              |                                          
|                                      |                                                                                          | Cash refunded during year for income taxes   |                                          
|                                      |                                                                                          |                                              |                                          
|                                      |                                                                                          | Cash paid during year for income taxes       |                                          
|                                      |                                                                                          |                                              |                                          
|                                      | NON-CASH INVESTING AND FINANCING ACTIVITIES:                                             |                                              |                                          
|                                      |                                                                                          | Cash dividend declared                       |                                          
|                                      |                                                                                          |                                              |                                          

See accompanying notes to consolidated financial statements.

26

---



COASTCAST CORPORATION    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of
Coastcast Corporation (the "Company") and its wholly owned subsidiaries. All material intercompany transactions have been eliminated in consolidation.

Organization and OperationsCoastcast Corporation is incorporated under the laws of the State of California. The Company
principal business is the production of investment-cast golf clubheads, precision investment castings and related engineering for the medical industry. The Company sells its products to
customers of varying strength and financial resources, principally located in the United States. The Company has three wholly-owned subsidiaries, two are incorporated under the laws of the Mexican
maquiladora program and their principal activities are the production of golf clubheads, and the other is incorporated in the State of California and manufactures aluminum compressor wheels (which
ceased operations in December 2001).

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue RecognitionRevenue is recognized when goods are shipped to the customer.

Cash EquivalentsCash equivalents consist of short-term investments with original maturities of three months or
less.

Concentration of Credit RiskThe Company's financial instruments that are exposed to credit risk consist primarily of accounts
receivable. The Company grants credit to substantially all of its customers, performs ongoing credit evaluations of its customers' financial condition and maintains an allowance for potential credit
losses. The Company's top two customers represented 77% and 74% of the accounts receivable balance as of December 31, 2001 and 2000, respectively. See also Note 12.

InventoriesInventories are stated at the lower of cost (determined on a first-in, first-out basis) or
market.

Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Depreciation and amortization are provided
using primarily the straight-line method over the estimated useful lives of the related assets as follows:

Building and improvements

531 yearsMachinery and equipment

57 yearsTransportation

57 yearsFurniture, fixtures and computers

37 years


Impairment of Long-Lived AssetsThe Company reviews long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the
carrying amount of an asset, an impairment loss is recognized. During the first quarter of 2001, the Company recognized an impairment of goodwill of $231,000 relating to its California subsidiary
purchased in 1999.

InvestmentsInvestments are included in an irrevocable rabbi trust and are considered available for sale and carried at fair
value. Fair value for fixed-maturity investments and equity securities is based

27

---

on quoted market prices. Unrealized appreciation or depreciation on fixed-maturity investments and equity securities is included in accumulated other comprehensive income (loss). Gains and losses on
sales of investments are computed on the specific identification method and are reflected in other income, net.

Income TaxesDeferred income taxes are recognized based on differences between the financial statement and tax basis of assets
and liabilities using presently enacted tax rates (see Note 7).

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

Fair Value of Financial InstrumentsThe carrying amounts of cash and cash equivalents, accounts receivable and accounts
payable approximate fair value because of the short maturities of these instruments.

Accounting PronouncementsIn July 2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 replaces Accounting Principles Board Opinion
No. 16, "Business Combinations," and eliminates pooling-of-interests accounting, prospectively. It also provides guidance on purchase accounting related to the
recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach.
Under SFAS No. 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. SFAS No. 141 is effective for all business
combinations completed after June 30, 2001. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will
cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified as goodwill. Companies are required to
adopt SFAS No. 142 for fiscal years beginning after December 15, 2001. In connection with the adoption of SFAS No. 142, companies will be required to perform a transitional
goodwill impairment assessment. As of December 31, 2001, the Company has no goodwill on its consolidated balance sheet. Management does not expect the adoption of SFAS No. 142 to have a
significant impact on the financial position and results of operations of the Company.

SFAS
No. 143, "Accounting for Asset Retirement Obligations," which becomes effective for the Company on January 1, 2003, addresses the obligations and asset retirement
costs associated with the retirement of tangible long-lived assets. It requires that the fair value of the liability for an asset retirement obligation be recorded when incurred instead of
over the life of the asset. The asset retirement costs must be capitalized as part of the carrying value of the long-lived asset. If the liability is settled for an amount other than the
recorded balance, either a gain or loss will be recognized at settlement. The Company is currently assessing the impact of the adoption of this statement on its financial position and results of
operations.

SFAS
No. 144, "Impairment or Disposal of Long-Lived Assets," will become effective for the Company on January 1, 2002. SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and provides guidance on implementation issues related to SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and addresses the accounting for a segment of a business accounted for as a discontinued operation. The
Company is currently assessing the impact of the adoption of this statement on its financial position and results of operations.

28

---

2.    INVENTORIES

Inventories consist of the following:

|                           |  | December 31,
|-------------------------- |  | ------------
|
|Raw materials and supplies |  | $           
|Tooling                    |  |             
|Work-in-process            |  |             
|Finished goods             |  |             
|                           |  |             
|                           |  | $           
|                           |  |             

Included
above are costs incurred for the production of tooling which is subsequently sold to customers upon acceptance of the first production unit.

3.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

|                                               |  | December 31,
|---------------------------------------------- |  | ------------
|
|Land                                           |  | $           
|Buildings and improvements                     |  |             
|Machinery and equipment                        |  |             
|Transportation                                 |  |             
|Furniture, fixtures and computers              |  |             
|                                               |  |             
|                                               |  |             
|Less accumulated depreciation and amortization |  |             
|                                               |  |             
|                                               |  | $           
|                                               |  |             

Depreciation
and amortization expense for 2001, 2000 and 1999 was $4,347,000, $4,428,000 and $4,089,000, respectively.

4.    SHORT-TERM BORROWINGS

The Company maintains an unsecured revolving line of credit which allows the Company to borrow up to $5,000,000 and which had no outstanding balance at
December 31, 2001 and 2000. This line of credit, which expires on May 31, 2002, bears interest at the bank's prime rate or LIBOR plus 2%.

5.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

|                                     |  | December 31,
|------------------------------------ |  | ------------
|
|Accrued payroll and related expenses |  | $           
|Accrued vacation                     |  |             
|Accrued insurance                    |  |             
|Accrued cessation reserve            |  |             
|Accrued lease reserve                |  |             
|Other accrued expenses               |  |             
|                                     |  |             
|                                     |  | $           
|                                     |  |             

29

---

The
accrued cessation reserve as of December 31, 2001 represents the estimated cost associated with the cessation of the aluminum turbocharger compressor wheels operation. The
accrued lease reserve as of December 31, 2001 represents the estimated total lease obligation, net of estimated sublet income, resulting from the abandonment of one of the Company's four leased
facilities in Mexicali, Mexico.

6.    RETIREMENT PLANS

The Company has a defined benefit plan which covers substantially all of its hourly union employees. The plan provides for a monthly benefit payable for the
participant's lifetime commencing the first day of the month following the attainment of age sixty-five in an amount equal to $9.50 to $11.40 multiplied by the participant's credited
service.

The
following table sets forth the plan's change in benefit obligation, change in plan assets and components of net pension cost:

|                                               |  | December 31, |          
|---------------------------------------------- |  | ------------ | ---------
|
|Change in Benefit Obligation:                  |  |              |          
|Benefit obligation at beginning of year        |  | $            | 2,287,000
|Service cost                                   |  |              | 88,000   
|Interest cost                                  |  |              | 157,000  
|Actuarial loss from change in assumptions      |  |              | 97,000   
|Increase in plan benefits                      |  |              |         
|Benefits paid                                  |  |              | (94,000  
|                                               |  |              |          
|Benefit obligation at end of year              |  |              | 2,535,000
|                                               |  |              |          
|Change in Plan Assets:                         |  |              |          
|Fair value of plan assets at beginning of year |  |              | 2,156,000
|Actual return on plan assets                   |  |              | (158,000 
|Employer contribution                          |  |              | 80,000   
|Benefits paid                                  |  |              | (94,000  
|                                               |  |              |          
|Fair value of plan assets at end of year       |  |              | 1,984,000
|                                               |  |              |          
|Funded status                                  |  |              | (551,000 
|Unrecognized actuarial loss                    |  |              | 469,000  
|Unrecognized prior service cost                |  |              | 108,000  
|Unrecognized transition obligation             |  |              | (45,000  
|                                               |  |              |          
|Accrued benefit cost                           |  | $            | (19,000  
|                                               |  |              |          

|                                |  | Year Ended December 31, |         
|------------------------------- |  | ----------------------- | --------
|
|Components of Net Pension Cost: |  |                         |         
|Service cost                    |  | $                       | 88,000  
|Interest cost                   |  |                         | 157,000 
|Return on plan assets           |  |                         | 158,000 
|Amortization and deferral       |  |                         | (325,000
|                                |  |                         |         
|Net pension cost                |  | $                       | 78,000  
|                                |  |                         |         

30

---

The
weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7% in both 2001 and 2000. The expected long-term
rate of return on assets was 7% for both 2001 and 2000. As of December 31, 2001, the Company has a liability for the employer contribution of $80,000, payable on or prior to June 15,
2002. An additional liability of $532,000 was recorded to reflect the required minimum pension liability. Since the additional liability was greater than the unrecognized prior service cost, an
intangible asset of $108,000 was recognized for the amount of additional liability up to the amount of unrecognized prior service cost and shareholders' equity (other comprehensive loss) was charged
$424,000 for the excess of the additional liability over unrecognized prior service cost (less income tax benefit of $176,000).

Effective
January 1, 1996, the Company adopted a retirement savings plan (the "401(k) Plan") pursuant to which all U.S. employees who satisfy the age and service requirements
under the plan and who are not covered by collective bargaining agreements may defer compensation for income tax purposes under section 401(k) of the Internal Revenue Code of 1986. Participants
may contribute up to 15% of their compensation up to the maximum permitted under federal law. The Company is obligated to contribute annually an amount equal to 25% of each participant's contribution
up to 6% of that participant's annual compensation. In accordance with the provisions of the 401(k) Plan, the Company matched employee contributions in the amount of $101,000, $112,000 and $93,000
during 2001, 2000 and 1999, respectively.

On
September 1, 1996, the Company adopted a supplemental executive retirement plan (the "SERP") for certain key employees. Benefits generally accrued at a rate of 7% of final
average salary per year of participation in the plan, up to 10 years. In general, participants in the plan only become fully vested with respect to their accrued benefits upon completion of
5 years of plan participation.The benefits under this plan were frozen effective December 31, 1997, except for the Chairman and Chief
Executive Officer who voluntarily relinquished all of his rights under this plan. An amended and restated supplemental executive retirement plan was approved effective January 1, 1998. The
amended plan revises the benefit formula for participants and provides additional flexibility with respect to funding. Under the amended plan, benefits generally accrue ratably over 25 years of
service at 2% per year (up to a maximum of 25 years of service) with the actual benefit being dependent on years of service with Company subject to the social security offset.

The
following table sets forth the plan's change in benefit obligation, change in plan assets and components of net pension cost:

|                                        |  | December 31, |           
|--------------------------------------- |  | ------------ | ----------
|
|Change in Benefit Obligation:           |  |              |           
|Benefit obligation at beginning of year |  | $            | 1,243,000 
|Service cost                            |  |              | 130,000   
|Interest cost                           |  |              | 87,000    
|Actuarial gain                          |  |              | (99,000   
|                                        |  |              |           
|Benefit obligation at end of year       |  |              | 1,361,000 
|                                        |  |              |           
|Change in Plan Assets:                  |  |              |           
|Funded status                           |  |              | (1,361,000
|Unrecognized actuarial loss             |  |              | (279,000  
|Unrecognized prior service cost         |  |              | 165,000   
|Unrecognized transition obligation      |  |              | 378,000   
|                                        |  |              |           
|Accrued benefit cost                    |  | $            | (1,097,000
|                                        |  |              |           

31

---



|                                |  | Year Ended December 31,
|------------------------------- |  | -----------------------
|
|Components of Net Pension Cost: |  |                        
|Service cost                    |  | $                      
|Interest cost                   |  |                        
|Amortization and deferral       |  |                        
|                                |  |                        
|Net pension cost                |  | $                      
|                                |  |                        

The
weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7% for both 2001 and 2000. To fund this plan, the Company prior
to December 31, 1998 purchased whole-life insurance contracts on certain participants. All the whole-life insurance contracts were surrendered for cash during 1999. A
portion of the cash received from the surrender of the contracts is invested in marketable securities in an irrevocable rabbi trust and is presented as an asset of the Company in the accompanying
consolidated balance sheets.

The
Company does not provide any other post-retirement benefits to its employees.

7.    INCOME TAXES

The (benefit) provision for income taxes is as follows:

|          |         | Years Ended December 31, |         
|--------- | ------- | ------------------------ | --------
|
|Current:  |         |                          |         
|          | Federal |                          | $       
|          | State   |                          |         
|          | Foreign |                          |         
|          |         |                          |         
|          |         |                          | (364,000
|          |         |                          |         
|Deferred: |         |                          |         
|          | Federal |                          |         
|          | State   |                          |         
|          | Foreign |                          |         
|          |         |                          |         
|          |         |                          | (536,000
|          |         |                          |         
|          |         | $                        | (900,000
|          |         |                          |         

The
actual (benefit) provision on income before income taxes differs from the statutory federal income tax rate due to the following:

|                                           |  | Years Ended December 31, |           
|------------------------------------------ |  | ------------------------ | ----------
|
|Federal income taxes at the statutory rate |  | $                        | (1,117,000
|State income taxes, net of federal benefit |  |                          | (74,000   
|California investment tax credit           |  |                          | (59,000   
|Non-deductible Mexico expenses             |  |                          | 237,000   
|Other items                                |  |                          | 113,000   
|                                           |  |                          |           
|                                           |  | $                        | (900,000  
|                                           |  |                          |           

32

---

The tax effects of items comprising the Company's net deferred income tax asset are as follows:

December 31,2001

2000Allowance for doubtful accounts

$
83,000

$
84,000Deferred compensation


455,000


346,000Accrued expenses


673,000


505,000Inventory reserve


225,000


437,000State income taxes


(154,000
)

199,000Depreciation


1,295,000


445,000Other items


33,000


(167,000
)$
2,610,000

$
1,849,000


8.    SHAREHOLDERS' RIGHTS PLAN

On October 27, 2000, the Board of Directors approved the adoption of a Shareholders' Rights Plan ("the Plan"). In connection with the Plan, preferred stock
purchase rights were distributed as a dividend at the rate of one right for each share of common stock. In general, the rights will not be exercisable or transferable apart from the common stock,
unless a person or group (i) acquires beneficial ownership of 15% or more of the outstanding common stock, or (ii) commences a tender offer or commences or files a registration statement
with respect to an exchange offer, to acquire beneficial ownership of 15% or more of the outstanding stock. When exercisable, each right will entitle the holder to buy at a $75 exercise price (the
"Exercise Price") 1/100th of a share of Series A Preferred Stock of the Company. Following an event described in (i) or (ii) above, each right will entitle the
holder to purchase from the Company, at the Exercise Price, common stock (or under certain circumstances, other securities or assets of the Company) having a value of twice the Exercise Price.
Further, if after the rights become exercisable the Company or a majority of its assets or earning power are acquired by merger or otherwise, each right will thereafter represent the right to purchase
that number of shares of the surviving corporation or (in certain circumstances) its parent having a market value of twice the Exercise Price. In general, no acquiring person, nor the person or group
whose purchase transaction or tender or exchange offer triggers the exercisability of the rights, nor any of that person or group's transferees may exercise rights held by them.

At
any time prior to the 10th day following an event described in (i) or (ii) above, the Board of Directors may redeem all outstanding rights at a price of
$.01 per right, and may amend the Plan and the rights in any and all respects. The rights will expire at the earlier date of their redemption or October 27, 2010.

9.    COMMITMENTS AND CONTINGENCIES

Operating LeasesThe Company leases certain facilities under various operating leases with terms
ranging from five to ten years. The leases contain renewal options for additional five or ten year periods which have not been included in the rental commitment schedule below. In general, these
leases provide for payment of property taxes, maintenance and insurance by the Company and include rental increases based on the Consumer Price Index.

33

---

The future minimum lease payments required under these leases as of December 31, 2001 are as follows:

Year Ending December 31,2002

$
1,687,0002003


1,562,0002004


779,0002005


779,0002006


750,000Thereafter


959,000$
6,516,000


Rent
expense for 2001, 2000 and 1999 was $2,234,000, $1,816,000 and $1,710,000, respectively. As of December 31, 2001, the Company has non-cancelable commitments to
purchase raw materials totaling $2.6 million and capital equipment of $0.7 million.

The
Company is a party to legal actions arising in the ordinary course of business, none of which, individually or in the aggregate, in the opinion of management, after consultation with
counsel, will have a material adverse effect on the business or financial condition of the Company.

10.  STOCK OPTION PLANS

Under the Company's 1996 Amended and Restated Employee Stock Option Plan ("1996 Employee Stock Option Plan"), a maximum of 1,950,000 shares of common stock may be
issued pursuant to exercise of options granted to officers and key employees under the plan. Options may be granted under the plan at prices which are equal to or greater than the fair market value of
the shares at the date of grant. The options become exercisable over a period of time as determined by the Board of Directors or a committee of directors and generally expire ten years from the date
of grant or earlier following termination of employment. As of December 31, 2001, an aggregate of 869,489 shares had been purchased pursuant to the exercise of options granted under the plan,
options to purchase an aggregate of 948,106 shares were outstanding (including options which were then exercisable to purchase 392,893 shares), and 132,405 shares were available for additional grants
of options under the plan.

Under
the Company's 1995 Amended and Restated Non-Employee Director Stock Option Plan ("1995 Director Stock Option Plan"), a maximum of 200,000 shares of common stock may be
issued pursuant to exercise of options granted under the plan to certain non-employee directors. Options are granted under the plan at prices equal to the fair market value of the shares
at the date of grant. The options generally become exercisable over a three-year period of time and expire at the earlier of one year after the optionee ceases to be a director or ten
years from the date of grant. As of December 31, 2001, an aggregate of 109,999 shares had been purchased pursuant to the exercise of options granted under the plan and options to purchase an
aggregate of 66,667 shares were outstanding (including options which were then exercisable to purchase 63,333 shares), and no shares were available for additional grants of options under the plan,
since on June 20, 2001, the Company shareholders approved the 2001 Non-Employee Director Stock Option Plan ("2001 Director Stock Option Plan").

On
June 20, 2001, the shareholders approved the 2001 Director Stock Option Plan, a maximum of 200,000 shares of common stock may be issued pursuant to exercise of options granted
under the plan to certain non-employee directors. The options generally become exercisable over a three-year period of time and expire at the earlier of one year after the
optionee ceases to be a director or ten years from the date of grant. As of December 31, 2001, no shares had been purchased pursuant to the exercise of options granted under the plan and
options to purchase an aggregate of 90,000 shares were

34

---

outstanding (including options which were then exercisable to purchase 20,000 shares), and 110,000 shares were available for additional grants of options under the plan.

The
following summarizes the Company's stock option activity under all arrangements for the three years ended December 31, 2001:

|                           |           | Number    |          | Weighted
Average
Exercise
Price
|-------------------------- | --------- | --------- | -------- | -------------------------------
|Balance, January 1, 1999   |           | 1,083,817 |          | $                              
|                           | Granted   |           | 111,950  |                                
|                           | Forfeited |           | (179,944 | )                              
|                           | Exercised |           | (4,667   | )                              
|                           |           |           |          |                                
|Balance, December 31, 1999 |           | 1,011,156 |          |                                
|                           | Granted   |           | 54,500   |                                
|                           | Forfeited |           | (35,883  | )                              
|                           | Exercised |           | (315,856 | )                              
|                           |           |           |          |                                
|Balance, December 31, 2000 |           | 713,917   |          |                                
|                           | Granted   |           | 577,700  |                                
|                           | Forfeited |           | (122,571 | )                              
|                           | Exercised |           | (34,273  | )                              
|                           |           |           |          |                                
|Balance, December 31, 2001 |           | 1,134,773 |          | $                              
|                           |           |           |          |                                

The
following table summarizes information about stock options outstanding at December 31, 2001:

|Range of Exercise Prices |  | Number Outstanding at December 31, 2001 |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |       | Number Exercisable at December 31, 2001 |         | Weighted Average Exercise Price
|------------------------ |  | --------------------------------------- |  | ------------------------------------------- |  | ------------------------------- | ----- | --------------------------------------- | ------- | -------------------------------
|$4.507.49               |  | 353,301                                 |  | 9.4                                         |  | $                               | 7.01  |                                         | 10,001  |                                
|$7.5710.38              |  | 213,000                                 |  | 9.0                                         |  |                                 | 7.80  |                                         | 38,000  |                                
|$10.6014.13             |  | 454,342                                 |  | 5.1                                         |  |                                 | 13.65 |                                         | 379,040 |                                
|$14.5022.25             |  | 74,130                                  |  | 6.4                                         |  |                                 | 19.25 |                                         | 39,185  |                                
|$27.0030.00             |  | 40,000                                  |  | 3.9                                         |  |                                 | 27.75 |                                         | 40,000  |                                
|                         |  |                                         |  |                                             |  |                                 |       |                                         |         |                                
|$4.5030.00              |  | 1,134,773                               |  | 7.2                                         |  | $                               | 11.35 |                                         | 506,226 |                                
|                         |  |                                         |  |                                             |  |                                 |       |                                         |         |                                

The
Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been
recognized for
options granted under its 1996 Employee Stock Option Plan or its 1995 and 2001 Director Stock Option Plan, except for stock options granted to directors on December 13, 1995, which were subject
to approval and subsequently approved by shareholders on June 12, 1996. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant dates for
awards

35

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under those plans consistent with the method of SFAS No. 123, the Company's net (loss) income and (loss) earnings per share would have been changed to the pro forma amounts indicated below:

|                                     |  |                       |  | Years Ended December 31,
|------------------------------------ |  | --------------------- |  | ------------------------
|
|Net (loss) income                    |  | As reported
Pro forma |  | $                       
|Net (loss) income per share:
Basic   |  | As reported
Pro forma |  | $$                      
|Net (loss) income per share:
Diluted |  | As reported
Pro forma |  | $$                      

The
fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used in 2001,
2000 and 1999, respectively: dividend yield of 0%, 6.8% and 0%, expected volatility of 63%, 64% and 67%, risk-free interest rate of 4.8%, 6.3% and 5.7%, and expected term of 4.0, 4.0 and
4.0 years. The weighted average fair value per share of options granted in 2001, 2000 and 1999 was $3.93, $5.54 and $5.86, respectively.

11.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

|                                  |                                | 2001                                                                                                     |       | 2000       |            | 1999
|--------------------------------- | ------------------------------ | -------------------------------------------------------------------------------------------------------- | ----- | ---------- | ---------- | ----
|Numerator:                        |                                |                                                                                                          |       |            |            |     
|                                  | Net (loss) income              |                                                                                                          | $     | (2,290,000 | )          | $   
|                                  |                                |                                                                                                          |       |            |            |     
|                                  |                                | Numerator for basic and diluted (loss) earnings per share(loss) income available to common stockholders |       |            | (2,290,000 | )   
|Denominator:                      |                                |                                                                                                          |       |            |            |     
|                                  |                                | Denominator for basic (loss) earnings per share
weighted average shares                                 |       |            | 7,661,496  |     
|                                  | Effect of dilutive securities: |                                                                                                          |       |            |            |     
|                                  |                                | Stock options                                                                                            |       |            |           |     
|                                  |                                |                                                                                                          |       |            |            |     
|                                  |                                | Denominator for diluted (loss) earnings per shareweighted average shares and assumed conversions        |       |            | 7,661,496  |     
|                                  |                                |                                                                                                          |       |            |            |     
|Basic (loss) earnings per share   |                                | $                                                                                                        | (0.30 | )          | $          | 1.15
|                                  |                                |                                                                                                          |       |            |            |     
|Diluted (loss) earnings per share |                                | $                                                                                                        | (0.30 | )          | $          | 1.12
|                                  |                                |                                                                                                          |       |            |            |     

The
anti-dilutive options as of December 31, 2001, 2000 and 1999 were 1,134,773, 95,930 and 758,639, respectively.

12.  BUSINESS SEGMENTS

The Company is engaged principally in the business of manufacturing precision investment-cast titanium and stainless steel golf clubheads,
representing 90.3%, 90.7% and 90.6% of sales for the years ended December 31, 2001, 2000 and 1999, respectively. The Company has determined that it has one reportable business segment.

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The
Company derived 50% and 33% of sales from its two top customers in 2001, 50% and 26% of sales from its two top customers in 2000, and 47%, 25% and 12% of sales from its three top
customers in 1999.

13.  SUBSEQUENT EVENT

The Company has announced that it is in the early stages of planning to consolidate manufacturing operations into less space in fewer locations with the
expectation of not limiting production capacity. The Company believes that this consolidation will improve manufacturing performance and cut costs but will result in substantial
non-recurring consolidation charges during 2002 and possibly into 2003.

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INDEPENDENT AUDITORS' REPORT

To
the Board of Directors
Coastcast Corporation:

We
have audited the consolidated financial statements of Coastcast Corporation and subsidiaries as of December 31, 2001 and 2000, and for each of the three years in the period
ended December 31, 2001, and have issued our report thereon dated February 7, 2002; such report is included elsewhere in this Annual Report on Form 10-K. Our audits
also included the financial statement schedule of Coastcast Corporation, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is
to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/
DELOITTE & TOUCHE LLP

Los
Angeles, California
February 7, 2002

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COASTCAST CORPORATION  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

|Classification                   |                              | Balance at Beginning of Period |   | (Charged)/Credited to Costs and Expenses |   | Charged to Other Accounts |         | Deductions |  | Balance at End of Period | 
|-------------------------------- | ---------------------------- | ------------------------------ | - | ---------------------------------------- | - | ------------------------- | ------- | ---------- |  | ------------------------ | 
|Allowance for doubtful accounts: |                              |                                |   |                                          |   |                           |         |            |  |                          | 
|                                 | Year ended December 31, 1999 |                                | $ | (600,000                                 | ) | $                         | 100,000 |            |  |                          | 
|                                 | Year ended December 31, 2000 |                                |   | (500,000                                 | ) |                           | 300,000 |            |  |                          | 
|                                 | Year ended December 31, 2001 |                                |   | (200,000                                 | ) |                           |         |            |  |                          | 

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EXHIBIT INDEX

|Exhibit Number |   | Description                                                                                                                                                                                      |  | Sequentially Numbered Page
|-------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------
|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(14)                                                                                                                                             |  |                           
|3.3            |   | Certificate of Determination Series A Preferred Stock(12)                                                                                                                                        |  |                           
|3.4            |   | Rights Agreement, dated October 27, 2000 between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent(13)                                                                   |  |                           
|4              |   | Specimen Stock Certificate of the Company(1)                                                                                                                                                     |  |                           
|10.1           | * | 1993 Amended and Restated Employee Stock Option Plan ("Employee Plan")(1)                                                                                                                        |  |                           
|10.2           | * | 1996 Amended and Restated Employee Stock Option Plan ("Employee Plan")(4)                                                                                                                        |  |                           
|10.3           | * | 1995 Amended and Restated Non-Employee Director Stock Option Plan ("Director Plan"), together with form of notice of grant and grant summary(2)                                                  |  |                           
|10.4           | * | 2001 Non-Employee Director Stock Option Plan(14)                                                                                                                                                 |  |                           
|10.5           |   | Agreement, dated June 12, 2000, between the Company and United Steelworkers of America(11)                                                                                                       |  |                           
|10.6           |   | Lease Agreement, dated December 16, 1998, between Coastcast Corporation, S.A. and Parque Industrial Mexicali, S.A. de C.V. for the facilities known as Mercurio #70 in Mexicali, Mexico(7)       |  |                           
|10.7           |   | Lease Agreement, dated December 16, 1998, between Coastcast Corporation, S.A. and Parque Industrial Mexicali, S.A. de C.V. for the facilities known as Avenue Galaxia #50 in Mexicali, Mexico(7) |  |                           
|10.8           |   | Lease Agreement, dated December 16, 1998, between Coastcast Corporation, S.A. and Parque Industrial Mexicali, S.A. de C.V. for the facilities known as Mercurio #30 in Mexicali, Mexico(7)       |  |                           
|10.9           |   | Lease Agreement, dated December 10, 1999, between Coastcast Corporation, S.A. and Parque Industrial Mexicali, S.A. de C.V. for the facilities known as Calle Marte #162 in Mexicali, Mexico(10)  |  |                           
|10.10          |   | Guaranty, dated January 26, 1999, by the Company for the lease of the Mexicali, Mexico facilities known as Mercurio #70(7)                                                                       |  |                           
|10.11          |   | Guaranty, dated January 26, 1999, by the Company for the lease of the Mexicali, Mexico facilities known as Avenue Galaxia #50(7)                                                                 |  |                           
|10.12          |   | Guaranty, dated January 26, 1999, by the Company for the lease of the Mexicali, Mexico facilities known as Mercurio #30(7)                                                                       |  |                           
|10.13          |   | Guaranty, dated December 10, 1999, by the Company for the lease, dated December 10, 1999(10)                                                                                                     |  |                           
|               |   |                                                                                                                                                                                                  |  |                           

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|10.14 |   | Lease Agreement, dated September 1, 1997, between the Company and Watson Land Company for the facilities in Rancho Dominguez, California(5)                                                                                                                                                   |  |   
|----- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|10.15 |   | Lease Agreement, dated January 5, 1998, between Coastcast Tijuana, S. De R.L. De C.V. and Frederick Clarke Sanders, Jr., Frederick Sanders Flourie, Monique Sanders Flourie, Scott Michael Sanders Flourie and Carlo E. Muzquiz Davila for real estate in
Tijuana, Baja California, Mexico(7) |  |   
|10.16 |   | Lease Guaranty Agreement, dated August 18, 1998, by the Company for the lease of the Tijuana facility(7)                                                                                                                                                                                      |  |   
|10.17 |   | Form of Indemnification Agreement(1)                                                                                                                                                                                                                                                          |  |   
|10.18 |   | Revolving Line of Credit Note, effective May 31, 2001, between the Company and Imperial Bank(14)                                                                                                                                                                                              |  |   
|10.19 | * | Amended and Restated Coastcast Corporation Selected Employees Pension Plan, dated October 1, 1987(1)                                                                                                                                                                                          |  |   
|10.20 | * | Amendment to the Coastcast Corporation Selected Employees Pension Plan, effective May 12, 1997(6)                                                                                                                                                                                             |  |   
|10.21 | * | Amendment to the Coastcast Corporation Selected Employees Pension Plan, effective June 12, 2000                                                                                                                                                                                               |  | 43
|10.22 | * | Coastcast Corporation 401(k) Retirement Plan, effective January 1, 1996(2)                                                                                                                                                                                                                    |  |   
|10.23 | * | Coastcast Corporation Supplemental Executive Retirement Plan, effective September 1, 1996(3)                                                                                                                                                                                                  |  |   
|10.24 | * | First Amendment to Coastcast Corporation Supplemental Executive Retirement Plan, effective September 1, 1996(3)                                                                                                                                                                               |  |   
|10.25 | * | Second Amendment to Coastcast Corporation Supplemental Executive Retirement Plan, dated February 18, 1997(4)                                                                                                                                                                                  |  |   
|10.26 | * | Coastcast Corporation Amended and Restated Supplemental Executive Retirement Plan, effective January 1, 1998(7)                                                                                                                                                                               |  |   
|10.27 | * | Coastcast Corporation Amended and Restated Supplemental Executive Retirement Plan, effective January 1, 1999(10)                                                                                                                                                                              |  |   
|10.28 | * | Amended and Restated Trust Agreement by and between Coastcast Corporation and Imperial Trust Company, dated December 18, 1998(7)                                                                                                                                                              |  |   
|10.29 | * | Second Amendment to the Coastcast Corporation Grantor Trust(9)                                                                                                                                                                                                                                |  |   
|10.30 |   | Stock Purchase Agreement, dated April 22, 1999 between the Company and the selling shareholders of California Precision Aluminum Casting, Inc.(8)                                                                                                                                             |  |   
|21    |   | Subsidiaries of the Company                                                                                                                                                                                                                                                                   |  | 45
|23    |   | Consent of Independent Auditors                                                                                                                                                                                                                                                               |  | 46

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