1 pkg. (14 oz.) caramels
1/2 cup walnuts
1/2 stick butter
1/4 cup water
4-1/4 cups rice cereal
1 cup baking coconut

On medium heat, melt caramels. Halfway through, add water and butter. Stir continuously until the caramels are melted and quickly remove from heat. Avoid over-cooking. Mix in the cereal, nuts, and coconut. Press into a greased pan. Cut when completely cooled.