COASTCAST CORP, 10-K, 1997-03-31

COASTCAST CORP
10-K, 1997-03-31
NONFERROUS FOUNDRIES (CASTINGS)

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(MARK ONE)
X 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, 1996

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-12676
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COASTCAST CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

CALIFORNIA 95-3454926
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

3025 EAST VICTORIA STREET 90221
RANCHO DOMINGUEZ, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 638-0595
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
---------------

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. [X]

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 11, 1997 ($15.875 per share): $120,329,000.

As of March 11, 1997, 8,794,334 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 11, 1997, 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, 1996

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PART I PAGE
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Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8

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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 9
Item 6 Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 8 Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 17

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PART III
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Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners and
Management 17
Item 13. Certain Relationships and Related Transactions 18

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PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K 18

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PART I

ITEM 1. BUSINESS.

GENERAL

Coastcast Corporation is one of the largest manufacturers in the world of
investment-cast titanium and stainless steel golf clubheads for high-quality,
premium-priced metal woods, irons and putters. The Company believes it has
manufactured more metal wood clubheads for high-quality, premium-priced golf
clubs than any other manufacturer. Over the last dozen years, golf clubs with
perimeter-weighted heads have become increasingly popular among golfers because
such clubs are more forgiving to off-center hits than other types of clubs. The
investment-casting process has become the principal method for manufacturing
clubheads because it facilitates the use of perimeter weighting designs and
modern alloys and enhances manufacturing precision and uniformity.
Manufacturing precision is particularly important in the manufacture of an
oversized, thin-walled metal wood which can involve more than 200 separate
manufacturing steps to produce a clubhead that meets strict standards for size,
weight, strength and finish.

The Company also manufactures a variety of investment-cast orthopedic
implants and surgical tools used principally in replacement of hip and knee
joints in humans and small animals, which products accounted for less than 6% of
the Company's total sales for the year ended December 31, 1996.

RECENT DEVELOPMENTS

In the past year, golf clubs with titanium alloy heads have increased in
popularity. The Company developed the capability of manufacturing titanium
clubheads and began shipping titanium clubheads at the end of 1995. Titanium
clubheads accounted for a significant portion, over 55%, of the Company's total
sales in 1996.

BUSINESS STRATEGY - GOLF

The Company recognizes that golf club companies are critical to its success
and, accordingly, has designed its business strategy to engender customer
satisfaction in order to maintain its industry leadership position. The
Company's strategy consists of the following principal elements:

o MAINTAIN RELIABLE, HIGH-QUALITY MANUFACTURING. The Company believes
its manufacturing expertise, quality control, scheduling flexibility,
substantial production capacity and its ability to manufacture golf
clubheads using stainless steel or titanium alloys differentiate it
from others in the industry. The Company endeavors to respond quickly
to customers' orders and deliver high-quality clubheads on a timely
basis. This capability is particularly important to golf club
companies which can experience rapid growth from the increasing
popularity of a particular club or set of clubs.

o INTEGRATE OPERATIONS. The Company's operations are integrated, from
the computer-aided manufacture of some of the tooling used to produce
clubheads to the packaging and shipment, in certain cases, of
shrink-wrapped and labeled products.

o FOSTER CLOSE CUSTOMER RELATIONSHIPS. The Company believes that its
responsive service has been a significant element of its success. The
Company endeavors to be a value-added supplier by offering
consistently high levels of customer service and support.

The Company has a staff of 13 employees dedicated to sales and customer
service. Representatives of the Company participate in sales programs of
customers. The Company maintains its own internal laboratory for testing of
customers' products. The Company typically delivers finished products to its
customers within 12 weeks from receipt of the customer's order during peak
production periods, within 8 to 10 weeks during other periods and within several
weeks or even several days if necessary to accommodate a customer's need

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for more rapid delivery. With new products, depending on their complexity, a
longer turnaround period may be expected.

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 "tour-driven" golf
clubs.

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

CALLAWAY TOMMY ARMOUR
- -------- ------------
GREAT BIG BERTHA TITANIUM METAL WOODS TI-100 TITANIUM METAL WOODS
BIG BERTHA WARBIRD METAL WOODS HOT SCOT 855 METAL WOODS
GREAT BIG BERTHA TUNGSTEN TITANIUM IRONS TI-100 TITANIUM IRONS
BIG BERTHA IRONS SILVER SCOT 845 IRONS
BIG BERTHA BLADE PUTTERS SILVER SCOT 855 IRONS
S2H2 PUTTERS GOLDEN SCOT 855 IRONS
DIAMOND SCOT 855 IRONS
CLEVELAND
- --------- TAYLOR MADE
VAS TITANIUM METAL WOODS -----------
CHROME WEDGES BURNER BUBBLE TITANIUM 2 METAL WOODS
BURNER BUBBLE TITANIUM METAL WOODS
COBRA RAYLOR TITANIUM METAL WOODS
- ----- BURNER BUBBLE METAL WOODS
KING COBRA TITANIUM METALWOODS BURNER TOUR IRONS
KING COBRA OFFSET TITANIUM METALWOODS
TITLEIST
ODYSSEY --------
- ------- STARSHIP METAL WOODS
BLACKSPIN WEDGES DCI IRONS
DUAL FORCE PUTTERS OVERSIZED PLUS IRONS
DF ROSSIE MALLET PUTTERS 962 IRONS
962 "BLADE" IRONS

GOLF PRODUCT CUSTOMERS

During the last five years, the Company has supplied investment-cast
clubheads for metal woods, irons and putters to over 50% of the top two dozen
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
metal woods and irons and the Great Big Bertha titanium metal woods and irons.
In addition, the Company is a supplier of investment-cast steel and titanium
clubheads for companies which market the Titleist, Tommy Armour, Odyssey, Taylor
Made, Lynx, Cleveland, Goldwin, Wilson, Cobra and Daiwa 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 very
substantial portion of the clubheads manufactured by it are incorporated in
clubs sold in North America, although some of the Company's clubheads are
incorporated in clubs sold in parts of the Far East, 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, pre-

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mium-priced golf clubs in North America. Currently, some of the more popular
high-quality, premium-priced clubs are Callaway metal woods and irons; Taylor
Made metal woods and irons; Ping irons and putters; Titleist metal woods, irons
and putters; Tommy Armour irons and putters; Wilson metal woods, irons and
putters; and Cobra metal woods and irons. Several of these golf clubheads are
marketed by customers of the Company. Callaway accounted for 46%, 47% and 68%
of the Company's total sales in 1996, 1995 and 1994, respectively. U.S.
Industries (Tommy Armour and Odyssey) accounted for 13% and 10% of the Company's
total sales in 1996 and 1995, respectively. Taylor Made accounted for 18% of
the Company's total sales in 1996. American Brands (Titleist) accounted for 13%
of the Company's total sales in 1995.

A close working relationship typically exists between the Company and its
principal golf club customers, and sales and marketing activities are conducted
by a limited number of direct sales employees and senior executives of the
Company.

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 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 more than 200 separate
manufacturing steps.

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

o Produce a metal die (sometimes called a wax mold) based on
specifications provided by the customer.

o Inject wax into the die, producing a pattern the exact shape of the
final casting.

o Surround (or "invest") the pattern with a ceramic material which is
allowed to dry to form a ceramic shell.

o Remove the wax by heat, leaving a cavity in the ceramic shell in the
shape of the desired casting.

o Pour molten metal into the cavity in the ceramic shell and allow it to
solidify.

o Remove the ceramic material by mechanical and chemical action after
the metal solidifies and clean the casting.

o Finish and inspect the casting.

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. Finishing of the
head for an iron or putter can require more than 50 separate steps and finishing
of a head for a metal wood can involve as many as 100 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, at times, also polishes and finishes limited quantities of
investment-cast clubheads manufactured by other companies.

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QUALITY CONTROL. The Company believes that its success as a leading
supplier of golf clubheads is largely attributable to its 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. See "Discontinued Operations" below.

COMPETITION - GOLF

The Company operates in a highly competitive environment. The Company
competes against a number of manufacturers of investment-cast titanium clubheads
for high-quality, premium-priced golf clubs, including but not limited to:
Selmet, Inc., Sturm Ruger, Inc., Cast Alloys, Inc. and Mitsubishi, Japan, some
of which have substantially greater resources than the Company. The Company
competes principally against two significant U.S.-based manufacturers (Hitchiner
Manufacturing Co., Inc. and Cast Alloys, Inc.) of investment-cast steel
clubheads. The Company also competes with several foreign manufacturers of
investment-cast steel clubheads, including Fu-Sheng Industrial Co. Ltd.

The Company believes that its position as a leading manufacturer of
titanium and steel clubheads for high-quality, premium-priced golf clubs is due
to its ability to produce quality clubheads in quantities sufficient to meet
rapidly growing demand for popular golf clubs, its experience and expertise in
manufacturing investment-cast golf clubheads, and its integrated manufacturing
operations.

Although price is a factor, the Company does not compete solely on price.
Quality and service are key success factors in the premium price golf clubhead
market. The Company seeks to provide better products and service to its
customers than its competitors in order to increase or retain market share.

Although the Company's foreign competitors (the principal ones of which are
located in the Far East) are typically able to offer prices below the Company's
prices, the Company believes that it has some competitive advantages over
foreign manufacturers, including its ability to deliver clubheads more quickly
to its customers due to shorter shipping and lead times. Shipment of clubheads
to the United States from the Far East usually requires at least two weeks by
ocean freight. In addition, the Company believes that its foreign competitors
have not demonstrated the same willingness and ability as the Company to commit
sufficient resources to meet rapidly growing demand for popular golf clubs in a
timely manner. Further, the Company believes that certain of its customers
prefer products made in the United States.

The Company also competes against golf club companies that internally
produce clubheads for their clubs. The Company believes that one of the largest
two dozen golf club companies, Karsten Manufacturing Co., manufactures
investment-cast steel clubheads for use in its own clubs. Karsten Manufacturing
Co., which produces the Ping brand of clubs, manufactures substantially all of
its clubheads. The Company believes that this golf club company produces
clubheads for its own use only and does not currently compete with the Company
for the business of other golf club companies. However, in 1996, Karsten
Manufacturing Co. purchased some steel golf clubheads for its Ping brand from
the Company.

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,

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

EMPLOYEES

As of December 31, 1996, the Company employed 3,719 persons on a full-time
basis. Of these employees, 2,521 were employed by Coastcast Corporation, S.A.,
the Mexican subsidiary 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 372
of such employees as of December 31, 1996. The collective bargaining agreement
for such employees expired on December 3, 1996, and is currently under
negotiation.

ORTHOPEDIC IMPLANTS

The Company also manufactures orthopedic implants and surgical tools used
principally for replacement of hip and knee joints in humans and small animals.
The Company believes that the engineering and manufacturing discipline required
to manufacture these products has contributed to the Company's ability to
manufacture golf products.

Approximately 55 of the Company's employees serve in the medical implant
and surgical tools operations. Such operations are conducted in the Rancho
Dominguez, California facility.

The Company believes that its principal competitor in this business is
Precision CastParts Corporation, which has substantially greater resources than
the Company.

NEW MARKETS

The Company is exploring the possibility of producing titanium investment
cast parts to potential customers in other commercial and industrial businesses
outside of the golf business. The Company is targeting products that can
benefit from titanium's high strength-to-weight ratio and corrosion resistance.
At this early stage, the Company cannot predict which product opportunities will
result in profitable sales, and whether volumes will be significant.

DISCONTINUED OPERATIONS

The Company historically manufactured investment-cast aerospace and other
industrial products in addition to golf clubheads and orthopedic implant
products. In October 1993, the Company announced its decision to discontinue
its aerospace business because of declining sales and operating losses on this
portion of its business. This business was essentially phased out by June 1994.
The net current assets of discontinued operations as of December 31, 1996 were
$808,000, principally consisting of the estimated net realizable value of the
Wallingford, Connecticut property including the related deferred tax asset.

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chlorinated solvents in groundwater beneath a portion of the property. The
Company is continuing to conduct further investigations to determine the source
and extent of the contamination. The Company has recorded the net assets
associated with its discontinued operations at the estimated net realizable
value. However, since the precise source and extent of the contamination has
not been identified at this time, no assurances can be given that the proceeds
to be realized upon sale of this property less the cost of remediation will
equal or exceed the estimated net realizable value.

ITEM 2. PROPERTIES.

The Company's principal executive offices and one of two investment casting
manufacturing facilities are located in a 150,000 square foot leased facility in
Rancho Dominguez, California, a suburb of Los Angeles. The lease expires in
September 1998 and the Company has a ten-year extension option.

The Company owns a complex of plants in Gardena, California (which is
within approximately five miles of the Rancho Dominguez facilities), comprising
an aggregate of approximately 110,000 square feet. These facilities are
principally used for manufacturing titanium golf clubheads and tooling. In
October 1994, the Company purchased approximately two acres of land contiguous
to its Gardena facility. In April 1996, the Company purchased another
approximately two acres of land next to the land purchased in October 1994.
This land is available for future expansion if and when necessary.

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 141,000 square feet. Three
of the leases expire in December 1998, and the other lease expires in June 2001.

The Company intends to purchase or lease a new investment casting facility
for steel products in Tijuana, Mexico, and intends to move some of its casting
operations to this facility. The facility is expected to be operational in late
1997.

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 consulation 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 64 Chairman of the Board and Chief Executive Officer
Richard W. Mora 56 President and Chief Operating Officer
Robert C. Bruning 54 Chief Financial Officer and Secretary
Jon A. Knartzer 51 Vice President, Operations
Ramon F. Ibarra 44 Vice President, Manufacturing
Thomas D. Dixon 51 Vice President, Marketing
Kathleen H. Wainwright 32 Vice President, Sales

Mr. Buehler is one of the founders of the Company and has been Chief
Executive Officer and 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 30 years of
experience in the

<PAGE>

investment-casting business, including more than 20 years of experience in the
manufacture of golf clubheads.

Mr. Mora joined the Company in May, 1995. From 1992 to 1995, he was Chief
Operating Officer of Pharmavite Corporation, a producer and marketer of
nutritional supplements. From 1971 to 1992, Mr. Mora worked for Bergen Brunswig
Corporation, starting as a member of the sales force and ending in the position
of Group Vice President.

Mr. Bruning joined the Company in May, 1996. From 1989 to 1996, he was
Chief Financial Officer of Zacky Farms, Inc., a producer of poultry products.
From 1986 to1988, Mr. Bruning was a partner at Coopers & Lybrand, LLP. Prior to
that time he worked for Arthur Andersen, LLP for 19 years, 10 of which he served
as a partner.

Mr. Knartzer joined the Company in November, 1996. From1995 to 1996, he
was Vice President of Operations of Enertech, a privately held manufacturer of
products for the nuclear power industry. From 1992 to 1995, he served as
Director of Operations for Accuride International, a manufacturer of precision
ball bearing equipment. Prior to that time, he held various management
positions in operations, engineering, and quality assurance.

Mr. Ibarra joined the Company in June, 1981. Since 1989, Mr. Ibarra has
served as Vice President, Manufacturing of the golf operations 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. Dixon joined the Company in 1983. Since 1996 he has served as Vice
President, Marketing. From 1989 to 1996 he was Vice President--Sales and
Marketing. Prior to that time, Mr. Dixon served in various sales capacities
related to the golf products business. Mr. Dixon has more than 20 years of
experience in the golf industry.

Ms. Wainwright joined the Company in 1988. Since November, 1996 she has
served as Vice President, Sales. Prior to that time, she served the Company in
various capacities, including plant manager at the facility located in
Wallingford, Connecticut.

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

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.

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Fiscal Year High Low
- ----------- ------ -----

1995
First Quarter . . . . . . . . . . $13 3/8 $9 3/4
Second Quarter. . . . . . . . . . 11 3/4 9 7/8
Third Quarter . . . . . . . . . . 11 8 1/2
Fourth Quarter. . . . . . . . . . 12 3/8 7 1/2

1996
First Quarter . . . . . . . . . . 20 1/4 9 3/4
Second Quarter. . . . . . . . . . 27 5/8 17 7/8
Third Quarter . . . . . . . . . . 23 3/4 14 3/8
Fourth Quarter. . . . . . . . . . 18 3/4 13

The approximate number of holders of common stock of the Company as of March 11,
1997 was 238.

DIVIDENDS

The Company does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to payment of dividends will be at the
discretion of the Company's Board of Directors and will depend on the Company's
results of operations, financial condition, contractual restrictions and other
factors deemed relevant by the Board of Directors.

STOCK REPURCHASE

On October 25, 1995, the Board of Directors authorized the Company to
purchase up to one million shares of Coastcast common stock from time to time in
the open market or negotiated transactions. For the year ended December 31,
1996, the Company purchased and retired 13,800 shares for $.2 million. As of
December 31, 1996, there were 596,400 shares remaining to be purchased under
this authorization.

BUSINESS RISKS

CUSTOMER CONCENTRATION. The Company's sales have been and very likely will
continue to be concentrated among a small number of customers. Sales to as few
as four customers accounted for 84%, 76% and 88% of sales during the years ended
December 31, 1996, 1995 and 1994, respectively. Sales to the Company's top
customer, Callaway Golf Company, accounted for 46% of sales for the year ended
December 31, 1996.

The Company has no long-term contracts with, and 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 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 and its prices are competitive, 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. 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 its ability to produce consistently
high-quality golf clubheads in quantities sufficient to meet rapidly growing

<PAGE>

demand for popular golf clubs. Some of the Company's current and potential
competitors may have greater resources than the Company.

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 POLISHING AND FINISHING PLANT IN MEXICO. A substantial
portion of the golf clubheads manufactured by the Company, and some clubheads
produced by other clubhead manufacturers, are polished and finished by the
Company. The polishing and finishing processes used by the Company are highly
labor intensive. The Company performs substantially all of these processes in
its facilities in 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 facility 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. The 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 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. 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. See also
Item 1. Business - Discontinued Operations.

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 in 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

<PAGE>

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.

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.

<PAGE>

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.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Income Data (1):
Sales $148,257 $76,001 $90,590 $66,928 $41,868
Gross profit 33,826 12,914 22,746 16,722 8,387
Income from operations 24,454 5,941 15,317 10,998 4,029
Income from continuing operations
before class action lawsuit
settlement expense and income taxes 25,496 7,488 16,242 10,352 3,130
Class action lawsuit settlement expense -0- 2,075 -0- -0- -0-
Income From Continuing
Operations Data (2):
Income before income taxes 25,496 5,413 16,242 10,352 3,130
Income taxes (2) 10,430 2,114 6,420 4,180 1,270
Net income (2) 15,066 3,299 9,822 6,172 1,860
Net Income From Continuing
Operations Per Share (2) $ 1.67 $ 0.36 $ 1.08 $ 0.80 $ 0.25
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Weighted Average
Shares Outstanding 9,038 9,099 9,113 7,747 7,487
------ ------- ------- ------- -------
------ ------- ------- ------- -------

AS OF DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS)

<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data (1):
Working capital $44,800 $ 34,788 $ 37,475 $ 22,031 $ 5,047
Total assets 76,100 58,908 56,821 38,608 33,328
Total debt, including
current portion -0- -0- -0- -0- 15,356
Deferred compensation 438 -0- -0- -0- -0-
Shareholders' equity 66,487 50,252 51,076 31,309 13,475

</TABLE>

(1) In October 1993, the Company announced its decision to discontinue its
aerospace business. See Note 2 of Notes to Consolidated Financial
Statements.

(2) The Company was taxed as an S corporation for federal and state income tax
purposes from 1983 until December 15, 1993. Income taxes, net income, and
net income from continuing operations per share reflect the pro forma
effect of income taxes for each of the two years in the period ended
December 31, 1993 as if the Company had been taxed as a C corporation.

<PAGE>

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.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------ ------- ------ -------

<S> <C> <C> <C> <C> <C> <C>
Sales $148,257 100.0% $76,001 100.0% $90,590 100.0%
Cost of sales 114,431 77.2 63,087 83.0 67,844 74.9
Gross profit 33,826 22.8 12,914 17.0 22,746 25.1
Selling, general
and administrative 9,372 6.3 6,973 9.2 7,429 8.2
Income from continuing
operations 24,454 16.5 5,941 7.8 15,317 16.9
Other income, net 1,042 0.7 1,547 2.0 925 1.0
Class action lawsuit
settlement expense -0- 0.0 2,075 2.7 -0- 0.0
Income from continuing
operations before
income taxes 25,496 17.2 5,413 7.1 16,242 17.9

</TABLE>

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Sales increased $72.3 million, or 95%, to $148.3 million for 1996 from
$76.0 million for 1995. The increase was primarily due to sales of titanium
alloy clubheads, which have significantly higher unit sales prices than steel-
alloy clubheads. Sales of titanium alloy clubheads more than offset a decrease
in sales of steel alloy clubheads. Titanium clubhead sales represented over 55%
and over 6% of total sales for 1996 and 1995, respectively. For the year ended
December 31, 1996, the majority of the Company's titanium sales were metal wood
clubheads. There is no assurance that metal wood clubheads will continue to
comprise the majority of the Company's titanium sales in the future. Sales to
Callaway Golf Company represented 46% of total sales for 1996 compared to 47% in
1995. There is no assurance that sales to Callaway will represent similar
percentages of total sales in the future.

Gross profit increased $20.9 million, or 162%, to $33.8 million for 1996
from $12.9 million for 1995. The gross profit margin increased to 23% in 1996
from 17% in 1995. The increase in gross margin was primarily due to the shift
in production to titanium clubheads. Gross profit increased $4.5 million to
$4.9 million in the fourth quarter 1996 from $0.4 million in the fourth quarter
1995. The gross profit margin increased to 14% in the fourth quarter 1996 from
3% in the fourth quarter 1995. The increase in gross margins was primarily due
to higher volume, mainly titanium, and the absence of start-up costs of the
titanium operations which were present in the fourth quarter 1995. The gross
margin for the fourth quarter 1996 was 9% lower than the gross margin for the
full year 1996, primarily due to seasonality of product ordering and the
increase in production costs related to the start-up of new products.

Selling, general and administrative expense increased by $2.4 million, or
34%, to $9.4 million for 1996 from $7.0 million for 1995 and decreased as a
percentage of sales to 6% in 1996 from 9% in 1995. The increase in selling,
general and administrative expense was due primarily to increased management
bonus, increased payroll and related expenses, and expenses related to the
supplemental executive retirement program.

Other income, principally interest income, was $1.0 million for 1996,
compared to $1.5 million for 1995. The decrease was due to lower cash balances
during most of 1996, coupled with lower average interest rates.

<PAGE>

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Sales decreased $14.6 million, or 16%, to $76.0 million for 1995 from $90.6
million for 1994. This decrease was mainly due to a significant decline in unit
sales of steel-alloy metal wood clubheads, partially offset by an increase in
unit sales of irons and putters and also the addition of titanium, both cast and
finish, and finish-only, clubheads. Additionally, orthopedic implant products
sales increased and represented 12% of sales in 1995. The Company does not
believe medical products sales will exceed 10% of sales in future years. Sales
to Callaway decreased, partially offset by an increase in sales to certain other
customers. Callaway sales represented 47% of total sales for 1995 compared to
68% in 1994. Sales in the fourth quarter decreased $10.7 million, or 43% to
$14.0 million for 1995 from $24.7 million for 1994. This decrease was due to a
decrease in sales of steel-alloy clubheads. This decrease was partially offset
by sales of titanium clubheads cast and finished by the Company and an increase
in medical product sales.

Gross profit decreased $9.8 million, or 43%, to $12.9 million for 1995 from
$22.7 million for 1994. The gross profit margin declined to 17% in 1995 from
25% in 1994. The decrease in gross margin was primarily due to lower
manufacturing volume and yields and start-up costs of the titanium operations,
partially offset by the favorable impact of the Mexican peso devaluation.

Selling, general and administrative expense decreased by $0.4 million, or
5%, to $7.0 million for 1995 from $7.4 million for 1994 and increased as a
percentage of sales to 9% in 1995 from 8% in 1994. The 1% increase in selling,
general and administrative expense as a percentage of sales was mainly due to
the decrease in sales and increased legal fees.

Other income, principally interest income, was $1.5 million for 1995,
compared to $0.9 million for 1994. The increase was due to higher cash balances
during most of 1995, coupled with higher average interest rates.

DISCONTINUED OPERATIONS

The plan adopted in October 1993 to phase out the aerospace business was
essentially completed by June 1994. The net current assets of discontinued
operations as of December 31, 1996 were $808,000, principally consisting of the
estimated net realizable value of the Wallingford, Connecticut property
including the related deferred tax asset.

In connection with the offering for sale of the Wallingford, Connecticut
property, the Company had an environmental assessment performed, which
identified the presence of certain chemicals associated with chlorinated
solvents in groundwater beneath a portion of the property. The Company is
continuing to conduct further investigations to determine the source and extent
of the contamination. The Company has recorded the net assets associated with
its discontinued operations at the estimated net realizable value. However,
since the precise source and extent of the contamination has not been identified
at this time, no assurances can be given that the proceeds to be realized upon
sale of this property less the cost of remediation will equal or exceed the
estimated net realizable value.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash, cash equivalents and short-term investments position at
December 31, 1996 was $14.1 million compared to $23.9 million on December 31,
1995, a decrease of $9.8 million. Net cash used in operating activities was
$1.8 million for the year ended December 31, 1996. Net income of $15.1 million
plus depreciation and amortization of $2.5 were more than offset by an increase
in inventories of $14.0 million and an increase in accounts receivable of $4.6
million. The increase in inventories was primarily due to the increase in
titanium metals inventory and titanium work-in-process inventory to support the
expansion of the business. Investing activities consist primarily of $7.7
million of net capital expenditures and the purchase of Company-owned cash
surrender value life insurance policies on certain key employees of $1.7
million. Net cash provided by financing activities of $1.2 million consists
mainly of proceeds from exercise of stock options of $.8 million including
related tax benefits.

<PAGE>

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, 1996. This line of credit, which expires on November 1, 1997,
bears interest at the bank's prime rate.

The Company believes that its current cash position, the working capital
generated by future operations and the ability to borrow from financial
institutions 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 necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly, and in accordance with generally accepted accounting principles, the
selected quarterly information when read in conjunction with the consolidated
financial statements included elsewhere herein.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------------- -------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $29,344 $42,508 $41,495 $34,910 $21,201 $23,518 $17,305 $13,977
Gross profit 7,781 11,575 9,552 4,918 3,921 5,269 3,331 393
Income (loss) before income taxes 5,963 8,627 8,112 2,794 2,469 3,879 70 (1,005)
Provision (benefit) for income taxes 2,445 3,623 3,245 1,117 1,000 1,602 29 (517)
Net income (loss) 3,518 5,004 4,867 1,677 1,469 2,277 41 (488)
Net income (loss) per share .39 .55 .54 .19 .16 .25 .00 (.05)

</TABLE>

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 in 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.

BACKLOG

As of December 31, 1996, the Company had a backlog of approximately $28.5
million as compared to a backlog of approximately $25.7 million as of
December 31, 1995. 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

<PAGE>

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 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.

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 11, 1997, which will be filed
with the Securities and Exchange Commission no later than 120 days after the
close of the year ended December 31, 1996. 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 11, 1997, which will be filed with
the Securities and Exchange Commission no later than 120 days after the close of
the year ended December 31, 1996.

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 11, 1997, which will be filed with the
Securities and Exchange Commission no later than 120 days after the close of the
year ended December 31, 1996.

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 11, 1997,
which will be filed with the Securities and Exchange Commission no later than
120 days after the close of the year ended December 31, 1996.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Not applicable.

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

The Company did not file any reports on Form 8-K during the fourth quarter
of 1996.

<PAGE>

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 24, 1997 COASTCAST CORPORATION

By: /s/ RICHARD W. MORA
--------------------------------------------
Richard W. Mora, President, Chief Operating
Officer

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 24, 1997.

SIGNATURE TITLE
--------- -----

/s/ HANS H. BUEHLER
- -----------------------------------
Hans H. Buehler Chairman of the Board, Chief Executive
Officer and Director (Principal
Executive Officer)

/s/ ROBERT C. BRUNING
- -----------------------------------
Robert C. Bruning Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer)

/s/ GEORGE L. GRAZIADIO
- -----------------------------------
George L. Graziadio Director

/s/ EDWIN A. LEVY
- -----------------------------------
Edwin A. Levy Director

/s/ VERNON R. LOUCKS, JR.
- -----------------------------------
Vernon R. Loucks, Jr. Director

/s/ LEE E. MIKLES
- -----------------------------------
Lee E. Mikles Director

/s/ RICHARD W. MORA
- -----------------------------------
Richard W. Mora Director

/s/ PAUL A. NOVELLY
- -----------------------------------
Paul A. Novelly Director

<PAGE>

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

CONSOLIDATED FINANCIAL STATEMENTS PAGE NUMBER

Independent Auditors' Report 21
Consolidated Balance Sheets as of December 31, 1996 and 1995 22
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 23
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1994, 1995 and 1996 24
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 25
Notes to Consolidated Financial Statements 26

SCHEDULES

Independent Auditors' Report 34
Schedule II--Valuation and Qualifying Accounts as of and
for the years ended December 31, 1994, 1995 and 1996 35

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Coastcast Corporation:

We have audited the accompanying consolidated balance sheets of Coastcast
Corporation and subsidiary as of December 31, 1996 and 1995 and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. 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 generally accepted auditing
standards. 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
subsidiary as of December 31, 1996 and 1995 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Long Beach, California
February 5, 1997

<PAGE>

COASTCAST CORPORATION

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents (Note 1) $14,060,000 $9,237,000
Short-term investments (Note 1) - 14,718,000
Trade accounts receivable, net of allowance
for doubtful accounts of $400,000 at
December 31, 1996 and 1995 (Note 1) 11,783,000 7,198,000
Inventories (Notes 1 and 3) 21,660,000 7,611,000
Prepaid expenses and other current assets 4,800,000 2,743,000
Deferred income taxes (Note 8) 864,000 1,240,000
Net current assets of discontinued operations
(Note 2) 808,000 697,000
----------- -----------
Total current assets 53,975,000 43,444,000
Property, plant and equipment, net (Notes 1 and 4) 20,171,000 15,214,000
Other assets 1,954,000 250,000
----------- -----------
$76,100,000 $58,908,000
----------- -----------
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,043,000 $3,833,000
Accrued liabilities (Note 6) 4,132,000 4,823,000
----------- -----------
Total current liabilities 9,175,000 8,656,000
Deferred compensation (Note 7) 438,000 -
----------- -----------
Total liabilities 9,613,000 8,656,000
Commitments and contingencies (Notes 7 and 10)
Shareholders' Equity (Notes 1 and 11):
Preferred stock, no par value, 2,000,000
shares authorized; none issued and
outstanding
Common stock, no par value, 20,000,000
shares authorized; 8,777,890 and 8,734,694
shares issued and outstanding as of
December 31, 1996 and 1995, respectively 38,205,000 37,036,000
Retained earnings 28,282,000 13,216,000
----------- -----------
Total shareholders' equity 66,487,000 50,252,000
----------- -----------
$76,100,000 $58,908,000
----------- -----------
----------- -----------

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

COASTCAST CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
------------ ----------- -----------
Sales (Notes 1 and 9) $148,257,000 $76,001,000 $90,590,000
Cost of sales 114,431,000 63,087,000 67,844,000
------------ ----------- -----------
Gross profit 33,826,000 12,914,000 22,746,000
Selling, general and administrative 9,372,000 6,973,000 7,429,000
------------ ----------- -----------
Income from operations 24,454,000 5,941,000 15,317,000
Other income, net 1,042,000 1,547,000 925,000
Class action lawsuit settlement expense - 2,075,000 -
------------ ----------- -----------
Income before income taxes 25,496,000 5,413,000 16,242,000
Provision for income taxes
(Notes 1 and 8) 10,430,000 2,114,000 6,420,000
------------ ----------- -----------
Net income $ 15,066,000 $ 3,299,000 $ 9,822,000
------------ ----------- -----------
------------ ----------- -----------

NET INCOME PER SHARE
Net income $ 1.67 $ 0.36 $ 1.08
------------ ----------- -----------
------------ ----------- -----------

WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 1) 9,038,223 9,098,936 9,112,702
------------ ----------- -----------
------------ ----------- -----------

See accompanying notes to consolidated financial statements.

<PAGE>

COASTCAST CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

COMMON STOCK
-------------------------
NUMBER OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>

BALANCE AT JANUARY 1, 1994 8,641,994 $31,058,000 $ 251,000 $31,309,000
Net income 9,822,000 9,822,000
Dividends (Note 1) (156,000) (156,000)
Issuance of common stock, net of
issuance costs 450,000 10,101,000 10,101,000
---------- ------------ ----------- -----------
BALANCE AT DECEMBER 31, 1994 9,091,994 $41,159,000 $9,917,000 $51,076,000
Net income 3,299,000 3,299,000
Stock options exercised, including related
tax benefit (Note 11) 32,500 298,000 298,000
Repurchase of common stock (389,800) (4,421,000) (4,421,000)
---------- ------------ ----------- -----------
BALANCE AT DECEMBER 31, 1995 8,734,694 $37,036,000 $13,216,000 $50,252,000
Net income 15,066,000 15,066,000
Stock options exercised, including related
tax benefit (Note 11) 56,996 834,000 834,000
Director compensatory stock options 269,000 269,000
Stock options granted to non-employee (Note 11) 269,000 269,000
Repurchase of common stock (13,800) (203,000) (203,000)
---------- ------------ ----------- -----------
BALANCE AT DECEMBER 31, 1996 8,777,890 $38,205,000 $28,282,000 $66,487,000
---------- ------------ ----------- -----------
---------- ------------ ----------- -----------

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

COASTCAST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,066,000 $ 3,299,000 $ 9,822,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,479,000 1,862,000 1,882,000
Loss on disposal of machinery and equipment 79,000 21,000 155,000
Change in accrual for disposal of aerospace business (214,000) (314,000) (1,491,000)
Deferred compensation 438,000
Deferred income taxes 479,000 258,000 (534,000)
Changes in operating assets and liabilities:
Trade accounts receivable (4,585,000) (629,000) 81,000
Inventories (14,049,000) (749,000) 1,515,000
Prepaid expenses and other current assets 2,057,000) (1,657,000) (406,000)
Accounts payable and accrued liabilities 519,000 2,906,000 43,000
------------ ------------ ------------
Net cash (used in) provided by operating activities (1,845,000) 4,997,000 11,067,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales (purchases) of short-term investments 14,718,000 4,921,000 (19,639,000)
Purchase of property, plant and equipment (7,653,000) (3,797,000) (6,500,000)
Proceeds from disposal of machinery and equipment 138,000 41,000 529,000
Other assets (1,704,000) 10,000 270,000
------------ ------------ ------------
Net cash provided by (used in) investing activities 5,499,000 1,175,000 (25,340,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Non-employee director compensatory stock options 269,000
Stock options granted to non-employee 269,000
Proceeds from issuance of common stock upon secondary
public offering 10,170,000
Payment of stock issuance costs (69,000)
Proceeds from issuance of common stock upon exercise
of options, including related tax benefit 834,000 298,000 00
Repurchase of common stock (203,000) (4,421,000)
Dividends paid (2,418,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities 1,169,000 (4,123,000) 7,683,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 4,823,000 2,049,000 (6,590,000)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,237,000 7,188,000 13,778,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $14,060,000 $ 9,237,000 $ 7,188,000
------------ ------------ ------------
------------ ------------ ------------

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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 subsidiary. 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's principal business is the
production of investment-cast golf clubheads, and precision investment castings
and related engineering for the medical industry (See Note 2). The Company
sells its products to customers of varying strength and financial resources,
principally located in the United States. The Company's wholly owned subsidiary
is incorporated under the laws of the Mexican maquiladora program and its
principal activities are the grinding, polishing and finishing of golf
clubheads.

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles 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.

DISCONTINUED OPERATIONS--The Company has historically manufactured
investment-cast aerospace and other industrial products in addition to golf
clubheads and orthopedic implant products. In October 1993, the Company
announced its decision to discontinue its aerospace business, and as of June
1994 had essentially phased out this business (See Note 2). As a result of the
disposition, the Company is devoted to the manufacture of investment-cast golf
clubheads and medical implants.

REVENUE RECOGNITION--Revenue is recognized when goods are shipped to the
customer.

CASH EQUIVALENTS--Cash equivalents consist of short-term investments
purchased with original maturities of three months or less.

SHORT-TERM INVESTMENTS--Short-term investments are recorded at cost plus
accrued interest, which approximates market value, and consist of U.S. Treasury
securities.

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. See also Note 9.

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 straight-line
methods over the estimated useful lives of the related assets as follows:

Machinery and equipment 7 years
Building and improvements 5-31 years
Furniture, fixtures and computers 3-7 years
Autos and trucks 5-7 years

<PAGE>

INCOME TAXES--Deferred tax assets and liabilities are recognized based on
differences between financial statement and tax basis of assets and liabilities
using presently enacted tax rates. The adoption did not have a material effect
on the consolidated financial statements (see Note 8).

EARNINGS PER SHARE--Net income per share is based on the weighted average
number of shares of common stock outstanding and dilutive common equivalent
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--During 1996, the Company adopted Statements of
Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Among other
provisions, the statement changed current accounting practices for the
evaluation of impairment of long-lived assets. The adoption did not have a
material effect on the Company's financial statements.

During 1996, the Company also adopted SFAS No. 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION. The statement requires expanded disclosures of stock-based
compensation arrangements with employees and encourages, but does not require,
compensation cost to be measured based on the fair value of the equity
instrument awarded. The statement also requires compensation cost to be
measured based on the fair value of equity instruments awarded to non-employees.
The Company will continue to apply Accounting Principles Board Opinion No. 25 to
its stock-based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per shares (see Note 11).

2. DISCONTINUED OPERATIONS

Revenues for the aerospace business for 1996, 1995 and 1994 were $0, $0 and
$3,484,000, respectively.

3. INVENTORIES

Inventories consist of the following:

DECEMBER 31,
-------------------------
1996 1995
---- ----
Raw materials and supplies ................ $ 10,448,000 $1,546,000
Tooling ................................... 294,000 178,000
Work-in-process ........................... 9,792,000 4,981,000
Finished goods ............................ 1,126,000 906,000
------------ ----------
$ 21,660,000 $7,611,000
------------ ----------
------------ ----------

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

<PAGE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:
DECEMBER 31,
--------------------
1996 1995
---- ----

Land ............................................$ 2,186,000 $ 1,788,000
Buildings and improvements ...................... 7,376,000 7,245,000
Machinery and equipment.......................... 21,800,000 16,213,000
Autos and trucks................................. 900,000 842,000
Furniture, fixtures and computers ............... 2,160,000 1,802,000
----------- -----------
34,422,000 27,890,000
Less accumulated depreciation and amortization .. 14,251,000 12,676,000
----------- -----------
$20,171,000 $15,214,000
----------- -----------
----------- -----------

Depreciation and amortization expense for 1996, 1995 and 1994 was
$2,479,000, $1,862,000 and $1,750,000, respectively.

5. 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, 1996. This line of credit, which expires on November 1, 1997,
bears interest at the bank's prime rate.

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:
DECEMBER 31,
--------------------
1996 1995
---- ----
Accrued payroll and related expenses.............$2,222,000 $ 908,000
Accrued vacation................................. 834,000 652,000
Accrued class action lawsuit settlement.......... 2,075,000
Accrued insurance................................ 332,000 492,000
Other accrued expenses........................... 744,000 696,000
----------- -----------
$4,132,000 $4,823,000
----------- -----------
----------- -----------

On October 24, 1995, the Company announced an agreement for settlement of
the securities class action lawsuits pending against the Company and certain of
its officers and directors in the United States District Court for the Central
District of California. On November 6, 1995 the parties entered into a
Stipulation of Settlement which provides for the creation of a settlement fund
of $6.25 million to be paid by or on behalf of the defendants to class members
who purchased Company common stock during the class period, January 24, 1994 to
August 17, 1994. The officers' and directors' liability insurer has contributed
$4.175 million towards the settlement fund, which has been duly and fully
funded. The Company charged $2.075 million against its operating results for
the year ended December 31, 1995. The $2.075 million was funded in January
1996. On May 6, 1996, the United States District Court granted final approval
of the Company's securities litigation class action settlement.

7. 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 $10 multiplied by the
participant's credited service.

<PAGE>

The following table sets forth the plan's funded status:

DECEMBER 31,
--------------------
1996 1995
---- ----
Actuarial present value of accumulated benefit
obligation, including vested benefits of
$1,430,000 and $1,407,000, respectively .......$1,592,000 $1,550,000
---------- -----------
---------- -----------
Projected benefit obligation.....................$1,592,000 $1,550,000
Fair value of plan assets........................ 1,883,000 1,856,000
---------- -----------
Plan assets in excess of projected benefit
obligation..................................... 291,000 306,000
Unrecognized net gain............................ (106,000) (111,000)
Unrecognized prior service costs................. 70,000 75,000
Unrecognized transition amount................... (172,000) (198,000)
---------- -----------
Prepaid pension cost.............................$ 83,000 $ 72,000
---------- -----------
---------- -----------
Net pension cost included the following
components:
Service cost...................................$ 31,000 $ 26,000
Interest cost on projected benefit obligation.. 104,000 99,000
Actual return on plan assets................... (159,000) (262,000)
Net amortization and deferral.................. 13,000 128,000
---------- -----------
Net periodic pension income......................$ (11,000) $ (9,000)
---------- -----------
---------- -----------

The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7% in 1996 and 1995. The
expected long-term rate of return on assets was 7% for 1996 and 1995.

Effective January 1, 1996, the Company adopted a retirement savings plan
(the "401(k) Plan") pursuant to which all 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 $102,000 during 1996.

On September 1, 1996, the Company adopted a supplemental executive
retirement plan (the "SERP") for certain key employees. Benefits generally
accrue 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. To partially fund this plan, the Company purchases whole-life
insurance contracts on the related participants. The cash surrender value of
these policies are in an irrevocable rabbi trust and are presented as an asset
of the Company, in "other assets" in the accompanying consolidated balance
sheets. Deferred compensation expense under the SERP was $438,000 in 1996.

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

8. INCOME TAXES AND PRO FORMA INCOME TAXES

The provision for income taxes are as follows:

YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
Current:
Federal. . . . . . . . . . . . . $8,319,000 $1,680,000 $6,029,000
State. . . . . . . . . . . . . . 1,405,000 176,000 1,541,000
Foreign. . . . . . . . . . . . . 227,000
----------- ---------- -----------
9,951,000 1,856,000 7,570,000
----------- ---------- -----------

<PAGE>

Deferred:
Federal. . . . . . . . . . . . . 258,000 210,000 (907,000)
State. . . . . . . . . . . . . . 221,000 48,000 (243,000)
----------- ---------- -----------
. . . . . . . . . . . . . . . . . 479,000 258,000 (1,150,000)
----------- ---------- -----------
. . . . . . . . . . . . . . . . . $10,430,000 $2,114,000 $6,420,000
----------- ---------- -----------
----------- ---------- -----------

The actual income tax provision on earnings subject to income taxes differs
from the statutory federal income tax rate due to the following:

YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
Federal income taxes at the
statutory rate . . . . . . . . $8,924,000 $1,895,000 $5,685,000
State income taxes, net of federal
benefit. . . . . . . . . . . . 1,541,000 363,000 955,000
California investment tax credit (349,000) (168,000) (119,000)

Other items. . . . . . . . . . . 314,000 24,000 (101,000)
----------- ---------- -----------
$10,430,000 $2,114,000 $6,420,000
----------- ---------- -----------
----------- ---------- -----------

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

DECEMBER 31,
------------------
1996 1995
---- ----

Allowance for doubtful accounts. . $ 170,000 $ 175,000
Accrued expenses . . . . . . . . . 315,000 1,222,000
Inventory reserve. . . . . . . . . 417,000 440,000
State income taxes . . . . . . . . 584,000 (60,000)
Depreciation . . . . . . . . . . . (303,000) (314,000)
Other items. . . . . . . . . . . (319,000) (223,000)
---------- ----------
$ 864,000 $1,240,000
---------- ----------
---------- ----------

9 . MAJOR CUSTOMERS

The Company derived 46%, 18% and 13% of sales from three top customers in
1996, 47%, 13% and 10% of sales from three top customers in 1995 and 68% from
one major customer in 1994.

10. 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 an additional five and ten year period 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.

The future minimum lease payments required under these leases as of
December 31, 1996 are as follows:

<PAGE>

YEAR ENDING
DECEMBER 31

1997............... $1,265,000
1998............... 1,080,000
1999............... 114,000
2000............... 114,000
2001............... 57,000
----------
$2,630,000
----------
----------

Rent expense for 1996, 1995 and 1994 was approximately $1,355,000,
$1,273,000 and $1,135,000, respectively.

11. 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, 1996, an aggregate of 374,378 shares had been purchased pursuant
to exercise of options granted under the plan, options to purchase an aggregate
of 1,111,459 shares were outstanding (including options which were then
exercisable to purchase 280,319 of such shares), and 464,163 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, 1996, no shares had been
purchased under the plan, options to purchase an aggregate of 150,000 shares
were outstanding under the plan, including 36,669 shares as to which such
options were then exercisable, and 50,000 shares were available for additional
grants of options under the plan .

In October 1993, the Board of Directors granted to two directors options to
purchase a total of 65,000 shares of common stock at an exercise price of $7.69
per share. These options were not issued under the foregoing option plans. The
options are exercisable immediately and expire at the earlier of one year after
the optionee ceases to be a director of the Company or 10 years from the date of
grant. As of December 31, 1996, no options were outstanding.

In April 1996, the Board of Directors granted to a non-employee options to
purchase 30,000 shares of common stock at an exercise price of $22.50, for which
the Company recognized expense of $269,000. These options were not issued under
the foregoing option plans.

<PAGE>

The following summarizes the Company's stock option activity under all
arrangements for the three years ended December 31, 1996:

WEIGHTED
AVERAGE
EXERCISE
NUMBER PRICE
---------- ---------

Balance, January 1, 1994 . . . . . 530,926 $12.96
Granted. . . . . . . . . 48,771 22.34
Forfeited. . . . . . . . . (130,705) 14.05
---------- -------
Balance, December 31, 1994 . 448,992 $13.66
Granted. . . . . . . . . . 431,500 8.00
Forfeited. . . . . . . . . (41,600) 16.37
Exercised. . . . . . . . . (32,500) 7.69
---------- -------
Balance, December 31, 1995 . 806,392 $10.73
Granted. . . . . . . . . . 689,698 16.81
Forfeited. . . . . . . . . . (147,635) 13.36
Exercised. . . . . . . . . (56,996) 12.00
---------- -------
Balance, December 31, 1996 . . . 1,291,459 $14.48
---------- -------
---------- -------

The following table summarizes information about stock options outstanding
at December 31, 1996:

Weighted Weighted Weighted
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/96 Contractual Life Price at 12/31/96 Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.00 - 10.00 190,013 7.2 $7.95 105,014 $6.29
10.25 - 12.50 209,833 8.3 10.89 11,667 10.98
13.13 - 13.62 191,321 9.9 13.61 52,107 13.60
15.00 - 15.38 240,000 9.2 15.36 6,667 15.00
16.00 - 16.00 228,894 7.1 16.00 132,466 16.00
16.38 - 21.50 143,648 9.5 18.88 0 0
22.25 - 30.88 87,750 8.9 25.60 9,634 29.76
--------- --- ------ ------- ------

$4.00 - 30.88 1,291,459 8.5 $14.48 317,555 $12.60
--------- --- ------ ------- ------
--------- --- ------ ------- ------

</TABLE>

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

YEARS ENDED DECEMBER 31,
---------------------------
1996 1995
---- ----

Net income: As reported....................... $ 15,066,000 $ 3,299,000
Pro forma......................... 14,460,000 3,179,000

Net income per share: As reported.............. $1.67 $.36
Pro forma................. $1.54 $.34

<PAGE>

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 1996 and 1995: no dividend yield, expected volatility
of 61.8%, risk-free interest rate of 5.9%, and expected term of 4 years. The
weighted average fair value per share of options granted in 1996 and 1995 was
$8.25 and $5.40, respectively.

12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

1996 1995 1994
---- ---- ----
CASH PAID DURING THE YEAR FOR:
Income taxes.................... $10,500,000 $2,700,000 $7,802,000

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Coastcast Corporation:

We have audited the consolidated financial statements of Coastcast Corporation
as of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, and have issued our report thereon dated February 5,
1997; such report is included elsewhere in this Annual Report on Form 10-K. Our
audits of the consolidated financial statements referred to in our
aforementioned report also included the financial statement schedule of
Coastcast Corporation, listed in Item 14(a)(2). 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.

DELOITTE & TOUCHE LLP

Long Beach, California
February 5, 1997

<PAGE>

COASTCAST CORPORATION

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(CHARGED)/
BALANCE AT CREDITED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
-------------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994 (378,000) 94,000 (16,000) (300,000)
Year ended December 31, 1995 (300,000) (100,000) (400,000)
Year ended December 31, 1996 (400,000) (400,000)
Reserve for inventory:
Year ended December 31, 1994 (161,000) (965,000) (1,126,000)
Year ended December 31, 1995 (1,126,000) 400,000 (726,000)
Year ended December 31, 1996 (726,000) (120,000) (846,000)

</TABLE>

<PAGE>

EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION 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 (1)

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") 39

10.3* Non-Employee Director Stock Option Plan ("Director
Plan"), together with form of notice of grant and
grant summary (1)

10.4* 1995 Amended and Restated Non-Employee Director Stock
Option Plan on-Employee Director Stock Option Plan
("Director Plan"), together with form of notice of
grant and grant summary (1)

10.6 Lease, dated June 20, 1988, between the Company and
Watson Land Company for the facilities in Rancho
Dominguez, California (1)

10.7 Lease Agreement, dated December 17, 1993, between
Productos Recreativos, S.A. and Parque Industrial
Mexicali, S.A. de C.V. for the facilities known as
Mercurio #70 in Mexicali, Mexico (2)

10.8 Lease Agreement, dated December 17, 1993, between
Productos Recreativos, S.A. and Parque Industrial
Mexicali, S.A. de C.V. for the facilities known as
Avenue Galaxia 50 in Mexicali, Mexico (2)

10.9 Lease Agreement, dated December 17, 1993, between
Productos Recreativos, S.A. and Parque Industrial
Mexicali, S.A. de C.V. for facilities known as
Mercurio #30 in Mexicali, Mexico (2)

10.10 Lease Agreement, dated January 22, 1996, 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 (4)

10.11 Guaranty, dated November 1, 1988, by the Company for
the leases of the Mexicali, Mexico facilities (1)

10.12 Guaranty, dated January 23, 1996, by the Company for
the lease, dated January 22, 1996 (4)

<PAGE>

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ----

10.13 Agreement, dated November 4, 1992, between the Company
and United Steelworkers of America (1)

10.14 Form of Indemnification Agreement (1)

10.15 Revolving Line of Credit Note and Loan Agreement, dated
November 1, 1996 between the Company and Wells Fargo
Bank, National Association 51

10.16 Revolving Line of Credit Note, dated November 1, 1996
between the Company and Wells Fargo Bank, National
Association 56

10.17* Employment Agreement between the Company and Hans H.
Buehler (1)

10.18* Employment and Severance Agreement between the Company
and Robert C. Milo (3)

10.19* Amended and Restated Coastcast Corporation Selected
Employees Pension Plan, dated October 1, 1987 (1)

10.20* Coastcast Corporation 401(k) Retirement Plan,
effective January 1, 1996 (4)

10.22 Coastcast Corporation S Corporation Termination, Tax
Allocation and Indemnification Agreement dated December
1, 1993, between the Company and certain
Shareholders (1)

10.24* Coastcast Corporation Supplemental Executive Retirement
Plan, effective September 1, 1996 (5)

10.25* First Amendment to Coastcast Corporation Supplemental
Executive Retirement Plan, effective September 1,
1996 (5)

10.26* Second Amendment to Coastcast Corporation Supplemental
Executive Retirement Plan, dated February 18, 1997 58

10.27* Trust Agreement by and between Coastcast Corporation
and Imperial Trust Company, dated September 1, 1996 (5)

11 Computation of Pro Forma Net Income Per Common and
Common Equivalent Shares 59

21 Subsidiaries of the Company (4)

24 Consent of Independent Auditors 60

__________________________________
* Management contract or compensating plan or arrangement.

(1) Incorporated by reference to the exhibits to the Registration Statement on
Form S-1 (Registration No. 33-71294) filed on November 4, 1993, as amended
by Amendment No. 1 filed on November 17, 1993, Amendment No. 2 filed on
December 1, 1993, and Amendment No. 3 filed on December 9, 1993.

(2) Incorporated by reference to the exhibits to Form 10-K for the fiscal year
ended December 31, 1993.

<PAGE>

(3) Incorporated by reference to the exhibits to Form 10-K for the fiscal year
ended December 31, 1994.

(4) Incorporated by reference to the exhibits to Form 10-K for the fiscal year
ended December 31, 1995.

(5) Incorporated by reference to the exhibits to Form 10-Q for the fiscal
quarter ended September 30, 1996.

<PAGE>

EXHIBIT 10.2
<PAGE>

COASTCAST CORPORATION

1996 AMENDED AND RESTATED

EMPLOYEE STOCK OPTION PLAN

<PAGE>

TABLE OF CONTENTS

Page
----

1. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Incentive and Non-Qualified Stock options. . . . . . . . . . . . 1

3. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.4 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 1
3.5 Disabled or Disability. . . . . . . . . . . . . . . . . . . 1
3.6 Fair Market Value . . . . . . . . . . . . . . . . . . . . . 2
3.7 Incentive Stock Option. . . . . . . . . . . . . . . . . . . 2
3.8 Non-Qualified Stock Option. . . . . . . . . . . . . . . . . 2
3.9 Optionee. . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.10 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.11 Plan Administrator. . . . . . . . . . . . . . . . . . . . . 2
3.12 Stock Option or Option. . . . . . . . . . . . . . . . . . . 2

4. Administration . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Administration by Board . . . . . . . . . . . . . . . . . . 2
4.2 Administration by Compensation
Committee . . . . . . . . . . . . . . . . . . . . . . . . . 3

5. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . 3

6. Shares Subject to Options. . . . . . . . . . . . . . . . . . . . 4

7. Terms and Conditions of Options. . . . . . . . . . . . . . . . . 4
7.1 Number of Shares Subject to
Option. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.2 Option Price. . . . . . . . . . . . . . . . . . . . . . . . 4
7.3 Notice and Payment. . . . . . . . . . . . . . . . . . . . . 4
7.4 Term of Option. . . . . . . . . . . . . . . . . . . . . . . 5
7.5 Exercise of Option. . . . . . . . . . . . . . . . . . . . . 6
7.6 No Transfer of Option . . . . . . . . . . . . . . . . . . . 6
7.7 Annual Limit on Options . . . . . . . . . . . . . . . . . . 6
7.8 Limit on Incentive Stock Options. . . . . . . . . . . . . . 6
7.9 Restriction on Issuance of
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.10 Investment Representation . . . . . . . . . . . . . . . . . 6
7.11 Rights as a Shareholder or
Employee. . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.12 No Fractional Shares. . . . . . . . . . . . . . . . . . . . 7
7.13 Exercisability in the Event of
Death . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.14 Recapitalization or
Reorganization of Company . . . . . . . . . . . . . . . . . 7

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Page
----

7.15 Modification, Extension, and
Renewal of Options. . . . . . . . . . . . . . . . . . . . . 8
7.16 Other Provisions. . . . . . . . . . . . . . . . . . . . . . 8

8. Termination or Amendment of the Plan . . . . . . . . . . . . . . 8

9. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 8

10. Effective Date and Term of Plan. . . . . . . . . . . . . . . . . 9

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<PAGE>

COASTCAST CORPORATION

1996 AMENDED AND RESTATED

EMPLOYEE STOCK OPTION PLAN

1. PURPOSE. The purpose of this Coastcast Corporation 1996 Amended and
Restated Employee Stock Option Plan ("Plan") is to further the growth and
development of Coastcast Corporation ("Company") by providing, through ownership
of stock of the Company, an incentive to officers and other key employees who
are in a position to contribute materially to the prosperity of the Company, to
increase such persons' interests in the Company's welfare, to encourage them to
continue their services to the Company or its subsidiaries, and to attract
individuals of outstanding ability to enter the employment of the Company or its
subsidiaries. This Plan amendment and restatement is effective on the Effective
Date (as provided in Section 10) and shall apply to options granted on or after
the Effective Date. The terms of options granted under the Plan prior to the
Effective Date shall be governed by the Plan terms in effect prior to the
Effective Date.

2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of Stock Options
(referred to herein as "Options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as Incentive Stock
Options under Section 422 of the Code and Non-Qualified Stock Options not
specifically authorized or qualified for favorable income tax treatment by the
Code.

3. DEFINITIONS. The following definitions are applicable to the Plan:

3.1 BOARD. The Board of Directors of the Company.

3.2 CODE. The Internal Revenue Code of 1986, as amended from time to
time.

3.3 COMPANY. Coastcast Corporation, a California corporation.

3.4 COMMON STOCK. The shares of the no par value Common Stock of the
Company.

3.5 DISABLED OR DISABILITY. For the purposes of Section 7.4, a
disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is Disabled or has a Disability is
determined under procedures established by the Plan Administrator for purposes
of the Plan.

<PAGE>

3.6 FAIR MARKET VALUE. For purposes of the Plan, the "fair market
value" per share of Common Stock of the Company at any date shall be (a) if the
Common Stock is listed on an established stock exchange or exchanges, the last
reported sale price per share on the last trading day immediately preceding such
date on the principal exchange on which it is traded, or if no sale was made on
such day on such principal exchange, at the closing reported bid price per share
on such day on such exchange, or (b) if the Common Stock is not then listed on
an exchange, the last reported sale price per share on the last trading day
immediately preceding such date reported by NASDAQ, or if sales are not reported
by NASDAQ or no sale was made on such day, the average of the closing bid and
asked prices per share for the Common Stock in the over-the-counter market as
quoted on NASDAQ on last trading day immediately preceding such date, or (c) if
the Common Stock is not then listed on an exchange or quoted on NASDAQ, an
amount determined in good faith by the Plan Administrator. Notwithstanding the
foregoing, the "fair market value" per share of common stock subject to any
option that is granted under this plan on the Effective Date of this Plan shall
be the initial public offering price per share of common stock of the Company in
the public offering of common stock of the Company which commences on the
Effective Date.

3.7 INCENTIVE STOCK OPTION. Any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

3.8 NON-QUALIFIED STOCK OPTION. Any Stock Option that is not an
Incentive Stock Option.

3.9 OPTIONEE. The recipient of a Stock Option.

3.10 PLAN. The Coastcast Corporation 1996 Amended and Restated
Employee Stock Option Plan, as amended from time to time.

3.11 PLAN ADMINISTRATOR. The Board or the Compensation Committee
designated pursuant to Section 4 to administer, construe And interpret the terms
of the Plan.

3.12 STOCK OPTION OR OPTION. Any option to purchase shares of Common
Stock granted pursuant to Section 7.

4. ADMINISTRATION.

4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are "disinterested
persons" as defined in Rule 16b-3(c)(2)(i) promulgated by the Securities and
Exchange Commission (a "disinterested person"). Subject to the provisions of
the Plan, the Plan Administrator shall have authority to construe and interpret
the Plan, to promulgate, amend, and

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<PAGE>

rescind rules and regulations relating to its administration, from time to time
to select from among the eligible employees (as determined pursuant to Section
5) of the Company and its subsidiaries those employees to whom Stock Options
will be granted, to determine the timing and manner of the grant of the Options,
to determine the exercise price, the number of shares covered by and all of the
terms of the Stock Options, to determine the duration and purpose of leaves of
absence which may be granted to Stock Option holders without constituting
termination of their employment for purposes of the Plan, and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Plan Administrator of any provision of
the Plan, or of any agreement issued and executed under the Plan, shall be final
and binding upon all parties. No member of the Board shall be liable for any
action or determination undertaken or made in good faith with respect to the
Plan or any agreement executed pursuant to the Plan.

4.2 ADMINISTRATION BY COMPENSATION COMMITTEE. The Board may, in its
sole discretion, delegate any or all of its duties as Plan Administrator and
subject to the provisions of Section 4.1 of the Plan, at any time the Board
includes any person who is not a disinterested person, the Board shall delegate
all of its duties as Plan Administrator during such period of time to a
committee (the "Compensation Committee") of not fewer than two (2) members of
the Board, all of the members of which Compensation Committee shall be persons
who, in the opinion of counsel to the Company, are disinterested persons, to be
appointed by and serve at the pleasure of the Board. From time to time, the
Board may increase or decrease (to not less than two members) the size of the
Compensation Committee, and add additional members to, or remove members from,
the Compensation Committee. The Compensation Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directions of the Board,
the Compensation Committee may establish and follow such rules and regulations
for the conduct of its business as it may deem advisable. No member of the
Compensation Committee shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.

5. ELIGIBILITY. Any employee (including any officer who is an employee)
of the Company or any of its subsidiaries shall be eligible to receive an Option
under the Plan; provided, however, that no person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations shall be eligible to
receive an Incentive Stock Option under the Plan unless at the time such
Incentive Stock Option is granted the Option price (determined in the manner
provided in Section 7.2)

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<PAGE>

is at least 110% of the fair market value of the shares subject to the Option
and such Option by its terms is not exercisable after the expiration of five
years from the date such Option is granted. An employee may receive more than
one Option under the Plan.

6. SHARES SUBJECT TO OPTIONS. The stock available for grant of Options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, Common Stock. The aggregate number of shares which may be issued
after April 18, 1996 pursuant to exercise of Options theretofore or thereafter
granted under the Plan shall not exceed 1,628,554 shares of Common Stock
(subject to adjustment as provided in Section 7.14). In the event that any
outstanding Option under the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the unexercised portion of the Option shall
Again be available for Options under the Plan as if no Option had been granted
with respect to such shares.

7. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall
be evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Plan
Administrator shall from time to time approve. Such agreements may incorporate
all or any of the terms hereof by reference and shall comply with and be subject
to the following terms and conditions:

7.1 NUMBER OF SHARES SUBJECT TO OPTION. Each Option agreement shall
specify the number of shares subject to the Option.

7.2 OPTION PRICE. The purchase price for the shares subject to any
Option shall not be less than 100% of the fair market value per share of the
Common Stock of the Company on the date the Option is granted. In the case of
an Incentive Stock Option granted to an employee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations, the Option price shall
not be less than 110% of the fair market value per share of the Common Stock of
the Company on the date the Option is granted.

7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock Option
may be exercised only by:

(a) delivery of a written notice to the Company, prior to the
time when such Stock Option becomes unexercisable under Section 7.4, stating the
number of shares being purchased and complying with all applicable rules
established by the Plan Administrator;

(b) payment in full of the exercise price of such Option by, as
applicable, (i) cash or check for an amount equal to the aggregate Stock Option
exercise price for the number

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<PAGE>

of shares being purchased, (ii) in the discretion of the Plan Administrator,
upon such terms as the Plan Administrator shall approve, a copy of instructions
to a broker directing such broker to sell the Common Stock for which such Option
is exercised, and to remit to the Company the aggregate exercise price of such
Options (a "cashless exercise"), or (iii) in the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve, the
Optionee may pay all or a portion of the purchase price for the number of shares
being purchased by tendering shares of the Company's Common Stock owned by the
Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on
the date of delivery equal to the aggregate purchase price of the shares with
respect to which such Stock Option or portion is thereby exercised (a "stock-
for-stock exercise");

(c) payment of the amount of tax required to be withheld (if
any) by the Company or any parent or subsidiary corporation as a result of the
exercise of a Stock Option. At ,the discretion of the Plan Administrator, upon
such terms as the Plan Administrator shall approve, the Optionee may pay all or
a portion of the tax withholding by (i) cash or check payable to the Company,
(ii) cashless exercise, (iii) stock-for-stock exercise, or (iv) a combination of
(1), (2) and (3); and

(d) delivery of a written notice to the Company requesting that
the Company direct the transfer agent to issue to the Optionee (or to his
designee) a certificate for the number of shares of Common Stock for which the
Option was exercised or, in the case of a cashless exercise, for any shares that
were not sold in the cashless exercise. Notwithstanding the foregoing, the
Company may extend and maintain, or arrange for the extension and maintenance
of, credit to any Optionee to finance the Optionee's purchase of shares pursuant
to exercise of any Stock Option, on such terms as may be approved by the Plan
Administrator, subject to applicable regulations of the Federal Reserve Board
and any other laws or regulations in effect at the time such credit is extended.

7.4 TERM OF OPTION. No Option shall be exercisable after the
expiration of the earliest of (a) ten years after the date the Option is
granted, (b) three months after the date the Optionee's employment with the
Company and its subsidiaries terminates if such termination is for any reason
other than Disability or death, (c) one year after the date the Optionee's
employment with the Company and its subsidiaries terminates if such termination
is a result of death or Disability or if such termination is for any reason
other than death or Disability and Optionee dies within three months after the
date of such termination; provided, however, that the option agreement for any
Option may provide for shorter periods in each of the foregoing instances. In
the case of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the

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<PAGE>

Company or any of its parent or subsidiary corporations, the term set forth in
(a), above, shall not be more than five years after the date the Option is
granted.

7.5 EXERCISE OF OPTION. No Option shall be exercisable during the
lifetime of an Optionee by any person other than the Optionee or at any time
prior to six months from the date the Option is granted. Subject to the
foregoing, the Plan Administrator shall have the power to set the time or times
within which each Option shall be exercisable and to accelerate the time or
times of exercise. Unless otherwise provided by the Plan Administrator, each
option granted under the Plan shall become exercisable on a cumulative basis as
to one-third (1/3) of the total number of shares covered thereby at any time
after two years from the date the Option is granted and an additional one-third
(1/3) of such total number of shares at any time after the end of each
consecutive one-year period thereafter until the Option has become exercisable
as to all of such total number of shares. To the extent that an Optionee has
the right to exercise an Option and purchase shares pursuant thereto, the Option
may be exercised from time to time by written notice to the Company, stating the
number of shares being purchased and accompanied by payment in full of the
exercise price for such shares.

7.6 NO TRANSFER OF OPTION. No Option shall be transferable by an
Optionee otherwise than by will or the laws of descent and distribution.

7.7 ANNUAL LIMIT ON OPTIONS. Options may not be granted in any
calendar year to any one person in respect of more than an aggregate of 450,000
shares of Common Stock (subject to adjustment as provided in Section 7.14).

7.8 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair market
value (determined at the time the Option is granted) of the stock with respect
to which Incentive Stock Options granted after 1986 are exercisable for the
first time by an Optionee during any calendar year (under all Incentive Stock
option plans of the Company and its subsidiaries) shall not exceed $100,000.

7.9 RESTRICTION ON ISSUANCE OF SHARES. The issuance of Options and
shares shall be subject to compliance with all of the applicable requirements of
law with respect to the issuance and sale of securities, including, without
limitation, any required qualification under the California Corporate Securities
Law of 1968, as amended.

7.10 INVESTMENT REPRESENTATION. Any Optionee may be required, as a
condition of issuance of shares covered by his or her Option, to represent that
the shares to be acquired pursuant to exercise of the Option will be acquired
for investment and without a view to distribution thereof; and in such case, the
Company may place a legend on the certificate

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<PAGE>

evidencing the shares reflecting the fact that they were acquired for investment
and cannot be sold or transferred unless registered under the Securities Act of
1933, as amended, or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration.

7.11 RIGHTS AS A SHAREHOLDER OR EMPLOYEE. An Optionee or transferee of
an Option shall have no right as a shareholder of the Company with respect to
any shares covered by any Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether cash, securities, or other property) or
distributions or other rights for which the record date is prior to the date
such share certificate is issued, except as provided in Section 7.14. Nothing in
the Plan or in any Option agreement shall confer upon any employee any right to
continue in the employ of the Company or any of its subsidiaries or interfere in
any way with any right of the Company or any subsidiary to terminate the
Optionee's employment at any time.

7.12 NO FRACTIONAL SHARES. In no event shall the Company be required
to issue fractional shares upon the exercise of an Option.

7.13 EXERCISABILITY IN THE EVENT OF DEATH. In the event of the death
of the Optionee, any Option or unexercised portion thereof granted to the
Optionee, to the extent exercisable by him or her on the date of death, may be
exercised by the Optionee's personal representatives, heirs, or legatees subject
to the provisions of Section 7.4 hereof.

7.14 RECAPITALIZATION OR REORGANIZATION QF COMPANY. Except as
otherwise provided herein, appropriate and proportionate adjustments shall be
made in the number and class of shares subject to the Plan and to the Option
rights granted under the Plan, and the exercise price of such Option rights, in
the event of a stock dividend (but only on Common Stock), stock split, reverse
stock split, recapitalization, reorganization, merger, consolidation,
separation, or like change in the corporate or capital structure of the Company.
In the event of a complete liquidation of the Company or a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, any unexercised Options
theretofore granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization, or consolidation
elects to assume the Options under the Plan or to issue substitute Options in
place thereof; provided, however, that, notwithstanding the foregoing, if such
Options would be cancelled in accordance with the foregoing, the Optionee shall
have the right, exercisable during a ten-day period ending on the fifth day
prior to such liquidation, merger, or consolidation, to exercise the Optionee's

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<PAGE>

Option in whole or in part without regard to any installment exercise provisions
in the Optionee's Option agreement. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Plan Administrator, the determination of which in that respect
shall be final, binding, and conclusive, provided that each Incentive Stock
Option granted pursuant to the Plan shall not be adjusted in a manner that
causes it to fail to continue to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code.

7.15 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted under
the Plan, accept the surrender of outstanding Options (to the extent not
theretofore exercised). The Plan Administrator shall not, however, modify any
outstanding Incentive Stock Option in any manner which would cause the Option
not to qualify as an Incentive Stock Option within the meaning of section 422
of the Code. Notwithstanding the foregoing, no modification of an Option
shall, without the consent of the Optionee, alter or impair any rights of the
Optionee under the Option.

7.16 OTHER PROVISIONS. Each Option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be determined
by the Plan Administrator.

8. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any time
terminate or amend the Plan; provided that, without approval of the shareholders
of the Company, there shall be, except by operation of the provisions of Section
7.14, no increase in the total number of shares covered by the Plan, no change
in the class of persons eligible to receive Options granted under the Plan, no
reduction in the exercise price of Options granted under the Plan, and no
extension of the latest date upon which Options may be exercised; and provided
further that, without the consent of the Optionee, no amendment may adversely
affect any then outstanding Option or any unexercised portion thereof.

9. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Plan Administrator, the members of the Plan
Administrator administering the Plan shall be indemnified by the Company against
reasonable expense, including attorney's fees, actually and necessarily incurred
in connection with the defense of any action, suit, or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any

-8-

<PAGE>

action, suit, or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit, or proceeding that such member is liable for
negligence or misconduct in the performance of his duties, provided that within
60 days after institution of any such action, suit, or proceeding, the member
shall in writing offer the Company the opportunity, at its own expense, to
handle and defend the same.

10. EFFECTIVE DATE AND TERM OF PLAN. The Plan, as amended and restated on
April 18, 1996 as provided herein, shall become effective on that date, subject
to approval of such amendment and restatement by the shareholders of the
Company. If such approval does not occur by September 30, 1996, this amended
and restated Plan will not become effective and the Plan, as stated prior to
such amendment and restatement, will continue in effect. Unless sooner
terminated by the Board in its sole discretion, the Plan will expire on December
31, 2001.

Dated: April 18, 1996

COASTCAST CORPORATION

By:_____________________________________
Hans H. Buehler
Chief Executive Officer

By:_____________________________________
Norman Fujitaki
Secretary

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<PAGE>

EXHIBIT 10.15

<PAGE>

WELLS FARGO BANK LOAN AGREEMENT
- --------------------------------------------------------------------------------

This Loan Agreement (this "Agreement") is entered into by and between
COASTCAST CORPORATION ("Borrower") and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") and sets forth the terms and conditions which govern all Borrower's
commercial credit accommodations from Bank, whether now existing or hereafter
granted (each a "Credit" and collectively, "Credits"), which terms and
conditions are in addition to those set forth in any other contract, instrument
or document (collectively with this Agreement, the "Loan Documents") required by
this Agreement or heretofore or at any time hereafter delivered to Bank in
connection with any Credit.

I. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Bank, which representations and warranties
shall be true as of the date hereof and on the date of each extension of credit
under each Credit with the same effect as though made on each such date:

(a) LEGAL STATUS. Borrower is a corporation, duly organized and existing
and in good standing under the laws of the State of California, and is qualified
or licensed to do business in all jurisdictions in which such qualification or
licensing is required or in which the failure to be qualified or licensed could
have a material adverse effect on Borrower.

(b) AUTHORIZATION AND VALIDITY. Each of the Loan Documents has been duly
authorized, and upon its execution and delivery to Bank will constitute a legal,
valid and binding obligation of Borrower or the party which executes the same,
enforceable in accordance with Its respective terms.

(c) NO VIOLATION. The execution, delivery and performance by Borrower of
each of the Loan Documents do not violate any provision of law or regulation, or
contravene any provision of Borrower's Articles of Incorporation or By-Laws, or
result in any breach of or default under any agreement, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.

(d) NO LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower except as disclosed by Borrower to Bank in writing prior
to the date hereof.

(e) FINANCIAL STATEMENTS. The most recent annual financial statement of
Borrower, and all interim financial statements delivered to Bank since the date
of said annual financial statement, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, are complete and correct. present
fairly the financial condition of Borrower and disclose all liabilities of
Borrower, and have been prepared in accordance with generally accepted
accounting principles. Since the dates of such financial statements there has
been no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.

(f) TAX RETURNS. Borrower has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year except as
disclosed by Borrower to Bank in writing prior to the date hereof.

II. ADDITIONAL TERMS.

(a) CONDITIONS PRECEDENT. The obligation of Bank to grant any Credit is
subject to the condition that Bank shall have received all contracts,
instruments and documents, duly executed where applicable, deemed necessary by
Bank to evidence such Credit and all terms and conditions applicable thereto,
all of which shall be in form and substance satisfactory to Bank.

(b) APPLICATION OF PAYMENTS. Each payment made on each Credit shall be
applied first, to any interest then due, second, to any fees and charges then
due, and third, to the outstanding principal balance thereof.

III. COVENANTS. So long as any Credit remains available or any amounts under
any Credit remain outstanding, Borrower shall, unless Bank otherwise consents
in
writing:

(a) INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, property
damage, flood and workers' compensation, carried with companies and in amounts
satisfactory to Bank. and deliver to Bank from time to time at Bank's request
schedules setting forth all insurance then in effect.

(b) COMPLIANCE. Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of its
business; and comply with the requirements of all laws, rules, regulations and
orders of any governmental authority applicable to Borrower and/or its business,
including without limitation, the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time, and all state or
federal environmental, hazardous waste, health and safety statutes, and any
rules or regulations adopted pursuant thereto, which govern or affect any
operations and/or properties of Borrower.

Loan Agreement (08/96), Page 1

<PAGE>

(c) OTHER INDEBTEDNESS. Not create, incur, assume or permit to exist any
Indebtedness or other liabilities, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, direct or contingent
(including any contingent liability under any guaranty of the obligations of any
person or entity), except (i) the liabilities of Borrower to Bank, (ii) trade
debt incurred by Borrower in the normal course of its business, and (iii) any
other liabilities of Borrower existing as of, and disclosed to Bank in writing
prior to, the date hereof.

(d) MERGER; CONSOLIDATION; TRANSFER OF ASSETS. Not merge into or
consolidate with any other entity; nor make any substantial change in the nature
of Borrower's business as conducted as of the data hereof; nor acquire all or
substantially all of the assets of any other person or entity; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.

(e) PLEDGE OF ASSETS. Not mortgage, pledge. grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except in favor of Bank and except any of the
foregoing existing as of, and disclosed to Bank in writing prior to, the date
hereof.

(f) FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank, together with such current financial and other
information as Bank from time to time may reasonably request:

(i) As soon as available, but in no event later than 90 days after
and as of the end of each fiscal year, an audited financial statement of
Borrower, prepared by an independent certified public accountant acceptable
to Bank, to include a balance sheet, income statement and statement of cash
flow, together with all supporting schedules and footnotes.

(ii) As soon as available, but in no event later than 45 days after
and as of the end of each fiscal quarter, a financial statement of Borrower,
prepared by Borrower and certified as correct by an officer of Borrower
authorized to borrow under the most current Corporate Borrowing Resolution
delivered by Borrower to Bank, to include a balance sheet and income
statement, together with all supporting schedules and footnotes.

(g) FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices, except to the extent modified by the
following definitions:

(i) Tangible Net Worth not at any time less than $46,000,000.00,
with "Tangible Net Worth" defined as the aggregate of total stockholders'
equity plus subordinated debt less any intangible assets.

(ii) Total Liabilities divided by Tangible Net Worth not at any time
greater than 0.60 to 1.0, with "Total Liabilities" defined as the aggregate
of current liabilities and non-current liabilities less subordinated debt,
and with "Tangible Net Worth" as defined above.

(iii) Quick Ratio not at any time less than 2.00 to 1.0. with "Quick
Ratio" defined as the aggregate of unrestricted cash, unrestricted marketable
securities and receivables convertible into cash divided by total current
liabilities.

(iv) Net income after taxes not less than $5,000,000.00 on an annual
basis, determined as of each fiscal year end, and pre-tax profit not less
than $1,000,000.00 on a quarterly basis, determined as of each fiscal quarter
end.

IV. DEFAULT; REMEDIES.

(a) EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:

(i) The failure to pay any principal, interest, fees or other
charges when due under any of the Loan Documents.

(ii) Any representation or warranty hereunder or under any other Loan
Document shall prove to be incorrect, false or misleading in any material
respect when made.

(iii) Any violation or breach of any term or condition of this
Agreement or any other of the Loan Documents.

(iv) Any default in the payment or performance of any obligation, or
any defined event of default, under any provisions of any contract,
instrument or document pursuant to which Borrower or any guarantor hereunder
has incurred debt or any other liability of any kind to any person or entity,
including Bank.

(v) The filing of a petition by or against Borrower or any guarantor
hereunder under any provisions of the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time, or under any
similar of other law relating to bankruptcy. insolvency, reorganization or
other relief for debtors; the appointment of a receiver, trustee, custodian
or liquidator of or for any part of the assets or property of Borrower or any
such guarantor; Borrower or any such guarantor becomes insolvent, makes a
general assignment for the benefit of creditors or is generally not paying
its debts as they become due; or any attachment or like levy on any property
of Borrower or any such guarantor.

(vi) Any material adverse change, as determined solely by Bank, in the
financial condition of Borrower.

Loan Agreement (08/96), Page 2

<PAGE>

(vii) The death or incapacity of any individual guarantor hereunder,
or the dissolution or liquidation of Borrower or of any guarantor hereunder
which Is a corporation, partnership or other type of entity.

(viii) Any change in ownership during the term hereof of an aggregate
of 25% or more of the common stock of Borrower.

(b) REMEDIES. Upon the occurrence of any Event of Default: (i) the entire
balance of principal, interest, fees and charges on each Credit shall, at Bank's
option, become Immediately due and payable in full without presentment, demand,
protest or notice of dishonor, all of which are expressly waived by Borrower;
(ii) the obligation, if any, of Bank to extend any further credit to Borrower
under any Credit shall immediately cease and terminate; and (iii) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any
security for any Credit. All rights, powers and remedies of Bank shall be
cumulative.

V. MISCELLANEOUS.

(a) NO WAIVER. No delay, failure or discontinuance of Bank in exercising
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy, nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under this Agreement. or any such waiver of any
provisions or conditions hereof, must be in writing and shall be effective only
to the extent set forth in writing.

(b) NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to the applicable party at its address
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (i) if personally delivered, upon delivery; (ii) if sent by mail, upon
the earlier of the date of receipt or 3 days after deposit in the U.S. mail,
first class and postage prepaid; and (iii) if sent by telecopy, upon receipt.

(c) COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (i) the negotiation and preparation of this
Agreement and the other Loan Documents, and Bank's continued administration of
each Credit, (ii) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents. and (iii) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

(d) SUCCESSORS: ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Bank's prior written consent. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan Documents. In
connection therewith Bank may disclose all documents and information which Bank
now has or may hereafter acquire relating to any Credit, Borrower or Its
business, any guarantor of any Credit or the business of any such guarantor, or
any collateral for any Credit.

(e) CONTROLLING AGREEMENT; AMENDMENT. In the event of any direct conflict
between any provision of this Agreement and any provision of any other Loan
Document, the terms of this Agreement shall control. This Agreement may be
amended or modified only in writing signed by Bank and Borrower.

(f) NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns. and no other person or entity shall be a
third party beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other Loan Document to which it
is not a party.

(g) SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall
be held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

(h) GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the laws of the state of California.

(i) CANCELLATION OF PRIOR LOAN AGREEMENTS. This Agreement cancels
and supersedes all prior loan agreements between Borrower and Bank relating
to any Credit.

VI. ARBITRATION.

(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common low, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan

Loan Agreement (08/96), Page 3

<PAGE>

Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party
may by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.

(b) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute
shall apply to any arbitration proceeding. All discovery activities shall be
expressly limited to matters directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded
to it under 12 U.S.C. Section 91 or any similar applicable state law.

(c) NO WAIVER: PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.

(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California. (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.

(E) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000,
the arbitrators shall be required to make specific, written findings of fact
and conclusions of law. In such arbitrations (A) the arbitrators shall not
have the power to make any award which is not supported by substantial
evidence or which is based on legal error, (B) an award shall not be binding
upon the parties unless the findings of fact are supported by substantial
evidence and the conclusions of law are not erroneous under the substantive
law of the state of California, and (c) the parties shall have in addition to
the grounds referred to in (tie Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (1) whether
the findings of fact rendered by the arbitrators are supported by substantial
evidence, and (2) whether the conclusions of law are erroneous under the
substantive law of the state of California. Judgment confirming an award in
such a proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error under the
substantive law of the state of California.

(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with (the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

(G) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the

Loan Agreement (08/96), Page 4

<PAGE>

parties.

IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of
November 1, 1996.

COASTCAST CORPORATION WELLS FARGO BANK,
NATIONAL ASSOCIATION

By: /s/ Hans H. Buehler By: /s/ Joelle Martin
-------------------------------- -------------------------------------
HANS H. BUEHLER
CHIEF EXECUTIVE OFFICER Title: /S/ Relationship Manager
----------------------------------

Address: ***************** Address: 111 West Ocean Blvd Suite 300
***************** Long Beach, CA 90802

3025 East Victoria St.
Rancho Dominguez, CA 90221

Loan Agreement (08/96), Page 5

<PAGE>

EXHIBIT 10.16

<PAGE>

WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- -------------------------------------------------------------------------------

$5,000,000.00 Long Beach, California
November 1, 1996

FOR VALUE RECEIVED, the undersigned COASTCAST CORPORATION ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") at its office at SOUTH BAY RCBO, 111 WEST OCEAN BLVD SUITE 300, LONG
BEACH, CA 90802, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available
funds, the principal sum of $5,000,000.00, or so much thereof as may be
advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.

INTEREST/FEES:

(a) INTEREST. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed)
at a rate per annum EQUAL TO the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto. Each change in the rate
of interest hereunder shall become effective on the date each Prime Rate
change is announced within Bank.

(b) PAYMENT OF INTEREST. Interest accrued on this Note shall be
payable on the 3RD day of each month, commencing DECEMBER 3, 1996.

(c) DEFAULT INTEREST. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to 4%
above the rate of interest from time to time applicable to this Note.

(d) COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest due hereunder by charging Borrower's demand deposit account number
4624-071643 with Bank, or any other demand deposit account maintained by any
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such demand deposit account to pay all such sums when due, the
full amount of such deficiency shall be immediately due and payable by
Borrower.

STANDBY LETTER OF CREDIT SUBFEATURE:

(a) LETTER OF CREDIT SUBFEATURE. As a subfeature under this Note, Bank
agrees from time to time during the term hereof to issue standby letters of
credit for the account of Borrower to finance Borrower's insurance deposits
(each, a "Letter of Credit" and collectively, "Letters of Credit"); provided
however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further,
that the aggregate undrawn amount of all outstanding Letters of Credit shall
not at any time exceed $500,000.00. Each Letter of Credit shall be issued for
a term not to exceed 360 days, as designated by Borrower; provided however,
that no Letter of Credit shall have an expiration date subsequent to the
maturity date of this Note. The undrawn amount of all Letters of Credit shall
be reserved under this Note and shall not be available for borrowings
hereunder. Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit Agreement and related documents, if any,
required by Bank in connection with the issuance thereof. Each draft paid by
Bank under a Letter of Credit shall be deemed an advance under this Note and
shall be repaid by Borrower in accordance with the terms and conditions of
this Note; provided however, that if advances hereunder are not available,
for any reason, at the time any draft is paid by Bank, then Borrower shall
immediately pay to Bank the full amount of such draft, together with interest
thereon from the date such amount is paid by Bank to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to advances
hereunder. In such event, Borrower agrees that Bank, in its sole discretion,
may debit any demand deposit account maintained by Borrower with Bank for the
amount of any such draft.

(b) LETTER OF CREDIT FEES. Borrower shall pay to Bank (i) fees upon
the issuance of each Letter of Credit equal to 2.000% per annum (computed on
the basis of a 360-day year, actual days elapsed) of the face amount thereof,
and (ii) fees upon the payment by Bank of each draft under any Letter of
Credit and upon the occurrence of any other activity with respect to any
Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance with Bank's
standard fees and charges then in effect for such activity.

BORROWING AND REPAYMENT:

(a) USE OF PROCEEDS. Advances under this Note shall be available
solely to finance working capital.

(b) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with, or
at any time as a supplement to, this Note; provided

Revolving Line of Credit Note, Prime Rate: Unsecured (EXPDOCS) (08/96), Page 1

<PAGE>

however, that the total outstanding borrowings under this Note shall not at
any time exceed the principal amount stated above; and provided further, that
Borrower shall maintain a zero balance on advances under this Note for a
period of at least 30 consecutive days during each fiscal year. The unpaid
principal balance of this obligation at any time shall be the total amounts
advanced hereunder by the holder hereof less the amount of any principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on NOVEMBER 3, 1997.

(c) ADVANCES. Advances hereunder, to the total amount of the principal
sum available hereunder, may be made by the holder at the oral or written
request of (i) HANS H. BUEHLER or ROBERT C. BRUNING, any one acting alone,
who are authorized to request advances and direct the disposition of any
advances until written notice of the revocation of such authority is received
by the holder at the office designated above, or (ii) any person, with
respect to advances deposited to the credit of any account of any Borrower
with the holder, which advances, when so deposited, shall be conclusively
presumed to have been made to or for the benefit of each Borrower regardless
of the fact that persons other than those authorized to request advances may
have authority to draw against such account. The holder shall have no
obligation to determine whether any person requesting an advance is or has
been authorized by any Borrower.

EVENTS OF DEFAULT:

Any default in the payment or performance of any obligation under this
Note, or any defined event of default under any loan agreement now or at any
time hereafter in effect between Borrower and Bank (whether executed prior
to, concurrently with or at any time after this Note), shall constitute an
"Event of Default" under this Note.

MISCELLANEOUS:

(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal,
interest, fees and charges outstanding hereunder to be immediately due and
payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by
each Borrower, and the obligation, if any, of the holder to extend any
further credit hereunder shall immediately cease and terminate. Each Borrower
shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
the holder's in-house counsel), expended or incurred by the holder in
connection with the enforcement of the holder's rights and/or the collection
of any amounts which become due to the holder under this Note, and the
prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any other person)
relating to any Borrower or any other person or entity.

(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.

COASTCAST CORPORATION

By: /s/ Hans H. Buehler
----------------------------
HANS H. BUEHLER
CHIEF EXECUTIVE OFFICER

<PAGE>

EXHIBIT 10.26

<PAGE>

THE ROBERSON COMPANY SINCE 1963

FAX TRANSMISSION

FROM THE DESK OF: JAMES D. ROBERSON DATE: 2/1/97

TO: DICK MORA
COASTCAST CORPORATION

FAX NUMBER: 310-631-3715
PHONE NUMBER:

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Pages: 1
Re: SERP Amendment

SECOND AMENDMENT TO COASTCAST CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Whereas, the Company desires to credit Mr. Richard Mora with a new
schedule for purposes of the vesting of benefits provided by the Coastcast
Corporation Supplemental Executive Retirement Plan.

Now, therefore, for purposes of calculating the Target Retirement
Benefits under paragraph 3.1 of the Plan and for all other purposes under the
Plan, Richard W. Mora shall be credit with two (2) Years of Participation,
each year, as such term is defined in paragraph 1.16 of the Plan.

COASTCAST CORPORATION

By /s/Hans H. Buehler
--------------------

Its Chairman CEO
--------------------

Date 2-18-97
--------------------

4199 CAMPUS DRIVE, SUITE 730, IRVINE, CALIFORNIA 92612-2698
VOICE: (714) 509-2940 FAX: (714) 509-2945

<PAGE>

EXHIBIT 11

COASTCAST CORPORATION

COMPUTATIONS OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARES

YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- ----------
Common stock outstanding at beginning of year 8,734,694 9,091,994
Repurchase of common stock (13,800) (389,800)
Exercise of options 56,996 32,500
----------- ----------
Common stock outstanding at end of year 8,777,890 8,734,694
----------- ----------
----------- ----------

Weighted average shares outstanding 8,772,815 9,045,257

Dilutive effect of stock options after application
of treasury stock method 265,408 53,679
----------- ----------
Total 9,038,223 9,098,936
----------- ----------
----------- ----------

Net income $15,066,000 $3,299,000
----------- ----------
----------- ----------

Net income per common and common equivalent share $1.67 $ .36
----------- ----------
----------- ----------

<PAGE>

EXHIBIT 24

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement
No. 33-77540 of Coastcast Corporation on Form S-8 of our reports, dated
February 5, 1997, appearing in this Annual Report on Form 10-K of Coastcast
Corporation for the year ended December 31, 1996.

DELOITTE & TOUCHE LLP
Long Beach, California
March 24, 1997

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